Ok, so IUL's have gotten my attention ...

[Tahoe Ray]

The deeper the pockets, the better advantages you have when it comes to investing and self diversifying. Consider how the insurance companies are able to offer what they do (for investment purposes), and to who that benefits the most. The most affluent won't even consider management fee mutual funds other than a small portion. Instead they'll do what insurance companies do.. which isn't buying other company annuities or WL. The further down the line you are, the more these things become attractive.

Yup...

You could do it yourself if you have the knowledge, discipline, and dough.

Most people don't.

 

[dbab]

There are plenty of advisors who use MEC IULs for a client's non-qual money (annuity alternative) and it works great. Others use IUL as a supplement for retirement savings... which can also work great.

Is the only reason someone would go the MEC IUL route is so they could contribute more to the cash value?

 

[KRobby]

Yup...

You could do it yourself if you have the knowledge, discipline, and dough.

Most people don't.

Self directed individual security portfolio, yes

but not performed yourself like a diy millennial asking for inevitable disaster

Most will go through a professional..(as you know)

 

[HoosierLife]

If I use the same calc from my other post, assume an end year of 2009, and start 27 years prior contributing 3k/mo, you end up with an account value of just over 3m (2.85 after cap gains taxes).

If you wanted to retire and take almost no risk, you could buy a SPIA with cash refund (bene gets anything left of the 2.85m) with your 2.85m and generate 159k annually for life.

Or just stick the whole thing in bonds and live on interest plus a little principal.

There are plenty of advisors who use MEC IULs for a client's non-qual money (annuity alternative) and it works great. Others use IUL as a supplement for retirement savings... which can also work great.

Again, not hating on IUL, just saying that it's not the end all and shouldn't be the primary savings vehicle for retirement.

Well that’s pretty good. But as I get closer to retirement, I’d be putting more to bonds anyway right? So it still wouldn’t end up being that high.

But I’m thinking I could retire off that either way :/

 

[Tahoe Ray]

Well that’s pretty good. But as I get closer to retirement, I’d be putting more to bonds anyway right? So it still wouldn’t end up being that high.

But I’m thinking I could retire off that either way :/

IULs are essentially bonds. That's the historical risk/return comparison. After all, what do you think these insurance companies invest your money in?

If they could make a premium over bonds in an equity investment, wouldn't they do that in their general account? Instead, they invest the large majority of those assets in bonds and real estate.

What do you think 120k will buy in 30+ years?

You're not including inflation in your calculation either.

Most people won't just dump all of their money into a SPIA or any annuity at retirement (I wish...) so they'll keep a 50/50 type portfolio which will keep pace w/ inflation, allow for some upside with limited downside, and a decent portion left over for heirs (assuming that's an objective).

Having something like an annuity w/ lifetime income plus an IUL IN ADDITION TO a retirement account (whether qual or non) makes for a really attractive distribution strategy.

Having just one product is not recommended.

 

[Tahoe Ray]

Is the only reason someone would go the MEC IUL route is so they could contribute more to the cash value?

The returns can be higher than annuities (the taxation is the same) and they're normally done as a 1-pay.

Plus, the plan "self-completes" if you drop dead early in retirement (substantial, immediate, tax-free upside to heirs).

 

[Allen Trent]

Now we’re talking.

ok, here is a bare bones spreadsheet mimicking those same contributions of 36k for 27 years & then $118k distributions for 35 years with it being emptied at age 100 like the IUL shows it lapsing.

to mimmick what they IUL is showing, you only have to net 4.93% over that 62 year time period.

