If you thought a 7702 plan is a retirement plan in itself, then you’re in for a big surprise. Of course, you may come across one or two insurance agents who market it as a retirement plan, but this is not really the case. Instead, it is more of a life insurance policy with higher premiums than term insurance policies.

Before you even think about leveraging 7702 plans, you ought to be fully aware of what is set to come your way. Fortunately, we are here to offer a helping hand and clear any doubts you might have in mind. Here are some of the most important things you ought to keep in mind before taking 7702 plans.

Tax Deductions

By now you should be aware of the fact that the money invested in your retirement plan is tax deductible even though the limits tend to change from year to year.  So do not be surprised if you do not enjoy tax benefits after opting for IRA and 401(k) plans. Things tend to be different when it comes to life insurance premiums since they’re viewed at as personal expenses and are not tax deductible. In short, 7702 plans do not come with tax deductions.


If you happen to own a retirement account, then you may already know withdrawing cash before your retirement age is likely going to result in a penalty. There might be some exceptions, but in most cases, if you withdraw your money early, you’re going to be taxed. With cash value life insurance, it is somehow complicated since you can pull out money early until your basis.

What this simply means is that you’re allowed to withdraw cash up to the amount of premiums you’ve paid in. Keep in mind this also includes any other withdrawable you may have taken initially.  In short, 7702 plans are entitled to penalties if you withdraw cash from your account earlier on.

Be sure to spend some time figuring out what 7702 plans entail before you finally jump into any conclusion.