Can High IUL Fees Destroy an IUL Retirement Strategy?

You’ve probably heard both versions.

One person says:

“IUL fees will eat you alive.”

Someone else says:

“The fees don’t matter because the policy performs so well.”

Neither answer is good enough.

The real question is:

Can the costs inside an IUL become large enough, relative to the policy’s actual performance, loans, and retirement distributions, that the retirement strategy starts breaking down?

Yes.

That can happen.

But it isn’t as simple as saying:

“High fees equal bad IUL.”

The real danger usually comes from several pressures hitting the policy at the same time.

Fees Don’t Exist in a Vacuum

Imagine two IUL policies.

Policy A has lower charges.

Policy B has higher charges.

Can you automatically say Policy A will produce more retirement income?

No.

You still need to see the complete policy math.

But if a policy already has significant charges and then experiences weak indexed crediting, growing policy loans, substantial retirement distributions, and a long retirement, those costs can become much more dangerous.

That’s the Failure Scenario You Need to Understand

The problem usually isn’t one fee.

It’s the interaction between:

• Policy charges
• Cost of insurance
• Indexed-crediting results
• Policy loans
• Loan costs
• Retirement distributions
• Policy funding
• Longevity

One weak variable may be manageable.

Several weak variables together can create a very different outcome.

Start With a Healthy Policy

Imagine an IUL entering retirement with strong policy values.

The policy has been adequately funded.

Indexed crediting has been reasonably favorable.

The retirement-income projection isn’t overly aggressive.

The policy has room between where it is today and where it would come under serious pressure.

Now compare that with a policy entering retirement already running close to the edge.

Those two policies may react very differently to the exact same bad year.

What Does “Running Close to the Edge” Mean?

It means there isn’t much room for the future to be worse than the illustration.

Maybe the retirement-income projection requires strong crediting.

Maybe the planned distributions are aggressive.

Maybe policy indebtedness becomes large.

Maybe the design assumes every future JUMP succeeds.

Maybe the loan rate is assumed to remain at today’s level.

Maybe the projection works to age 90 but gets shaky at 95.

That’s what I mean by a thin margin for error.

Then Add Policy Charges

An IUL can have several types of costs, including:

• Cost-of-insurance charges
• Premium-related charges
• Administrative expenses
• Rider charges
• Surrender charges
• Policy-loan costs
• Other contract-specific charges

Not every charge behaves the same way.

And not every charge creates the same risk during retirement.

Cost of Insurance Can Become Especially Important Later

Cost-of-insurance rates can increase with attained age under the policy’s contractual schedule.

The actual dollar COI charge is affected by the policy’s mechanics, including the applicable amount of insurance risk.

So you shouldn’t assume:

“I’m older, therefore my COI charge will automatically explode.”

But you also shouldn’t assume:

“My cash value is large, so later-life insurance costs don’t matter.”

Run the actual numbers.

Now Imagine Retirement Begins

During the accumulation years, you’re putting money into the policy.

Then retirement begins.

Your contributions may stop.

Now money starts coming out.

That’s a major change.

The policy goes from an accumulation phase into a distribution phase.

And the Policy Charges Don’t Retire When You Do

This is where the math gets interesting.

You may stop making your annual contribution.

But applicable insurance costs can continue.

Administrative charges can continue.

Policy-loan costs can continue.

Meanwhile, you’re accessing policy values for retirement.

That’s why a policy that looks great at age 65 still needs to be tested at age 75, 85, and 95.

Now Add a Weak Indexed-Crediting Year

Suppose the applicable indexed-crediting result for a year is:

0%.

If the applicable indexed strategy has a 0% floor, negative index performance itself may not create a negative indexed-interest credit below that floor.

But the rest of the policy doesn’t stop.

Applicable charges can still be deducted.

Loan costs can still matter.

Retirement distributions can still occur.

So total policy value can still decline.

This Is Why the 0% Floor Does Not Solve the Fee Problem

The floor applies to the applicable indexed-crediting calculation.

It does not mean:

“My policy can never lose value.”

If indexed crediting is 0% while money is leaving the policy through charges, loans, and retirement distributions, the total policy economics can still be unfavorable.

One 0% Year Is One Thing

Now imagine several weak years.

Maybe you get:

0%.

Then 2%.

Then 0%.

Then a stronger year.

Then another weak year.

At the same time, you’re taking retirement income.

Policy charges continue.

Policy indebtedness may be growing.

That sequence can create much more pressure than looking at a long-term average suggests.

Average Crediting Can Hide the Path

This matters.

Two retirement projections can produce similar average crediting assumptions but experience the annual results in very different orders.

When money is being distributed from a policy, the order of those results can matter to policy durability.

That’s why I don’t want to see only one smooth illustrated rate.

I want to see ugly years too.

Now Add Policy Loans

This is where retirement-income strategies require even more attention.

Policy loans create indebtedness.

They have an applicable loan cost.

