Frequently Asked Questions
Q: I'm already retired, can I start a 7702 Life Insurance Retirement Plan?
A: Generally, an accumulation period of 7 to 15 years is required for life insurance to produce superior tax free retirement income. Shorter period accumulation scenarios can be illustrated, but we find the risks associated with these scenarios extraordinary. If your objective is tax-free retirement income, and your accumulation period is shorter than 7 years, then there may be other alternatives that can produce superior results.
Q: I'm over 70 years old. Can I start a 7702 Life Insurance Retirement Plan?
A: Starting a life insurance policy for retirement accumulation at older ages may or may not be a suitable solution for you, depending on the facts of your situation. If your deferral period is shorter than 7 to 15 years, an annuity or other savings vehicle may be a better option. On the other hand, if your family history is one of extraordinary longevity, and you're still saving for the future, life insurance may still be a suitable option.
Q: Can I start a 7702 Life Insurance Retirement Plan for a minor child or grandchild?
A: Yes. Unlike a Roth IRA or Traditional IRA that require "earned income" to start, a Life Insurance policy can be started without the need for "earned income" reported on a tax return. Most life insurance companies do have financial underwriting guidelines for life insurance issued on the lives of juveniles, but substantial policies may be obtained when the applicant uses an agent with experience in negotiating larger policies with special circumstances. In general, a parent or legal guardian must approve of the application, when a grandparent is making the purchase.
Q: My financial adviser recommended term life insurance. Can I still start a 7702 Life Insurance Retirement Plan?
A: Yes. In fact, it is possible to convert your current life insurance expense into an asset class that grows.
Q: I own a business. Can I start a 7702 Life Insurance Retirement Plan?
A: Yes. Virtually any size business from a sole proprietorship to a Fortune 100 sized company can purchase investment grade Life Insurance to fund a Retirement Plan under Section 7702. Nine out of ten large public corporations use investment grade Life Insurance to fund various retirement plans, including nonqualified deferred compensation, 401k mirror plans, executive bonus plans, and key person insurance plans. In fact, 49 out of the 50 largest banks have more cash values in their Tier I reserves than any other asset class (this fact is ignored by certain life insurance critics who demonstrate poor math skills, judgmental heuristics, and mental accounting).
Q: I am a business owner. Can I start a 7702 Life Insurance Retirement plan for the benefit of my key employees?
A: Yes. There are several options that make the use of investment grade Life Insurance for retirement accumulation especially attractive to business owners. As long as certain safe harbors are used, premiums may be tax deductible to a corporation, and benefits may be used to create "golden handcuffs" to attract, reward, and retain high value key employees. Unlike a qualified plan, like a 401(k), pension, SEP IRA, or SIMPLE IRA, a 7702 Life Insurance Retirement Plan may be discriminatory. The owner can choose who participates in the plan.
Q: My company has a 401(k) plan, and I have a Roth IRA. Can I still start a 7702 Life Insurance Retirement Plan?
A: Yes. Unlike your 401(k) plan, or any type of IRA, there are no IRS limits on how much you Life Insurance you can purchase. Insurance companies have financial underwriting guidelines, but an expert can help you design the right policy for your situations.
Q: I own rental property, and all my income is "passive" so I'm not eligible for an IRA or Roth IRA. Can I set up a 7702 Life Insurance Retirement Plan?
A: Yes. Unlike all types of IRA plans, there is no "earned income" requirement to set up an investment grade Life Insurance policy.
Q: I own a farm, and have all my land leased out to another farmer, so I do not have any "earned income" and cannot contribute to an IRA. Can I set up a 7702 Life Insurance Retirement Plan?
A: Yes. Unlike all types of IRA plans, there is no "earned income" requirement to set up an investment grade Life Insurance policy, even a "gentleman farmer" can set aside some savings for the future.