Similar returns with less risk
The cash value that grows inside of a permanent life insurance policy is tax-deferred and can be accessed as tax-free income. However, this savings strategy is subject to monthly policy charges which are subtracted from the cash value in order to fund the death benefit protection – but are usually less than the amount of taxes you’ll pay in an investment account.
On the flip side, if you were to invest the same amount of money into a taxable investment account, as many financial
advisors suggest, you will be subject to both short term and long term capital gains tax along with possible management fees. Utilizing a properly structured, low fee LIRP (Life Insurance Retirement Plan) can save on taxes, reduce the impact from market downturns, and potentially result in having more funds available that last longer when compared to a taxable investment account.