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PFP2109 - PFP2109. The Unlimited Roth IRA - Tax free saving inside a Life insurance policy: Good or too good to be true?

Jul 26, 2021 1:30pm ‐ Jul 26, 2021 2:45pm

Standard: $49.00


Life insurance enjoys similar income tax characteristics as Roth IRAs. Premiums are paid into the policy after tax, earnings in the cash value, and withdrawals therefrom or loans thereagainst, are not includible in the policy owner’s gross income (if the policy is designed and managed properly), and death benefit proceeds are generally not includible the beneficiary’s gross income. For many high-income-earner taxpayers cannot qualify for Roth IRAs, or may be limited with how much can be contributed to a Roth 401(k), cash value life insurance can be a powerful Roth-alternative wealth accumulation strategy. For those with large traditional IRAs not needed for retirement income, cash value life insurance can also be a powerful wealth transfer strategy when distributions from the IRA are used to fund premiums. This session will examine how cash value life insurance can act as an “unlimited Roth IRA” for high earners to grow wealth, including a detailed analysis of the effect of policy charges on cash value accumulation compared to investing in a portfolio of traditional taxable investments, as well as an effective wealth transfer strategy to help control the damage caused by the SECURE Act on traditional IRAs.

Learning Objectives:
  • Outline the inner workings of cash value life insurance including its tax attributes and economics.
  • Express how to position cash value life insurance as an alternate to Roth IRAs for high-income-earning clients as well as understand how it compares to, and can compliment, a traditional investment portfolio.
  • Describe the implications of the SECURE Act on wealth transfer with respect to traditional IRAs and how cash value life insurance can be an effective strategy to help leave a more tax-efficient legacy.


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