Multiple accumulation strategies: Another benefit of the L.I.R.P. is the flexibility it provides in choosing how to grow dollars within the tax-free accumulation account. Clients can choose between one of three basic accumulation strategies at the outset of the program. Determining the right one for your clients will depend on their individual goals and objectives.

Insurance company investment portfolio: Clients can opt to grow their money within the general investment portfolio of the insurance company that administers their program. Because insurance companies are in the business of managing risk, these types of returns tend to be safe but very modest. Typical returns can range anywhere from 3 percent to 5 percent.
Stock market: Alternatively, clients can pass their contributions through insurance companies and into mutual fund portfolios called sub-accounts. While this approach can provide much higher returns, it exposes clients to the impact of severe market declines. Many Americans have steered clear of this approach in the wake of the economic collapse of 2008.
Index: In this arrangement, clients contribute dollars to an accumulation account whose growth is linked to the upward movement of a stock market index, like the S&P 500. Clients participate in the growth of this index up to a cap, typically between 13 percent and 15 percent. On the flip side, if the index ever loses money, the account is credited zero. With back-tested historical returns of between 7 percent and 9 percent, this can be a safe but productive way to accumulate tax-free dollars for retirement.

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