LIRP?

[Zeno]

I had a sit down with my financial advisor today and aside from the reality of my investments not doing so well we talked retirement. He suggested I look in to a Life Insurance Retirement Plan (LIRP) as I will soon be ineligible to contribute to a ROTH due to my income exceeding the limits.

Does anyone here already have a LIRP?

Can anyone explain in an extreme laymans terms how it works? He handed me pamphlets and tried his best to explain it to me but maybe I am too slow...I don't fully understand.

 

[82CardsGrad]

The owner of my company uses these as a "deferred compensation" plan. They are actually quite attractive and also serve the purpose of a retention tool.

Our plans are with Mass Mutual. Their rate of return has averaged around 7% over the past 10 years, so, it's also a terrific investment.
The way our plan works is that you first set a timeframe as to when you think you will want to retire. You also attempt to hone in on a cash balance that you believe will be desireable, and attainable, at the time you retire. Obviously, your current age is a big factor in this equation.

As an example, I have an employee who is 48. He's a non-smoker and in good health. He would like to retire at 60. We selected a program with an annual premium of $20,000. We pay that premium over a 10 year period. At the age of 60, it's estimated that the cash balance in the plan will be approximately $243,000. Our plan says that we will pay this employee $4,000 per month over a 5 year period, or, he can take the $243,000 in a lump sum. Or, if he chooses to hold off on accessing these funds - at the age of 65 the cash balance is estimated to be $327,000.

I am sure there are many variation on this theme...

 

[Zeno]

Thanks 82.

The one plan I was shown was with MetLife. He based it on me continuing to contribute what I do to my ROTH (which is the max of $5K a year) for 20 years and starting to make withdrawals at 60. It was a return of about $16K a year...It sounded almost too good to be true. I am going to sit down with him and the MetLife rep in a few weeks to see how well they can explain it to me page by page.

I will be 39 in a few months and plan to retire at 57 (at which point I will have 32 years of service in my job). Luckily I will have a pension, but I need to make sure everything is there so I can retire comfortably.

 

[82CardsGrad]

Thanks 82.

The one plan I was shown was with MetLife. He based it on me continuing to contribute what I do to my ROTH (which is the max of $5K a year) for 20 years and starting to make withdrawals at 60. It was a return of about $16K a year...It sounded almost too good to be true. I am going to sit down with him and the MetLife rep in a few weeks to see how well they can explain it to me page by page.

I will be 39 in a few months and plan to retire at 57 (at which point I will have 32 years of service in my job). Luckily I will have a pension, but I need to make sure everything is there so I can retire comfortably.

I'm definitely not a financial expert Zeno. However, I joined the company I am with now about 4 years ago. I know of 4 people in my company who have received this "deferred comp" plan - each of whom have been with the company for over 20 years, so they each have gone thru the 10 years worth of premiums being paid. None of them are age 60 yet, however, the current cash balances in their plans are actually higher than first estimated! All of them received exactly what was promised to them. It does sound almost too good to be true - however, I have 4 instances right before my eyes where the numbers worked and the current cash balances are there.
I met with our rep. from Mass Mutual just last week as, thankfully, the owner of my company gave me this benefit 3 years ago. As is the case with the 4 I mentioned above, the cash balance in my plan is actually higher than initially estimated. In all case, me and the other 4 would've been perfectly fine had the cash balances equalled what was estimated. However, the actual is higher than the estimate! Hard to beat...