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🛡️ Tax-Free Retirement Strategy · 2026

See How Life Insurance Can Pay Your Retirement Tax Bill

Most retirees withdraw more than they need from qualified accounts just to cover taxes — silently eroding the balance that should be compounding. This calculator shows you what changes when life insurance cash value pays those taxes instead, letting your qualified and non-qualified accounts grow undisturbed and deliver more income for life.

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Your Timeline
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Set your current age, when you plan to retire, and how long you want the plan to run.
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Account Values & Growth Rates
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Enter current balances and set the annual growth rate used during accumulation. Actual S&P 500 returns are applied during distribution.
Qualified
401(k) / Traditional IRA
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Pre-tax contributions — every dollar withdrawn is taxed as ordinary income at your selected tax rate.
$
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25% ordinary income tax
Gross distribution required to net your income target
Roth IRA
Roth IRA — Tax-Free
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After-tax contributions. Qualified withdrawals (5+ year rule) are 100% income-tax-free — no gross-up needed.
$
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✓ 0% — Tax-Free
Assumes 5+ year seasoning rule met
Non-Qualified
Brokerage / Savings / Cash Value
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After-tax contributions. Growth is taxed at the long-term capital gains rate you select — 0%, 15%, 20%, or 23.8% (including the 3.8% Net Investment Income Tax for higher earners).
$
%
Long-term capital gains rate applied to non-qualified distributions
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Retirement Income & Tax Rate
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Set your target retirement income in today's dollars, an annual inflation rate, and your hypothetical blended tax rate.
$
First-year income need, in today's dollars. Grows with inflation each year.
0%2%4%6%8%
At 3%, $80k/yr becomes $145k/yr by year 20. ⚠ Based on historical U.S. CPI averages — adjust to your own assumption.
25% ordinary income
0%15%25%35%45%
Roth: 0% · Non-Qual: ½ this rate · Qualified: full rate
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Distribution Order
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Drag to set which account gets drawn down first. The first account listed will be fully depleted before moving to the next.
⠿ 1
Qualified Account
401(k) / Traditional IRA — taxed at full income rate on withdrawal
Qualified
⠿ 2
Non-Qualified Account
Brokerage / savings — cap gains treatment on distributed growth
Non-Qual
⠿ 3
Roth IRA
Tax-free qualified distributions — save this for last to maximize tax-free compounding
Roth
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Your Information
Showing results for your projection
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Your results will appear here
Fill in your information and account details on the left, then click Calculate to see your personalized tax-free retirement projections.
Life Insurance Tax Strategy — Comparing Outcomes
In this strategy, your qualified account distributes only the exact income you need (no gross-up). The tax owed on that distribution is paid by life insurance cash value — preserving more of your retirement accounts. The chart and table compare both strategies side by side.
How this works
Standard Strategy (Strategy A)Qualified accounts are grossed up — you withdraw more than you need so taxes are paid from the account itself. Each dollar of tax reduces the compounding balance.
Life Insurance Strategy (Strategy B)Qualified accounts distribute only your target income. The tax bill is paid from life insurance cash value — keeping your qualified balance larger and compounding longer. The LI pool grows at a fixed 1.0% net rate (4.5% gross minus 3.5% expenses), independent of market returns.
Life insurance tax fund starting balance
$
Cash value available to pay taxes. Grows at the accumulation rate of your non-qualified account. Depletes as it covers annual tax bills.
Qual. draw — Standard Qual. draw — LI Strategy Tax — Standard (line) LI pays tax (line) Qual. bal — LI Strategy (line)
Life insurance strategy comparison chart
Qualified Account Balance: Standard vs. Life Insurance Strategy
The LI strategy preserves more of your qualified balance each year. This chart shows the difference.
Qual. balance — Standard Qual. balance — LI Strategy LI pool remaining
Balance comparison chart
Strategy A — Investment Only (No Life Insurance)
Qualified distributions are grossed up to cover taxes. Taxes paid directly from the account each year. Account growth uses actual S&P 500 annual returns (most recent years ending 2024).
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Strategy B — Life Insurance Pays Taxes
Qualified draw equals your income target. LI covers the tax. Roth/Non-Qual draws match Strategy A — see table above for those columns.
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Age S&P Withdrawal ¹²³ Total Tax LI Pays Tax ¹³ After-Tax End Balance Advantage vs A

¹ Qualified (401k/IRA): Draws exactly your income target — no gross-up. Life insurance covers the ordinary income tax owed so the full withdrawal is spendable. Without LI the account would need to distribute more than your target to net the same after-tax income.

² Roth IRA: Qualified withdrawals are 100% tax-free — no LI needed. Assumes the 5-year seasoning rule is met and you are over age 59½. Drawn only after accounts higher in your distribution order are exhausted.

³ Non-Qualified: Draws exactly your remaining income need — no gross-up. Life insurance covers the long-term capital gains tax owed on distributed growth so the full withdrawal is spendable. Without LI the account would gross up to cover the LTCG tax internally. If the LI pool is exhausted, both qualified and non-qualified distributions revert to the standard gross-up method.

Account growth during distribution uses actual S&P 500 annual total returns (with dividends reinvested) sourced from 1928–2024, applying the most recent consecutive years that fit your distribution window. If your plan exceeds 97 years of available data, the remaining years fall back to your selected accumulation growth rate. Strategy B assumes life insurance cash value is available to pay income taxes on qualified distributions each year; the LI pool grows and declines at a fixed 1.0% net rate (4.5% gross minus 3.5% expenses), independent of market returns. This is a hypothetical stress-test illustration only — actual portfolios are diversified and returns will differ. Not investment, tax, or legal advice. Consult a licensed advisor before implementing any strategy.

Ready to Build a Tax-Free Income Layer?

Life insurance cash value can supplement these accounts with tax-free income — helping you reduce your total tax burden and protect against sequence-of-returns risk.

📞 Talk to an Advisor
Accumulation Phase — Account Growth to Retirement
Year-by-year account values from today through retirement age, stacked by account type.
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Qualified (401k/IRA) Roth IRA Non-Qualified
Account accumulation chart
Distribution Phase — Annual Withdrawals & Tax Due
Annual draw from each account type (stacked bars) with total tax due shown separately in red. Income target grows with inflation each year.
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Qualified withdrawal Roth withdrawal (tax-free) Non-Qualified withdrawal Total tax due
Distribution chart
Remaining Balances During Retirement — Standard Strategy
Shows when each account type runs to zero based on your distribution order and income target, with taxes paid from the distributing account.
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Qualified Roth IRA Non-Qualified
Balance chart

Ready to Build a Tax-Free Income Layer?

Life insurance cash value can supplement these accounts with tax-free income — helping you reduce your total tax burden and protect against sequence-of-returns risk.

📞 Talk to an Advisor