IUL and whole-life policies both have their place. Whole-life advocates prefer it because your cash value is guaranteed to increase each and every year as the IUL has growth that is tied to the upward movement of a stock market index.
The downside to the IUL is that down years do happen, and in those years you get credited a zero but still have the expenses associated with the IUL.
David goes through a scenario where all premiums within a LIRP go to the IUL’s fixed account. By allocating money in this way, you will net a consistent rate of return that is not linked to the upward movement of a stock market index, even during a down year.
By allocating your premiums to your IUL’s fixed account, you can recreate all the attributes of the whole-life policy inside the IUL, only on a supercharged basis.
To discover the companies that David used to model this scenario, email him at info@powerofzero.com
The scenario takes a 40-year-old male contributing $20,000 per year until the age of 65. In either model, the factors were averaged out to make the comparison as fair as possible.
Starting with the whole-life policy, at age 66 it produced a loan of $42,675 every year until the age of 100. That is cumulative distributions of $1,493,625.
The IUL is able to produce a loan of $48,084 every year until the age of 100, with cumulative distributions of $1,683,940.
If you are just comparing maximum loans on the backend, the IUL comes out on top.
Whole-life policies do not have guaranteed zero-percent loan provisions which is one of the reasons that policy lags behind.
With that being said, you wouldn’t want to use an IUL for its fixed account.
Using a slightly different model, the benefit of the IUL races ahead considerably.
At 7% growth, the loan value jumps to $100,100 and the cumulative distributions go to $3,503,500.
By allocating your premiums to the fixed account inside of a maximum funded IUL, you can generate more income than you would inside a maximum funded whole-life policy.
By taking a little more risk in your IUL and tying the growth of your cash-value to the growth of a stock market index up to a cap, you can more than double your annual tax-free distributions.
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