If you are in your 20’s, you are not much older than Indexed Universal Life is. Transamerica was the first to come out with this very unique universal life insurance policy back in 1997. I would like to share with you the top 4 reasons to buy IUL in your 20s. The idea of being able to have a cash value life insurance policy that could generate stock market-like returns without having the risk of being in the stock market was a genius idea.
Many of my clients that are in their 20’s don’t really want to talk about anything other than term life insurance. That is until I am able to educate them on why they would even want to buy an indexed universal life insurance policy.
When we are fresh out of college and thrust into the real world, we really don’t know much about how finances work. We meet with the 401k guy and the employee benefits guy shortly after we start to get our financial futures all set up. It all sounds good but compared to what?
Unlike our Parents and Grandparents, our first job is probably not where we will end up. It will be a stepping stone. Our younger generation tends to have several jobs before we find that perfect job.
So let’s dig into why an indexed universal life insurance policy is a great idea for someone in their 20’s.
Top 4 reasons to buy IUL in your 20s
- Your tax bracket
- Your desire to have a steady income at retirement like your parents and grandparents
- Your need for life insurance and living benefits
- Your likeliness to change jobs
Why not pay taxes on the small amount of money being contributed now instead of the large amount of money that will come out at retirement? The idea behind the 401k is to defer income today while in a higher tax bracket than we will be in when we retire. You may not have noticed that our government’s debt is now approaching $20 trillion. Where will the money come from to satisfy this debt? TAXES! In 1980, it was under $1 trillion. In 1980, the top federal tax rate was 70%! It was even higher in the 50’s and 60’s at 90%. Federal Tax Rate History So do you think that taxes will go back up? We have already seen this in the last few years. Do you think you are in a higher tax bracket now than you will be when you retire? The question is would you rather pay taxes at today’s rate or at retirement 40 years from now? Would you rather pay taxes on the seed or the harvest? Get this. The income from an indexed universal life insurance policy is paid to you TAX-FREE!
Your desire to have a steady income at retirement like your parents and grandparents
Now this is my favorite part of why you should buy an indexed universal life insurance policy while you are in your 20’s. TIME is on your side and your best friend when it comes to investing in your future. I am sure that you don’t yet fully understand that a life insurance policy could be a source of retirement income but let me give a brief explanation.
Let’s assume that you are 25 years old and want to sock away $500 per month towards your retirement goal. Also assume that you want to retire when you are 65 like most do today. Well, if we were to take that $500 per month and buy an indexed universal life policy until you reach age 65, that would create a bucket of cash that would generate about $90,000 tax-free per year every year from age 65 through age 100. That is only assuming that you make 7% return on the policy each year. It would create over $52,000 tax-free per year if you only got a 6% return. That is what 40 years of growth and compound interest will do for you.
In addition to the income that the policy will create, you will also have the death benefit and the living benefits. The death benefit will be over $700,000 and paid directly to your family tax-free in the event of your death.
Your need for life insurance and living benefits
Now this one is the tough one. See, in our 20’s we don’t think we are going to die, get cancer or another disease, be disabled in an automobile accident, etc… Well, I am 45 yrs old now and I thought the same thing. I had some rough times in my 20’s where I lost some great friends. Not only do indexed universal life insurance policies pay lump sum benefits to our beneficiaries, they will pay us directly in the event of a critical, chronic or terminal illness. So there is protection for us in the event of stroke, cancer, accident, and the list goes on. You can read more about those benefits in our blog post about living benefits.
Likeliness to change jobs
Let’s face it. We will change jobs. 401k plans do not change with us and we will have to either roll these existing plans to an IRA or our new 401k creating new fees and commissions. An Indexed universal life insurance policy is yours to keep forever. You can take it with you wherever you go. You can also start and stop premium payments if needed. Sometimes life happens and we need to redirect our funds to other areas – it’s ok.
So I hope you can see that now is the time to at least consider an indexed universal life insurance policy. $500 per month may not be your magic number. It may be $200 per month or $2000 per month. We can take your magic number and create a personalized quote that you can take a look at and decide for yourself. All you have to do is request a quote on the left-hand side of this page or give us a call at 1-800-712-8519. We have many indexed universal life companies that we work with and can give you the best one available for your situation.