Tax-Free Retirement: IUL as a supplement

[pavone]

Posted short educational video series on my website to learn more- https://www.edgefinancials.com/IUL-Education/

IUL has its place in financial portfolio but it is not for everyone. It is good at producing bond like returns with some tax advantages. It is not a stock market replacement and doesnt suit everyone.

IUL is a permanent life insurance and has cash component to it. A properly structured max-funded policy will have cash growth based on one or more index performance. It guarantees a 0% return when index returns -ve but returns are capped if index performance is +ve. So, returns are not guaranteed but it is expected to perform like a bond alternative.

Pros:

- tax deferred growth

- tax free access to cash using loans

- bond like returns

- tax free living benefits for long term care needs

- tax free death benefit to beneficiaries

- arbitrage opportunities (ex: guaranteed loan rate at 5% and if a cd/real estate returns 6%. Then, profit 1% on loaned amount)

Cons:

- agents can design it badly for commissions

- front loaded fees and can be reduced with proper policy design (by min. insurance needed by IRS and net amount at risk concepts)

- not for short term

- returns are not guaranteed (since index linked and rate caps are sensitive to interest rates)

Please read these books- "The Power of Zero" by David Mcknight and "Tax-Free Retirement" by Patrick Kelly.