The Typical Hype - the top 10
- get the gains of the S&P 500 without any of the loss
- guaranteed 2% minimum gain
- Tax-Free income at the time you decide!
- Cash value accumulation added to the death benefit!
- Cash value can be accessible up to 90% without changing the gross value. For example, if you have $500k cash value and you borrow out $200k, the policy still pays you interest on $500k!
- An optional hybrid combining term with a base policy can cut the cost of insurance, resulting in very low payments!
- Policy pays for itself at the same time it starts paying you a Tax-Free Retirement!
- Usually beats a 401(k) and IRA all to pieces!
- No 10% penalties and no 59 1/2 age limit on borrowing out of cash value!
- It just makes good sense for many.
Reality - Let's take the top ten apart a little
- True, sort of. You are protected from loss, but typically get the gains of the S&P 500 up to a cap, usually 11 - 14% measured on a 1 year point-to-point basis.
- The guaranteed floor is 0%. Some policies do have a higher floor over a longer term than 1 year.
- Tax-Free income is available through policy loans against the cash value, but cash value is low in the early years. Generally, substantial borrowing in the first 10 years should be avoided.
- True if you use a variable rate loan. Fixed rate loans have a lesser interest rate, but the loan amount is set aside from interest crediting.
- Hybrids can be very useful, but be aware that the amount you pay for the term portion has no cash value, and thus no growth potential for that portion.
- True for a properly designed policy if you don't borrow too much. The cost of your life insurance goes up every year, and is paid from your cash value when you stop paying premiums. Your choice of when (what age) you start taking cash out, and current crediting rates determine the amount you can safely take out without ever paying it back.
- Because of never taking a loss of principal, the IUL can perform better over the long term.
- True. There are no penalties for borrowing against your policy, and no age limit.
- This statement is generic B.S. An IUL is not for everyone. Not everyone needs life insurance, and not everyone can qualify.
For a discussion about this, with no sales pitch contact us.