Outstanding indebtedness can affect policy values and the net death benefit.

And excessive borrowing can increase lapse risk.

The Current Applicable JUMP Loan Rate Is 5%

With the policy structure we currently use for the IUL JUMP Strategy, the applicable loan rate is currently:

5%.

The applicable loan feature has a contractual maximum loan rate of:

6%.

If you’re building a long-term retirement model, don’t only run 5%.

Run 6% too.

Why?

Because retirement planning isn’t about proving the strategy works under today’s assumptions.

It’s about seeing what happens when an assumption becomes less favorable.

If moving the modeled loan rate from 5% to 6% causes the policy to deteriorate dramatically, that’s information you want before retirement.

Not after.

Now Combine a 0% Crediting Year With a 5% Loan Cost

Under a simplified economic comparison:

0% indexed crediting

versus:

5% applicable loan cost

creates an unfavorable:

5-percentage-point relationship.

And that is before treating the policy’s insurance and administrative charges as though they somehow disappeared.

They didn’t.

This Is Where High Costs Can Become Dangerous

Imagine:

• Weak indexed crediting
• 5% or 6% loan costs
• Large outstanding loans
• Increasing insurance costs
• Ongoing policy charges
• Large retirement distributions

Now keep that going for multiple years.

That’s the scenario that matters.

Not “What Is the Fee?”

The better question is:

“What happens when the costs collide with the other pressures on the policy?”

That’s how an IUL retirement strategy should be evaluated.

Can Policy Charges Accelerate a Downward Spiral?

They can contribute to one.

Imagine policy value starts declining.

Retirement distributions continue.

Outstanding indebtedness remains significant.

Loan costs continue.

Insurance and other applicable charges continue.

If future performance doesn’t recover enough to support the strategy, the policy can come under increasing pressure.

And That’s Where Lapse Risk Matters

If a policy does not have sufficient value to support its contractual requirements, it can potentially lapse unless action is taken and subject to any applicable guarantees or other policy provisions.

A lapse is not something to shrug off when there are large outstanding loans.

Why Can a Lapse With Outstanding Loans Be So Serious?

Because a policy with gain and outstanding indebtedness that lapses or is surrendered can potentially create taxable income under applicable tax rules.

Imagine the worst possible timing.

You’re in your 80s.

You used the policy for retirement income for years.

You weren’t monitoring it closely.

Then you discover the policy is under serious pressure.

That is exactly what proper planning is supposed to help prevent.

So Can High Fees Destroy the Strategy?

Here’s the more accurate answer:

Policy charges can materially weaken an IUL retirement strategy, especially when combined with weak crediting, aggressive distributions, growing policy indebtedness, unfavorable loan economics, insufficient funding, or greater-than-modeled longevity.

That’s very different from:

“IULs fail because the fees are high.”

The interaction is what matters.

Now Let’s Look at the Other Extreme

Suppose somebody tells you:

“Our policy has extremely low costs, so you don’t need to worry.”

I still want the math.

“Low” compared with what?

At what age?

Under what death-benefit structure?

At what funding level?

With what outstanding loan balance?

Show me the actual dollars.

A Low Fee Cannot Rescue a Bad Retirement Design

Imagine an IUL with relatively favorable costs.

But the retirement-income projection is far too aggressive.

Or the policy is underfunded.

Or the illustration assumes stronger crediting than the policy ultimately experiences.

Or the client takes much more retirement income than originally modeled.

Low costs alone don’t fix that.

Policy Design Comes First

If an IUL is being used for retirement, the design needs to match the objective.

That includes the relationship among:

• Premium funding
• Death benefit
• MEC limits
• Policy charges
• Indexed-crediting assumptions
• Policy loans
• Retirement distributions
• Longevity

A retirement strategy isn’t built by finding the policy with the prettiest accumulation number.

Now Add the IUL JUMP Strategy

The JUMP Strategy introduces another layer because it uses a Matching Indexed Participating Loan.

The matching amount is created as a policy loan.

The proceeds are redeployed into the same policy as additional funding.

That can increase the amount of policy value potentially participating in the applicable indexed-crediting strategy.

But the loan also creates indebtedness and an applicable loan cost.

The Match Is Not Free Money

This needs to stay clear.

Suppose the client contributes:

$10,000 per year.

The example JUMP progression shows:

• Years 1 and 2: $10,000 client contribution, no matching loan
• Year 3: $10,000 client + $10,000 Matching Indexed Participating Loan = $20,000 total annual funding shown
• Year 5: $10,000 client + $20,000 matching loan = $30,000 total annual funding shown
• Year 7: $10,000 client + $30,000 matching loan = $40,000 total annual funding shown
• Year 9: $10,000 client + $40,000 matching loan = $50,000 total annual funding shown
• Year 11: $10,000 client + $50,000 matching loan = $60,000 total annual funding shown

The client is not writing a $60,000 check in Year 11.

The client’s out-of-pocket contribution in this example remains $10,000.

