Equity Indexed Universal Life is, when simplified, investment grade insurance. It’s a tool, a vehicle used by folks to create retirement income. I’ve written of this before, much to the chagrin of Mr. Swann. I’ve since put many clients into them using industry experts. Why? ‘Cuz it’s the right thing to do. Every dollar a client spends on this vehicle is a buck they’re not spending with me. I make zip, nada, zilch. They understand this, and appreciate it. They’ve come to rely on our consistent congruency when it comes to keeping their agenda #1. And their agenda is a magnificently abundant retirement. We make use of what i’ve called a Purposeful Plan. Sometimes that Plan includes investment vehicles other than real estate. We do what works.
As a favor to Greg, though he didn’t ask, I’ve moved this party over to my place. Last time I think his head almost exploded when this subject came up here. People tend to get upset when it’s their ox being gored. Heck, I’m goring my own ox with this one. But again, it’s the right thing to do much of the time.
David Shafer is the guy who will answer your technical questions for this post. He recently wrote a guest post on BawldGuy Talking explaining why and when taxpayers would opt for an EIUL over their qualified retirement plan.
Soon, I’ll be writing a piece referencing a recent 20 year study showing mutual fund returns inside 401(k)’s have been less than 5% annually. And this study is used as a marketing tool. Go figure. I’ll make the study available, probably in dual form with David’s site. This study sheds light on the dirty little truth about mutual funds and their performance inside taxpayers’ qualified retirement plans.
Folks aren’t starting with realistic numbers. Mutual fund returns in 401(k)’s not good. Front loading EIUL is best — drives down the cost of the insurance. Your combined income tax rate is over 15%? Then numbers skew toward EIUL. The higher the combined retirement income tax bracket, the more the numbers favor EIUL EIUL never tells you when you can access your money or force you to pull it out. Insurance component: 50% die before 84 — 25% before 75 years old. Average return rate reported my mutual funds don’t allow for ‘down’ (negative) years Negative years hurt more than positive years help — EIUL’s don’t have negative years.
It’s been my contention since I learned about the EIUL that 401(k)’s are Uncle Sam’s own retirement plan. It begins by saddling Boomers with bigger tax bills than they ever paid while working. Those who believe their tax bite in retirement will be less are either ill informed, or not candidates for an EIUL. Why? ‘Cuz their retirement plan was so bereft of any real planning, their income will in fact not be high enough to put them into a higher tax bracket. They won’t be entering retirement as much as they’ll be beginning their life sentence.
OK — Let the games begin. Go see what David has to say, and give him your best shot.26 comments