I purchased an IUL policy last year, but I am still not sure if this is the right product for me.
I have been maxing out my ROTH IRA and my 401K, so I am able afford the payment for the IUL plan at the moment. However the future time commitment and the possibility of the policy lapping in the future is a concern. Also trying to see if it is better to just put the money in index fund myself instead of being indexed against index funds
If you fully fund it, there’s no way it can fail. When you stop adding funds, just lower the death benefit to the minimum non-MEC level. The fee will be around 0.25% of your cash value. You can expect the policy to grow more than this small cost.
IUL isn’t the best option unless the tax savings outweigh the fees, which usually applies if you’re very wealthy. You’re better off investing in something like VTI, VOO, or VT. If you want permanent life insurance, consider a GUL or ULSG policy and invest the rest separately.
If IUL are a good investment I do plan on funding more early on so that I have a lower risk of the policy ending when my illustrated funding period is up
Do you need life insurance? If so, ask for an in-force illustration to get a clearer picture of your policy and see if it’s funded properly. This will help prevent a lapse.
It sounds like you’re in a good financial spot for an IUL, especially if your other retirement accounts are maxed out. You could get better returns elsewhere, but keep in mind that other accounts may be taxed, while an IUL grows tax-free. I’m not an accountant, so it’s worth looking into the tax impact if you invest your money differently.
If you like cash value life insurance but aren’t sold on an IUL, consider a whole life policy designed for cash accumulation. While it may not grow as fast, it’s more stable, and you won’t have to worry about the policy lapsing. You could do a 1035 exchange into a whole life policy, but you’ll need a knowledgeable broker to structure it properly.
If you’re not interested in cash value life insurance but still need coverage, you could explore a convertible term policy with living benefits. Let me know if you have any more questions!
I eventually decided to stick with it for the long-term benefits, but it’s important to weigh how it fits into your overall plan.
How many years do you need to pay the premiums? Is it max-funded? If it is, and the death benefit is high, you can lower the death benefit later. If the premiums are only for 10 years, plan your funds assuming you’ll be working for that time. Since the payments are flexible, you can reduce them to the minimum if money gets tight.
I chose something that felt right for me at the time, but I still think about it sometimes. Take your time and consider your options. It’s all part of the learning process, and you’ll find what works best for you.
I can relate to your situation. Finding the right life insurance can be tricky, especially with a health condition. I also had to search for reputable options that consider pre-existing conditions.