Retirement Plan Schemes


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I received a question at USTaxAid.com about 702j plans. What were they? Were they any good?

Whenever you see numbers in the title of something that is remotely tax or financially based, the numbers probably have something to do with the IRS Tax code. For example a 501 (c) (3) charity is set up according to IRS Tax Code 501 (c) (3). A 401 (k) plan is set up according to 401 (k)

A “702j” plan is something that comes about because of Tax Code number 7702. Most people looking into the plan are looking for a retirement plan. There is a lot of money being put into advertising by a group called Palm Beach something or other.

When you look at the code, you see what it really is – a whole life insurance policy.

Personally, I don’t like advertising that tries to disguise what something is. If we’re talking about whole life insurance policies, let’s talk about them.

Permanent life insurance policies are designed to provide coverage for life and also contain a cash value component. The cash value account builds up and you can borrow against it.

The 7702 scheme uses a permanent life insurance policy that you overfund. Then later, you can pull that out as a loan against cash value.

Some of the things to look at: what are the fees for the life insurance, what (if any) guarantee do you have on the return for the money you’ve put in the plan and what is the overall guaranteed return.



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