Indexed Universal Life (IUL)
Compare a Max-Funded IUL to IRAs, 401(k)s, SEP IRAs & Roth IRAs
See Which Strategy Could Provide You More Retirement Income.
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See How Long $500,000 Could Pay You $50,000 a Year
Three Different Strategies. Very Different Results.
Each strategy below starts retirement with the same $500,000. Example: a 35-year-old who sets aside $500 per month into each strategy for 31 years, using a 6.69% assumed annual return — non-guaranteed index crediting in the IUL — is illustrated to accumulate approximately $500,000, then retire and begin receiving income at the official retirement age of 67.†
Traditional IRA
401(k) / SEP IRA
- Annual Withdrawal Needed(to receive $50,000 after tax)
- $62,500per year (gross)
- Estimated Taxes(assumes 20% federal rate)
- $12,500per year
- Spendable Income(after taxes)
- $50,000per year
- How Long $500,000 May Last(at 6.69% annual return)
- About 12 years*
Roth IRA
- Annual Withdrawal Needed(to receive $50,000 tax-free)
- $50,000per year
- Estimated Taxes
- $0
- Spendable Income(after taxes)
- $50,000per year
- How Long $500,000 May Last(at 6.69% annual return)
- About 17 years*
Maximum Funded IUL
- Annual Policy Distributions(illustrated)
- $50,000per year
- Estimated Taxes
- $0†(policy loans)
- Spendable Income(after taxes)
- $50,000per year
- How Long $500,000 May Last(illustrated at current 6.69%)
- To age 120†
Why Is There Such a Difference?
Traditional IRA / 401(k) / SEP IRA
Withdrawals from traditional IRAs, traditional 401(k)s and SEP IRAs are generally subject to ordinary income tax. Assuming a hypothetical 20% effective federal income-tax rate, about $62,500 must be withdrawn to provide $50,000 after federal income taxes. At the hypothetical 6.69% annual return, $500,000 would support these withdrawals for approximately 12 years.
Roth IRA
Qualified Roth IRA withdrawals are generally federal income-tax free. Therefore, only $50,000 needs to be withdrawn to provide $50,000 of spendable income. At the hypothetical 6.69% annual return, $500,000 would support these withdrawals for approximately 17 years.
Maximum Funded IUL
An Indexed Universal Life policy can provide access to accumulated cash value through withdrawals and policy loans. Under the non-guaranteed policy illustration used in this example, $50,000 in annual policy distributions is illustrated through age 120.†
Same Starting Value. Very Different Retirement Outcomes.
Total contributions over 31 years: $186,000
- Traditional IRA / 401(k) / SEP IRA: $600,000 in cumulative after-tax withdrawals under the hypothetical assumptions shown.*
- Roth IRA: $850,000 in cumulative qualified tax-free withdrawals under the hypothetical assumptions shown.*
- IUL: $1,350,000 in cumulative illustrated policy distributions through age 92, plus an illustrated $300,000 death benefit at age 92, under the non-guaranteed policy illustration.†
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For comparison purposes only. Each example assumes total contributions of $186,000 and a $500,000 starting retirement value. Traditional-plan results are hypothetical and depend on the return and tax assumptions shown. IUL values are based on a non-guaranteed policy illustration and are subject to policy charges, loan provisions and actual policy performance. Actual results will vary.
Indexed Universal Life (IUL) insurance involves fees and charges, including cost of insurance, and is subject to the terms of the policy. Policy loans and withdrawals reduce the death benefit and cash value and may result in a taxable event if the policy lapses. This information is not intended as tax, legal, or financial advice. Please consult a qualified professional regarding your individual situation.
What Makes a Max-Funded IUL So Special?
A properly designed, max-funded Indexed Universal Life policy offers a combination that can be difficult to duplicate with traditional retirement strategies:
- Protection from negative index crediting. When the market index has a negative year, the policy's index crediting rate generally will not go below 0% because of the policy's floor.§ You don't have to recover from a negative index crediting year before you can begin growing again.
