One of the biggest risks to long-term wealth isn’t taxes or even inflation—it’s being forced to pull money from market-based accounts at the wrong time. When markets are down and you’re still withdrawing income, the damage can be permanent. This is exactly why many retirement and wealth-preservation strategies today focus on non-market-dependent financial tools, including annuities and 7702 cash-value life insurance.
In a widely referenced research paper, Wade Pfau explains that portfolios last longer when retirees have access to assets that are not tied directly to market performance. These “buffer” or “safety-first” assets allow families to avoid selling investments during downturns—helping preserve wealth and reduce sequence-of-returns risk.
👉 You can read Dr. Pfau’s research here: https://retirementincomejournal.com/article/diversification-beyond-the-60-40-portfolio/
Why Non-Market Assets Help Preserve Wealth
When all of your money is invested in market-dependent accounts (like 401(k)s, IRAs, or brokerage accounts), you’re exposed to volatility at the worst possible moments. If the market drops and you still need income, you’re locking in losses.
A 7702 strategy creates an alternative income and liquidity source, so you can:
- Let your market accounts recover instead of selling low
- Reduce overall portfolio volatility
- Extend the life of your retirement assets
- Create more predictable, stress-free income
Simply put: your wealth lasts longer because you’re not forced to draw from accounts while they’re down.
What Is a 7702 Strategy?
A 7702 strategy refers to a properly structured cash-value life insurance policy that complies with IRS Section 7702. Because there is a cost of insurance, this strategy is fully allowed under the tax code—and that insurance does something powerful:
✔️ Protects your family from day one with a tax-free death benefit
✔️ Allows cash value to grow tax-deferred
✔️ Provides tax-free access to funds (when structured correctly)
✔️ Is not directly tied to market losses
✔️ Offers flexibility—you can use the money however you choose
Unlike retirement accounts that restrict how and when you access your money, a 7702 strategy gives you control.
Living Benefits: Protection While You’re Alive
One of the most overlooked advantages of modern 7702 policies is living benefits. These riders allow you to access a portion of your policy’s value if you’re diagnosed with a critical, chronic, or terminal illness. That means funds are available to help cover:
- Medical bills
- Mortgage or rent
- Everyday living expenses
- Time away from work
It’s an added layer of protection that many families don’t realize exists.
A Simple Story That Says It All
Consider this:
Two families retire at the same time with similar savings. A few years in, the market drops sharply. One family has no choice but to withdraw from their investments to pay bills. The other family uses their 7702 strategy for income during the downturn—giving their investments time to recover.
Years later, the difference is staggering. One portfolio is depleted early. The other lasts longer, with less stress, and more options.
That difference isn’t luck—it’s strategy.
Is a 7702 Right for Everyone?
Simply put, a 7702 strategy is just the tax code the describes the tax benefits when used properly. It isn’t about replacing your investments—it’s about complementing them. When used correctly, it can:
- Improve tax efficiency
- Reduce reliance on market timing
- Add flexibility and protection to your overall plan
At Brightside Financial, we help families and business owners understand whether a 7702 strategy fits into their bigger picture—and how to structure it properly from the start.
If you’ve never heard of cash-value life insurance used this way, you’re not alone. But once you understand how it works, it often becomes one of the most powerful tools in a well-diversified financial plan.
👉 Reach out to Brightside Financial to learn how a 7702 strategy could help protect your family, preserve your wealth, and give you more control—no matter what the market does.
