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An IUL is an Index Universal Life Insurance policy.

As you approach retirement, you may hope to grow your savings or at a higher rate for more retirement income. Unfortunately, putting your savings in growth-oriented investments like a variable universal life policy could also put your money at risk.

So, what happens if the stock market plummets just as your retirement date arrives?

The good news is that strategies are available to attain positive market-linked returns without taking a loss when things go south. One method is using indexed universal life insurance or IUL.

Although many people shy away from insurance products, the reality is that IUL can provide you with a great deal of growth and tax-related advantages while at the same time keeping your principal safe in any market environment.

It can also offer you an additional stream of tax-free income in retirement – no matter how high-income tax rates may go in the future. So in a world filled with financial uncertainty, cash value accumulation life insurance could be well worth looking into.

How Indexed Universal Life Insurance Works 

Indexed universal life is a type of permanent life insurance coverage that offers both death benefit life insurance protection for survivors and a cash value component that can help you to grow your savings by tracking the stock market indexes.

As with other types of permanent life insurance, the growth inside an IUL cash value account is tax-deferred. This means that no taxes are due on the gains, loans, or the death benefit.

What makes IULs stand apart is how the return on the cash value is credited. In this case, an underlying market index like the S&P 500 or the Dow Jones Industrial Average is tracked. (In some policies, you can track more than one index). There is typically also a fixed interest rate option available.

If the return on the chosen index(es) is positive in a given contract year, a positive return is credited to the IUL’s cash account – usually up to a set maximum, or “cap.” However, if the index performs poorly during a given contract year, a negative return is not credited to the account, which provides financial protection.

Rather, a guaranteed minimum interest rate “floor” (such as 0% or 1% minimum interest rate) is given, which not only protects your contributions and previous gains but also allows the account to build upon these gains in the future without having to first make up for any losses. This is perfect for protecting against the downside risk on market returns affecting your cash accumulations.

So, even though the positive investment return can be capped in an IUL policy’s cash value, your principal will remain safe – even during the recession of 2008 or the more recent COVID-19 crisis (and corresponding stock market downturn).

No more worries about taxes eating into your retirement savings. With IUL, we’re unlocking a path to a worry-free retirement where your income remains untouched by taxes. Ready to transform your financial landscape? Let’s chat and explore the incredible benefits that IUL brings to the table. Your tax-free income journey can start today by getting your own personal illustration! 

Beneath the surface of a LIRP, lies the potency of growth with deferred taxation, functioning within the confines of Internal Revenue Code Section 7702. This implies that any interest, dividends, or profits from investments generated within the policy remain unaffected by annual income taxes. As your cash value accumulates over time, the deferred tax nature of a LIRP propels the overall value of your policy.

A noteworthy accomplishment of a LIRP is its capability to facilitate withdrawals free from taxation. Governed by Internal Revenue Code Section 72(e), this attribute allows you to access the cash value within the policy without incurring any income taxes, provided it’s executed correctly. It’s akin to possessing an income source that genuinely belongs to you, devoid of entanglement with the tax authorities.

In the regrettable event of the policyholder’s demise, Internal Revenue Code Section 101(a) comes into effect, guaranteeing that the death benefit paid to beneficiaries remains entirely tax-exempt. This ensures that your loved ones receive the complete financial safeguard furnished by the life insurance component of the LIRP, without any tax-related apprehensions. The tax advantages provided by this policy, through these three fundamental tax codes, establish a financial milieu that is not only effective but also remarkably beneficial. It’s crucial to bear in mind that tax laws can be intricate and subject to modifications, underscoring the importance of the guidance from a financial expert or tax professional. Allow us to assist you in comprehending and leveraging the tax benefits of a LIRP to pave the way for a flourishing and tax-free retirement. Reach out to us to unlock the complete potential of your financial future today.