WHY IUL IS BAD

What is IUL?

Indexed universal life (IUL) is a type of life insurance policy that combines a death benefit with a cash value account. The cash value account accumulates on a tax-deferred basis, and you can borrow against it or withdraw from it while you're still alive.

The Bait of IUL

Insurance companies offer IUL as a great way to save for retirement or supplement your income in retirement. They will tell you that it's a safe investment that can provide you with a guaranteed death benefit and tax-deferred growth.

The Switch and Unattractive Sides of IUL

But the truth is, IUL is a bad investment. Here are a few reasons why:

1. High Fees

IUL policies come with a number of fees, including sales charges, administrative fees, and surrender charges. These fees can eat into your cash value and reduce your returns.

2. Low Returns

The average annual return on an IUL policy is around 4%. This is lower than the return you could get from investing in a stock market index fund.

3. Limited Flexibility

IUL policies are very inflexible. You can't change the death benefit or the cash value account without paying a fee. You also can't withdraw money from the cash value account without taking a loan, which will incur interest.

4. Tax Inefficiency

IUL policies are taxed differently than other types of life insurance policies. When you withdraw money from the cash value account, you will have to pay taxes on the earnings. This can be a significant tax liability if you have a large cash value account.

5. Surrender Charges

IUL policies typically have surrender charges that apply if you cancel the policy before a certain number of years. These charges can be as high as 10% of the cash value account.

Conclusion

IUL is a bad investment and we hope we have been able to provide enough information to help you reach your own conclusions. If you're looking for a way to save for retirement or supplement your income in retirement, there are better options available than IUL.

FAQs

1. What are the alternatives to IUL?

There are a number of alternatives to IUL, including:

• Whole life insurance
• Variable life insurance
• Term life insurance
• Annuities
• Mutual funds
• Exchange-traded funds (ETFs)

2. How can I avoid IUL scams?

To avoid IUL scams, you should:

• Do your research and understand the fees and risks involved.
• Talk to a fee-only financial advisor who is not affiliated with an insurance company.
• Get quotes from multiple insurance companies before you buy a policy.

3. What should I do if I’m already invested in an IUL policy?

If you're already invested in an IUL policy, you should:

• Contact your insurance company and ask about your options.
• Consider cashing out the policy and investing the money in a more suitable investment.
• Talk to a fee-only financial advisor to help you make a decision.

4. Is IUL ever a good investment?

IUL can be a good investment for a small number of people, such as:

• People who need a death benefit and a cash value account.
• People who are willing to pay high fees.
• People who are not concerned about low returns.

5. What is the best way to save for retirement?

The best way to save for retirement is to start early and invest in a diversified portfolio of stocks, bonds, and other assets. You should also consider working with a fee-only financial advisor to help you create a retirement plan that meets your individual needs.