- Potential tax-free retirement income. When properly structured and maintained, accumulated cash value may be accessed through withdrawals and policy loans without current income taxes.†
These two features can have a significant impact on illustrated retirement-income comparisons: avoiding negative index crediting years and potentially avoiding income taxes on policy distributions. Avoiding taxes in retirement can be a big win. And with the national debt now over $40 trillion and the possibility of higher tax rates in the future, having a properly structured IUL that provides the potential for tax-advantaged access to accumulated cash value could become an even greater advantage. Those who plan ahead for the possibility of higher taxes could benefit tremendously.
Indexed Universal Life Insurance: A Smart Choice for Retirement 📊
10 Reasons Why More People Are Choosing IUL
Why Choose IUL? 10 Compelling Reasons
Below are 10 compelling reasons why interest in this strategy continues to grow year after year.
1. Potential Retirement Income Without Increasing Taxable Income
When properly structured and maintained, IUL policy withdrawals and loans may provide access to cash value without current federal income taxation and therefore may not increase taxable income or move you into a higher federal income-tax bracket.†
2. Higher Contribution Potential
Fund your policy beyond IRA limits. Traditional IRAs limit you to $7,500 per year in 2026 (or $8,600 if you're 50 or older). IUL has no annual IRS contribution limit — though contributions must stay within IRS §7702 guidelines to maintain tax-favored status — allowing many clients to fund their policy at higher levels than a traditional IRA.
3. No Required Minimum Distributions
Take control of your retirement timeline. With traditional retirement accounts, you're forced to withdraw money starting at age 73, even if you don't need it. IUL has no required minimum distributions, giving you complete flexibility over when and how you access your money.
4. Access Your Money When You Need It
Your funds, available on your schedule. Traditional plans impose a 10% IRS penalty for withdrawals before age 59½. IUL offers access to your cash value at any age without IRS penalties, though surrender charges may apply during the policy's surrender period (typically 10-15 years).
5. Tax-Free Legacy for Your Family
Leave more for your loved ones. When you pass away, your IUL death benefit transfers to your beneficiaries income tax-free. Traditional retirement accounts subject your heirs to income taxes, potentially reducing their inheritance by thousands or even hundreds of thousands of dollars.
6. Living Benefits Protection
Insurance that works while you're alive. IUL provides living benefits that can pay up to 100% of your death benefit if you experience a qualifying chronic or terminal illness. This protection can preserve your retirement savings from being depleted by unexpected health challenges.
7. Tax-Free Income in Retirement
Keep more of what you've earned. IUL allows tax-advantaged income through policy loans when the policy is structured properly and remains in force. Traditional retirement accounts generally provide taxable income, potentially pushing you into higher tax brackets and reducing your spendable retirement income.
8. Protection from Market Downturns
Sleep soundly during market volatility. When the market drops, your IUL cash value is protected by a guaranteed floor (typically 0-1%) on index-credited interest. Your index-credited gains are locked in and protected from future market declines, helping insulate your retirement savings from a market downturn at the wrong time.
9. Superior Income Potential
Maximize your retirement dollars. Due to its tax advantages and efficient structure, IUL can provide more retirement income than traditional plans with the same contribution amount when structured properly. This efficiency translates to a more comfortable retirement lifestyle.
10. No Exam up to $3,000,000
With our Accelerated Underwriting, applicants up to age 60 in good health who qualify can get coverage in days for rates lower than the cost of most other permanent life insurance policies that are fully underwritten.
Is an IUL right for everyone?
No. If you're uninsurable, have only a few years before retirement, or don't have the money to fund it properly, an IUL may not be a good option.
But for self-employed individuals, high-income earners, business owners, or anyone who has sufficient time to accumulate cash value, can consistently fund the policy, and values protection from negative index crediting along with permanent life insurance, a properly structured IUL may be worth considering as part of a long-term retirement strategy.
An IUL may be particularly attractive to small-business owners who want the flexibility to fund additional retirement income for themselves without the employee contribution requirements that can apply to employer-sponsored retirement plans such as SEP IRAs and certain 401(k) arrangements.†
Not All IULs Are Structured the Same
How an IUL is designed can make a significant difference. When we prepare an illustration, we structure the policy with a lower death benefit relative to the planned premium, subject to carrier requirements and applicable tax rules. This approach is designed to reduce the amount of insurance charges relative to the premium and emphasize cash-value accumulation.
