How Life Insurance Can Also Serve as A Retirement Plan

Danielle Forsman |

Life insurance can fulfill many needs not the least of which is retirement.  In can be underwritten on a tax-qualified basis or non-tax-qualified basis.  Tax qualified simply means the premiums for the policy can be deductible if structured correctly through one’s business.


The advantages of a non-qualified retirement plan are selective participation, greater plan design flexibility, premium costs can be recoverable, any testing schedules are optional, lower administrative costs, unlimited contributions as opposed to a Roth IRA, the plan becomes a corporate asset, and finally, there are no reporting or disclosure requirements because the retirement plan is not registered nor regulated by the IRS.


Contributions to a non-qualified plan are usually not deductible until distribution takes place, and the retirement plan may be established on a discriminatory basis with as few as one person.


Unlike a non-qualified retirement plan, in a qualified retirement plan, the life insurance premiums are deductible. The cash value of the insurance policy as well as the cash value of the required side fund are guaranteed at retirement or death as long as the premiums have been paid.  Premiums are required to be paid for no more that seven years, and you can fund for a death or retirement benefit up to $2,000,000.  A qualified retirement plan is also exempt from creditors including the IRS.


By reviewing pension plans you can find many ways to save more taxes.  This is where we can help with a no-cost review! Schedule a call today! 856-582-3500.