How Indexed Universal Life Insurance Can Be Used As A Retirement Tool
The majority of people in America use a 401(k) investment as their primary source of retirement funds, but is that the best option to use? An indexed universal life insurance plan (IUL for short) is a life insurance policy that can help maintain and grow wealth with less of a risk that a 401(k) brings. With the ability to use variable loans to take out money, the rules and regulations of an IUL differ from that of a 401(k). Here are three of the major benefits of an IUL to help maintain and grow your wealth upon retirement.
Interest Benefits
Perhaps the most beneficial aspect of an IUL being used for retirement would be the interest.
As opposed to a 401(k), an IUL earns interest on the entirety of the funds in the policy, even when a loan is taken out.
For example, John has $750,000 in a 401(k), and he elects to take out $50,000. Since this is taxable income, John can only earn interest on the $700,000 remaining in the account.
However, Joe put $750,000 in an IUL policy. When he retired, he elected to take out a variable loan (explained below) worth $100,000. Despite Joe taking out a $100,000 of the policy, the IUL will still earn interest on $750,000 due to the money being distributed to the policy owner as a loan. Since a loan is something that is paid back over time, the IUL is considered to still have $750,000 in it.
Variable Loans
When you are ready to start taking money out of an IUL, the most common method to do so is via a loan. There are two options to choose from when selecting the type of loan you are going to take out: fixed and variable. With a fixed loan, your interest rate stays constant throughout the borrowing period. With a variable loan, the interest rate fluctuates over time, giving you more flexibility on the repayment of the loan. However, the owner of the policy might not even have to pay it back.
Death Benefit
When the owner of the policy passes away, the policy distributes a death benefit to the owner’s beneficiary. However, if the owner takes out money from the IUL in the form of a loan and then he/she passes away, the death benefit can be used to pay off the rest of the loan. Essentially, taking out money from a UIL doesn’t have to be paid back until the passing of the policy owner, where the death benefit will pay back the outstanding balances on the loans taken out.
Agents
We hope this information on how to use indexed universal life insurance for retirement was helpful to you. If you have additional questions regarding an indexed universal life insurance policy, please contact Bill Bronson at (817)-410-5820, at wbronson@empowerbrokerage.com
Empower Brokerage is devoted to helping you educate clients on the insurance they need through webinars, one-on-one calls, seminars, or marketing resources. Give us a call if you have any questions 888-539-1633.
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Jeffrey is a graduate from the University of North Texas and joined the Empower Brokerage marketing team in 2020. He is the social media manager for empower brokerage, in addition to writing blogs and doing various campaigns. LinkedIn profile
