Indexed Universal Life Insurance

Indexed Universal Life

"Buy Term and Invest The Rest" 

 A common phrase in the insurance industry you will hear is, "Buy Term and Invest The Rest". This does not Always work for everyone and is the reason why today only 5% of people at age 65 can retire. Also, the majority of the people that I personally meet with are 60+ years of age and have 30 year mortgages with $0 in Savings and $0 in Life Insurance.

Market Risks

When you invest your money in the market whether it be in stocks, mutual funds, etc. your money is at Sequence of Returns Risk, potentially causing unexpected losses. Although this is not an issue for younger folks, it can be an issue for people near or at retirement age. Another issue to consider is Tax risks. No one knows where taxes will be in the future, so this can drastically reduce money in retirement when taxes increase significantly.

Index Universal Life Option

My personal recommendation is a large term policy to cover a person while their debt is at its highest and term insurance is at its lowest cost and also purchase an IUL (Indexed Universal Life) policy with an increasing death benefit that would be fully funded by age 65. At that point, I would change the strategy to a level death benefit from 65 to 121 to bring down the cost of insurance. At 65, you then turn on 0 net cost policy loans from 65 to 100 and have the policy pay you Tax-Free Income for the rest of your life. This will also provide a death benefit for your loved ones during this time, in addition to providing you with Tax-Free Income.

I am in no way saying this is the end all be all solution for your retirement and insurance needs. There are many carriers with many different products and everything has a solution for a specific problem. In addition to the IUL, I would also invest in the market and in your 401K and or IRA, as well. For anyone to ever give a strategy without a conversation to fully understand your specific situation is highly suspect.

Also, all money not in life insurance is taxable and that should also be considered. Additional income from other sources, other than Life Insurance, could affect your AGI (adjusted gross income) and cause higher taxation on social security benefits and also may be able to be taken by bankruptcy courts and/or creditors, should a situation like that arise. Money in high cash value life insurance may be protected from bankruptcy courts and/or creditors and does not affect your AGI (adjusted gross income) when it comes to social security. A Life Insurance Death Benefit is also passed tax-free, probate free to your loved ones.


For more information, contact us at Family First Life to meet with a professional to discuss the best option for you and your family!