Note-- you then need to factor in for what the value/cost of the life insurance is & some taxation benefit as an after tax equity account would owe some taxation on some distributions.

page 1 & 2 are the spreadsheet showing 4.93% which is less than half the historical average of the S&P 500.

pages 3 & 4 would be if you could invest & average 9%. at age 100 the account would still have $50M in it. man, it is late at night, so that seems like a wrong math number, but I have checked the spreadsheet many times & it could be confirmed in retirement projection software. It is because it grew to such a large number that taking 118k out of it is not anywhere close to the projected interest.

if I had more time, I would plug it in a more formal retirement planning software.

regardless, a WL with PUAR can be great as can an IUL for supplementing. but it is a horrible stretch for those in our industry that talk people into stopping 401k & roth contributions to put into WL or IUL. the pitch is that the future tax man is going to crush them for saving in retirement plans. while that may be true, taxation on the internal build up of life insurance cash values is always being brought up by the IRS as a future revenue source. so, the tax benefits we currently know of tax deferral & tax free loans are not 100% guaranteed to be here forever.

at a minimum, it might be smart to put half in Life plan & half in a retirement investment rather than all in life insurance, especially if you are not getting the max contributions of 10-25k per year into 401k/SEP/SIMPLE/ Roth between both spouses, etc

 

[HoosierLife]

ok, here is a bare bones spreadsheet mimicking those same contributions of 36k for 27 years & then $118k distributions for 35 years with it being emptied at age 100 like the IUL shows it lapsing.

to mimmick what they IUL is showing, you only have to net 4.93% over that 62 year time period.

Note-- you then need to factor in for what the value/cost of the life insurance is & some taxation benefit as an after tax equity account would owe some taxation on some distributions.

page 1 & 2 are the spreadsheet showing 4.93% which is less than half the historical average of the S&P 500.

pages 3 & 4 would be if you could invest & average 9%. at age 100 the account would still have $50M in it. man, it is late at night, so that seems like a wrong math number, but I have checked the spreadsheet many times & it could be confirmed in retirement projection software. It is because it grew to such a large number that taking 118k out of it is not anywhere close to the projected interest.

if I had more time, I would plug it in a more formal retirement planning software.

regardless, a WL with PUAR can be great as can an IUL for supplementing. but it is a horrible stretch for those in our industry that talk people into stopping 401k & roth contributions to put into WL or IUL. the pitch is that the future tax man is going to crush them for saving in retirement plans. while that may be true, taxation on the internal build up of life insurance cash values is always being brought up by the IRS as a future revenue source. so, the tax benefits we currently know of tax deferral & tax free loans are not 100% guaranteed to be here forever.

at a minimum, it might be smart to put half in Life plan & half in a retirement investment rather than all in life insurance, especially if you are not getting the max contributions of 10-25k per year into 401k/SEP/SIMPLE/ Roth between both spouses, etc

Ok now we’re talking.

So I thought there were income stipulations for Roth’s? My spouse doesn’t work anymore. Though I could hire her or make her a member in one of my LLCs.

What are my options on that front?

 

[Tahoe Ray]

Ok now we’re talking.

So I thought there were income stipulations for Roth’s? My spouse doesn’t work anymore. Though I could hire her or make her a member in one of my LLCs.

What are my options on that front?

Assuming everyone in your org are 1099:

Self-Employed? Get Tax-Free Retirement Income via a Roth Solo 401(k)

Also, FWIW, the 2019 limit for a Roth IRA is 193k for married filing jointly.

You may make more than that but most people in the insurance industry don't so if they have a non-working spouse, that's not a crazy-low number.

 

[HoosierLife]

Assuming everyone in your org are 1099:

Self-Employed? Get Tax-Free Retirement Income via a Roth Solo 401(k)

Also, FWIW, the 2019 limit for a Roth IRA is 193k for married filing jointly.

You may make more than that but most people in the insurance industry don't so if they have a non-working spouse, that's not a crazy-low number.

So as long as I show less than $193k on my taxes, I can contribute up to $56,000 a year to a Solo 401k?

And then I can choose to put that in a low fee Vanguard Indexed fund or whatever? And a certain % Roth?

What happens if my income shows over the $193k or whatever it increases to year to year?