![]() ![]() So, if the child decides to add more money to the plan over time, these funds will also have the benefit of growing tax-deferred. There is also no funding limit with a LIRP as long as you do not MEC the policy. This means that money is available at any age, and it doesn’t have to be reported on a tax return. Unlike IRAs and employer-sponsored retirement plans like 401(k)s, there is no IRS “early withdrawal” penalty for accessing funds from a LIRP prior to age 59 ½. ![]() This can allow the money in the policy to grow and compound exponentially over time. That’s because IUL’s provide guaranteed minimum floors of 0%, which keep the principal safe.Īs the cash value in the policy grows, it is able to compound on a tax-deferred basis, meaning that no tax is due on the gain. In addition to the opportunity for cash value substantial growth, with a Child LIRP, there is no need to worry about the loss in value – even if the stock market tumbles. We can set you up with the best life insurance companies as we know all the carrier’s products and benefits. These plans can offer the chance to attain double-digit upside performance, depending on the stated “cap,” or maximum. Starting a Child LIRP (or IUL for a kid) can provide both financial security and protection throughout all phases of his or her life.Ī Child LIRP is an indexed universal life, or IUL policy, the cash value can grow, based on the performance of an underlying market index such as the S&P 500. Plus, there are strategies for accessing this cash tax-free, so it can be used for paying off high-interest debt like student loans, or a nice supplement to future retirement income. It can also offer guaranteed insurability throughout the child’s life – even if he or she contracts an adverse health condition in the future.Īnother key benefit of a Child’s LIRP is the cash value – which can grow to an excess of a million dollars by the time the child reaches retirement age. This can provide funds for parents and other loved ones if the unthinkable occurs. ![]() One is because these plans offer a significant death benefit for the child, starting on day one. That’s because, with no real benefit to speak of, it was probably determined at some point that the premium wasn’t worth paying.īut a Child LIRP is much different from whole life coverage – and there are several reasons for this. Unfortunately, the only one that these plans usually benefitted was the life insurance company. It’s likely that, while well-intentioned, this plan offered only a small death benefit, along with cash value that grew – but at a turtle’s pace. Your grandparents may have set up a child whole life insurance policy for you when you were young or they may have opted for the Gerber Grow Up plan. ![]()
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January 2023
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