Indexed Universal Life insurance, also known as IUL, is a type of life insurance that offers a different way to grow cash within the policy.
While the primary purpose of such a policy is the death benefit associated with life insurance, many insurance agents are suggesting the use of this product as a form of retirement savings and income.
An IUL is a type of policy that has cash value. It is the potential growth of this cash value that is often touted as a major benefit. The cash value growth potential is tied to an index, such as the S&P 500, hence the name “Indexed” Universal Life. If the index chosen within the policies does well, then there is a reasonable chance that your policy cash value will grow. The suggested strategy is to grow the cash value within this policy over time so that future withdrawals from the policy can be taken. However, this policy growth doesn’t always happen as planned or projected.
Indexed Universal Life insurance is a tool that can be used correctly or incorrectly. While the purpose of life insurance is beneficial for many reasons, the push to use it as a means of generating retirement income should be approached cautiously. An IUL policy could be designed to create future tax free income. However, this strategy is normally applied in situations of high net worth and income. It often is “sold” to people who have other, more practical, and less costly tactics available. One should definitely use caution before designing or purchasing an insurance policy for anything beyond death benefit.
Daniel J. Wendol is the owner of the Dolphin Financial Group. He is a CERTIFIED FINANCIAL PLANNER™, licensed as an Investment Advisor Representative, and also has an insurance license. He combines the investing and insurance worlds with a focus on retirement. ‘
Each week Dan hosts Dolphin Financial Radio, a podcast about the wide-ranging issues people face leading up to and through retirement.
Dolphin Financial Group acts in a fiduciary capacity to help people make life’s toughest financial decisions.