If I had the opportunity to "do over" my financial life as a younger person (I'm 66 now), I would take the match offered in an employer's 401(k) plan and invest the rest in an Indexed Universal Life policy. In my opinion, nothing else matches the value of tax free growth, the opportunity to earn as much interest as 13% per year with no chance of losing money, and taking the cash value growth in a policy as tax free "loans" that are withdrawals against the policy's death benefit.

 

Additionally, consider that low cost long-term care coverage can be, in some cases, a free benefit. How? If an insured cannot perform 2 of the 6 activities of daily living, many policies offer a monthly benefit as much as 2% of the death benefit. Consider that a $250,000 death benefit would pay $5,000 per month in this example. Why buy an expensive, stand-alone long term care policy?

 

Permanent life policies are also available in other forms beside the Indexed Universal Life. A whole life policy offers more in guarantees but less opportunity to earn as much in gains. A Universal Life (non indexed) also offers cash value gains while maintaining flexibility in its design. 

 

A permanent policy can be used for college funding because the cash value in a policy does not count as an asset on the FAFSA form when calculating financial aid. Nor do tax-free loans.

 

Medicaid versatility is another feature offered by permanent life policies. A fixed income can begin at the policy owner's discretion. Now the cash value in the policy no longer counts as an asset that must be spent-down.

 

Why should you use an Indexed Universal Life policy as one of your wealth building and retirement tools?  Safety! In years when the measuring index (i.e., the S&P 500) earns a negative rate of return, the account is credited Zero. So, when the market loses, you don't! But, each year when the measuring index records a gain, these increases are locked-in and can NEVER be lost due to a stock market downturn. Here's a comparison example:

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Start with $100,000 in an Indexed Universal Life Policy

Year 1: Market gains 10% so account is now worth $110,000

Year 2: Market loses 15% so account value remains $110,000

Year 3: Market gains 5% so account value is now worth $115,500

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​Start with $100,000 in a brokerage account

Year 1: Market gains 10% so account is now worth $110,000

Year 2: Market loses 15% so account is now worth $93,500

Year 3: Market gains 5% so account value is now worth $98,175

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In this fictitious example the Indexed Universal life policy grew 17.6% more than the  brokerage account - without taking any risk! Do you see the power of growing wealth using this type of policy? Not only do you eliminate market risk, but you enjoy the power of locking-in gains!  In the example above, the $110,000 is never susceptible to loss due to the market.  Request a no obligation, free quote by clicking the button:

The cash value in the policy is tied to a financial index like the S&P 500. When the index is positive, the policy is credited by the amount of gain up to a certain limit - typically withing the 12-13% range. If the index has a negative return, the policy is credited 0%. No losses are possible due to market risk!

I carry an example illustration in my briefcase for a 28 year old male contributing $500/month to an Indexed Universal Life policy and then discontinuing premiums at age 65. I used an assumed return rate of 6.5%. At age 65, he can withdraw $78,275/year for the rest of his life. If he dies at age 92, he will have taken tax free loans of $2,113,425 and his beneficiaries will still receive $348,022 as a tax free death benefit. His totals premiums would have totaled $384,000. See why I like them so much?

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