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A Fresh Approach For The New Age of Retirement Planning

 Integrated retirement planning services to prepare for the life you want to lead. 

Connect with a planner

Retirement Plans Are Just The Beginning

Preparing for the future means building momentum toward whatever you want to pursue. Your retirement years bring the promise of realizing the goals you worked so hard to reach, but they also come with a host of questions. And your 401k is only one piece of the retirement planning puzzle. Start with a partner who knows how wealth planning works and can guide your momentum so you can transition confidently into retirement. 

Sophisticated Support For a Dynamic Retirement Landscape

 Our planners assess a broad spectrum of your financial life that impacts your retirement planning, not just your investment strategy. They can tap into a wealth of tools and expert resources, reviewing your assets, income and other savings to help guide you toward your desired retirement and financial future. 

Life Insurance Retirement Plan LRIP Overview

 A life insurance retirement plan (LIRP) is a strategy that uses the cash value of a permanent life insurance policy to provide supplemental income during retirement. This approach is not a standalone retirement plan but rather a supplement to traditional retirement savings vehicles like 401(k) plans and individual retirement accounts (IRAs). This strategy integrates the benefits of life insurance for retirement savings with traditional retirement planning approaches, enhancing overall financial stability in later years. 

How Life Insurance Retirement Plans Works

A LIRP operates around a permanent life insurance policy's cash value component. You can access this cash value upon retirement, providing an additional income source.

Although you can withdraw the cash value, doing so reduces the death benefit, impacting the amount your beneficiaries receive upon your death. Strategic planning is essential when using a LIRP to balance retirement income needs and the financial security of your beneficiaries.

Cash Value Component of a Life Insurance Policy

Cash value is a key feature of permanent life insurance policies. When you pay premiums on these policies, a certain percentage goes to a cash value account. This account functions much like an investment account within the policy. The insurance company invests it and grows over time on a tax-deferred basis, meaning you won't pay taxes on the growth until you withdraw the funds.

The exact percentage of your premium that goes into the cash value account depends on the terms of your individual policy and can vary based on factors like the type of policy, the insurance company and the policyholder's age and health.

Over time, the cash value account can grow substantially due to the portion of premiums allocated to the account and the interest or investment returns earned. The cash value can be accessed during the policyholder's lifetime, providing a potential source of funds for retirement income, emergencies or other financial needs. Its versatility underscores the potential benefits of investing in life insurance for retirement.

Types of Policies to Use for LIRP Accounts

 Generally, any type of permanent life insurance policy with a cash value component is suitable for a LIRP. These include:


  • Whole Life Insurance: This policy type offers a guaranteed death benefit, ensuring a fixed sum for beneficiaries upon the policyholder's death. The premiums remain level, meaning they don't increase with age or health changes. The cash value component is an investment-like account that grows over time, enhancing your options for retirement planning with whole life insurance.


  • Universal Life Insurance: This policy type provides flexible premiums, allowing policyholders to adjust their payments as needed. It includes a death benefit and a cash value component. Cash value growth is based on a fixed interest rate or the performance of a specific market index, which offers the potential for market-linked growth. This flexibility may be worth considering when considering life insurance for retirement savings.


  • Variable Life Insurance: This policy type features a cash value component that can be invested in various subaccounts, similar to mutual funds. This allows policyholders to potentially increase their cash value through investment performance. However, it also means the policy's cash value and death benefit may fluctuate based on the performance of these investments, introducing more risk.


Consider what type of life insurance policy best suits your retirement needs and risk tolerance.

Who Should Use a Life Insurance Retirement Plan

A LIRP can be a strategic retirement planning tool for specific groups of policyholders, including the following:


  • High-Net-Worth Policyholders: LIRPs can be particularly advantageous for high-net-worth policyholders. These individuals often max out contributions to traditional retirement accounts like 401(k) plans and IRAs and are in search of additional avenues for tax-deferred savings. LIRPs provide this opportunity, allowing these policyholders to grow their wealth further in a tax-efficient way and enhance their financial security in retirement.


  • People With Lifelong Dependents: LIRPs can be a suitable choice for individuals with lifelong dependents, such as children with disabilities. These individuals have a unique need for continued life insurance coverage even into their retirement years. A LIRP provides this continued coverage and offers the potential for cash value accumulation that can be used as a supplemental income source in retirement.


A LIRP is more than just an insurance policy; it can be a versatile financial planning tool that can significantly influence one's retirement landscape. By choosing the right type of life insurance for retirement savings, individuals can secure a more resilient and flexible financial future, making it a wise choice for those qualifying under the described scenarios.

