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Should I start an IUL policy in my 20s?

Should I start an IUL policy in my 20s
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.

 5 minute read

Life insurance is one of the best products that you’ll ever purchase for your family, but you may ask the question, should I start an IUL policy in my 20s?

It can be confusing because of all the different options available.

The life insurance market is constantly changing, and several new kinds of products have been introduced to the market.

You may ask, “Should I start an IUL policy in my 20s?” Interestingly, 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 want to share with you the top 4 reasons to buy IUL.   The idea of having 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 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. The question I get a lot from younger clients is, should I get life insurance in my 20s?


When we are fresh out of college and thrust into the real world, we really don’t know much about how finances work.  We met with the 401k guy and the employee benefits guy shortly after we started 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. This article is going to explore the different advantages and disadvantages of IUL plans. We know that it can be confusing, but we are here to help. Hopefully, this article is going to answer all of the questions that you have.


Top 4 Reasons to Start an 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


Tax Bracket in your 20s

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 over $30 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 50s and 60s at 90%. 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 IUL policy is paid to you TAX-FREE!  You can check using an IUL calculator to see just how taxes will affect your income.

Hear from Tax Expert Ed Slott.


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 20s.  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 you 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 consistently contribute to an indexed universal life policy until we reach age 65, that would create a bucket of cash that would generate around $90,000 to $100,000 tax-free income per year every year from age 65 through age 100.
This certainly proves that it’s a good idea to get life insurance in your 20s.

That is only assuming that you make around a 6% return on the policy each year.  It would create over $50,000 tax-free per year if you only got a 5% 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 $400,000 and paid directly to your family tax-free in the event of your death.

The Roth IRA can’t provide that much income, nor does the Roth have a life insurance payout.


Your Need For Life Insurance and Living Benefits in your 20s

Now, this one is the tough one.   See, in our 20s, we don’t think we are going to die, get cancer or another disease, be disabled in an automobile accident, etc., so why spend money on life insurance in your 20s? Well, I am well into my 50s now, and I thought the same thing.  I had some rough times in my 20s when I lost some great friends.

Not only do indexed universal life insurance policies provide a tax-free retirement income stream and pay lump sum benefits to our beneficiaries, but they will also 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.   

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.

What Indexed Life Insurance Policy is the Best?

There are now over 40 life insurance companies that offer indexed universal life insurance policies.  Of course, we have our favorites, but you should check out our reviews on the following companies that offer indexed universal life insurance:

  • Allianz
  • North American 
  • Lincoln National
  • Ameritas
  • National Life

As an advisor for all of the top indexed universal life companies, we can help you find the best one available for your situation.


We can design the best IUL for your situation
Use the IUL Calculator on this page to get an idea of cost or call us at 1-800-712-8519.

Frequently Asked Questions

How are the withdrawals from an IUL not taxable?

return of premium term life insurance - ATM

When you take money out of your IUL cash account using a policy loan, the IRS does not consider the loan income and therefore it is non-taxable. You can take loans on a regular basis during retirement to create a stream of non-taxable income.

Do I have to pay the IUL loans back?

Although you will be charged interest on your loan (far less than tax liability), you do not have to repay it. Any outstanding loans will be deducted from the death benefit to your beneficiary(s) when you die.

I've read that IULs are flexible. Does that mean I can increase the death benefit?

what is life insurance

You can increase your death benefit in your IUL after proving insurability which will likely include a medical exam.

Isn't it better to invest with before tax money?

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 U.S. debt is astronomical and growing everyday. The only way the government can pay it down is to increase taxes. Tax increases are imminent. Would you rather pay taxes on the seed or the harvest?

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