Dedicated to empowering middle-aged individuals, my personal training focuses on enhancing mobility, managing weight, building lean muscle mass and overcoming age related hurdles. Die too soon (Life insurance with true living benefits you don’t have to die to use)
2. Reach retirement age without adequate savings (underperforming 401K)
Index Universal Life (IUL) offers 4 huge advantages . Advantag
e #1: Return
The biggest advantage is return which makes it a great investment vehicle. We can illustrate return in a familiar game to tic-tac-toe. A lot of people put their money in the bank because it is safe, secure, money is there when they need it. But it doesn’t earn that much. When they want to earn more money, they put their money into the stock market or real estate in hopes of earning 8 – 12%. But the problem is that the stock market is risky. A lot of people lost a lot of money during the last decade 2000 – 2007. I could tell you a story how a family member lost the entire retirement savings when the Enron stock crashed. The EIUL product is right in the middle connecting high return with security. The historical average return is 8.2%. That’s the first key advantage to remember. Advantage #2: Tax Deferral
The 2nd advantage is tax deferral. EIUL growth is tax deferred like a 401K and you can distribute it tax-free. Actually, it is much more powerful than a 401K because you can pull money out tax free. Advantage #3: No Risk
The 3rd advantage is that the EIUL has no risk of losing money. The insurance company created this product (Equity Index) that indexes against the S&P 500 which is the orange line. The EIUL is the blue line. If we take an historical look at the market from 1997, we see that when the market went up, the EIUL went up slower because of the 13% cap. But when the market crashed 55% in 2000, the EIUL did not lose a dime. The EIUL started going up again, starting at a higher place. The market went up faster. But again, it dropped by 40% in 2007 and the EIUL did not lose any money. You can never lose money in the EIUL because of the trap door feature that locks in your earnings. Whenever you gain, the EIUL traps the gain. You can never have less at the end of the year than what you started with. This strategy out performs the market which is amazing to be able to do that. The EIUL has upside potential without any downside risk. But what is the downside? There is a cap on the product. For the last 2 years it’s been around 13%. They change the cap every year depending on what the market is predicted to do. So far we’ve covered 3 major advantages of the EIUL.
• Money grows at 8 – 10%
• Growth is tax deferred and distributions are tax free
• No risk of losing money. Advantage #4: Protection against injury or illness
The 4th advantage is the protection against injury or illness. There are several policies that have this equity index feature. New York life doesn’t have it. But Transamerica and mutual of New York might have it. In 2007, national life group was the first company to offer this protection along with the living benefits part which gives the policy a second leg to stand on which is very powerful. The old way of investing is put money away into a 401K to build an estate. The new way is to put that same money into an EIUL policy because you get an immediate protection against serious injury or illness separate from cash value savings for retirement. ABR1 is accelerated benefit for terminal illness which covers a person when they are diagnosed to die within a 24 month period. This is unlikely to happen to most people, but it has happened in the past. So if it does, you have the coverage that allows you to get 90% of the face value while still living totally tax free. ABR2 is accelerated benefit if you have a chronic illness that limits your ability to perform 2 out of 6 daily living activities: bathing, toileting, continence, dressing, eating or transferring. Under these conditions, you cannot access the face value of a traditional life insurance policy because it only pays after the insured is deceased which is not that good. If you try to access money from the 401K, you can do that put you pay federal and state income tax on the withdrawal plus there’s a 10% penalty to the Feds and another 2.5% penalty to the FTB. Instead, you can access the policy under ABR2 and receive 1 – 2% of the face value each month. This chronic illness rider used to require a 2 year wait period. Now the wait is only 30 days because the insurance company does not want people who already have a chronic illness to fraud and seek coverage. ABR3 is accelerated benefit for critical illness which is: stroke, heart attack, serious cancer, major organ transplant, renal failure, blindness, Lou Gehrig’s disease, Alzheimer’s disease or dementia. Under the old life insurance policy, there is no coverage. So a person suffering any of these problems has to pull money out of the 401K. However with the EIUL, you are protected up to 70% of the face value tax free. Death Benefit-then there’s the ultimate use for insurance which allows the beneficiary to collect the face value when the insured passes away. Another thing to consider is that you don’t want to outlive your retirement money if you live a long time. You’ve grown the money over the years better than a 401K. Now you’re able to withdraw the money tax free. LIBR is Lifetime income benefit rider. You can exchange your accumulated value for a monthly payment that continues as long as the insured lives, no matter how long they live. Can be exercised between ages 60 and 85; policy in effect 10 years; and no outstanding loans.
