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amyewhite

Why I'm Dumping My IRA for an Index Universal Life Insurance Policy

Jan 11th 2019 at 2:43 PM

I'm doing it!  I'm making a drastic change to my retirement plan.  I know it sounds crazy, but I'm going to take the early withdrawal penalty and the tax hit, all to move my retirement money from my IRA to an index life insurance policy (IUL).

I love setting aside money and playing in the stock market.  In the past, I would spend hours pouring over stock reports and researching my investment options.  To me it was fun - yes I really am that much of a dork.

Over the last couple of years as my life got more crazy with work and family responsibilities I quickly discovered that I didn't have the time to do the research I needed to really be an effective investor.  As a result, I began using roboinvesting companies like Acorns for my retirement planning.

Ironically enough there were many years when my roboinvesting outperformed my hand-picked stocks.

Recently though, as I watched the stock market surge upwards and then take a couple of nasty little drops I realized that I was tired of not having security.  I was tired of watching all the progress I had made disappear with one day of negative investing.

So I went searching for other options.

When I found indexed universal life insurance I knew that I may have found a winner.  I want to make one thing very clear, when I talk about IUL policies, I'm talking specifically about max funded index life insurance policies, not level or term policies.  There is a big difference.

An indexed life insurance policy is an insurance policy with a standard death benefit, however, it has the added benefit of a cash value account tied to the policy.

In a level IUL policy, your money is used to purchase the death benefit (think of it like term insurance) first, in a max funded IUL, your money is used to fund your cash value first and you are purchasing the least amount of life insurance possible.

By purchasing the least amount of life insurance possible in the beginning the vast majority of your money is being used to add value to the cash account.  The cash account is what matters, since that is what is accumulating interest.

Now here is the beautiful thing about a cash value account in an IUL policy.  Index Universal Life Policies have a nifty little feature called the 0% floor.

In my opinion, the 0% floor is the absolute best financial tool available.  What this means is that when the stock market goes below zero, your losses stop at zero.  You won't gain anything that year, but you won't lose anything either.

This means that you have true asset protection!

You may lose a little bit of money because of administrative fees, but you won't lose value because the stock market tanked.  This is why I like indexed universal life policies more then 401k policies. I'm all about protecting my asset.

Now on the other end, there is a cap on the max you can gain as well.  The max is typically 11-13%.  This means that if the stock market has an amazing year and gains 35%, the max you will get is the cap value.

That part kind of sucks, but I'll take the cap in gain over the loss of my principle any day.

So if you are looking for an alternative to an IRA for 401K for your retirement planning, take a look at max funded IUL policies.

I have a feeling you'll be pleasantly surprised at the options you find.

 

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