Prepared for James and Rachel White · ConfidentialSplit, two policies
A way to move your retirement savings out of a tax trap and into an account you control, where the income comes out tax free and your family is protected along the way.
Where the money sits today
Your $785,000 has done its job growing, but it carries three pressures that never go away as long as it stays where it is.
Every withdrawal in retirement is fully taxable as ordinary income. At a 32% bracket, nearly a third of each check goes to the IRS.
Starting in your seventies the government forces taxable distributions whether you need the income or not. You lose control of the timing.
Under current law, the heirs who inherit this IRA must drain it within ten years and pay income tax on every dollar. The tax problem passes to your family.
The goal is simple: move this money from uncontrolled and at risk to controlled and safe.
How the rescue works
We reposition the IRA over 5 years into two indexed universal life policies, one for each of you. The clever part is the middle step: each policy lends you the cash to cover the tax, so you are not writing checks to the IRS out of pocket.
$157,000 a year flows from your IRA into the two policies, $78,500 into each, for 5 years.
Each move triggers about 42% in tax and penalty, plus a penalty and interest because the payment lands late. Policy loans of $34,607 each, $69,214 together, pay it, so nothing comes from your savings.
Once repositioned, the two policies pay tax free income for retirement, every year from 65 to 90.
The 42% reflects a 32% income tax plus the 10% early distribution penalty on each $157,000 moved. The loans are larger than the tax itself only because the payment is made late, which is broken out in the next section. Because the loans are internal to the policies, your out of pocket cost for the tax is effectively zero.
The repositioning years
Here is exactly what happens during the move. Money comes out of the IRA into the two policies, and the policy loans quietly settle the tax the following year.
| Year | Ages, James / Rachel | Into each | Into both | Tax loan each | Tax loan both |
|---|---|---|---|---|---|
| 2026 | 49 / 47 | $78,500 | $157,000 | — | — |
| 2027 | 50 / 48 | $78,500 | $157,000 | $34,607 | $69,214 |
| 2028 | 51 / 49 | $78,500 | $157,000 | $34,607 | $69,214 |
| 2029 | 52 / 50 | $78,500 | $157,000 | $34,607 | $69,214 |
| 2030 | 53 / 51 | $78,500 | $157,000 | $34,607 | $69,214 |
| 2031 | 54 / 52 | — | — | $34,607 | $69,214 |
| Total | $392,500 | $785,000 | $173,035 | $346,070 |
$785,000 moved out of the tax exposed IRA. The entire $346,070 tax and penalty cost is carried inside the two policies, not paid from your pocket.
Adjusting for the timing
Both policies issue on August 20, 2026. The tax on each distribution comes due on April 15, 2027, but the loans that pay it are not available until the policy anniversary, 127 days later. So the design funds the gap. Each policy carries its share of the tax, the late payment penalty, and the interest together, so all three are funded and none of it comes out of your pocket. Here is the adjusted bill on the full $157,000 moved each year, split evenly across the two policies.
| Item | Amount | What it is |
|---|---|---|
| Tax owed | $65,940.00 | 32% income tax plus the 10% early distribution penalty, the same rate either way |
| Failure to pay penalty | $1,648.50 | 0.5% of the unpaid tax for each month or part of a month it is late, 5 of them |
| Interest | $1,626.00 | 7% a year, compounded daily, over 127 days |
| Total funded by the loans | $69,214.50 | Tax, penalty, and interest, all covered, $34,607.25 per policy |
Adjusting for the timing adds $3,274.50 a year, $16,372.50 across the 5 repositioning years, and it is already built into every figure in this presentation. The ledgers round each policy loan to $34,607, $69,214 together.
The retirement payoff
James is two years older, so his income begins at his 65th and Rachel's at hers, two years later. For those first two years the household receives $40,718, then steps up to the full $94,678 once both streams are flowing. Each policy pays for 26 years, from that person's age 65 to 90.
Splitting the rescue across two policies gives up about $3,900 a year of income, roughly $101,500 over retirement, compared with funding a single policy on one life. In exchange the household carries about $40,000 more death benefit and both of your lives are covered. That trade is the reason to weigh this version alongside the single policy design.
The honest comparison
We gave the IRA every advantage: a steady 7.6% every year, no down markets ever, and a comfortable 4% withdrawal. Even under those ideal conditions, here is how the income and the taxes compare.
After tax dollars in your pocket from age 65 onward. Same idea, one is taxed, one is not.
Beyond the numbers
The income comparison is only part of the picture. The policy comes with protections an IRA was never built to provide.
Income tax free protection for your family from day one, across the two policies, $1,000,000 on James and $1,090,245 on Rachel.
Access a portion of each death benefit while living for a qualifying chronic or terminal illness, illustrated up to $441,332 on James and $497,866 on Rachel.
Indexed growth participates in up years and is shielded from down years. A bad market cannot reduce your value.
No required minimum distributions. You decide when and how much to take, on your own timeline.
Cash value life insurance carries meaningful protection from creditors, varying by state.
Your family inherits the death benefit tax free, instead of a fully taxable IRA they must drain in ten years.
The protection that starts immediately
The IRA only gives your family whatever it has grown to. The two policies deliver a full, tax free death benefit from the very first year. If you both passed at 55, the difference is stark.
In the early years the policies protect more, and what they protect arrives tax free. The strategy is self completing: if life is cut short, your family is covered in full.
The whole picture
| What matters to you | IRA Rescue | Leave in IRA |
|---|---|---|
| Retirement income tax treatment | Tax free | Fully taxable |
| Spendable income each year | $94,678 | $74,173 |
| Lifetime taxes you and family pay | $346,070 | $3,694,796 |
| Protected from market downturns | Yes, 0% floor | No |
| Death benefit if you pass early | Up to $2.09M | Account only |
| Living benefits if you get sick | Up to $939,198 | None |
| Required minimum distributions | None | Forced at 73+ |
| Tax owed by your heirs | $0 | Up to 32%+ |
| Largest theoretical balance, ideal markets | Lower | Higher |