Understand if an IUL might be the right retirement savings plan for you
Everyone’s personal financial situation and retirement goals and objectives are different. Before you take the plunge and jump in to learn more about this approach, I’ve outlined a few things for you to consider. However, the absolute best thing for you to do is speak to a knowledgeable resource.
You can contact your insurance agent or financial adviser. If he or she can’t help, please feel free to contact me via email or phone. We can set up a quick 15-minute call where I will ask a few questions and help you understand if using an IUL is a good option or not.
In general, here are some things to think about.
Health
While health is a consideration for this type of insurance, it is less of an issue than with “traditional life insurance.” Anyone who will become the insured in your IUL policy or policies needs to answer questions about their health. How healthy or unhealthy the policy holder is will dictate the cost of his or her insurance. However, we are not structuring a policy explicitly for the death benefit. We are focused on creating living benefit. So, anyone who is relatively unhealthy can still use this policy to generate living benefits and achieve a strong rate of return.
Often there are also interesting options or “mini-contracts” called riders that you can add to your life insurance policy that will give you some financial relief should you end up disabled or diagnosed with a critical illness.
Age
You can open an IUL policy at any adult age, starting at 18, when you become eligible to enter into a contract. The top age is 85, at which point insurance companies will not sell life insurance to you any longer. There is nothing to prevent you, however, from buying a policy on someone else of any age, so long as you have a family relationship of some kind with that person.
Liquidity
Not everyone qualifies for this kind of plan. Indexed universal life policies work best for people who are currently contributing to qualified plans, are earning a decent income, and want to save more than a few thousand dollars per year, while avoiding the pitfalls of other plans offered in the marketplace. Ideally, one should be able to invest a minimum of $15K a year, and I also have clients who put in half a million dollars every year. The only people these plans are not suitable for are those who are not savers or are not worried about their retirement.
The ideal way to fund this plan is to engage in what I call “maximum funding” which means you put in large amounts of money for four or five years to build up sufficient cash value and then start borrowing against that cash value as needed or to add to their annual contributions.
Bottom Line
These are really the only 3 considerations – age, health and available wealth. As stated before, an IUL is a great option for anyone with a decent enough income to be able to put aside more than a few thousand dollars a year for their retirement. Contact us to learn more about how an IUL might work for you and how you can get started.
