Generally speaking, all medical professionals, including medical specialists like urologists, cardiologists, and pulmonologists, earn above average income. In fact, urologists, according to Chron.com, fall in the group of highest paid medical professionals with an average salary of $300,000 to $350,000.
When it comes to retirement planning, there are several issues that most highly-paid medical professionals face when they attempt to accumulate wealth with traditional retirement investment products such as IRAs and 401(k)s. The issues that can have a significant impact on reaching their retirement goals are:
• IRS limits on annual contributions in traditional retirement vehicles
• Only limited access to funds prior to age 59 ½
• Required minimum distributions at age 70 ½
• Distributions are taxable at the current rate
So then, knowing about the IRS constraints that are contained in traditional retirement vehicles. would it be important for you to learn about an alternate method of wealth accumulation using life insurance? Specifically, Indexed Universal Life insurance or IUL.
In order not to get too far out in the weeds, we are going to discuss how an IUL works and provide you with the advantages and disadvantages that are inherent in every type of investment product.
What is an IUL and How does it Work?
An IUL or Indexed Universal Life insurance is an insurance product that, although similar to traditional universal life which delivers a fixed interest crediting method, is designed to accumulate significant cash value by investing the cash value in the policy into index accounts like the S&P 500.
Using an IUL, the investor can earn returns from the performance of the stock market without actually investing your money in the stock market. An IUL is an insurance product that contains two distinct components: a guaranteed death benefit and an investment component.
Since your intention is to accumulate wealth that can be used as a tax-free income stream during your retirement, your insurance professional will likely recommend that you maintain a low death benefit so that the majority of your premium will be invested in the indices you elect to invest in.
There are three components in your IUL that will determine how much your cash account can grow:
- Cap – Your “Cap” is a limit placed on the interest you can earn from each index you invest in. For example, if your “Cap” is 16% and your index earns 21% during the reporting period, the amount that will be credited to your cash value account will be 16%.
- Floor – Your “Floor” is the minimum amount of interest you can earn from each index you invest in. For example, if your “Floor” is 3%, and your index earns 1%, your account would be credited 3%. In fact, if an index were to post a -3% loss, your account would still be credited the 3% “Floor” rate.
- Participation Rate – The participation rate (varies by company and usually placed on uncapped index strategies) is a percentage of the total index gain that is allocated to the policy. Some carrier participation rates may be more than 100% and always typically more than zero.
The important thing to note when considering the Cap, Floor, and Participation rate from the carriers you are considering is to be aware that they can change. Knowing this, you want to look to an insurance company that has a history of keeping their rates as stable as possible. Here is a simple graphic that indicates how your premium will accumulate tax-deferred cash value over time:
What is the Best Way to Shop for an IUL?
Currently, there are more than 40 life insurance companies offering indexed universal life insurance. Certainly contact one at a time would be a fool’s errand, especially when there are independent insurance professionals like InsuranceQuotes2Day who specialize in setting these policies up for medical professionals like urologists.
An independent insurance agent typically represents at least the top ten insurance carriers that they rate in terms of a company’s financial ratings, and the stability of their Cap, Floor, and Participation rates. When you do business through an independent agent who specializes in setting up LIRPs (life insurance retirement plans) you have the advantage of using the agent’s experience and knowledge about retirement planning and is able to quickly decide based on your circumstances, which insurance company and product will be the best fit to meet your retirement planning goals.
Not only will we recommend who we believe will be the single best carrier to meet your needs, we offer our list of the top five insurers (developed over time) for you to consider and offer a review for each of them.
- North American Company – North American is an A+ rated insurer who has consistently maintained a Comdex Score of 92. We typically go to North American’s Builder Plus IUL for helping clients build tax-free retirement income.
- Midland National Life Insurance Company – Also a highly-rated life insurer, Midland National is a sister company to North American since both are under the same ownership. Midland has demonstrated that they are a great selection for your LIRP by maintaining consistent and favorable Cap and Floor rates.
- Allianz Life – Allianz offers their Life Pro+ Elite IUL with a variety of indices to choose from along with several important riders. The company maintains very high ratings from the national rating services and continues to be a solid choice for wealth accumulation.
- Symetra Life Insurance – Symetra Life and its subsidiaries are highly-rated by the four major rating services and maintain a solid financial standing as a result. The company also enjoys a very high rating with the Better Business Bureau which is a solid indication for outstanding customer service. The Symetra Accumulator IUS was designed to accumulate a significant cash value that can be accessed as a tax-free income string and provides a guaranteed death benefit.
- Minnesota Life – Minnesota Life (a Securian Company) can trace its roots as far back as 1880 and has substantially increased its footprint in the life insurance marketplace. Also receiving top ratings from the four national rating services, policyholders who use Minnesota Life’s Indexed Universal Life insurance in their LIRP (life insurance retirement plan) are rewarded with significant gains for retirement.
If you are a medical professional that has been maxing out other investment products which could have a negative impact on your retirement goals, we recommend that you consider a Life Insurance Retirement Plan (LIRP) as part of your retirement portfolio. In fact, if you have other retirement products that you feel are underperforming, you may want to consider converting one or more of them to Indexed Universal Life. Call us during normal business hours and we will be happy to offer a side-by-side comparison so you can make an informed decision about wealth accumulation for retirement.