An IUL is a life insurance policy that offers the death benefit protection of traditional life insurance, however, its' main objective is the increase of cash value within the policy. The cash value accumulation is based on the performance of one or more underlying indexes. The main benefit of these options is the ability to generate significant profits within the policy cash value without the risk of loss when one or more indexes decrease in value. IUL's provide policy holders with the potential to have their life insurance premiums returned to them in the form of tax-free cash value, while also having the death benefit protection in place for their loved ones. For a more detailed account of how this works, you may wish to read IRS Sec. 7702 of the U.S. tax code.
IULs have become increasingly popular in recent years as more and more people look for ways to grow their money without taking on unnecessary risks.
In describing the drawbacks to IULs, many non-agents as cite high fees and Surrender Charges that traditional stock investments typically do not have. However, upon closer examination, these fees are typically "front-loaded" in the first 10 years of the policy life as are the surrender charges. If one were to compare this type of policy over a typical stock investment with commissions and management fees you will find little difference in the long run. Then, if you then compare the tax-free distributions vs. taxability on gains as well as increasing tax on social security payments you will be pleasantly surprised.
IUL's are one type of permanent life insurance policy, which means they offer lifelong coverage as long as the premiums are paid.
Universal life insurance policies are another type of permanent life insurance that also offers lifelong coverage, however, they do not have the same cash value growth potential as IUL's. Whole life insurance is another type of permanent life insurance, however, it does not offer the same cash value growth potential as IUL's or universal life policies.
With an IUL, you have the potential to participate in the upside of the market while having downside protection.
This means that if the market goes up, your cash value will grow; but if the market goes down, your cash value will not go down as much, and may even continue to grow. You may also take advantage of the annual interest paid on the policy by the insurance company instead of a choice of indexes. This of course would only make sense if you felt that your change of gain in a particular year might be greater in "cash" than in the market.
IULs typically offer several different index options to choose from, each with its own set of rules and requirements. You can often select how frequently you want your cash value to be linked to the index performance, and you may have the option to take loans or withdrawals from your policy.
There is another important but little understood way the "borrowing" of tax-free" distributions benefits the policy owner.
When one borrows from the policy, the insurance company uses the policy cash value as collateral for the loan. This means that gains (or interest) are based on the entire cash value in the policy. Said another way, you pay interest on the loan but earn interest on the entire cash value which in some cases can result in positive leverage.
One of the benefits of IULs is that they offer the potential for tax-free growth on the cash value inside the policy.
The cash value grows tax-deferred, which means you don't have to pay taxes on it until you withdraw the money. And if you structure the policy correctly, you can withdrawal the money tax-free. This is because IULs are considered life insurance policies by the IRS, and as such they are subject to IRS rules regarding life insurance policies.
IULs also offer the potential for a death benefit that is greater than the cash value in the policy.
This can be accomplished through what is called "indexing to a multiple", which essentially allows you to leverage your death
IULs can be a flexible and powerful tool for financial planning, and can offer significant benefits over other types of investment products. If you are looking for potential upside with downside protection, an IUL may be right for you. Give us a call at 425-214-4757.
When it comes to saving for retirement, there are a lot of options out there. One option you may not have considered is a fixed index annuity.
What is a fixed index annuity?
It's an insurance product that provides you with the potential to earn interest based on the performance of a stock market index, without the risk of losing your principal investment. Sounds great so far, right? And there are more benefits: - Your interest is locked in, even if the market crashes - You can receive income payments for life, even if you live to be 100 or older.
There are a few things to keep in mind before investing in a fixed index annuity, though.
But if you're looking for a safe way to grow your retirement savings, a fixed index annuity may be a good option for you. Just get in touch with me and we can go over the details to see if it makes sense for your retirement savings goals.
If you're like many American workers, you have a 401k plan through a previous employer.
And while 401k's are a great way to save for retirement, they have their limitations. For example, you're limited in how much you can contribute each year, and you're at the mercy of the stock market.
That's where a fixed index annuity can help. A fixed index annuity is a retirement service that provides guaranteed income for life, no matter how long you live. And, unlike a 401k, there's no limit to how much you can contribute. So, if you're looking for a retirement solution that provides guaranteed income for life, a fixed index annuity may be right for you.
A fixed index annuity is a retirement service that offers former or current workers with a 401k plan the ability to receive a fixed, tax-deferred income stream during their retirement years. This retirement service also offers the potential for greater income growth than traditional fixed annuities, based on the performance of one or more stock market indexes.
The index chosen by the annuity provider will determine how the annuity’s value will fluctuate.
For example, if the S&P 500 is the index, and it goes up by 5%, your annuity value will also go up by 5%. The above example is for illustration purposes only, and certain indexes with give the account a higher rate of return while some will give a lower rate. This a complex product and you should make sure you understand how interest is credited from year to year. However, if the market index goes down, your annuity value will remain the same, minus fees and/or expenses for that year.
This stability makes fixed index annuities an attractive retirement service for those who are looking to protect their retirement savings from market volatility.
What are stock indexes?
Indexes are used in a fixed index annuity as a benchmark to calculate interest crediting potential. The most common indexes used in fixed index annuities are the S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq-100 Index. In order for an index to be eligible for use in a fixed index annuity, it must meet certain criteria established by the insurance company, including being publicly traded and having a sufficiently long history. The goal of using an index in a fixed index annuity is to provide potential interest crediting that is based on the movement of the underlying market, while at the same time limiting downside risk. When selecting an index for use in a fixed index annuity, it is important to consider both the past performance of the index and its expected future performance.
A stock index is a statistical measure of the changes in the value of a basket of selected stocks. It is a tool used by investors to track the performance of the overall stock market. The most commonly quoted stock indexes are the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite.
There are two main types of stock indexes: price-weighted indexes and market-value weighted indexes. In a price-weighted index, each stock is given equal weight regardless of its share price. In a market-value weighted index, each stock is given a weight based on its market value (share price times number of shares outstanding).
Stock indexes can be used to measure the performance of a particular sector or industries within the overall stock market. For example, the S&P 500 index includes stocks from 500 large companies across 11 different sectors. The Dow Jones Transportation Average is an index that tracks the performance of 20 transportation stocks, including railroad operators and airlines.
Stock indexes can also be used to create investment products, such as mutual funds and exchange-traded funds (ETFs). These products allow investors to gain exposure to the underlying stocks in the index without having to purchase them individually. fixed index annuities are another type of investment product that track the performance of a stock index. fixed index annuities provide guaranteed income for life, making them an attractive option for retirees who want to protect their nest egg from market volatility.
However, there are also some drawbacks that you should be aware of:
He has been exclusively involved in the life insurance and related areas for the last 30 years. During that time, he has seen many changes in the business, and uses his diverse knowledge and experience to help potential clients understand how life insurance can play a significant part in their financial planning, especially their retirement planning.
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