Are your contribution restrictions on your retirement planning vehicles causing you to fall short of your wealth accumulation goals?
Are you maxing out your 401k or IRA and still not saving and earning enough to guarantee a retirement lifestyle that you have been planning for?
Would it interest you to know there is an investment vehicle that can deliver a tax-free income stream without having to worry about the ups and downs we regularly witness in the marketplace?
If you answered yes to any of these questions, it’s time to consider using Indexed Universal Life insurance, IUL or LIRP (Life Insurance Retirement Plan) as part of your retirement planning strategy, especially if you’re are a medical professional. Here, we’ll discuss the IUL for gynecologists, obstetricians, and other high-income physicians.
IUL versus 401(k)
Certainly, a 401(k) is a gift from the IRS and your employer that every employee should take advantage of it you get matching contributions. Yes, there are different types of 401(k)s but for the purposes of comparison to an IUL, we’ll choose the “vanilla” 401(k).
A primary difference between these two investment products (yes, an IUL is an investment product) is how they are classified by the IRS. Since the IUL is a life insurance product, it is covered under IRS Section 7702 whereas all 401(k) plans are covered under IRS Section 401(k).
An IUL is funded with non-qualified dollars (after-tax) which allows a potential tax-free income stream during retirement years. And, since the IUL has a death benefit, it can provide a tax-free death benefit to surviving loved ones. Here are the differences high-earning professionals should be aware of:
|Employer match||Maybe||Yes, up to employer's limits|
|Market loss exposure||Floor rate eliminates exposure||Exposed to losses|
|Withdrawal Penalties||Can be taken without penalty||Penalties and taxes apply if taken prior to age 59 1/2|
|Contribution Restrictions||None||$19,000 for 2019|
|Minimum Required Distributions||None||Must begin by April 1st the year after turning 70 1/2|
|Living Benefit Riders||Chronic illness, disability benefits, special circumstances||None|
IUL versus IRA
IRAs have been very popular for many years as a way to invest for retirement planning because of good returns and tax deductions for your contributions. Being able to deduct your contributions and then earning tax-deferred money seemed like a no-brainer. But at retirement, the tax man does come knocking on your door.
Along with taxes at retirement, IRA owners will also have to deal with limits on their contributions and those pesky required minimum distributions. Whether you get the money or your beneficiary gets it, the taxes will reduce the final outcome.
With an IUL, however, these archaic rules simply do not apply. There are no contribution limits, no taxes to deal with since you’re taking policy loans as income, and there is a death benefit for surviving loved ones. Yes, IUL is life insurance, and yes, IUL is a great retirement investment vehicle.
Can I Convert My IRA to an IUL?
Absolutely! If you are a high-income earner like a gynecologist, obstetrician, or other medical professional who is dissatisfied with the restrictions and taxes on traditional retirement products, converting your IRA to an IUL is likely to be a solution you can get behind.
We certainly don’t believe that converting an IRA to an IUL is the perfect choice for everyone, but if your circumstances call for it, let’s talk about the advantages that await you.
- You can take advantage of investment indexes to accumulate more wealth for retirement
- Your income stream in retirement can be tax-free
- You can invest in the market without “being in the market” with no worries of market losses
- You can leave a tax-free death benefit for surviving loved ones while you accumulate substantial wealth.
The rules for converting your IRA to an IUL may seem cumbersome but not all financial professional can walk you through the process and guard you against various pitfalls. We have an IRA to IUL Calculator that we use to compare tax liabilities of both plans and offer the best solution.
The goal of our planning is to eliminate Taxes, Inflation and Risk. Here’s why you may want to consider an IRA to IUL conversion:
- You can’t lose money in an IUL due to market decline
- An IUL doesn’t come with all of the restrictions of IRA and 401(k)
- No limits on your contributions. Your earning a lot so you can contribute a lot.
- No 59 ½ Rule. Policyholders can take their money out anytime they choose without the concern of taxes and penalties.
- You are in control of your taxes. Although you cannot deduct your contributions, you will get a tax-free income stream at retirement – when it matters the most.
- No Required Minimum Distributions. You take your money when you want to and not when the IRS requires you to do so.
- You have a death benefit that is paid tax-free to surviving loved ones.
- Our preferred IUL policies include riders that pay you if you are diagnosed with a critical, chronic or terminal illness.
This sounds Complicated, Where Can I Get Help?
If you read the IRS code for any investment product, it will seem much more complicated than it really is. Our Agency will be able to explain Indexed Universal Life Insurance in simple terms and take the time needed to explain the features and benefits that are available to you.
An experienced and reputable independent insurance agent can give you the advice you’ll need to determine whether Indexed Universal Life insurance is a good solution for your retirement planning, and if so, the best IUL companies to look at for your circumstances.
We understand the benefits of having a 401(k) or IRA, but we also understand the restraints you may be dealing with while attempting to accumulate the wealth needed for a retirement lifestyle that you have worked for. Whenever you can remove taxes, inflation and risk from the equation, you’ll have a better shot at meeting your goals and expectations for income in the future.
Whether you are a gynecologist, pediatrician, obstetrician, or another medical professional, an IUL can make a considerable difference in your retirement planning.