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Indexed Universal Life
aka IUL
What is Indexed Universal Life?
Indexed universal life insurance, or IUL, contracts can give your loved ones a death benefit while also assisting you in accumulating wealth. These policies allocate a portion of the premium payments made by the policyholder toward annual renewable term life insurance, with the remaining funds being added to the policy's cash value once costs have been removed.
The cash value receives interest credits on a monthly or annual basis depending on improvements in an index. Your money is not directly invested in the index. Even though IUL insurance might be useful to some, it's crucial to comprehend how it functions before buying coverage.
How Does Indexed Universal Life Work?
IUL is in the same category as other permanent life insurance plans such as whole life insurance. This implies that as long as the premiums you are paying and the value of the policy account are sufficient to maintain the policy in force, it won't expire—unlike term life insurance that will.
A portion of the premium paid on the account covers the cost of the insurance based on the life of the insured. After paying any fees, the remaining amount is added to the cash value.
Protections offered by IUL:
Legislative Risk
As the Federal Government makes changes that may affect your 401k or other retirement accounts you can rest easy knowing that because of Section 7702 of the IRS tax code your IUL is safe from governmental interference and regulation changes.
Customizable Design
The IUL offers flexibility in premiums, and design options so you can utilize the policy how you see fit. If necessary, you can change the premiums you pay and the size of the death benefit. You might utilize those funds to pay your premiums if your account gains enough value.
Market Risk
The performance of the underlying index will determine the annual return you receive from an IUL insurance policy. However, your insurance provider may still guarantee a minimum rate of return on your investment. The index calculates the interest crediting rate on the cash value even though it is not really invested in the stock market.
Social Security
IUL's can provide a tax-free income stream that does not affect your Social Security benefits. So you can take a policy loan against your IUL without reducing your Social Security benefits.
Tax Risk
In contrast to other forms of financial accounts, such as 401k, policyholders are not taxed on capital gains on the growth in cash value over time unless they cancel the policy before it expires. This advantage also applies to any loans taken against the policy's cash value.
Death Benefits
When properly structured an IUL can act as an additional stream of income; however, the true purpose of an IUL is to function as life insurance. When you pass away your beneficiaries will receive your policy income tax-free.
Accessible Cash Value
Regular retirement plans require you to wait until you reach the minimum distribution age of 59.5 before you can begin drawing money out or be charged a penalty. There is no minimum age restriction for IULs so your money can be accessed at any time. By doing this, the funds from the IUL policy can also be used tax-free for any other use or as a supplement to retirement income.
No Required Distributions
IULs do not require mandatory distribution so you are not penalized if you do not take a policy loan like other investment accounts. IRAs and other investments require RMDs by the age of 72. After that point, you are penalized heavily if you do not withdraw RMDs.
Riders
IULs offer flexibility and availability to add riders to the policy to make them customizable. You can add benefits such as a Long-Term Care rider, which provides you care in a long-term care setting, or a Waiver of Premium rider, which pays your premiums if you were to become disabled.
What makes an IUL different?
- Contribution caps apply to conventional retirement options, but not to IULs.
- Flexible premiums - you can skip premium payments if you have enough cash value or pay over the premium amount to grow the cash value.
IULs Explained
Achieve a Tax-Free Retirement with IUL
We will simplify the confusion surrounding IUL policies and show you how this tax-free vehicle can add millions to your assets.
IUL for Dummies
We break down IUL to make it simpler in this IUL for Dummies video. Consider this an IUL for Beginners course.
IUL Pros VS Cons
We will cover the good, the bad, and the ugly of IULs. If you are considering adding an IUL to your retirement portfolio you need to know the pros and cons of how they work before deciding.
Tax-Free Retirement Strategies for High Earners
We will cover strategies used by high-income earners to achieve a tax-free retirement. Learn what the wealthy do to achieve tax efficiency in their retirement portfolio.
IUL Solutions
IUL insurance can assist you in providing your family with the financial security they require while also generating cash value. These policies, however, can be more complicated than other kinds of life insurance, and not every investor may want to use them.
A properly constructed IUL may rank among your best possessions. If done incorrectly, it may cause you pain and frustration. You may determine if indexed universal life insurance is a good fit for you by speaking with a knowledgeable life insurance agent or broker. Ensure proper execution or you are wasting your time and money.
IUL Strategy Consultation
We have helped thousands of clients and we want to help you too. Don't make the mistake of waiting until it is too late.
It cost you nothing to learn more about Indexed Universal Life and get a quote.
Safeguard Insurance, LLC
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Insuring your health, life, and retirement.
Phone: 270-904-6070
Email: education@safeguardky.com
1600 Scottsville Rd, Suite 100
Bowling Green, KY 42104
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