Retire Wisely: Use a Buffer Asset to Maximize Income and Legacy
Discover how using a buffer asset can protect your retirement income during market downturns and leave a tax-free legacy using Sections 101 and 7702.
6/25/20253 min read
How to Generate Tax-Free Income In Retirement With Zero Market Risk
If you’re planning for retirement and are concerned about market volatility, taxes, or outliving your savings, you’re not alone. These concerns are real and valid, especially as traditional pensions disappear and Social Security becomes less reliable. But there is a solution that combines tax-advantaged growth, tax-free income, and a built-in legacy for your loved ones.
By leveraging two powerful provisions in the IRS tax code Section 101 and Section 7702, you can build a strategy that not only gives you tax-free income in retirement but also protects your investments and provides a tax-free death benefit to your heirs.
This type of planning tool is often built using a properly designed whole life insurance contract. But this is not just about life insurance. This is about maximizing your overall portfolio by introducing a buffer asset and tax-free income to your retirement plan.
Watch This Short Video to Learn More
If you're looking for a way to enjoy a tax-free retirement without risking your money in the market, this video explains how the right strategy can help you save, grow, and protect your money using the tax code.
Click the image to watch the video
How the Strategy Works
When structured properly, permanent life insurance can be used as a tax-advantaged savings vehicle. Here's what it allows you to do:
Grow your money tax-deferred
Access income tax-free through policy loans
Avoid market risk entirely
Earn yearly non-taxable dividends
Leave a tax-free death benefit to your beneficiaries
It’s one of the few tools in financial planning that offers both living benefits and legacy benefits in one solution.
Why a Buffer Asset Matters in Retirement
One of the most overlooked threats to retirement income is the need to sell investments during a down market. When that happens, you lock in losses, and your portfolio has less capital to rebound. Over time, this dramatically increases the risk of running out of money.
With this strategy, your life insurance policy acts as a buffer asset. A non-correlated account you can draw from during negative market years. Instead of selling stocks or depleting your 401(k), you tap into the life insurance cash value, giving your investments time to recover, and allowing your retirement income to never skip a beat.
This simple shift can help:
Maintain consistent income, even in bad markets
Preserve your retirement accounts for future growth
Extend the life of your portfolio significantly
Enhance the legacy you leave behind
The Hidden Gem: The Tax-Free Death Benefit
While the cash value and income features are powerful, one of the most underappreciated parts of this strategy is the tax-free death benefit.
When you pass away, the death benefit is paid to your beneficiaries income tax-free under Section 101(a) of the tax code. This can serve multiple purposes in your overall retirement and legacy plan:
Offset taxes owed by heirs on inherited 401(k)s, IRAs, and other taxable assets
Provide liquidity to pay estate or income taxes without having to sell investments
Enable you to spend more freely in retirement, knowing your legacy is already covered
Leave behind a guaranteed, tax-free legacy, no matter what happens in the market
In other words, you can confidently use your retirement savings to enjoy life without worrying about leaving nothing behind, because the money your family inherits comes from the life insurance, not your spent-down assets.
Who Is This Right For?
This strategy may be a great fit if you:
Are between the ages of 30 and 65
Want to reduce overall taxes on retirement income
Are concerned about market volatility and sequence of returns risk
Want to leave a meaningful, tax-efficient legacy
Prefer predictable, flexible income sources in retirement
Want to maximize your retirement income plan
Next Steps
If you're interested in building a tax-free retirement income plan that includes downside protection and a guaranteed legacy, this strategy deserves a closer look.
Schedule a complimentary retirement income strategy session to see how a buffer asset and tax-free death benefit can work together in your plan.