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Question for the Money Doctors

Question submitted on May 22, 2014.

Question

We have had a LIRP for 3 years. Also have 401(k) plans through employer. Both of us are 55 years old and joint AGI 2013 $160,000. What is the best amount of cash to invest in a LIRP with a LTC rider? What other investments make more sense if retiring by age 65?

Answer

A Life Insurance Retirement Plan (LIRP) is a life insurance policy specifically used to help fund retirement. Whether or not an LIRP makes senses (or how much to fund one) depends on many factors. Assuming your 401(k) plans are solid (i.e., low cost, decent investment choices, etc.), I would suggest you first fully fund your 401(k) accounts (total of $23,000 for someone age 50 or over) before funding the LIRP. Also, make sure you understand how the life insurance policy works, including what to expect to get from it down the road, embedded costs, and the funding strategy. Under what circumstances would additional premiums need to be paid versus the initial illustration? Regarding the LTC (long term care) rider, I'm afraid that question is beyond what can be answered here since there are too many factors to consider. You may want to consult an independent advisor/agent to discuss LTC insurance options and whether or not the rider on the LIRP policy is your best choice.


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