Indexed Universal life
What is an IUL policy?
Indexed universal life (IUL) is an insurance policy that, like all life products, has a death benefit. But, in addition, an IUL can help in your overall retirement plan in many ways. For clarity, and IUL falls under the category of permanent life insurance. With these types of policies, you may have the chance to see a reasonable rate of return. This means IUL owners may see both an increase in the value of their policy as well as have the security of a payout upon their death. What is an IUL policy? In short, it allows you protection of your money as well as a potential increase in the policy value. Most people like the IUL due to the fact that they can take income from it, tax-free.
While Orfin and Associates 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 has protection. In fact, the money put into this type of plan is not at risk in the stock market at all. Instead, the rate of return you may receive connects with an index. Therefore, it is possible to see a reasonable rate of return with your IUL cash value. Then, even if the stock market happens to be down, your initial money has protection. Regardless of what the market decides to do, your money is safe from downturns in an IUL.
What is an IUL Policy For Retirement?
Basically, after you deposit money into your IUL, part of this premium covers the cost of life insurance protection. The money left over becomes your cash value. This part of the policy may link to an index, which could provide an interest rate. To further explain, a market index is not the same as the market itself. An index may follow a similar pattern as the market, but your money is not at risk from the market. For instance, the S&P 500 index may show a rate of return somewhat similar to the S&P 500 stocks. However, the market does not directly impact your money. If the cash value in your IUL rises, it is due to the index. On the other hand, if the market drops, your cash value remains stable. This can happen because your money does not participate directly in the market itself.
Also, an IUL may offer flexibility in terms of which index you choose. In addition, you may choose many different indexes if you like. Hence, some retirees actually create diversify with their IUL cash value. They might have some of their money producing a fixed interest rate, while another portion changes with an index. Also, you could potentially “average” out your returns here depending upon your strategy. Of course multiple possibilities are available, so be sure to learn which ones may be right for you.
IUL BENEFITS DURING YOUR LIFETIME
What is an IUL policy is it isn’t offering lifetime protection? Because an IUL is an insurance product (versus a true investment), you may have more flexible options. For example, laws regarding taxes and rules about your account may be different with an IUL than a traditional retirement account. With an IRA, 401(k) or other qualified plan, you may notice that there are contribution limits. In addition, you may be limited on how much you can take out and when you can take it. However, IUL’s do not have these regulations. Also, when comparing with other financial products, and IUL may allow for earlier withdrawal. This is because there are no fines for taking money out before age 59 1/2. Additionally, IULs do not require minimum distributions (RMD’s) at age 72, either.
IUL’s a generally considered conservative places to put your money. Even when the market has a downturn, your life insurance does not with an IUL. The money in cash value may grow if its index grows, but won’t disappear if the market happen to crash. Retirees may enjoy peace of mind knowing their money is safe. Of course, no one can ever be sure how the market values will change. So, and IUL may be part of an overall plan for protecting your savings.
You may experience other benefits with an IUL as well. For instance, you could choose how much to fund your IUL upfront. Some retirees put as much money as they can in all at once. Then, they use this money as a tax-free income source. However, you could also 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 find out the rules and any taxes that may apply. If you have questions, just reach out and we’ll be glad to lend a hand.
Your Family's Future
After you’re gone, you may want to leave some of your wealth to your family. One benefit of an IUL is the death benefit may be larger than the amount you initially put in it. This is because the death benefit may increase over time, depending upon the performance of the IUL’s index. No probate court in necessary with an IUL benefit, either. Your beneficiaries simply receive what you want them to get without the hassle of probate. In addition, the funds they get from this death benefit are non-taxable.
More About IUL's
Although there is quite a bit to learn about IULs, Orfin & Associates team is here to help you. Reach out to find out more.