Why Everyone Should Consider an IUL to Increase Retirement Income
Many companies have started offering indexed universal life insurance (IUL) to their customers for implementing an IUL retirement account. Each IUL company is different.
Each company has its own advantages and disadvantages that you should take note of when you’re shopping for coverage and considering indexed universal life insurance retirement.
Although only in the marketplace for about twenty years, new policy sales of Indexed Universal Life (IUL) insurance has grown to over $2.9 billion as of the end of 2021. That is more than an 21% increase over 2020.
It appears that 2022 will see even more consumers looking for better ways to plan for retirement. We have already seen several new indexed universal life insurance to hit the market place. North American has the Builder Plus, Midland National has CV Max and Symetra has the Accumulator Select.
Needless to say, indexed universal life insurance does have its fans in the world of financial and retirement planning. IUL for retirement is typically used as a cash accumulation product and goes by several different names. A life insurance retirement plan or LIRP is used by many advisors to describe indexed universal life as a retirement plan.
The perks this product brings to the table are just too good to overlook. Yes, there are many reasons to use IUL for retirement planning, but, as with any insurance product, there are plenty of naysayers out there that claim otherwise.
IUL insurance policies can be an excellent option for retirement planning and life insurance coverage, but they can also be confusing. It’s important to understand all of your options when deciding what is the best kind of life insurance policy to purchase and how to create your IUL savings account.
This article is going to explore the different advantages of IUL and reasons that you should consider purchasing one of these plans.
The Safety Factor
Investors who have been seriously burned by declining returns in the bond, equity, and real estate markets certainly understand the value of a guarantee that their annual returns will never be a negative number. That coveted guarantee is exactly what IUL is famous for. Because of the annual reset provided in the contract, current values cannot be negatively impacted by a down market which will preserve the funds in your IUL retirement account.
Tax-Free Cash Flow
While other well-known and popular investment vehicles may create a tax burden for the investor, the IUL eliminates the drawback since cash flow can be created by accessing accumulated funds through contract loans that are immune from federal, state, and local income taxes. These cash producing loans are also free of the alternative minimum tax that can be levied against most other investment products.
When you consider the earnings in your account along with the tax-savings benefits, the IUL just keeps looking better and better.
Higher Positive Returns
As the market has suffered over the last decade with a lower than expected return on investment, traditional investment products have become somewhat unattractive to savers. With the IUL, if the selected index performs well over the measured period, your contract can experience an interest-earning that is considered very attractive. In fact, some IUL products include interest crediting formulas that will compare multiple indices and then more heavily weight the better performers which makes indexed universal life insurance for retirement a significant retirement planning option.
The Available Death Benefit
Although death statistics can be very disappointing, it’s important to take into consideration the financial devastation that can result from the unexpected death of a wage earner. Reports provided by the Life and Health Insurance Foundation for Education indicate that a man at 35 years old has more than a one-in-six chance of dying before retirement, and a man at 45 years old has more than a one-in-seven chance of dying before age 65.
Fortunately, your IUL policy provides a tax-free death benefit that mitigates this risk by providing the funds needed for your family and surviving loved ones to continue with their lives without excessive worries about finances.
Coverage for Life without Paying for Life
An unexpected bonus that comes with your IUL retirement account is that once you stop paying periodic premiums and begin taking cash through policy loans, your insurance coverage doesn’t end but remains a component of your IUL retirement plan.
In fact, many policyholders continue to be covered for the rest of their lives without having to keep paying additional money into the contract.
Waiver of Premium Rider
When you buy life insurance, consider including the waiver of premium rider. When elected, it keeps your protection in place by waiving premiums if you, as the insured, are unable to work due to injury or illness and are considered totally disabled. Additionally, even if you own disability income insurance and should become disabled, the benefits obtained from a life policy with Waiver of Premium could provide supplemental income after the disability policy benefits end. The Waiver of Premium rider maintains your life insurance coverage while you are unable to work, freeing up cash flow for other critical needs. And, with a whole life policy, your cash value is guaranteed to grow. In this way, a indexed universal life policy with waiver of premium is a unique, self-completing financial asset.
Compare IUL with Traditional Retirement Plans
How Much Life Insurance Do You Need?
Regardless of which type of policy you buy, it’s vital that you purchase enough protection for your family. Not having enough life insurance is one of the worst mistakes that you can make for your loved ones. There are several different factors that you’ll need to account for before you buy insurance coverage.
The first number that you should crunch is your debts and other final expenses that your family would be responsible for if you were to pass away. The primary goal of your life insurance is to give your loved ones the money that they need if something tragic were to happen to you. Be sure to add up your mortgage, student loans, and burial fees. All of these can add up to thousands and thousands of dollars of debt, and that’s where your insurance plan comes in.
The next number that you should add up is your paycheck. The secondary goal of your insurance policy is to replace your paycheck. If you’re one of the main income earners in your home, they would struggle if something were to happen to you. That’s where your life insurance comes in. It gives them the money that they need to get through a difficult time without sacrificing their standard of living.
Every insurance company is different, and they all have different medical underwriting standards, which means that you’re going to get drastically different rates depending on which company that you get the quote from. If you want to get the lowest premiums, it’s important to compare dozens of quotes before you decide which one is going to work best for you, and our agents can help you do that in a matter of minutes. We can bring you the best personalized quotes and connect you with the perfect policy for you.
You never know what’s going to happen tomorrow, which means that you shouldn’t wait any longer to get life insurance protection for your family. We know that isn’t a frustrating and overwhelming process, but it doesn’t have to be. Our experienced agents are here to help you get quality insurance at an affordable price. It’s our mission to save you money and get your family the protection that they will need.
Why I Recommend Lincoln Financial Group as your IUL Choice
With a company name like Lincoln Financial, it’s difficult to imagine this company being anything less than excellent and that’s exactly the way the rating services feel about their financial stability:
A+ by A.M. Best Company (the second highest rating out of 16 total)
AA- by Standard & Poor’s (the 4th highest rating out of 21 total)
A1 by Moody’s Investor Services (the fifth highest rating out of 21 total)
A+ by Fitch Ratings (the fifth highest out of 19 total)
With three IUL products to choose from, Lincoln National is continually one of our go-to carriers for retirement planning with life insurance. That's why I chose to represent this great financial stable company and provider their products to my clients. Please contact me today and allow me to help you get started in creating a more efficient way to save for retirement and provide you with more retirement income when that day comes.
Matthew Barks
Managing Partner/Founder
