In 2026, the IRS lets you put $24,500 into a 401(k). If you're a business owner earning several hundred thousand dollars a year, that cap barely scratches the surface of what you need to save — and every dollar you eventually withdraw will be taxed as ordinary income.
The Landscape Has Shifted
This year brought two major shifts. The One Big Beautiful Bill Act permanently locked in today's federal tax brackets, ending years of speculation about a 2026 rate increase. And SECURE 2.0 now requires high earners making over $145,000 to make catch-up contributions on a Roth-only basis — eliminating the pre-tax advantage on those additional dollars. For business owners, the message is clear: if you're only relying on qualified retirement plans, you're leaving significant tax-free wealth on the table.
Section 7702: The Tax Code's Best-Kept Secret
That's where Section 7702 of the tax code comes in. A properly structured permanent life insurance policy — typically an indexed universal life contract — accumulates cash value tax-deferred, with no annual contribution limit imposed by the IRS. In retirement, you access that cash value through policy loans that are not treated as taxable income. No 1099. No impact on your adjusted gross income. No required minimum distributions — ever.
Why Business Owners Need This Strategy
For business owners with variable income, concentrated net worth, and complex tax situations, this strategy fills the gap that qualified plans can't reach. It absorbs surplus income in strong years, provides a liquid asset independent of business equity, and produces retirement income that is invisible to the IRS — no bracket creep, no Social Security taxation triggers, no Medicare premium surcharges.
Getting the Structure Right
The key is proper structure: the policy must stay within Section 7702 guidelines and avoid Modified Endowment Contract status. That requires professional design, conservative assumptions, and coordination across your full advisory team — exactly the kind of comprehensive planning we call the entrepreneur's family office.
Read the full guide for a deeper breakdown of Section 7702 strategies and how they compare to traditional retirement accounts. Download the June 2026 Prospera Perspectives PDF →