A properly structured, max-funded IUL is generally designed to accept substantial premium funding while remaining within the limits of Internal Revenue Code Section 7702 and avoiding classification as a Modified Endowment Contract (MEC) under Section 7702A.
The goal is to maximize the policy’s potential for cash-value accumulation and future retirement-income distributions while maintaining the life insurance benefits and tax treatment of the policy.†
Helping clients properly structure and fund these policies to provide the most retirement income possible is what we specialize in.
See What a Maximum-Funded IUL Could Look Like for You
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Why We Represent Allianz
After evaluating dozens of insurance carriers, we chose Allianz for their industry-leading IUL products and unique features that benefit our clients.
Index Lock Feature
Pioneered by Allianz. Lock in positive index gains at any point during the crediting period — not just at year-end. When markets are up, you can secure those gains before a potential downturn. Few carriers offer this level of control.
Uncapped Index Options
Unlike many traditional IULs with 10–12% caps, Allianz offers uncapped index strategies with participation rates that have exceeded 190% (rates are set by the carrier and subject to change). This means more of your money can participate in index gains while still maintaining the 0% floor protection.
Overloan Protection Rider
Helps protect against a taxable event if a heavily loaned policy would otherwise lapse. Allianz's overloan protection is designed to keep the policy in force and help you avoid the unexpected tax bill that can occur when policy loans exceed cash value. Eligibility rules apply. Peace of mind for your retirement income.
Favorable Underwriting
Allianz's underwriting is highly competitive. Clients rated Preferred or Standard elsewhere often qualify for Preferred Plus with Allianz, and some Table 2 clients may receive Standard rates. Lower insurance costs mean more money growing for retirement. Approval and rating depend on the carrier's underwriting requirements.
Industry-Leading IUL Products
Allianz is a top IUL provider in America, consistently ranked among the leaders in IUL sales. Their flagship Allianz Life Accumulator+ is designed specifically for cash value accumulation and retirement income — exactly what a Maximum Funded IUL requires.
Global Financial Strength
Backed by Allianz SE, one of the world's largest financial services companies with over €1 trillion in assets under management. Allianz brings exceptional stability and security to help protect your retirement.
See how Allianz's unique features can maximize your retirement income.
Allianz ratings shown are for Allianz Life Insurance Company of North America as of the most recent published review and are subject to change. Product features, riders and index strategies vary by state and policy and are subject to the terms of the contract.
Important Disclosures
*Traditional IRA, 401(k), SEP, and Roth examples are hypothetical mathematical illustrations and are not predictions of actual investment results. They assume a starting retirement balance of $500,000, a constant 6.69% annual return, annual withdrawals, and no fees or other expenses during the withdrawal phase. Actual investment returns will fluctuate and may be substantially higher or lower. The Traditional IRA / 401(k) / SEP example assumes a 20% effective federal income-tax rate and does not account for state income taxes. Future tax rates are unknown. Roth IRA contribution eligibility is subject to applicable income limits, and Roth tax-free treatment requires qualified distributions under applicable tax law.
†Favorable IUL tax treatment generally depends on the policy remaining in force and avoiding classification as a Modified Endowment Contract (MEC). Consult a qualified tax or legal professional regarding your individual circumstances. This is not tax or legal advice.
§The 0% floor applies to index crediting and does not mean the policy's cash value cannot decrease. Policy charges and expenses continue to apply. An IUL does not invest directly in the stock market.
What Happens If the Market Drops 30%?
Here's the mathematics many people don't think about until they're close to retirement.
If you have $500,000 and your investment loses 30%, you're left with $350,000.
How much does $350,000 have to grow just to get back to $500,000?
Not 30%.
42.9%.
And that's before considering retirement withdrawals. If you're also taking money out for living expenses while the market is down, recovering can become even more difficult.
That's why sequence-of-returns risk can matter so much in retirement — and why more people consider strategies such as an IUL that are not directly invested in the stock market and provide a floor against negative index crediting.†
Expert Guidance for Your Financial Future
Most IULs can provide tax-advantaged retirement income, but policies with caps on market returns, low participation rates, or contributions below the maximum allowed can significantly reduce the amount of retirement income they may generate.
