Rethinking Your Retirement Strategy? Take a Look at an Indexed Universal Life Insurance

05.25.2017 | Category: Retirement Planning

When it comes to planning for retirement, individual retirement accounts (IRAs) and 401(k)s offer tax advantages that can be hard to beat. But what if you don’t have access to a 401(k) program through your employer, or you’ve maxed out your IRA contributions? It may be time to consider adding an indexed universal life insurance (IUL) policy to your financial plan. We’ll explain what it is and how this tax-advantaged vehicle can work.

What is indexed universal life insurance?

Indexed universal life insurance (IUL) is a permanent life insurance policy that provides a death benefit and potential to build up internal cash value¹ when properly funded. A portion of your cash value may be credited interest based on index crediting strategies, as well as having access to fixed interest crediting strategy. The policyholder has the control and flexibility as to the allocation of interest crediting strategies.

However, with an IUL, instead of being subject to a carrier’s set interest crediting rate, an IUL’s interest credit is linked to a financial index such as a stock index like S&P 500®. To be clear, no premium is ever invested directly into the stock market; the indexing method is simply another way to determine the interest rate crediting.

IUL key features for retirement savings:

Reduced market volatility: Because most IULs have a zero-percent floor (and thus your index credit can’t go below zero based on negative market returns), they may be better protected from the losses associated with poorly performing markets.

Potential for gains: IULs have an increased potential for strong cash value¹ gains that may be higher than those possible through other types of insurance.

Tax benefits: The cash value¹ within the policy could provide tax-deferred growth that can be used (also tax-free²) and can remain outstanding until the death of the insured, at which time the unpaid loan or withdrawl³ is deducted from the death benefit.

Death benefit: In the unfortunate circumstance of an early death of the insured, the death benefit paid can far exceed the premiums paid for the policy. Because an IUL is a life insurance policy, your premiums ensure a death benefit, tax-free⁴, to your heirs.

These are just some of the features to consider when looking to add an indexed universal life insurance policy to your retirement portfolio.

¹The amount that may be available through loans or withdrawals, as defined in the contract.

²For federal income tax purposes, tax-free income assumes (1) withdrawals do not exceed tax basis (generally, premiums paid less prior tax-free withdrawals); and (2) the policy does not become a modified endowment contract. See IRC §72 and 7702A.

³Available loan amounts are based on your cash surrender value. The minimum withdrawal is $100 and may not exceed 90 percent of the surrender value during the first 14 years and 100 percent of the surrender value thereafter. Surrender charges may apply. Standard policy loans will be charged at the interest rate, Policy years 1-9: Charge 4 percent (in arrears), Credit 2 percent. Policy years 10+: Charge 2 percent (in arrears), Credit 2 percent. Index loans will be charged an interest rate determined by the company not to exceed 6 percent. We may defer payments of any surrender value, partial withdrawal or loan (except for loans to pay premium on any policy issued by us) for up to six months after we receive your written request for payment. If we defer payments of any surrender value or loan for more than ten business days, we will credit interest on the surrender value or loan amount at the current rate for proceeds held on deposit. The interest will be calculated from the date we receive all necessary documentation to the date of payment.

⁴Death benefit proceeds from a life insurance policy are generally not included in the gross income of the taxpayer/beneficiary (Internal Revenue Code Section 101(a)(1)). There are certain exceptions to this general rule including policies that were transferred for valuable consideration (IRC §101(a)(2)). This information should not be construed as tax or legal advice. Consult with your tax or legal professional for details and guidelines specific to your situation.

Product base plans, provisions, features and riders may not be available in all states and may vary by state.

All guarantees subject to the financial strengths and claims paying ability of the issuing insurance company.

This is a solicitation of insurance. A licensed agent/producer may contact you.

Life insurance is underwritten by United of Omaha Life Insurance Company, 3300 Mutual of Omaha Plaza, Omaha, NE 68175. United of Omaha is not licensed in New York. In New York, life insurance is underwritten by Companion Life Insurance Company, Hauppauge, NY 11788-2934. Each company is responsible for its own financial and contractual obligations.

Income Advantage – GPT Sex Distinct Policy Forms: ICC15L123P or state equivalent. In FL, D501LFL14P. In NY, 961Y-0414. GPT Unisex Policy Forms: ICC15L124P or state equivalent. In FL, D502LFL14P. In NY, 962Y-0414.

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.

Mutual of Omaha and its representatives do not provide tax and legal advice, and the information provided herein is general in nature and should not be considered tax and legal advice. Loans and withdrawals can be subject to taxation. Consult a qualified professional regarding your specific situation.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by United of Omaha Life Insurance Company (United of Omaha) and Companion Life Insurance Company (Companion). S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by United of Omaha and Companion. United of Omaha’s and Companion’s Income Advantage^SM is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

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