Advantages of Using LIRP Plans

Using life insurance as a retirement plan can offer several benefits, which we highlight below:


  • Potential for Cash Value Growth: A life insurance policy's cash value component can grow over time, providing an additional source of income during retirement. This growth can supplement other retirement income sources, helping to ensure a comfortable retirement.


  • Tax Advantages: One significant benefit of using life insurance as a retirement plan is the tax advantage. The cash value within a life insurance policy grows tax-deferred, meaning you won't pay taxes on any earnings as long as the money remains within the policy. This can lead to substantial tax savings over time.


  • No Contribution Limits: Unlike traditional retirement accounts like 401(k) plans and IRAs, life insurance policies do not have annual contribution limits. This lack of restriction allows for greater flexibility in retirement planning and the potential for higher savings.


  • No Penalties for Early Withdrawal: Life insurance policies do not penalize for early withdrawal from the cash value, unlike 401(k) plans and IRAs, which typically impose penalties for withdrawals before age 59 1/2. This feature provides additional flexibility, especially in case of financial emergencies.


  • Guaranteed Death Benefit: Regardless of how the cash value performs, a permanent life insurance policy provides a guaranteed death benefit to your beneficiaries. This ensures that your loved ones will receive financial support after your death.


Ultimately, a LIRP can offer financial flexibility and security, making it an attractive component of a comprehensive retirement strategy.

How to Use Life Insurance as a Retirement Plan

 Using life insurance as a retirement plan involves strategic planning and understanding the policy's features. Here are the steps to effectively use life insurance as a retirement plan:


  • Choose the Right Policy

The first step is to choose a permanent life insurance policy that suits your financial goals and risk tolerance. This could be a whole, universal or variable life insurance policy. Each of these policies has a cash value component that can be used for retirement income, but they differ in terms of premium flexibility, cash value growth and investment options.


  • Fund Your Policy

Once you have chosen the right policy, you need to fund it. This involves paying premiums that are split between the cost of insurance and the cash value component, which is integral to building a life insurance savings plan for retirement.


  • Overfund Your Policy (Optional)

If you have the financial capacity, consider overfunding your policy. This means paying more than the required premium to build up your cash value faster. However, be aware of the Modified Endowment Contract (MEC) limits, as exceeding these can result in less favorable tax treatment.

A life insurance policy becomes an MEC when it loses its tax benefits because it holds too much cash. The Internal Revenue Service (IRS) determines whether a policy is an MEC based on the total amount of premiums paid into the policy within the first seven years, a measure known as the "seven-pay test." If the premiums paid within those seven years exceed the amount needed to pay the policy in full, the policy is classified as an MEC.


  • Manage Your Cash Value

The cash value component of your policy is an investment-like account that grows over time. You should monitor this account and consider how it fits into your overall investment strategy. Some policies offer flexibility in how your cash value is invested, allowing you to tailor it to your risk tolerance and investment goals, which is key in investing in life insurance for retirement.


  • Plan Your Withdrawals

As you approach retirement, you should plan how to withdraw from your cash value. This could involve taking out loans against your cash value, making withdrawals or surrendering the policy. Each option has different tax implications and can impact the death benefit, so it's wise to plan this carefully to maximize life insurance for retirement savings.


  • Consult a Financial Advisor

Using life insurance as a retirement plan can be complex, and it's important to get it right. It may help to consult with a financial advisor who can provide personalized advice based on your individual circumstances. They can guide you in choosing the right policy, planning your funding and withdrawals and integrating this strategy into your overall retirement plan.

An Integrated Approach To Wealth Management

 To help maximize your wealth, your financial life – investment strategy, taxes, insurance, retirement and estate planning – must be wired together in a holistic approach. Your dedicated financial planner can coordinate with a team of experts to connect those different pieces into a cohesive view so you can unlock new ways to help build, grow, protect and preserve your wealth. 


The Value of Meeting with a Financial Advisor

 We're uniquely focused on modeling both the risk and return potential of each piece of your financial plan -- we know this takes more than a presumptive, one-size-fits-all approach. We start by evaluating your entire picture, looking for opportunities to adjust and rebalance based on your retirement goals. 


Retirement Planning Frequently Asked Questions

 To learn more about retirement planning and how the Edelman Financial Engines team can help you meet your goals, review some of our most frequently asked questions. 

Frequently Asked Questions

Please reach us at contactus@synergyadvisorsinc.com if you cannot find an answer to your question.

