Retirement insurance?

With today's ever-increasing restrictions on retirement plans, many professionals are looking for ways to simplify their lives and avoid paying additional fees to maintain a qualified retirement plan, such as pension, profit-sharing , 401(k), or SEP plans. They are turning to life insurance plans — such as variable life or indexed universal life. These plans are funded with additional dollars that accumulate in an environment sheltered from any taxes.

One benefit of this type of plan is that it has no requirement to include any employees, nor does it require paying fees to keep the plan up to date.

Here is an example of how this type of plan works:

Dr. A is 38 years old and will deposit $2,000 each month to this program. At age 65, he will start withdrawing a retirement income of $90,000 per year until age 100, totally tax free. He will pay in a total of $648,000, and take out a total of $3,150,000, tax-free.

He will pay taxes on the dollars going into the plan, so his total tax liability is $7,200 per year at a 30 percent rate for a total of $194,400. If he had a qualified plan, he would pay taxes on the money coming out, so to yield $3,500,000, he would have to have $4,550,000, for a tax bill of $1,050,000.

Which is better: To pay a tax now of $194,400, or to pay $1,050,000 later? This type of retirement insurance works just like a ROTH IRA, but without the restrictions.