A growing share of Gen Z is not chasing meme stocks or prediction markets. They are saving with unusual intensity. Bloomberg recently profiled the trend under the label “retirement-maxxing,” describing young savers opening retirement accounts earlier than any prior generation and maxing them out year after year. According to Vanguard, roughly a third of Gen Z savers who contributed to an IRA last year hit the full contribution limit, and Gen Z, on average, begins saving and investing at age 19, compared with 32 for Gen X and 35 for Baby Boomers, according to a 2024 Charles Schwab survey.
The instinct is a sound one. But for the most disciplined savers, and for the parents, employers, and advisors guiding them, the ceiling on tax-advantaged retirement accounts arrives faster than most expect. A 401(k) is capped at $24,500 in 2026. An IRA is capped at $7,500. Roth IRA eligibility phases out entirely once income crosses six figures for single filers. For a generation determined to “get ahead while young,” in the words of one 26-year-old profiled by Bloomberg, hitting that ceiling in their late twenties or early thirties is no longer unusual.
At Cedar Point Financial Services LLC, we work with high-net-worth and ultra-high-net-worth families, as well as, increasingly, their adult children and young executives, to build savings strategies that pick up where qualified plans leave off. Cash value life insurance, properly designed, can be a versatile, tax-advantaged tool for extending a retirement-maxxer’s runway well beyond what a 401(k) or IRA alone can provide. It is not the right fit for everyone, however, and it carries costs and risks that deserve the same attention as its benefits.
What Is “Retirement-Maxxing”?
Retirement-maxxing describes a cohort of Gen Zers, some aligned with the FIRE movement (financial independence, retire early), others simply anxious about the future, who are opening IRAs and 401(k)s earlier than prior generations and contributing the legal maximum each year. A 2024 report by the Investment Company Institute and the University of Chicago found that older Gen Zers hold nearly three times more assets in retirement accounts (adjusted for inflation) than Gen X households had at the same age in 1989.
The motivations are practical rather than aspirational: rising real estate prices and interest rates that have made homeownership difficult, a Social Security trust fund facing a projected funding shortfall, and an entry-level job market being reshaped by artificial intelligence. Retirement-maxxers are reacting to those pressures with a clear response: save early, save often, and close the gap while time is still on their side.
The Ceiling Every Retirement-Maxxer Eventually Hits
Those limits arrive even faster for two groups worth watching. Owners and highly compensated employees at smaller companies often find their 401(k) contributions capped further still by IRS discrimination testing, which exists to keep qualified plans from disproportionately benefitingexecutives and owners over the rank and file. And once Roth IRA eligibility is lost to rising income, it does not return simply because a young professional's career took off.
Even a fully funded qualified account carries a structural limitation that matters to a generation drawn to financial independence before age 65: the money is generally inaccessible without a 10% early-withdrawal penalty before age 59½. The planning experts at Cedar Point Financial Services LLC recognize that for a retirement-maxxer who wants both accumulation and flexibility, that gap is where cash value life insurance planning begins.
Overfunding a Cash Value Policy: The Life Insurance Retirement Plan (LIRP)
A life insurance retirement plan, or LIRP, is not a distinct product but a funding strategy applied to a permanent cash value policy, typically whole life, indexed universal life, or variable universal life, in which the policyholder contributes more premium than strictly required to keep the policy in force. The goal is to purchase the minimum death benefit the law allows relative to premium paid, which is designed to help manage insurance costs and emphasize tax-deferred cash value growth.
For the strategy to work, the policy must be funded as a non-Modified Endowment Contract under IRC §7702A. A properly structured non-MEC allows cash value to be accessed later through withdrawals of basis and policy loans that are not treated as taxable distributions under IRC §72, provided the policy stays in force, and the death benefit generally passes to heirs income-tax-free under IRC §101(a). The Consolidated Appropriations Act, 2021 expanded how much premium can be contributed relative to a given death benefit, making LIRPs a more flexible savings vehicle than a decade ago.
What makes an LIRP particularly relevant here is what it does not have: no IRS contribution ceiling beyond what the death benefit supports, no income limits for participation, and no age 59½ penalty on accessing cash surrender value, although surrender charges may apply in the early years. A policyholder can draw on it for a home purchase, to buy or start a business, or simply provide themselves with the freedom to say no to a job they no longer want, allowing the policy to become the segue to the freedom Bloomberg’s retirement-maxxers are chasing. A LIRP also performs best for policyholders who can wait a decade or more before they need to use the money, which describes this generation almost exactly.
Understanding the Costs and Risks
An overfunded policy is not a substitute for a qualified plan, and it is not without cost. Every policy carries cost of insurance (mortality) charges, administrative fees, and premium loads, and most impose surrender charges that can last ten years or longer. As a result, cash surrender value in the early years is often well below the premiums paid, which makes these policies a poor fit for money that may be needed in the near term. Indexed and variable universal life policies add performance risk: index crediting is subject to caps and participation rates, variable subaccounts can lose value, and illustrated returns are not guaranteed. Underperformance may require higher premiums to keep the policy in force.
The tax advantages also come with conditions. Policy loans are loans, not income. They accrue interest, reduce cash value and the death benefit, and if loans grow too large relative to cash value, the policy can lapse. A lapse or surrender with loans outstanding can trigger income tax on the gain even though the policyholder receives no cash at that point. Funding a policy beyond IRS limits turns it into a MEC, which changes how distributions are taxed. Tax treatment ultimately depends on policy design, ongoing funding, and current IRS rules, which is why these strategies should be reviewed with a qualified tax advisor and monitored over time.
That is why we start with a conversation rather than a product. Let’s discuss your situation, your timeline, and your liquidity needs and see whether an overfunded policy might be a good fit, or whether another approach makes more sense.
