The Financial Pillar You Never Knew You Needed

The journey to financial freedom and a fulfilling retirement is a long one, but it can also be a perilous one if you don’t have the right tools to help along the way. It is critical to take advantage of financial vehicles that bring different features to the table. So, I’m sure you’d be thrilled to have assets and strategies that provide you with the following:

• Market growth protected from any loss
• Tax-free growth and distributions
• Financial protection for loved ones
• Long-Term Care Coverage
• Estate-Tax Mitigation

You’d be wise (and perhaps lucky!) to have all of these attributes working as part of your wealth-building strategy. To acquire them all, most people would need multiple vehicles, possibly even a different vehicle for each attribute. But did you know there’s actually a financial product that provides all of the above and more? If not, let me introduce you to the Indexed Universal Life insurance policy, or IUL. This financial "pillar" provides numerous benefits to help support your future financial goals and dreams.

Here’s how it does it:

Cash Value Growth

These policies don’t just protect loved ones; they grow and protect wealth. With an IUL, the cash value that builds up in your policy captures a portion of any stock market growth, but if the market suffers a loss, your cash is completely shielded and loses no value.

Tax Advantages

The IUL offers tax-deferred growth on your cash value, which can also be found in a 401(k), IRA, or 403(b). This prevents the growth on your funds from being taxed every year, helping compound interest grow your nest egg without any “drag.” However, unlike these retirement accounts, you can also access your cash tax-free via loans from your policy. While the “L” word may give you pause because of the interest charged, many policies offer no-cost, zero-wash loans, where the borrowed amount is credited and charged with the same percentage of interest every year, resulting in a net interest of 0%. (I personally only offer policies with this critical feature to my clients.) Even the death benefit is received tax-free by your beneficiaries when you pass.

Lifetime Coverage

As permanent life insurance, an IUL stays with you for life, ensuring your loved ones are always protected. Although term insurance is quite popular these days, 99% of these policies never pay out a claim. I have personally experienced the benefit of a permanent policy when my father passed last year and wanted to be buried back in Nigeria. This was an expensive wish to fulfill, but fortunately, he had a final expense policy, which greatly eased the financial stress of our family and helped us make his desire a reality. With an IUL, the same benefit is available, but when combined with the ability to grow cash value, the amount left to your loved ones can be generation-changing.

Long-Term Care

While likely being the least attractive of these features on paper, this will be the most important one for many in their retirement. The need for long-term care (LTC) is one of the most common reasons retirees run out of money as the expensive medical bills deplete one’s savings. Around 60-70% of Americans will need LTC in their lifetime, but only about 4% of retirees carry traditional LTC insurance due to its high cost and challenging approval process. However, the death benefit of the IUL actually doubles as long-term care insurance as it can be accessed if you become unable to perform everyday activities like getting out of bed or feeding yourself. And if you never need to activate this feature, you wouldn’t have thrown thousands of dollars away in LTC insurance premiums for coverage that was never needed.

Estate Planning

For those in a position to pass on significant wealth to their beneficiaries, permanent life policies such as the IUL can play a critical role in estate planning, helping to cover the cost of estate taxes and ensuring a smooth transfer of wealth to the next generation. Working with a CPA and estate lawyer can help you determine how the IUL can be utilized to transfer your wealth in the most cost-effective way.

Having all of these features working for you allows you to invest with peace of mind and makes your retirement more affordable. With the IUL, you get them all in one product. These multi-faceted policies serve as a solid foundation for essentially any wealth-building strategy you can imagine. If you haven’t already, it might be time to speak with an IUL specialist to see how this policy can help you achieve your specific financial aspirations.