Ask Terry Questions Investment


By Terry Savage on December 17, 2013 | Insurance & Annuities

Is it a good move to start putting money into a lirp from an annuity and 401k ?
I will be 60 years old in 2 weeks

Terry Says:  I assume you are talking about a Life Insurance Retirement Plan, which is a fancy name for getting you to buy more life insurance than you really need, in order to take advantage of the tax-deferred growth within a policy.

Now, I have nothing against life insurance, properly used and I definitely feel you should have “enough” to provide for those who depend on your income, now and in the future.  If you’re young and need more coverage, then buy term insurance.  It won’t build cash value, but it will give the desired coverage.  And a cash value policy — variable, universal, etc. — can definitely build cash that can be borrowed out for retirement or build death benefits.

BUT why on earth would you consider taking money out of your 40l(k), which will require that you pay income taxes on it, only to turn around and put it inside another tax-deferral vehicle based on insurance, which will certainly have higher costs because you’re paying for the “mortality” costs — the ultimate death benefit?

If you need insurance,  but life insurance.  If you don’t need the money in your retirement plan, then keep it growing tax deferred until you do, or until you’re forced to make Minimum Required Withdrawals, starting at age 70-1/2.

The only person who benefits from the question you asked, the plan you proposed, is THE LIFE INSURANCE SALESPERSON!



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