How Can They Be Used for Retirement?

These life insurance policies are tax deferred over time to build cash value.
A 7702 plan is a type of life insurance policy that has tax advantages to the insured. Due to deferment, the cash value is built bandar poker online.
The 7702 is not a retirement fund. Instead, it is a marketing name for cash value life insurance policies.
To be considered a 7702 and not subject the holder to taxable income, the plan must pass the cash value accumulation test (CVAT) and the guideline premium and corridor test (GPT).
When it comes to retirement plans, most people know about the 401(k) and various individual retirement accounts (IRA) available to savers. What many haven’t heard of, though, are 7702 plans. Marketed as vehicles to withdraw funds without incurring tax penalties, 7702 plans sound like a flexible retirement fund. So why aren’t they more widely used?

The answer lies in understanding what 7702 plans really are and how they differ from traditional retirement funds.

What are 7702 plans?
Named for a section in the IRS Internal Revenue Code (IRC), 7702 plans aren’t retirement funds at all. They are life insurance policies that can be leveraged for certain tax advantages. Under Section 7702 of the IRC, the federal government lays out the parameters by which life insurance policies that build cash value will be taxed.

These policies are essentially variable universal life insurance policies. Contributions to these policies grow tax-deferred over time and can be invested in different accounts. As a result, they do not have age restrictions on withdrawals. However, 7702 plans are not retirement funds and should not be viewed as a replacement for a 401(k), IRA or savings account.