What is Indexed Universal Life?

Indexed universal life insurance is a permanent life insurance funding that earns interest based on the stock market’s returns. Since it’s universal life, policyholders can change payments and benefits as needed. Like other forms of permanent life insurance, IUL offers a death benefit and a cash account. The death benefit is determined at the beginning of the policy. The cash account grows based on the performance of a stock index.

A stock index, such as the S&P 500, Barclays, or Dow Jones Industrial Average, is a way to track a group of stocks. Insurance companies pick one or more of these and pay interest to policyholders based on the index’s performance — as the value goes up, the account earns interest. If the index drops, the account earns less or nothing.

The amount you can earn is subject to “floors” and “indexes” to help minimize losses. The floor is the lowest your account rate can go and is usually guaranteed for the life of the policy but is often set at 0%. ‍

Example: if the market plummets as it did in 2008 (-40%)  and during the 2020 covid-19 pandemic (-30%), your policy will be credited 0% as opposed to taking a 30% or 40% loss like other traditional retirement accounts did.
‍“ZERO is your HERO.”

Some Indexes today have no “caps” allowing you to maximize gains.

Example: if the market has an annual return of 10%, you will be credited 10%. If the market has an annual return of 30%, you will be credited that 30%!

How Indexed Universal Life Insurance Works

Simply put, compound Interest! Compound Interest has been called the 8th wonder of the world; it has been used by savvy investors around the world to help grow and compound wealth. By taking advantage of compound interest, you can position yourself to build up your savings over the long term as the magic of earning interest on interest helps expand your wealth and magnify your legacy.

COMPOUND
INTEREST

What EXACTLY is Compound Interest?

1. Simple Interest: Interest earned on invested principal over multiple periods of time that does not take into account the interest earned in earlier periods. In other words, interest is only paid on principal, not on any interest earned on that principal.

2. Compound Interest: Interest earned on invested principal over multiple periods of time that does account for the interest earned on the principal in earlier periods. Interest is earned on interest plus principal when compound interest is used. It is this “compounding” of principal and interest that creates huge long-term accumulation.

A popular way to demonstrate the power of compound interest is to ask the question…

“What would you rather have, $1,000,000 or a penny doubled every day for 30 days?”

Most people choose one million dollars. However, taking a penny doubled every day for 30 days is far and away the winner. IUL is a compounding interest-earning MACHINE!

THE IUL
VS 401K…

What Distinguishes IUL From the 401K?

Unlike traditional 401(k)s, The IUL is funded with non-qualified money or after-tax dollars. So what you pay into IUL has been taxed already. That’s good news for future income – tax-free retirement income! IUL also offers the advantage of a tax-efficient death benefit for loved ones.

The index universal life policy is a worthy alternative to the 401(k), the IRA, the Roth IRA, and other investment strategies for your retirement fund.

What Are Some Other Key Differences?

• Money within a 401(k) plan is exposed to losses from market downfalls
• 401(k) plans don’t let you borrow against them with the same flexibility as you might with IUL, generally speaking
• 401(k) withdrawals before age 59.5 are subject to a 10% penalty and income taxation
• Unlike with the 401(k), distributions from an IUL policy, when taken as loans, are non-taxable‍
• Withdrawals from a 401(k) are subject to more substantial tax liability
• There are fewer restrictions on contributions to an IUL policy than they are to a 401(k) plan
• In the 2020 tax year, the contribution limit for a 401(k) is set at $19,500. THAT’s ALL!
• With its contractual guarantees, IUL offers the benefit of preserving your earning power in your professional working years
• Indexed universal life insurance can also be customized for different situations: there are riders for chronic illness, work disability, and other specialized circumstances

And It Gets Even Better!

• You can pour money into the IUL while other retirement options have restrictions on the amount of contributions you can make
• You get life insurance that cannot be revoked
• You cannot lose your principal to a recession
• When you start withdrawing money in retirement it’s tax-free! The federal government cannot look at a steady $100,000 a year withdrawal from your IUL, combine it with your $32,000 Social Security income and declare that you are making too much money and tax your Social Security money

The IRS has no hand in your IUL pot. There is no paperwork, no filing. IUL does not exist as far as the IRS is concerned.

The IUL is going to prove to you it beats traditional retirement strategies every time. So don’t walk into the “retirement casino” that has been beating you year after year. Build your OWN casino. You play the games YOU want and get some gains without losses due to a bad market. Walk out with your wealth intact.