Understanding Indexed Universal Life (IUL) as a Retirement Plan

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Understanding Indexed Universal Life (IUL) as a Retirement Plan

Indexed Universal Life Insurance (IUL) policies are increasingly being considered as tools for retirement planning. Their appeal lies in the potential for tax-free income in retirement, primarily through policy loans. However, the success of using an IUL as a retirement plan hinges on several factors:

  1. Early Purchase: Buying a policy at a younger age is crucial. This allows more time for the cash value to grow, benefiting from the compounding effect.
  2. Focus on Cash Value Growth: Individuals using IULs primarily for retirement planning focus less on the death benefit and more on growing the policy’s cash value.
  3. Policy Performance: The cash value growth is linked to a stock market index but with caps and floors that protect against market downturns.
  4. Tax Advantages: IULs can offer tax-free income via policy loans. However, managing these loans is important to avoid policy lapses and potential tax liabilities.
  5. Flexibility: IULs offer the flexibility to adjust premium payments and death benefits, which can be advantageous during different stages of life.

Key Considerations for IUL as a Retirement Plan

  • Age Factor: Starting an IUL policy no later than age 45 is recommended to maximize growth potential by the standard retirement age of approximately 65.
  • Costs and Fees: IULs can have higher costs and fees than other investment vehicles, impacting the net returns.
  • Understanding Risks: The policy’s performance is subject to market risks and the policy’s specific terms, including caps on returns and participation rates.
  • Policy Management: Proper policy management, including handling loans and understanding surrender charges, is essential.

IUL for Retirement Planning

Age of Policy PurchasePotential Growth TimeFocus in Retirement PlanningTax Benefits
Below Age 4520+ yearsCash Value AccumulationTax-Free Loans
Age 45 and Above15 – 20 yearsBalanced Benefit & GrowthTax Deferred Growth


Using an Indexed Universal Life Insurance policy as a retirement plan can be a viable strategy, especially when started at a younger age, such as before 45. Its success largely depends on the policy’s performance, the management of the cash value, and understanding the associated costs and risks. When used wisely, it can offer substantial tax benefits and be a flexible retirement planning tool. Contact us today for a free quote.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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