Meet the “Indexed Universal Life”.

This is the new kid on the block (not really new). Indexed Universal life (IUL) is a type of universal life policy. The universal portion means that premiums are flexible and the components of the life insurance policy (death benefit, savings element, and premium) can be altered throughout the contract

Within universal life policies, there is a cash component as well as an insurance component. It is the cash component that makes IULs differ from Variable Universal life and Universal life. (Don’t loose me now, stay with me). The cash bucket inside of an indexed universal life policy grows as a result of index performance. The indexes will usually reflect broad market indexes like the S&P 500, DJIA, etc. This all seems pretty simple.

It is actually a very well structured policy with many components. Bottom line is a permanent life policy that builds a “savings” account that is guaranteed not to have a negative growth in the event the market goes south with a capped but very respectful rate of growth, that allows for great results over the years, especially if it is started at a very early age, as young as one year old. There are no taxes on the growth of the savings part, similar to a 401K or IRA and the accumulated cash can be accessed at any time with no tax implications. So at retirement or at any age- your money is available tax-free. I never met a retiree who wants to pay huge taxes at retirement, and yet, millions are going to have a tax obligation when they cash their IRAs or 401ks.

No wonder most Americans retire broke, or close enough. Consider the debacle of a few years ago when millions of retirees lost most of what saved in their lifetime due to their mutual fund or 401k going up in smoke. IUL premiums are very reasonable and can be customized every year, or whenever based on your budget and your financial situation. And yes, I really like chocolate.