How to use IUL to build wealth?
Asked by: Adell Rolfson | Last update: July 2, 2025Score: 4.9/5 (44 votes)
Can you make money from an 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.
Do wealthy people use IUL?
Who should buy IUL insurance? It's ideal for wealthy clients planning their estate or seeking retirement income. It also suits cautious investors who want stock market growth without risk. Additionally, people who want to invest and have easy access to their money can benefit.
How to maximize IUL?
Consistent premium payments: Regular contributions to your IUL ensure a steady increase in the principal amount, which can then earn interest. As interest adds to your cash value, future interest calculations are based on this larger amount, leading to exponential growth.
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).
IUL for Dummies
How soon can I take money out of my IUL?
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.
What are the disadvantages of IUL?
Complexity and Costs
IUL policies are usually complex and often come with higher costs compared to other retirement savings options. The fees associated with IULs, such as administrative fees, cost of insurance and surrender charges, can eat into the cash value, reducing overall return on investment.
What is better than a IUL?
IUL vs.
Indexed universal life (IUL) policies have flexible payments with cash accumulation pegged to the performance of an equity index. Whole life insurance is safer and simpler. IUL has higher upside potential, but is riskier and takes more work to manage.
How much money do I need to open an IUL?
The minimum amount you need to start an IUL life insurance policy varies between insurers and depends on your chosen coverage amount and premium payment method. Annual payments for an internationally indexed universal life policy start at around US$20,000 yearly and rise to $100,000 or more in premiums.
Can you borrow money against an 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 to build wealth with IUL?
You pay a premium in exchange for potentially lifelong coverage and have the opportunity to build cash value over time. Part of your premium payment goes toward the cost of insurance — i.e., paying out the death benefit — and other fees. The rest is added to your cash value.
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.
Why do rich people use IUL?
The IUL model has been wielded by such successful entrepreneurs as McDonald's founder Ray Kroc, Walt Disney and the Rockefeller family. By using cash-value life insurance policies to create wealth while still living, IUL can allow investors to pass on death benefits to their spouses, children and grandchildren.
Can I use my IUL to buy a house?
IUL Policy Loans
For example, you may take a policy loan from the cash value account to help buy a property, pay school fees, or expand your business. Keep in mind, if you take a policy loan you are borrowing from issuing insurance company with your own money.
What is the 7 year rule for IUL?
The 7 Pay Rule is the idea that you should pay in to your IUL policy for 7 years before taking withdrawals or loans from the cash value. This rule is important for policy holders in order to maximize their cash value and ensure that they are able to capture the most out of the index's performance.
Is IUL better than 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 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.
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.
How much can you put into an IUL every year?
There is no contribution limit on an IUL policy, unlike an IRA or 401(k). You can put as much as you'd like into the contract and the amount will grow. So, by overfunding your IUL policy, you can accumulate a cash value that is tied market performance, but not directly exposed to market forces.
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.
Can you lose money in an IUL policy?
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.
What is the average return on an IUL?
IUL policies typically allow you to grow a portion of your premiums through allocation to an index. Insurers often offer a growth cap of 8-9% and floor of 0%. This allows for upside potential with downside protection.
How much can you borrow from IUL?
With IUL, you can usually borrow up to 92-93% of your surrender value within the first few years, tax-free. Loans are smart: - Zero Wash Loan: Borrow at 2%, credited 2% on your cash value no cost. - Indexed Loan: Borrow at 4-5% but earn 8-10% on your cash value, often double what you're charged.