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Should I Buy Indexed Universal Life Insurance At Age 45?

Should I buy Universal Life Insurance at age 45?

Reviewed By: Rob Pinner

Rob Pinner Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

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Fact Check By: Holly Mitchell

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

If I was 45 years old, would I buy IUL? 

You bet I would.  Fortunately, I started buying permanent life insurance when I was 25 years old.  I bought whole life insurance.  I was married and had no children at the time so I bought a $100,000 whole life policy in addition to a $250,000 term policy. 

After 6 years, my policy had built up some cash value.  Life insurance products change all the time.  They usually change for the better.  The great thing about permanent, cash value life insurance is that you can do a 1035 exchange to a newer and better policy.  

For sure, I would buy indexed universal life insurance at age 45.

Should I buy Indexed Universal Life insurance at age 45?

 

Doing a 1035 exchange will allow you to roll your current policy cash value into your new policy without causing a tax liability.  This can be huge if you had a lot of growth in your original policy.  Just imagine you have a policy with $100,000 of cash value but you only paid $50,000 into the policy.  That $50,000 of growth would be taxable. Doing a 1035 exchange will keep this gain from being taxed.

So from whole life I went to variable universal life insurance.  This was a great time to be in variable products and I was able to grow my cash value even more.  I also bought a variable life policy on my wife at that time too.  We let these grow over the next 8 years and were able to catch 7 good years of growth.  The problem was in 2008.  About 25% of our cash value evaporated that year. 

Not a fun time to be in the market.

 

After a couple years of hoping to catch up from 2008, we decided to move again.  We did another 1035 exchange to indexed universal life insurance.   Here is where it gets really good.  After years of saving and contributing to our whole life and variable universal life policies, we were able to take all of the accumulated cash value in our policies and move it to a policy that has been able to grow at over 7% each year for the last 12 years.  A few of those years we maxed out the cap in the policy for a 14% gain.  Needless to say, we are very happy about our decision.  By moving to an IUL policy, we eliminated all of the market risk that we were originally faced with in the variable life policy.

So now we are at a stage that we can’t afford to see a 25% or more loss in our cash value.  Our value in the indexed universal life policies are locked in.  We can’t lose money with these policies.  These indexed policies were purchased primarily to use for retirement income planning.  We have other term life insurance policies that will carry us into our 60’s and expire in our retirement years.

I still see indexed universal life as a great way to supplement other retirement plans.  The IRA maximum contribution limit is $7000 per year.  If instead, you were to put that $7000 into an IUL you will build a bucket of cash that you will be able to use as a tax-free retirement income.

Let’s assume that you put $7000 in your policy for the next 20 years.  When you are 65 years old, you will have accumulated around $237,000 in cash value.  This is assuming a 5.72% return.  By taking loans against your IUL policy, you would be able to create an income stream of over $26,000 per year for the rest of your life. 

Look at this PDF comparison of an IRA and IUL:

 

 

We show the IRA/retirement plan making the same 5.72% per year with 1.5% in management fees.  The IRA runs out of money at age 79 if you take the same amount of income as you get from the IUL policy.  That is not good.

Making The Best Life Insurance Choice For You

When you’re looking to get life insurance coverage, it can be difficult and overwhelming to make the best decision. There are several different kinds of coverage that you’ll need to compare. Each kind of policy has various kinds of advantages and disadvantages that you should weigh based on your specific situation.

If you want to use your life insurance coverage as another way to diversify your portfolio, then an indexed universal life insurance plan is going to be an excellent option. They are a great way to have an additional stream of income once you‘ve reached retirement.

 

Indexed Universal Life Insurance At Age 45

At age 45 the IUL still beats an IRA.  We firmly believe in IUL.  Not only for our clients but for ourselves.  We design indexed universal life plans for our clients – people just like you, every day in all parts of the country.  We will happily design a couple of options for you based on your personal input.

Feel free to call us at 1-800-712-8519 to get started.

Frequently Asked Questions

Why should I buy Indexed Universal Life at age 45?

Indexed universal life insurance can be a great way to supplement other retirement plans.  The IRA maximum contribution limit is $5,500 per year.  If instead, you were to put that $5,500 into an IUL you will build a bucket of cash that you will be able to use as a tax-free retirement income.

What is an advantage to buying indexed universal life insurance at age 45?

Look at this example scenario: Let’s assume that you put $5,500 in your policy for the next 20 years.  When you are 66 years old, you will have accumulated around $230,000 in cash value.  This is assuming a 7% return.  By taking loans against your IUL policy, you would be able to create an income stream of over $20,000 per year for the rest of your life. 

Where do I start to buy an Indexed Universal Life insurance policy at age 45?

Instead of wasting hours and hours on the phone calling different companies, let one of our independent agents do all of the hard work for you. Unlike a traditional insurance agent, our independent brokers work with dozens of highly rated life insurance companies, which means that we can bring all of the best insurance rates to you.

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