We write IULs with uncapped index strategies, high participation rates currently up to 175%, optional no-lapse guarantee protection (where available), and maximum allowable funding under IRC Section 7702 to help maximize accumulation potential and generate tax-free retirement income.†
A properly structured IUL can substantially increase lifetime retirement income, and helping clients structure these plans effectively is what we do best.
Our team brings decades of experience helping individuals and families create more secure retirement strategies. We understand the complexities of financial planning and focus on clear, transparent guidance tailored to your goals.
If you'd like to see a customized illustration designed to grow your cash value when the market index rises, help protect it during market downturns, and provide tax-advantaged income in retirement, give us a call today at 877-571-1980.
† Tax-free retirement income via policy loans requires the policy to remain in force and be properly structured under IRC Section 7702. Withdrawals beyond cost basis or a lapse of the policy may trigger ordinary income tax. Not tax or legal advice; consult a qualified professional.
Our Process
- Initial Financial Consultation
- Investment Strategy Review
- Policy Design & Customization
- Underwriting Process
- Policy Implementation
- Annual Review & Adjustment
FAQs
Indexed Universal Life Insurance Disclosures
Not a direct stock market investment. An Indexed Universal Life (IUL) insurance policy is not a direct investment in the stock market. Market indices such as the S&P 500® are price indices only and do not include reinvested dividends. Index-credited interest is subject to caps, participation rates, and floors set by the issuing carrier. Caps and participation rates may be adjusted by the carrier in the future, subject to contractual minimums.
Claims-paying ability. All guarantees, including the floor on index crediting and the death benefit, are subject to the financial strength and claims-paying ability of the issuing insurance company. Policy values are not insured by the FDIC, NCUA, or any government agency, and are not bank deposits.
Internal policy charges and long-term commitment. IUL policies include internal charges that reduce cash value, including cost of insurance, expense charges, administrative fees, and surrender charges. Surrender charges typically apply during the first 10–15 policy years and decrease over time. IUL is a long-term financial vehicle and is not appropriate for short-term needs. Early surrender, lapse, or under-funding may result in loss of benefits, forfeiture of cash value, and unfavorable tax consequences.
Modified Endowment Contract (MEC) warning. If a policy is funded above IRS Section 7702A limits, it may be classified as a Modified Endowment Contract. Loans and withdrawals from a MEC are taxed as ordinary income to the extent of any gain in the policy, and may be subject to an additional 10% IRS penalty if taken before age 59½. Policies marketed as “max-funded” are designed to fund up to—but not exceed—the IRS 7702A guidelines.
Tax treatment. Tax-advantaged access through policy loans depends on the policy remaining in force and being properly structured. Tax treatment of life insurance is governed by the Internal Revenue Code and is subject to change. Information on this page is for educational purposes only and does not constitute tax, legal, or investment advice. Consult a qualified tax advisor and a licensed insurance professional before purchasing a policy or implementing any strategy described on this page.
S&P 500® is a registered trademark of S&P Dow Jones Indices LLC. All other trademarks are the property of their respective owners.
* Testimonials represent real customer experiences. Individual results may vary based on age, health status, and coverage needs.
** Coverage and rates are subject to eligibility, underwriting requirements, and state availability. Not all applicants will qualify. Please consult with a licensed insurance agent to understand your specific situation and options. Sample rates shown are for illustrative purposes only; your actual premium will depend on age, gender, health classification, coverage amount, and carrier underwriting at time of application.
Curtis Drake | Licensed Independent Life Insurance Broker | NPN: 1141954 | TX License #738897 | Licensed in 32 states (not licensed in Connecticut, Delaware, Illinois, Kentucky, Massachusetts, Minnesota, Mississippi, Montana, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, Wisconsin, Wyoming, or the District of Columbia).
NPN: 1141954 | TX License: 738897 | 40+ years experience | 20+ A/A+ rated carriers | Multi-state licensed
Content reviewed: March 2026 — Questions? Call 877-571-1980