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Best Tax-Free Retirement Plan To Ease Life at Old Age

Best Tax-Free Retirement Plan To Ease Life at Old Age

Index Universal Life Insurance (IUL)

Indexed Plan is Tax-Free Retirement and permanent life insurance which comes with a tax-free retirement plan, life insurance and medical insurance such as critical illness, chronic illness and terminal illness. Some investors referred to this as one of the best tax-free retirement and medical products. The premiums are determined on the basis of policy type, face amount, age, risk evaluation based on health status and optional riders. Premium covers the cost of insurance and expenses and the remaining premium goes to a cash-value account where it grows via fixed and indexed account, such as the S&P 500 or the Nasdaq-100. Cash-value accumulation occurs within two sub-accounts: Fixed account and Indexed account.


An Index Universal Life Insurance’s key features and benefits:

  • Flexible premium, skip premium
  • Option to pay a minimum premium to keep policy in force
  • Option to pay maximum within federally established tax lay
  • Tax free retirement
  • No plenty and age limit on early withdrawal
  • Take loan against the cash value while cash value is earning interest
  • Saving never run out as long as you live
  • Death benefit – Family protection
  • Fast cash accumulation, Cash Value – Saving account
  • Risk free – Never loses money even the market crash. In 2008, 401k lost money but IUL didn’t
  • Loan option to buy house, car, medical bills
  • Tax free education plan
  • Full access to saving account
  • Not considered an asset when calculating the amount for financial aid
  • Use money at any College & University

It's always wise to have a life insurance policy for your children and grandchildren. This is not the reason that they die before you and you collect the money. It creates

  • (1) College saving
  • (2) Tax-free retirement.
  • (3) Family protection and
  • (4) Medical Benefits, such as Chronic illness, Critical Illness, and Terminal Illness.

Risk-Free And Tax-Free Retirement (Also See Blog: )

The main purpose of using this policy is to accumulate wealth through a tax-deferred interest crediting basis. The excess premium paid by the policyholder is placed in the sub-account that continues to earn interest on an index like S&P 500 or NASDAQ. IUL is an attractive option because it is not as volatile as other policies available in the market. This is because your money is not invested in the equities in real, but the insurance company mimics the index returns.

Graph 1 shows investment in IUL (Indexed). It’s like a staircase. Money always goes up or stays the same. Your savings never go down as shown in Graph 2.  It earns compound interest on indexed based formulas. Your investment is earning money rather than losing.

So what is an Indexed account?  Fig 1 shows money goes three ways. Goes up, stays the same or goes down. In an indexed account money goes up or stays the same but never goes down. Your money is protected from going down. It is a guarantee that you will never lose money.

Graph 1 shows StairCase and Table 1 shows Variable Account (401(k) vs Indexed plan. When the market is 50% down, saving in an Indexed plan stays the same at $1000. When the market goes 50% up, indexed accounts accumulate 50% interest. So the Indexed account will have $1,000 + $500 = $1,500 in savings.

Graph 2  shows a variable chart and Table 6 shows a variable account. When the market is 50% down, saving in 401(k) loses $500. When the market goes 50% up, saving in 401(k) earns $250. This comes out to be $500 + $250 = $750 in 401(k) savings.

Now we know how the market plays a big role in our investments.

Indexed Universal Life insurance policy emphasizes the cap and floor rate. Therefore the returns are guaranteed because of the floor rate the policy offers. This further means that even if the index is in loss, your account will be credited. The policyholder will not lose any money or be negatively impacted in any given situation. For example: You policy has cap rate of 13% and market performs 15%, you will get 13% of the market performance. If market performs -4%, floor is 0%, you will not lose money. This is why it calls “Zero is Hero.”  Over the last 20 years, market has performed close to 80%

No Limit on Premium Paid

Another reason why IUL is the best option and most preferred is that IRS has established no limit with premiums paid with indexed universal life insurance into LIRP (life insurance retirement plans). However, options like Life Insurance Retirement Plans such as 401k or IRA have limitations.

For example, in a 401(k) plan, the annual contributions are limited to approximately $20,500 annually. This can seriously impact your wealth accumulation when you reach the mandatory distribution age of 70 ½.

Tax-Free Retirement

IUL offers a great retirement plan as long as you continue to make payments on the policy, the cash value will grow tax-deferred. If you start early, by the age of 65 you will have good tax-free retirement for life. Upon your death, your family will get the tax-free death benefit.

However, if you withdraw money from the policy before age 59 ½ you may have to pay tax on gain. Please note that if the loan is not paid back, your death benefit will be used to balance the loan due. This is where you have to be careful about it.

Death Benefit

IUL is insurance with death benefit plus it has living retirement benefit. This makes the policy benefit in both ways. If you, the policyholder, die early, your beneficiary will be given a tax-free death benefit, thereby it becomes easier for them to pay for your funeral expenses without the financial burden. On the other hand, if you live long, you can enjoy the savings after retiring and continue to maintain your lifestyle.

No Penalty on Withdrawal

If you have a 401(k) policy and wish to withdraw money before 59 ½ years of age, you will have to pay income tax on the withdrawal amount. In the majority of cases, this is around 10 percent. However, with IUL, you can withdraw money at any time without any tax liability or penalties.

Family Protection

This policy is a very powerful financial tool for protecting the financial well-being of your family for decades to come—even after death. With this policy in hand, you will have the flexibility to build assets and deal with life's uncertainties. Ever since 2020, many medical professionals, including physicians and nurses, have lost their lives in the quest of saving others from COVID-19. They are our real heroes.

Nonetheless, those medical professionals at the forefront, putting their lives at risk in saving the lives of patients from COVID-19; they need their own and family protection if something happens to them. You can borrow against the savings in policy for your children’s education, down house payment, or buy a car.  Medical coverage can be used for any uncertainties that may come in future.

Loan Availability

Withdrawals will reduce your cash-value dollar to dollar. Full Surrender may have some tax implications. With IUL, you get the flexibility of taking out a loan without facing penalties, credit checks, or taxes. It will not reduce your cash-value account. Moreover, you don't have to return the money you take out. This makes the policy far more attractive than other options available.

Kids Education Savings:

Not many people know, this policy is not considered an asset when it comes to financial aid or scholarships.  But the State 529 College saving plan is considered as an asset. The college financial advisor will calculate it as an asset to determine the financial aid amount they will be awarded, but the IUL policy will not be included.

Zero Loss

The best part about investing in the Index Universal Life Insurance Plan or Tax-Free Retirement plan is that the savings in the IUL never take a downward dip even if the market comes crashing down. Therefore, there is no risk of losing some or all your money. This gives you the peace of mind that your money is safe, and you never have to worry about market volatility and swings.

Medical Insurance

Our life is unpredictable. No one knows what will happen at any age. Spending too many hours at work is a leading cause of burnout, heart attack and stroke. What if you had a heart attack and treated at the hospital. Health insurance pays 50 to 80%, rest 20 to 50% comes from your savings. What if insurance pays the 20 to 50% would you call it an investment? Yes, I will. This insurance policy covers heart attack, stocks, cancer, heart disease, lung disease, liver disease, and more at no extra cost. Moreover, this policy gives you tax-free retirement for life with other benefits.

Life and health fragile and no one know what will happen tomorrow. You don’t have to buy Terminal Illness, Critical Illness, and Chronic Illness coverage because it comes with a policy.






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