We talk a lot about using indexed universal life insurance to help supplement our retirement income. There are many great reasons to buy IUL at 50 and I am going to give you’re the best 3 reasons in this blog post.
Seems like most of our clients shoot for a retirement age of around 65. Does that sound like you too? Have you saved enough to retire at 65? How much money does it take to retire? With our low-interest rate environment today, it is hard to put a number on it. I believe it was ING (now VOYA) that put out the commercials about your retirement number. I would be more comfortable knowing what my income needed to be. Let’s face it, age 65 is just 15 years away.
Wouldn’t it make more sense to focus on cash flow at retirement? How much do you need now each month? Keep in mind that you probably have a mortgage payment, car payments, expenses that are related to your employment, etc. Just think about what you spend now that you will not be spending in retirement. That could be a big number in itself.
Many in the retirement planning space say that you will need anywhere from 65% to 85% or your pre-retirement income during retirement. This amount is assuming that all of your income is taxable. How much would you need if you paid no tax on your income? It would certainly be less.
Take a look at this PDF that I ran showing a 50-year-old male putting $10,000 per year into an indexed universal life insurance policy. Saving just $10,000 per year for 15 years making on average 7.28% return would accumulate a balance of just over $230,000. Now using the same rate of return and putting the same amount of money into a 401k, 403b or a SEP retirement plan would accumulate more cash – you would have over $250,000 in savings. But let’s compare the income:
Remember, we want to know how much cash flow we will have not how much cash. Let’s assume that we take the same income from both the indexed UL policy and the Retirement plan of $22,406. By taking that amount of income from both, the Retirement plan will run out of money at age 82 but the life insurance policy will keep paying the $22,406 all the way to age 100.
No, it is not magic. The difference is taxes! Your Retirement plan income is fully taxable at your current rate. We are using 20% in this example. Your life insurance income comes from policy loans and do not have to be repaid. These loans are income tax-free when you receive the funds.
When most folks think about life insurance, they are not thinking about income. Most of our clients equate life insurance to money that their family will receive when they die. Life insurance has come a long way. Not only do we buy life insurance for the death benefit, but also living benefits. Living benefits can be in the form of tax-free income or income when you become critically or chronically ill. Policies can now pay benefits when you get sick. My goal here is to show you a better way.
Hopefully, you have done a good job saving for retirement and currently have a disciplined routine for saving. You may be on the right track or you may need help. Either way, using indexed universal life insurance as a supplemental tax-free income source, should be considered. Especially if you are in good health. Even though we are talking about using this policy as an income source, it is still life insurance and will need to be underwritten for health.
Everyone is different. Each policy we write is different. We structure these policies keeping the death benefit as low as possible. We do this to keep the expenses down so that the policy will provide the best growth possible.
3 Great reasons to buy indexed universal life when you are 50?
Use as a supplemental retirement plan
Income is tax-free
Policy includes critical and chronic illness payouts
This is example will probably not cover your entire retirement need but it could provide a strong base for your income goals. If you are 50, hopefully, you have already started saving for the golden years. If not, indexed universal life may be a great way to play catch up for retirement. In the example above, we showed what $10,000 per year can do with saving for just 15 years. Many of our clients save much more than that. Some as much as $100,000 per year and just recently $1,000,000 per year. My point is, whether you have $200 per month to contribute or $2000 per month, indexed ul could make since.
It is not too late to buy indexed universal life when you are 50. Sure you are not 35 years old or even 45 years old anymore, but 15 years of saving could really make a difference in your retirement income.
The best way to find out is to use our custom quote request form on the left of this page. We can put together a presentation just like the one we used in this article. You can also call us at 1-800-712-8519 and speak with a qualified life insurance agent. All we will need from you is a little information about your goals and timing to get a personalized presentation put together for you.