Life Insurance In Retirement
I deal with many people going into retirement.
Joint tax filers and large 401ks to IRAs.
When they get into their 70’s and 80’s those RMDs can be painful and not to mention causes max tax to SSI income.
Suppose my client has $2million in IRAs, both are in their mid 60’s.
What if we had $500-$1m each of life insurance on them, then at 1st death (as it is extremely unlikely they both die in the same tax year) we use the tax-free death benefit to pay the “conversion” tax on all the IRAs as max tax is 37%.
Then flowing year- the single survivor is living on tax free Roth IRA money! What would that do to that persons SSI income, mostly TAX FREE! And, at the 2nd death Roth passes tax free to heirs (with 10 yr rule in place)
This concept is something I have found people really like.
Finally, for single people, we “redirect” IRAs beneficiary to a Charitable Trust, and use Life Insurance to family, all tax free!
I’d love to hear what Ed Slott thinks of this.
Gary
Permalink Submitted by Alan - IRA critic on Tue, 2025-08-26 16:47
This forum is not monitored by the Slott organization.
In the past, Ed has solidly backed using LI as part of an estate plan, and you can pull up various U Tube presentations he has made. But the devil is in the details.
How much will the LI premiums be, especially if purchased later in life when there are health issues?
What happens if both spouses live into their late 80s? There will be several years of taxable RMDs due before the first death.
How much is the value of other assets outside the IRAs? Most people with a 2mm IRA have a brokerage account and/or other assets that generate enough to result in SS income being partly or even 85% taxable. It does not take much since the income thresholds have never been increased for inflation. In such cases, a 100% conversion may not reduce SS taxation or only reduce it by a small amount.
There may be a fit for certain clients, but the numbers would have to be run.