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Indexed Universal Life Insurance (IUL) for Retirement Savings

Ed Slott – a renowned tax expert – on tax benefits of IUL policies

Indexed Universal Life Insurance (IUL) Policy is a Great Tax-Free Retirement Savings Plan

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The Power of Indexed Universal

Life Insurance (IUL) Product

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IUL policy

for people of all walks of life

Moon – 37 years old, nail salon manicurist, living in Washington DC
Moon is replacing a whole life policy with an indexed universal life policy. She reduces the premium payment period to 23 years only (instead of paying premiums for the rest of life with the Whole Life policy). She has much better cash distribution to supplement retirement income. She pays $220 a month for 23 years and receives $13,600 cash distribution a year, tax free, for 30 years, from 61 to 90 years old, from the cash value account of the policy.

Moon, 37 years old, female, a nail salon manicurist, has an income of $40-50K a year and excellent health.

– She wants to invest in a permanent life insurance policy from which she can withdraw money to supplement her retirement income when she retires at 60. She has owned a whole life policy for 4 years. 

– Her whole life policy is by MassMutual. It offers $200K guaranteed coverage and she is required to pay $220 a month in premiums for the rest of her life. Currently, there is $3,500 in the cash value account of the policy. 

 – After shopping with 30+ carriers and their 90+ permanent products, we advised her to switch to an Indexed Universal Life Insurance policy of Allianz Life (Life Pro+ Advantage product). She will still pays $220 a month in premiums. However, she only pays until she reaches 60 years old (23 years).

– She will be able to withdraw up to $13,600 a year, tax free, for 30 years, from 61 to 90 years old, based on the illustration of the policy. 

-If she passes away at 91 years old, her beneficiary can still receive $37K in death benefit, income-tax free.

Emma, 40 years old, a product marketing manager living in San Francisco.
Indexed Universal Life Insurance Policy to provide tax-free cash distribution to supplement retirement income. Pay $500 a month for 20 years (40-60 years old). Receive up to $32,605 a year, tax free, for 25 years, from 66 to 90 years old.

Emma, 40 years old, a product marketing manager living in San Francisco, has an income of $165K a year and good health. She wants to invest in a permanent life insurance policy with the purpose to withdraw cash from it to supplement her retirement income when she reaches 65 years old. 

She plans to pay $500 a month in premium until she reaches 60 years old (20 years in total) and wants to withdraw the maximum cash distribution from the policy when she is 66 to 90 years old (25 years). She also wants to have access to cash income if she becomes terminally or chronically ill or requires long term care.  

After shopping with 30+ carriers and their 90+ permanent products, we find and recommend Emma to choose between two best products: 

  1. Allianz Life with its Pro+ Advantage product – she can withdraw up to $32,605 a year, income-tax free, from 66 to 90 years old (25 years). If she passes away when she is 91 years old, her beneficiary can receive up to $75,500 in death benefit as well. These are based on the illustration of the policy.
  2. Penn Mutual with its Accumulation Builder Flex IUL product offers annual distribution up to $28,760, income-tax free, from 66 to 90 years old. If she passes away at 91, her beneficiary can receive up to $95,000 in death benefit.

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