 A retirement plan can help enable you to confidently transition into retirement, providing you with the income you need to maintain the lifestyle of your choice. Most Americans worry about outliving their retirement savings. In fact, according to a recent study by Allianz Life, 61% of Americans say they are more afraid of running out of money than they are of death. No one wants to be in this situation, but it can happen if you don’t have a plan. Edelman Financial Engines provides personalized retirement planning strategies that can help tap into your financial potential and strive to meet your retirement goals.  

 You should begin your retirement planning as early as possible, starting with your first paycheck. The earlier you begin saving, the more time your money has the opportunity to grow. If you haven’t started planning for retirement savings yet, now is the time to take the first steps. 

 Retirement planning can look very different from person to person. One of the best ways to plan for retirement savings is to consult a financial planner who can guide you through the many questions and options you’ll need to consider. Retirement planning should include determining timing, estimating expenses, assessing your risk tolerance, identifying investment vehicles, planning for potential tax implications and thinking about estate planning. 

 How much money you need to retire will vary depending on your own personal lifestyle, assets, financial situation and retirement goals. A common suggestion is to have 10-12 times your annual income at retirement age. But there are several factors that may impact that number, from the expenses you’ll have during retirement, to health care costs and even whether you may be planning to move to another state where the taxes may differ. Your portfolio balance and the monthly retirement income that you’ll draw should be determined after considering all these factors as part of an integrated retirement plan. 

 As you near retirement, a financial planner can help you prepare for a systematic withdrawal plan. After building a diversified portfolio, you’ll simply withdraw money each month. Ideally, the annualized rate is 4% of the portfolio or less – the more you withdraw, the higher the risk that you’ll begin to erode principal if investment markets decline in value. But as you get older, you may explore the possibility of a higher withdrawal rate. For example, a 75-year-old could consider a 5% withdrawal rate. 

 We expect Social Security will continue to exist in some form in the foreseeable future, but it alone is unlikely to provide clients with a comfortable retirement. As such, unless there are other factors to consider, we recommend clients continue to work full time to at least their full retirement age and take Social Security no earlier than their FRA. In many cases, waiting longer can be even more beneficial. However, there are several other considerations that could affect your individual Social Security decision, so consulting with a financial planner is a good way to review and weigh your options. 

 Although setting retirement goals can be a time-consuming step, developing a strategy to fund your retirement is even more challenging due to the number of variables involved. For example, you’ll need to estimate the proper timing and size of your withdrawals, likely from numerous accounts, which will be impacted by unpredictable market conditions over decades. Fortunately, there are planning and retirement income strategies that can help you feel more confident. 

 There are many risks to your retirement, including high inflation, market volatility, unexpected health care and other costs, longevity and taxes. Your retirement plan needs to have a cushion and the flexibility to adjust as these variables and your situation change. 

 One of the biggest expenses during retirement is health care. In 2022, the average total health care cost in retirement for a 65-year-old couple was $315,000. But if you only plan for the average, what happens if your costs are more? Your plan needs to have a cushion and the flexibility to adjust as your situation changes. 

 Your retirement income is likely to come from a variety of sources. Some are fixed sources, which provide a predictable amount of funds each year. Social Security is the most common example, but employer pensions and annuities are two other income sources that can fund your retirement through regular, predictable payments. It’s important to take the tax and distribution rules for all these sources into account as you establish your retirement income plan. Some sources are better to tap into right away, while you should avoid taking withdrawals from others for as long as possible. As with most financial decisions, what you do should be based on your specific situation, and an Edelman Financial Engines planner can help guide you. 

 There are strategies you can implement to help reduce your potential tax burden, such as making withdrawals from tax-deferred accounts before you reach the age at which you must begin Required Minimum Distributions, using Roth conversions, or making qualified charitable donations directly from your IRA. But determining the best approach for you can be complex. When you develop a retirement income plan with an Edelman Financial Engines planner, we encourage you to work with your Certified Public Accountant to help develop a tax-efficient income strategy. 

 This may surprise you, but typically the answer to this question is no, in most situations. When it comes to your retirement, it’s all about wealth creation, not debt elimination. So while paying off your mortgage early may seem appealing, we believe your focus should be on creating wealth so that you can comfortably afford the cost of living in and owning your home. There are a number of factors that may impact this decision, however, so you should weigh your options with a financial planner to determine what makes the most sense for your situation. 

 Working with a Synergy Advisors planner who understands your goals and unique circumstances is key to helping you build, grow, protect and preserve your wealth both before and during retirement. We help connect the dots between key parts of your financial life so you can see what may be missing, make an effort to fill in the gaps and trust in a retirement vision that can be integrated into a financial plan built for your goals. 

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