LIRP (Life Insurance Retirement Plan)

A LIRP isn't a product; it's a use case. You overfund a permanent policy — Whole Life Insurance or Indexed Universal Life (IUL) — during working years, then draw retirement income by withdrawing your basis and switching to policy loans, both of which arrive income-tax-free under current law as long as the policy stays in force.

The structural advantages over qualified plans are real: no contribution limits (fund what Underwriting and the Modified Endowment Contract (MEC) rules allow), no income phase-outs that lock out high earners, no required minimum distributions at 73, no 59½ early-access penalty on properly structured loans, and no market-crash sequence risk in the whole life version — plus a Death Benefit that transfers whatever you didn't spend. Distributions also don't count as provisional income for Social Security taxation, a quiet but meaningful edge.

The honest cost side: insurance charges are a real drag in early years, the strategy needs a decade-plus of disciplined funding before the tax advantages outweigh those costs, and everything depends on the policy never lapsing — a collapsed policy with large loans outstanding converts years of "tax-free" income into a single brutal tax bill. This is a strategy you monitor with in-force illustrations, not one you set and forget.

Where it fits best: as tax diversification, not replacement. A retiree drawing from taxable, tax-deferred (401(k)/IRA), and tax-free (Roth, LIRP) buckets can steer taxable income under bracket thresholds, IRMAA cliffs, and Social Security taxation lines each year. The LIRP is the flexible tax-free bucket that also carried life insurance the whole way — and in the whole life version, doubles as the Infinite Banking system during working years. Same asset, two careers.

The whole-life-vs-IUL choice inside a LIRP mirrors the general debate: guarantees and dividend history versus index-linked upside with moving parts. Model both at conservative assumptions before committing — the illustration stress-test matters more here than anywhere.