Indexed Universal Life
What is an
What is an IUL insurance policy? An IUL, or indexed universal life insurance policy, is an insurance product that can help you plan for your retirement. Like any life insurance product, it has a death benefit. But they come with other benefits that can help you in your retirement.
For the sake of clarity, an IUL falls under the category of permanent life insurance. With this type of policy, you could have the chance to see a reasonable rate of return.** This means that IUL owners could see both an increase in the value of their policy, as well as the security of a payout upon their death. So, what is an IUL policy? Well, in short, it allows you protection of your money as well as a potential increase in the policy value. Most people like an IUL because it allows them to take income from it, tax-free.*
While we can also help you with term or permanent life insurance, an IUL is a product that works best for those entering or in retirement. An IUL policy is held via an insurance company. Therefore, your money is protected. In fact, the money put into an IUL isn’t at risk in the stock market at all. Instead, the rate of return you could receive connects with an index. For this reason, it’s possible to see a reasonable rate of return** with your IUL cash value, as well as protect your initial money when the market is down.
What Is An IUL Policy For Retirement?
Essentially, after you deposit money into your IUL, part of this premium covers the cost of life insurance protection. The money left over then becomes your cash value. This part of the policy might link to an index, which could provide an interest rate. Furthermore, a market index isn’t the same as the market itself. An index may follow a similar pattern to the market, but it doesn’t put your money at risk. For example, the S&P 500 index may show a rate of return that’s similar to the S&P 500 stocks. If the cash value in your IUL rises, it’s due to the index. But if the market drops, your cash value remains stable. This can happen because your money doesn’t participate directly in the market.
An IUL could also offer flexibility in terms of which index you choose. Additionally, you could choose multiple different indexes if you want. Hence, some retirees actually create diversity with their IUL cash value. They might have some of their money producing a fixed interest rate, while another portion changes with an index. You could even potentially average out your return here depending on your strategy. Of course, with many different possibilities available, make sure to get educated to determine which ones could be right for you.
IUL Benefits During Your Lifetime
Because an IUL is an insurance product, not an investment, you may have more flexible options. For instance, laws regarding taxes and rules about your account could be different with an IUL than a traditional retirement account. With a plan such as an IRA or 401(K), you may notice that there are contribution limits. Additionally, you may be limited on how much you can take out and when you can take it. But IULs don’t have these regulations on them. An IUL may also allow for earlier withdrawal when compared to other financial products. This is because there are no fines for taking money out before the age of 59 1/2. In addition, IULs don’t have required minimum distributions (RMDs) at age 72, either.
IULs are considered, generally, to be conservative places to put your money. With an IUL, even when the market has a downturn, your life insurance doesn’t. The money in cash value may grow if its index grows, but it won’t disappear if the market crashes. Retirees may enjoy more peace of mind, knowing their money is safe. Of course, no one can tell for sure how the market values will change in the future. So an IUL could be part of your strategy for protecting your savings.
You may experience other benefits with an IUL as well. For example, you could choose how much to fund your IUL upfront. Some retirees put as much money as they can in, all at once. They then use this money as a tax-free* income source. You could, however, contribute money slowly over time. In this case, your deposits may be slow, due to rolling over money from other types of accounts. Be sure to look into the rules and any taxes that may apply. Reach out to us if you have any questions!
Your Family's Future
You may want to leave some of your wealth to your family after you’ve passed. One benefit of an IUL is how the death benefit may be larger than the amount you initially put in it. This is because the death benefit could increase over time, depending on the performance of the IUL’s index. No probate court is necessary with an IUL benefit, either. Your beneficiaries simply receive what you want them to, without the hassle of probate. Additionally, the funds they get from this death benefit are non-taxable.
What is an IUL?
Learn More Information
Although there is quite a bit to learn about IULs, the team here at AGM Secure Money is here to help. Reach out to us today to learn more.