Indexed universal life insurance (IUL) provides the opportunity for good, tax-free asset growth with zero downside risk. As an individual or couple approaches and enters retirement, risk should be avoided and security embraced. IUL provides retirement income in the form of tax-free growth and tax-free policy loans (which loans are usually paid back from the policy death benefit). Well-designed policies reliably provide income for the entire lifetime of even long-lived individuals, and typically still have a remaining death benefit after loans are repaid. Tax-free IUL income also has the benefit of minimizing an individual’s “provisional income”, which determines the taxation of social security benefits and the cost of Medicare premiums.

In selecting and designing an IUL po0licy for income purposes, it is important to know the policy’s provisions regarding loan interest rates and the crediting of loan amounts. A good policy for income continues to credit the account balance including policy loans. In other words, in good IUL, so-called policy loans are not actually deducted from the policy account balance; rather, the insurance company makes the loan from its own account. The loan balance accrues at a set interest rate, but the account balance of the IUL policy is not touched and continues to grow according to the selected crediting formula.