Serving the needs of San Diego area clients, Brian Gibbs heads Heritage Retirement Advisors and works in areas such as tax, income stream, and insurance-backed solutions. One area in which Brian Gibbs has extensive knowledge is enabling San Diego families to make the most of insurance as they move toward retirement.
Using life insurance policies effectively in qualified retirement plans requires navigating IRS regulations. While such policies cannot be held within IRA or SEP plans, the IRS does provide for their inclusion in certain defined benefit and profit sharing plans. The advantage is that life insurance premiums can be paid for with pre-tax funds, thus reducing overall taxes. At the same time, life insurance provides policy beneficiaries with a death benefit that is income-tax-free.
There are several factors to consider in such an approach. Within defined contribution plans, the whole life policy premium can be no more than 50 percent of total contributions, with this dropping to 25 percent for universal life plans. When contributions that have accumulated in the participant’s account for more than two years are used toward paying the life insurance premium, other rules come into effect.
Another consideration is that the life insurance policy can only be held within the retirement plan as long as the covered party is a participant. Unwinding such arrangements can be complex, and the assistance of an experienced professional is recommended.
Brian Gibbs (San Diego) 