I've spent 16 years researching and helping clients with their varied retirement investment savings plans. I have come to the conclusion that of all the different plans available, the "IUL Plan", when partnered with the "very best value" life insurance policy, has the greatest number of benefits and yields the most money in the long run of any plan.
Why is it called "Tax-Free"?
One important item to clear up right away. This plan is referred to as “Tax-Free” because during its growth period (accumulation) and pay out period (distribution), no income taxes generated from interest gains need to be paid.
Instead, just like a Roth IRA, you pay your income tax before you place your principal into the plan. So technically, no retirement savings plans are totally “tax-free”. That is a nickname for this plan.
The "IUL Plan”, also referred to as the “Tax-Free" Retirement Savings Plan (TFRSP), "EIUL”, “LIPR” or the “Barefoot Retirement Plan” are all essentially the same plan.
It is referred to as the "IUL Plan" because the foundation of the TFRSP is an IUL (Indexed Universal Life insurance policy). It is a “cash value” policy because this plan provides guarantees and cash value, both of which need to be insured. It is designed and intended to be a "lifetime policy" and will yield the greatest benefits when funded consistently and kept for the duration of your life.
Why use the "IUL Plan"?
Why are well-informed business owners, executives, managers and other investors using the "IUL Plan" as their #1 retirement savings plan or to supplement their 401(k) plans, IRA's or stock and bond portfolios?
Here are some of the many reasons why they use this plan:
1) the IUL Plan is CPA-approved and recommended for its huge tax advantages.
2) the IUL Plan guarantees their cash accumulating in their plan can never lose value, even when their 401(k), IRA or stock portfolio lose value during a major drop in the stock market.
3) the IUL Plan works like a Roth IRA on steroids, by allowing much greater contributions than a 401(k) or IRA. This means more of their future income becomes tax-free.
4) the IUL Plan has earned an average of 7% interest annually over the past 30 years with zero losses.
5) the IUL Plan earns tax-free interest every year, which compounds and allows for tax- free retirement income.
6) the IUL Plan diversifies their investments and balances their income tax liability in their retirement years.
7) if they ever suffer a severe critical or chronic or terminal illness, the very best IUL Plan provides them access to a max of $1,000,000 to pay medical bills and make up for lost income.
8) the very best IUL Plan has the ability to prevent their personal bankruptcy and small business failure.
9) the very best IUL Plan can provide money for their long-term care expenses.
10) the IUL Plan can be designed so they will never outlive their money.
11) the IUL provides life insurance coverage that protects their loved ones financially.
What do CPA's and other retirement savings professionals have to say about the "IUL Plan"?
The listed videos explain the tax-free retirement savings plan concepts, tax advantages, benefits and how it works.
presented by Ed Slott, a nationally renowned CPA, IRA and tax expert.
presented by Ed Slott
with Patrick Kelly - financial advisor, national best-selling author and nationwide expert on the IUL Plan
(25 minute video)
Tax-Free Retirement (audio) https://www.last.fm/music/Patrick+Kelly/Tax-Free+Retirement (262 minutes)
Any investment, especially one that is long-term like an IUL, should stand up under scrutiny. The IUL is only one of many strategies and options for you to consider. This plan may or may not be the best option for you. You may or may not even qualify to have one. You owe it to yourself to gain the knowledge you need to gain peace of mind and confidence in your decision.
If you do an Internet search (which I recommend) for the “IUL Plan”, “Tax Free Retirement”, “EIUL” or “LIPR”, you will discover that there are primarily two camps who have strong feelings about them – those who are positive about it and those who are negative. That’s pretty normal for most things, but it’s important to know why people think the way they do.
This is especially true of people who feel very strongly negative. I found that some former customers who owned an IUL were negative about it because they were improperly told false information or made false promises to, or their plans were not set up properly by poorly trained agents. I’d be angry and negative too, if I was treated that way.
If you track the money, you’ll discover that another negative group of people are those affiliated with Wall St. & the Stock Market. Investment and financial advisors, stock brokers, etc. are losing commission money because their clients are shifting some of their investment money from the stock market to the IUL Plan.
The other small group of negative people are respected popular media financial advisors who believe you should only buy ”term” life insurance and never buy “lifetime” or “permanent” insurance. I used to be of the same belief, so I can understand their reasoning. However, after conducting due diligence and a study of investment and insurance history, my mind was changed about 12 years ago. Now I help clients get both term and lifetime policies, whichever is most appropriate for their situation. Usually they get both.
The fact that I am both an insurance and investment broker means that I don't have a bias against one or another. Each has their place in your overall financial planning, especially as you look to the future and retirement years.
I have designed IUL Plans for my clients (most small business owners and executives) for over 12 years in the state of Washington. The IUL Plan, when it is designed by an expert and utilized properly, can be an awesome retirement savings plan with numerous benefits.
Once it is set up properly, it’s on auto-pilot & cruise control and earns its other nickname – the “Sleep Well at Night” Plan. While others are losing sleep and worrying about their savings accounts when the stock market takes a nose dive, you are not one of them, knowing your plan will never lose value, no matter how far it drops!
It is hard to argue against great results. The chart below highlights the performances of a "Tax-Free" Retirement Savings Plan utilizing an IUL vs. a stock market plan utilizing an IRA or 401(k).
Both examples started with a lump sum of $100,000 in 1998 and track the performance of that sum through 2016, using the actual results of the S&P 500 index.
No addition contributions were made during that 18 year period, nor were any fees deducted. By and large, the cost and fees are quite similar between the investment plans.
Please notice the lines representing the two strategies (blue for the IUL and red for the IRA/401k) start at the same place and mirror each other most years. The exceptions were the two huge negative impacts made on the stock market by the big drops during 2001-2 and 2007-8. Those were what earned that ten year period of 2000-2009 the "Lost Decade".
Notice the IUL did not drop in value when the stock market did. The IUL never needed to recover from those losses, so with its annual reset feature allowed it to pick up big gains while the stock market was recovering.
At the end of 2016, the IRA/401(k) lump sum had grown to $182,116 while the IUL had grown to $332,975.
Which strategy do you wish you had invested in?
They say "hindsight is better than foresight" because one has become fact and the other still an unknown. Most investments don't come with guarantees, and with the ups and downs nature of the stock market projected to continue, any forecasting is still an educated guess.
I hope you caught my deliberate omission - the IUL does come with a guarantee - to never lose value, no matter how far the stock market drops in the future.
SCHEDULE A PRIVATE WEBINAR WITH STU
If you are serious, I invite you to join me for a private 30-minute Zoom interactive webinar. To schedule, please visit my calendar at calendly.com/stuschell
In addition to providing explanations, I will also have a time for Q&A and share what you need to do to see if you can qualify for the IUL. Time permitting, I will run projections to determine the size of the nest egg you can develop and how much money you can expect to receive in annual tax-free income.
I will also show you a chart projecting the impact taxes will make on an IRA or 401(k) plan compared to an IUL earning the exact same amount of interest during the pre-retirement years. The most startling insight is how long the nest egg in each strategy is projected to last.
My goal is to develop a long-term relationship with you as a trusted advisor. I have done this with small business owners, executives, managers and others who could afford to use this strategy. I know that takes time to develop trust and I need to prove myself. I hope you can sense that I have your best interest in mind.