A Step Above Traditional Employer-Sponsored Savings Plans: Non-Qualified Retirement Plans
Some of the fastest-accumulating members of Gen Z are key company personnel, maxing out their company 401(k) and outstripping what a qualified retirement plan allows, or whose company’s 401(k) is constrained by discrimination testing. A non-qualified deferred compensation plan, governed by IRC §409A, allows a business to contractually promise additional compensation to a key employee at a future date, with no dollar limit on how much can be deferred. The tradeoff is that the deferred amount remains a general, unsecured asset of the business until paid out, and these plans are frequently funded informally using corporate-owned cash value life insurance to support that future obligation. Speak to a team member at Cedar Point Financial Services LLC to find out if a non-qualified retirement plan might be a solution to provide future income to key company personnel.
Cash Balance Plans and Split-Dollar Through a C-Corporation
For business owners and highly compensated professionals with substantial earned income, often $400,000 or more, a split-funded cash balance plan can allow six-figure plus, tax-deductible contributions, frequently from $100,000 to $400,000 or more annually, as we have written previously. A split-funded design typically allocatesroughly half of each contribution to a cash value pension life insurance policy held inside the plan, with the balance invested in a diversified portfolio. These plans carry ongoing actuarial and administrative costs and generally require consistent annual funding. Not every retirement-maxxer has the income to support one today, but for young business owners, law partners, or physicians, the earlier it is put in place, the more efficiently it compounds.
For young executives or family-business successors, a split-dollar arrangement offers a related path. As we outlined previously, a C-corporation with retained earnings can pay some or all of the premium on a policy owned by a key employee or owner. In a loan-regime structure, the outlay is treated as a loan secured by the policy and repaid from cash value or death benefit, letting the owner or employee build cash value using company dollars, subject to the interest and income tax rules that govern split-dollar loans.
Living Benefits: The Overlooked Advantage of an Overfunded Policy
Most modern cash value life insurance policies include living benefits, riders that let a policyholder accelerate a portion of the death benefit while still living if diagnosed with a chronic, critical, or terminal illness, or in need of long-term care. For a 25-year-old, that benefit may not become relevant for 40 or 50 years, but it is underwritten now, while the applicant is young and healthy, when it is least expensive and easiest to secure. That matters to a generation that has watched long-term care costs strain the retirement plan of parents and grandparents: an overfunded permanent policy purchased young is simultaneously a savings vehicle and a hedge against one of the largest uninsured risks faced in retirement. Riders may add cost, any accelerated benefit reduces the death benefit and cash value, and qualification standards and tax treatment vary by policy.
Q&A: Retirement-Maxxing and Cash Value Life Insurance
What is retirement-maxxing?
Gen Zers use retirement-maxxing, which is the practice of opening retirement accounts earlier than prior generations, and contributing the maximum allowed each year, reflecting both financial discipline and concerns about housing costs, Social Security, and AI-driven changes to entry-level employment.
Can cash value life insurance help someone save for retirement beyond a 401(k) or IRA?
It can, for the right person. An overfunded cash value life insurance policy, structured as a LIRP, allows tax-deferred cash surrender value growth with no IRS contribution ceiling comparable to a 401(k) or IRA, and cash surrender value can later be accessed through withdrawals of basis and policy loans that are generally not taxable if the policy remains a non-MEC and stays in force. Loans accrue interest and reduce the death benefit, and a lapse with loans outstanding can create taxable income.
How is an LIRP different from a 401(k) or IRA?
A 401(k) and IRA have fixed annual IRS contribution limits and generally penalize withdrawals before age 59½. A LIRP has no comparable contribution cap beyond what the death benefit supports, and cash surrender value can be accessed at any age without an early-withdrawal penalty, provided the policy stays in force. A LIRP, however, carries insurance costs and surrender charges that a 401(k) or IRA does not, and cash value available in the early years is typically limited.
What are the main risks of using cash value life insurance to save for retirement?
Key risks include policy costs and surrender charges, limited liquidity in the early years, interest on policy loans, the possibility of lapse if loans or underperformance erode cash value, and potential income tax if a policy lapses with loans outstanding. Indexed and variable policies also carry the risk that actual results fall short of illustrations.
What is a non-qualified deferred compensation plan, and who should consider one?
Governed by IRC §409A, it lets a business promise additional compensation to a select or key employee at a future date, with no dollar limits. It is most relevant for key employees whose compensation or qualified-plan access is constrained by IRS limits or discrimination testing.
A related option for high-earning business owners and paid board members is a Split-Funded Cash Balance (SFCB) Plan, a tax-qualified defined benefit plan that allocates a portion of each actuarially determined contribution to cash value pension life insurance held inside the plan, with the balance invested in a diversified portfolio. Contributions can run $100,000 to $400,000 or more annually, well beyond 401(k) limits, making it best suited to owners or paid board members with earned income of at least $400,000 and the ability to save $100,000/yr on a pre-tax basis.
We Are Here to Help
The generation now defined by “retirement-maxxing” has embraced the discipline of saving early. What many have not yet discovered is that qualified plans may be only the first stage of a longer strategy. Overfunded cash value life insurance, non-qualified deferred compensation, split-funded cash balance plans, and split-dollar arrangements can each help extend that runway for the right client, and the earlier they are put in place, the more efficiently they compound. Each also involves costs, tradeoffs, and commitments that should be weighed carefully against your goals.
At Cedar Point Financial Services LLC, we work with clients’ legal, accounting, and other advisory professionals in developing and implementing strategies that optimize their individual and business financial plans. If you, your children, or your clients are already maxing out qualified retirement accounts, we would welcome the chance to discuss your situation and see whether any of these strategies might be a good fit.