A LIAAP provides a very flexible source of tax-free income.  Unlike 401(k)s and IRAs, there are no penalties for withdrawals before age 59 1/2 - and no minimum distributions required beginning at age 70 1/2.  There are also several ways to access LIAAP assets.  First, you can simply withdraw assets tax-free up to your cost basis and after that, you can take “wash” or no-cost loans against the policy’s value.  Many policies assess a charge on outstanding loans but also credit the same or nearly same interest rate back to the contract’s cash value during the loan so there’s essentially no charge to take money out of the contract. 

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