Indexed Universal Life
Create tax-free income in retirement
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What You Get
- Permanent coverage as long as premiums are paid
- Accumulated cash value that can increase over time
- Accessible cash value that can be leveraged as tax-free income
Why You Need It
- To financially secure your family in the event of your passing
- To provide for your retirement needs
- Flexible premium amounts
Indexed Universal Life (IUL) Insurance
This is a type of permanent life insurance policy that has guaranteed cash value and a death benefit. The cash value can earn interest based on the performance of certain stock market indices. Each year this policy credits interest accrued via the index to your cash value. Most carriers have a cap on interested credited, usually 10-12% annually. The flip side to this coin is that most carriers also have a floor to interest credited, usually 0%. This means that in a year where the index has a negative return, your cash value is generally protected from market volatility.
In contrast to whole life insurance, indexed universal life insurance (IUL) allows you to adjust your premium for the higher growth potential of your cash value. Generally, if you want greater returns, you have to purchase a larger face amount to maintain the tax advantages offered by the IRS. Also, you have to bear the risk of getting no interest if the index goes down. Apart from this, you can also adjust your death benefit within specific limitations, but you may be required to complete a medical exam to do this.
Another feature found in this type of insurance is it allows you to withdraw or borrow against the cash value. IULs are often used as vehicles to create tax-free income in retirement because when you withdraw the cash value it is taken as a loan, this means that your policy is still earning interest as if the money was never out of the account. If structured properly and market conditions are favorable, it is possible to create a policy that provides income in retirement for decades. The terms “infinite banking concept”, “IBC”, and “family banking” are often used to describe the concept of indexed universal life insurance. Any outstanding loans when you pass away shall are simply reduced from the death benefit.
If you are in good health and want life insurance and cash value accumulation for your retirement needs, IULs are a fantastic option.
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