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IRA Rollover to IUL

IRA rollover to IUL
Insurance Quotes 2 Day Team

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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.

Rob Pinner   &

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

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

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Are you familiar with Roth IRA conversions? An IRA rollover to IUL can also help in saving taxes during retirement.  Here is how:

  • Your account grows tax-deferred and is not subject to stock market declines
  • You can take tax-free income in retirement via policy loans
  • Your IUL can help pay the cost of long-term care in the event you need it.
  • You create and leave a financial legacy for your heirs.

The IRA rollover is not for everyone.  Age plays an important role here. If you are not 60, the IRA or 401k will carry a 10% IRS penalty for early withdrawal.  You can avoid this penalty if you use the 72t rule.

What is an IRA rollover to IUL?


An IRA Rollover to IUL is the process of withdrawing money from an IRA or 401k over a period of time and contributing the net amount to an IUL. A Roth conversion, which is a process of moving money from a qualified account to a new tax-free Roth IRA account are both very similar processes. You will pay taxes on the funds you withdraw in both of these cases.

When you decide to take advantage of an IRA rollover to life insurance (we recommend IUL), you can eliminate the IRS rules that will later impact your income stream during retirement.

Is IRA Rollover to IUL Considered a Sound Retirement Strategy?

life insurance like ira

The answer to this question is yes, if designed properly.

Like most financial strategies, an IRA rollover to IUL can be advantageous for some nearing retirement. It may not be the best strategy for others. Like with any strategy using a life insurance product, the policy must be structured properly to make certain that your financial goals are met.

It is also important to know which IUL company is the best for your situation.  There are over 40 life insurance companies offering indexed UL, but I would only recommend 5 of them to handle the IRA to IUL conversion.

It’s worth mentioning that some previous attempts at converting an IRA or 401k to an IUL have been considered to be controversial because, in some cases, the strategies were dependent upon IUL illustrations that were simply unrealistic.  With any financial strategy and product, there’s a right way and a wrong way to structure the plan.

Knowing this, the following questions will help in the decision-making process:

  1. Would it be more beneficial for you to go ahead and pay the taxes now and move your savings to a tax-free IUL? An IRA conversion to IUL will lower your tax liability during retirement.
  2. Are you at least 59 1/2 years of age or do you need help from Rule 72t?
  3. Are you healthy enough to qualify for indexed universal life insurance?

What to consider before converting your IRA to IUL

  1. Since your new IUL will take some time to grow, it makes good sense to use only a portion of your IRA funds when you start the conversion. We suggest using no more than 1/3 of your account. Especially if you need some retirement income before 10 years.
  2. Analyze Your IRA for an Informed Decision. You should consider (along with the help of your CPA) what the tax liability will be for your IRA over your lifetime. This will help you understand if your investment strategy should be tax-deferred or tax-free.
  3. Compare your analysis to an IUL illustration prepared by an IUL advisor. This will allow you to compare pre-tax growth in an IRA with the after-tax growth in an IUL.  We can help.  We are experienced in designing IUL policies for maximum growth and tax-free distributions. Our IUL calculator can help understand how much income you can expect to have.
  4. Tax Liability should be handled responsibly. You will have some tax liability when you move some of the IRA funds to the IUL, so make certain you have a strategy to handle the tax liability. We recommend using only the net amount after taxes are paid to fund your IUL.

The Structure of Your IRA rollover to IUL is Critical

The two primary elements to structuring your IUL are how it is funded and what the death benefit should be. We recommend a 5-year funding pattern and then 5 years to allow your IUL to grow. Your IUL must be designed in the right way:

IUL Design

  • Move the funds to the IUL policy quickly to speed up the cash value accumulation.
  • Do not over-pay into the IUL because it could be a risk of becoming a modified endowment contract (MEC). MEC loans are not tax-free so you would be defeating the purpose of the conversion.
  • Consider funding the IUL using a 5-pay premium plan. Using the 5-pay plan allows you to fund the IUL quickly and will help prevent the policy from becoming an MEC. A 5-pay also lessens the impact of having to pay taxes when you withdraw the funds from your IRA by spreading your tax liability out over five years.

IUL Death Benefit

  • Selecting an appropriate death benefit is just as important as funding your IUL. Our design calculations find the least amount of life insurance needed in order to escalate cash value growth.

The Responsible IRA Conversion to IUL

Your financial advisor is responsible for designing and monitoring your IUL to make certain your goals will be met. As the policyholder, you should take on the responsibility of reviewing the annual policy reports and speaking with your financial advisor if you have concerns about the report or are confused about the process.

Because of the tax savings and the structure of the IUL, the IRA to IUL rollover has become extremely popular with the 50-year and older generation across the U.S. This investment strategy provides a sound financial strategy to reduce taxes in retirement. 

We are Here for Your Needs
For more information about the IRA to IUL Rollover and find out if it’s a good strategy for you, use our IUL calculator on this page or call us at 1-800-712-8519.

Frequently Asked Questions

Is it a good idea to convert my IRA to IUL?

woman with list graphic

Although it’s not appropriate for everyone, the IRA to IUL conversion can generate tax savings over your lifetime and increase your retirement plan substantially. By making the conversion you will no longer be subject to the constraints that the Fed places on the traditional IRA.

What exactly is an IRA to IUL conversion?

fist full of money

Similar to the IRA rollover, the IRA to IUL conversion moves money from one investment product to another. And, similar to the Roth IRA conversion process, the IRA to IUL conversion requires paying taxes no on funds removed from a tax-deferred account and investing the net funds into a tax-free investment product (the IUL).

Are some companies better than others for IRA to IUL conversion?

ogletree financial logo

Currently, there are more than 40 life insurance companies offering IUL. After years of experience with converting IRA to IUL, we only recommend a handful of companies that we know will make the conversion properly.

Is an IUL a good strategy for retirement?

IUL cash flow image

Currently, about 75% of CEOs in the top 500 companies use IUL for their retirement strategy. The IUL lets you invest in the market without being in the market and you can have peace of mind knowing you will not suffer loss because of the market.


author avatar
Doug Mitchell, CLU Independant Advisor
Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent almost 30 years in the life insurance industry and has also held licenses to sell securities, long-term care insurance and home and auto insurance. Doug is a Top of the Table Million Dollar Round Table member (MDRT).  MDRT is a global, independent association of the world's leading life insurance advisors.  For two years, Doug served as President of the Auburn Opelika Association of Financial Advisors and has been a member of the Million Dollar Round Table. He obtained Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award. Later in his career with New York Life he was an Executive Council Member. Doug currently serves as President of Ogletree Financial, a managing general agency serving life insurance agents and clients in all parts of the United States. Today, Doug’s main focus is servicing 1000s of policyholders and growing the agency through the reach of