Dave Ramsey contends that the IUL is a ripoff primarily because of two reasons: high fees and surrender charges
He also recommends that if you have an IUL to surrender it immediately, thereby incurring those surrender charges immediately.
The reason companies have surrender charges is to cover the costs of getting the program off the ground. They start off high and reduce gradually over the first fifteen years or so.
The question is, ‘Is the surrender schedule something that should weigh on your decision to do an IUL?’ The answer in most cases is no, as long as you plan on keeping the plan until death do you part.
An IUL is like getting married. You have to investigate the alternatives before choosing the one that’s right for you.
If Dave Ramsey adopted the same approach with the taxes and penalties in your 401(k), he would be singing a different tune.
If you were to take $100,000 out of your 401(k) at the age of 40, you’d end up paying the penalty and taxes at your current tax bracket, likely resulting in $40,000 in penalties.
The penalty schedule also doesn’t reduce over time when you consider that you’re likely to bump up into higher tax brackets.
The first fifteen years of your IUL, 401(k), or IRA are the years you should least want to access that money.
Like traditional retirement plans, IULs are generally long-term propositions. Don’t start an IUL if your plan is to take the money out in the first ten to twenty years.
If Dave Ramsey has a problem with the IUL surrender charges, he should likewise have a problem with all the taxes and penalties you will pay on your traditional retirement accounts over a much longer period of time.
The IUL only really works as part of a comprehensive approach to retirement and getting to the zero-percent tax bracket.
Mentioned in this episode:
David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
DavidMcKnight.com
DavidMcKnightBooks.com
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com
The Fatal Flaw in Suze Orman and Dave Ramsey's Retirement Planning Advice
Here’s What Happens When You Put 30% of Your Retirement Savings into Cash Value Life Insurance
What Dave Ramsey DOESN’T Want You to Know About Indexed Universal Life
First Glimpse at Your Tax Bracket in 2026 (And What It Will Cost You)
How Gen Z Should Save for Retirement
Why Ken Fisher Does NOT Want You to Do a Roth Conversion
How Much of Your Social Security is REALLY Getting Taxed? (and At What Rate?)
Why Don't More Financial Advisors Recommend Indexed Universal Life?
Your Roth Conversion Roadmap for the Next 10 Years and Beyond
Clark Howard Says Fixed Indexed Annuities Stink! (My Response)
Is IUL the Dream Investment that Doug Andrew Claims?
The Two 5-Year Roth Rules Explained
Warren Buffet Says AVOID Financial Advisors Like the Plague (Is He Right?)
George Kamel Swings and Misses on Indexed Universal Life
Is Ken Fisher's Anti-Annuity Stance Illegal?
Suze Orman vs. Dave Ramsey on Sustainable Withdrawal Rates in Retirement
Is a 100% Tax-Free Retirement Really Possible?
A Recent Penn Wharton Study Says that the U.S. has 20 Years to Fix Debt or Face Cataclysm
How to Figure Out How Much Money to Save for Retirement
The Best Way to Make Sure Your Money Lasts as Long as You Do
Create your
podcast in
minutes
It is Free
The Commercial Edge: Unleash the Power of People
The emPOWERed Half Hour
U.S Property Podcast
Aligned Money Show
Dubai Property Podcast
The Ramsey Show
The Clark Howard Podcast