An IUL can supplement retirement income through policy loans against accumulated cash value, which are generally tax-free if the policy stays in force. It tends to fit people who are already maxing out other tax-advantaged accounts, want principal protection, and can fund the policy consistently for 10-15+ years before drawing on it.
If your 401(k) and IRA contributions are already at the annual IRS limit, an IUL offers additional tax-advantaged savings with no contribution cap.
IUL cash value needs time and consistent premium to build meaningfully. People within a few years of retirement rarely see enough accumulation to matter.
If avoiding a down-market year matters more to you than capturing a strong year's full gain, the floor-and-cap structure is a deliberate tradeoff, not a flaw.
Guy walks through an actual illustration, including the fees, before recommending an IUL for retirement income. If it isn't the right fit for your timeline, he'll say so.
Loans against cash value are generally not taxed as income as long as the policy remains in force and isn't classified as a Modified Endowment Contract. If the policy lapses with an outstanding loan, the loan amount can become taxable. This is a case where working with a licensed agent who explains the mechanics matters.
It varies by funding level and the specific product, but most IUL strategies assume at least 10-15 years of consistent premium before cash value is substantial enough to supplement retirement income meaningfully.
Depending on accumulated cash value, the policy may continue covering costs from existing cash value for a period, but consistently underfunding or stopping premiums risks the policy lapsing, which can trigger taxes on any outstanding loan and end the death benefit.
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