Most “traditional” retirement savings plans allow for pre-tax contributions and tax-deferred growth. So, upon withdrawal, 100% of the funds you access in retirement may be fully taxable – at a future rate that is currently unknown.

Tax-free withdrawals are allowed from certain types of accounts, such as Roth IRAs and 401(k)s, and via some types of life insurance policy loans. IUL (indexed universal life) policies fall into this category. 

IUL Policy loans can provide you with more net spendable income in retirement to use for the goods and services you need (and want) to purchase.

If the unexpected happens, it could leave your loved ones struggling financially with debt(s) to pay off, as well as everyday living expenses like housing, transportation, utilities, and food. An indexed universal life (IUL) policy can provide your survivors with an income tax-free death benefit that can allow them to carry on without worrying about drastic changes to their lifestyle. These policies can also provide you with a way to access funds tax-free in retirement cash flow through policy loans.

Employer-sponsored plans and individual retirement accounts (IRAs) generally mandate a maximum annual contribution limit. This can reduce the amount of tax-advantaged savings that you have. But permanent life insurance like IUL (indexed universal life) can provide you with a way to make unlimited contributions into an account that grows on a tax-deferred basis – and that you could also access tax-free in the future – even if you have already “maxed out” the contribution limit on these other types of plans.

Indexed universal life (IUL) insurance allows the cash account to grow on a tax-deferred basis. This means that there is no tax due on the gain until the time of withdrawal, providing the ability to compound exponentially over time – especially compared to a taxable account, with all other factors being equal. If other tax-deferred accounts – such as traditional IRAs and 401(k) plans – have reached their annual maximum contribution limits, an IUL policy can provide you with a way to continue expanding your tax-advantaged retirement savings.

As with other permanent life insurance policies, IUL (indexed universal life) insurance provides coverage for the insured’s life. This means that as long as the premium is paid (in turn, keeping the policy in force), an income-tax-free death benefit will be paid to the named beneficiary(ies). This is the case, even if the insured contracts an adverse health condition in the future.

Permanent life insurance policies like IUL (indexed universal life) provide several types of guarantees.

The cash value will be credited with a guaranteed minimum floor amount – even if the index(es) being tracked incur a loss in a given contract period. These policies also guarantee that a death benefit will be paid to one or more named beneficiaries if the insured dies while the IUL policy is in force.

Indexed universal life (IUL) insurance policies provide flexibility concerning how the cash value return is credited. In addition, as with regular universal life (UL) insurance, IUL policyholders may decide (within certain guidelines) how much of the premium will go towards the death benefit and how much will go towards the cash value component.

In some cases – such as generating too much income from other sources – Social Security retirement benefits may be taxable.

Neither the growth on an IUL (indexed universal life) policy nor the funds that are accessed via a tax-free loan count against these income thresholds and, in turn, have no impact on Social Security benefits.

The death benefit on an IUL (indexed universal life) insurance policy is the amount that is paid out to the named beneficiary (or beneficiaries) if the insured dies while the policy is in force. These funds are typically received free of income tax. Other names for death benefit are face amount and policy proceeds.

The cash value of an indexed universal life (IUL) insurance policy offers higher potential returns than other permanent plans like whole life and regular universal life insurance – but in a given contract period. IUL differs from variable universal life (VUL) in that VUL provides the opportunity for higher total returns but also has the risk of loss if the investments perform poorly.