Joe’s Teaching Moments-Roth IRA vs. IBC “Bank”

The Roth IRA, named after its chief legislative sponsor, the late Senator William Roth, has continued to grow in popularity since its inception in 1997.

While generally similar to a Traditional IRA, Roth IRAs have some unique features that account for their popularity; such as income tax-free qualified distributions and no required minimum distributions (RMD’s) during the owner’s lifetime.

While Roth IRA’s hold definite appeal, there are some drawbacks and limitations:


  1. Not Everyone Can Play. Income limitation precludes some individuals from contributing to a Roth IRA ($183,000 to $193,000 adjusted gross income for married couples filing jointly for 2015).

  2. Relatively Low Limits. Roth IRA annual contribution limits are relatively low ($5,500 for individuals under age 50 and $6,500 for individuals age 50 and older for 2015).

  3. No access to funds. Since Roth IRA’s are Government Qualified Plans, accessing your funds prior to age 59-1/2 will incur a 10% penalty for early distribution.

  4. Included in One’s Estate. Roth IRAs are included in a decedent’s gross estate and may trigger state and federal estate taxes (where applicable).

But wait; there is another option for Roth IRA fans.

Most people know the value of a life insurance policy’s death benefit, providing income tax-free cash to a spouse or loved one. But a properly engineered whole life policy, (IBC Bank), in many respects resembles a “Roth IRA”, with a self-completing benefit. In fact, I recommend using a permanent life insurance policy over a Roth IRA for the following reasons:

  1. Life Insurance is Not a Government Qualified Plan. That’s right. Using a life insurance policy as a retirement plan is not part of any Government program. So all those “rules” that govern “Roth IRAs” do not apply.

  2. Everyone Can Play. There are no upper Income limitations for individuals who opt to use life insurance as this type of retirement plan. One must qualify based on underwriting criteria and must have the ability to pay.

  3. Fund Any Amount You Choose. Again this is different from a Roth IRA. There are no max funding limitations except those that are set by the Insurance Company and those limits are set at extremely high limits.

  4. You Can Access your Funds before 59-1/2. That’s right. As the owner of a life insurance policy, you have the right to withdraw funds (thru loans); from your policy’s cash values anytime you want, without incurring penalties or taxes. No minimum age requirements with this plan. (This cannot be done with a Roth IRA).

  5. Tax-Free Distributions at Retirement Age. No Required Minimum Distributions with this plan. You may enjoy tax-free income thru withdrawals and/or loans. Any Amount. Any Time. Any Age. You decide. 

  6. Self-Completing Retirement Plan. If death occurs before you begin your retirement, this plan has a built in solution. The death benefit immediately delivers a fully funded retirement plan to your spouse or loved one. This self-completing retirement plan benefit is paid as a lump sum income tax-free cash payment. (Try getting this feature from a Roth IRA)!

  7. This Retirement Plan May be Excluded from One’s Estate. Again, a life insurance policy may be excluded from a decedent’s gross estate if proper estate planning had been completed prior to the passing of the individual. (Remember, a Roth IRA must be included in the decedent’s gross estate).

If you like the idea of owning a Roth IRA, but don’t like all the Government red tape…then you should definitely consider using a properly engineered whole life policy, issued by a Mutual Life Insurance Company.

Nelson Nash recommends using this type of policy with “The Infinite Banking Concept, Becoming Your Own Banker”.

These are the retirement plans I own and have been teaching others to use since 2003.

If you have read this with an open mind; you may be able to “see the light” and begin to think outside the box. Less is more. Less Government regulations gives us more options and I think that is a good thing.

Stay tuned for more of Joe’s teachable moments.