Can I take my money out of an IUL?

Asked by: Milton Rohan  |  Last update: March 4, 2025
Score: 4.6/5 (29 votes)

You can take money from your IUL anytime, but fees and surrender charges may be associated with doing so. If you need to access the funds in your IUL policy, weighing the pros and cons of a withdrawal or a loan is essential. A withdrawal will reduce the cash value in your policy and may trigger surrender charges.

Can you take money from your IUL anytime you want?

Use at any time: With regular retirement programs, you typically have to wait until you reach age 59 ½ before you can start taking money out penalty-free. With an IUL, there is no age requirement.

How do you get your money out of an IUL?

Another way to access cash from your My Choice IUL is by taking out a loan against your cash value. The loaned amount may be tax-free, but it will be charged interest. You can choose to pay back the loan, or the loan amount will be paid through a decrease in your death benefit.

Can you lose money in an IUL policy?

You typically cannot lose money in an Indexed Universal Life (IUL) policy due to a 0% floor, which prevents cash value losses from market downturns. However, fees and policy costs can reduce cash value over time, especially if credited interest is low or nonexistent in certain years.

Can I borrow money from my IUL?

Applying for an IUL Policy Loan

You can typically take a loan against your index universal life insurance policy's cash value component as soon as it exceeds your insurer's minimum requirement, making borrowing against the policy's cash a flexible option.

How Can I Withdraw Money From My Indexed Universal Life (IUL) Insurance Policy?

31 related questions found

What is the penalty for withdrawing from IUL?

Unlike other tax-advantaged accounts like a 401(k) or IRA there is no age 59.5 withdrawal penalty with Indexed Universal Life. You can always take out up to what you put into an IUL policy via a tax-free withdrawal.

Can I borrow against my index fund?

With a portfolio line of credit, your broker will lend you money against the value of your securities portfolio, using your stocks, bonds and funds as collateral for the loan. The larger your portfolio, the larger the amount you can borrow.

What is the bad side of IUL?

An IUL is a very bad option for retirement planning. As with any investment tied to an index fund, your returns will be mediocre at best. About the most you can expect the cash value to do is beat inflation over time—and even that's iffy.

Why do rich people use IUL?

Indexed universal life (IUL) insurance offers several compelling advantages for estate planning: Large, Tax-Free Death Benefit: The money paid to your beneficiaries is generally tax-free, allowing for the efficient transfer of a greater portion of your wealth.

Is an IUL better than a 401k?

IUL contracts protect against losses while offering some equity risk premium. IRAs and 401(k)s do not offer the same downside protection, though there is no cap on returns. IULs tend to have have complicated terms and higher fees.

Can I cancel my IUL?

An IUL policy may be canceled if you stop paying premiums. In general, these policies are best for those with a large up-front investment who are seeking options for a tax-free retirement.

How soon can I borrow from my life insurance policy?

When your policy has enough cash value (minimums vary by insurer), you can use it as collateral to request a loan from your insurance company. Keep in mind that if you have a newer policy it may take several years before it has accrued enough value for you to borrow against.

How to make money with IUL?

In an IUL policy, the cash value portion can earn interest based on the performance of a stock market index, such as the S&P 500. It's important to note that your money is not directly invested in the stock market.

How much money can I take out of my IUL?

The amount you can borrow depends on your policy's accumulated cash value. Typically, you can borrow up to 90% of this value with an index universal life insurance policy. However, it's essential to remember that enough cash value must remain to cover policy fees and ensure your life insurance stays in force.

Can I use IUL to buy a car?

Funding Major Purchases: Instead of relying on traditional bank loans with high interest rates, you can borrow from your IUL policy to finance significant purchases like a new car or a home deposit. Since you're borrowing from yourself, the interest you pay goes back into your policy, accelerating its growth.

Is an IUL worth it?

Indexed universal life insurance policies provide greater upside potential, flexibility, and tax-free gains. This type of life insurance offers permanent coverage as long as premiums are paid. Some of the drawbacks include caps on returns and no guarantees as to the premium amounts or market returns.

Which is better, IUL or Roth IRA?

They also provide tax-free income in retirement. Therefore, investors concerned about their family's welfare after they're gone may prefer an IUL, while those who want a tax-free income stream during retirement can opt for a Roth IRA.

What is the max fund for IUL?

A max-funded Indexed Universal Life (IUL) policy is designed to build maximum cash value by funding the policy up to legal premium limits. This structure enhances cash growth potential without triggering tax penalties, making it a strategy for those seeking life insurance with significant tax-advantaged savings.

Is it illegal to have an IUL?

It is illegal to market Index Universal Life (IUL) as an "investment security", as defined by the Securities Act of 1933 & the Securities Act of 1934. These Acts of Congress gave birth to the SEC, in reaction to the stock market crash of 1929 that preceded the Great Depression.

What is the 7 pay rule for IUL?

What is the 7 pay rule for IUL? In simple terms, the IRS “7-Pay Test” states that if the cumulative premiums paid during the first seven years exceed the amount needed to have the policy paid up in seven level annual payments, the policy becomes a Modified Endowment Contract (or MEC).

How can you lose money in an IUL?

Can You Lose Money in an Indexed Universal Life Insurance Policy (IUL)? It is unlikely you will lose money in an IUL because insurance providers set a guarantee for your principal to protect it against losses in the market. However, there is also often a cap on the maximum amount you can earn.

Can I withdraw money from index fund anytime?

Can I withdraw money from mutual funds anytime? Yes, you can withdraw money from most mutual funds anytime, unless they have a lock-in period.

How do rich people borrow against their assets?

Instead, they can take loans against their shares. Securities based lending, securities based lines of credit, home equity lines of credit and structured lending are options for leveraging assets without selling them.

Can an index fund go to zero?

How Likely Are Index Funds to Go to Zero? Index funds are generally not as volatile as individual stocks because of their diversification. But of course, if the underlying index is volatile, then the index fund will be, too, assuming it tracks the index's performance well.