Tax Free Retirement Concepts

Tax-Free Retirement Plans

Permanent Life Insurance (Section 7702 Plans/TFRAs): life insurance policies can build cash value that can be accessed as tax-free income through policy loans in retirement.   These have no contribution limits and are not subject to RMDs.

The Kai-Zen System:  a specific type of financed indexed universal life (IUL) insurance plan that uses leverage to help income earners accumulate more wealth for retirement.

How it Works: The plan uses bank financing to supercharge contributions to a cash-accumulating life insurance policy. The participant (or their employer) makes contributions for the first 5 years, while a bank finances the majority of the premiums (often a 3:1 leverage ratio). The life insurance policy itself serves as the sole collateral for the commercial loan, which means participants typically do not need to sign loan documents or provide personal guarantees.

Benefits: The goal is to build a larger cash value faster than could be done through self-funding alone. This cash value grows tax-deferred, has a 0% floor to protect against market losses, and can provide a stream of tax-free income during retirement through policy loans. It also includes a death benefit and living benefit riders for critical/chronic illness.

Target Audience: It's designed for higher income earners who may have already maxed out traditional retirement plans (like 401ks and IRAs) and are looking for additional tax-advantaged savings options.   

• Roth IRA:  an individual retirement account funded with after-tax dollars.
  • Contributions & Withdrawals: Contributions can be withdrawn anytime, for any reason, without taxes or penalties. Qualified withdrawals of earnings (after age 59½ and meeting the five-year rule) are entirely tax-free.
  • Limits & Rules: It has annual contribution limits of $7,500 for individuals under age 50, and an increased contribution limit of $8,600 for individuals over age 50. Roth IRAs also have no required minimum distributions (RMDs) during the original owner's lifetime.
• Roth 401(k): This option is offered through an employer's retirement plan.
  • Contributions & Withdrawals: Contributions are made with after-tax money, and qualified withdrawals are tax-free.
  • Limits & Rules: It has annual contribution limits of $7,500 in 2026, plus a $1,100 catch-up for ages 50-59 totaling $8,600, and an additional super catch-up of $11,250 for ages 60-63, for a total of $35,750. Unlike a Roth IRA, has no income limits for contributions. Roth 401(k) accounts generally are subject to RMDs, but these can often be rolled into a Roth IRA to avoid them.

Other Sources of Tax-Free Retirement Income

Health Savings Account (HSA): Contributions are tax-deductible, the money grows tax-free, and withdrawals are tax-free if used for qualified medical expenses. After age 65, funds can be withdrawn for any purpose (subject to ordinary income tax, but no penalty), making it a versatile retirement savings tool.

Municipal Bonds: Interest earned from municipal bonds is generally exempt from federal income taxes and potentially state and local taxes if issued by your home state.