The additional amount shown comes from Matching Indexed Participating Loan activity.

And those matching amounts are policy loans.

Existing Loans Don’t Disappear When Another JUMP Occurs

The loans accumulate under the strategy mechanics we’re discussing.

A later JUMP does not simply pay off the earlier JUMP loan.

That means long-term indebtedness has to be part of the analysis.

So do applicable loan costs.

So do policy charges.

This Is Why the JUMP Strategy Needs More Stress Testing, Not Less

If a strategy uses policy-loan mechanics to potentially increase long-term retirement income, I want to know what happens when the loan economics are favorable.

But I also want to know what happens when they aren’t.

Let’s Look at the Historical 6.87% Example

One historical analysis used in our JUMP modeling looked at annual S&P 500 price changes from 2006 through 2020.

Dividends were excluded because the indexed strategy is not a direct investment in the S&P 500.

The example applied a:

10% cap

and:

0% indexed-crediting floor.

Negative annual index price changes were replaced with 0% for purposes of the historical indexed-crediting calculation.

Positive annual changes above 10% were limited to 10%.

The resulting annual capped-and-floored figures averaged approximately:

6.87%.

Against a 5% Loan Rate, the Simplified Modeled Spread Is 1.87 Percentage Points

The math is:

6.87% – 5.00% = 1.87%.

But do not call that:

“1.87% profit after fees.”

It isn’t.

It’s a simplified economic comparison between the historical indexed-crediting result used in the model and the current applicable loan rate.

Insurance costs and other applicable policy charges still matter.

What Happens If the Spread Turns Negative?

Suppose the indexed-crediting result is:

3%.

Against the current 5% applicable loan rate, the simplified economic relationship becomes:

3% – 5% = an unfavorable 2-percentage-point difference.

At 0% crediting:

0% – 5% = an unfavorable 5-percentage-point difference.

If the applicable loan rate were 6%, that unfavorable relationship would be larger.

Now Add Policy Charges to the Stress Test

This is where the title of this article becomes real.

Don’t test:

“What happens if the loan spread is negative?”

in isolation.

Test:

“What happens if the loan relationship is unfavorable while policy charges continue and I’m taking retirement income?”

That’s the retirement scenario.

What About the 8.74%, 11.61%, 14.48%, and 17.35% Numbers?

Under assumptions used in one JUMP model, the combination of the base indexed-crediting assumption and the modeled positive-arbitrage effect attributed to successive Matching Indexed Participating Loans produced modeled effective results of approximately:

• 8.74% at the Year 3 JUMP
• 11.61% at the Year 5 JUMP
• 14.48% at the Year 7 JUMP
• 17.35% at the Year 9 JUMP

Those figures are not:

• Guaranteed returns
• S&P 500 returns
• IUL indexed-crediting rates
• Net returns after every policy charge

They are modeled effective results under the assumptions used in that JUMP analysis, before accounting for applicable policy charges and other factors.

If Someone Calls 17.35% Your “Net IUL Return,” Stop

That’s not how I would present the number.

I want to see the actual policy values after the applicable policy mechanics are included.

Because that’s what you’ll eventually rely on for retirement.

Can the JUMP Strategy Still Work After Policy Costs?

That’s the question the model has to answer.

Not me.

Not a brochure.

Not a headline.

The actual projection.

Put the applicable costs into the policy.

Put the loans into the policy.

Put the retirement distributions into the policy.

Then see what survives.

And Don’t Assume Every Future JUMP Will Happen

Future JUMPs require future underwriting and approval.

They are not guaranteed when the original policy is issued.

The example progression includes planned JUMPs in Years:

3, 5, 7, 9, and 11.

But health, income, employment, existing insurance, occupation, driving history, risky hobbies, and other underwriting factors can affect future approval.

What If the JUMP Progression Stops?

Under the mechanics we’re discussing, a missed JUMP can pause the progression rather than automatically resetting the strategy.

If the client has already reached a $30,000 matching-loan level, for example, failure to qualify for the next increase does not necessarily mean that prior successful progression disappears.

But the original retirement-income projection may no longer be appropriate.

Rerun it.

This Matters to the Fee Question

Why?

Because if the original projection expected more future funding from later JUMPs and those JUMPs never happen, the relationship between future policy values and future policy costs can change.

You don’t get to keep the old retirement-income projection simply because you like the number better.

Now Let’s Talk About Retirement Distributions

Under retirement modeling used with the JUMP Strategy, distributions can be modeled at approximately:

12% per year of policy/account value

under specific assumptions.

That does not make 12% a universal safe withdrawal rate for IULs.

It isn’t.

A 12% Modeled Distribution Has to Survive the Policy Math

What if indexed crediting is weaker?

What if loan costs increase?

What if policy charges are higher later?

What if you live longer?

What if you take more money than originally modeled?

Run it.

Don’t Say “The Policy Can’t Implode”

No retirement-income strategy deserves that kind of blind confidence.

The goal is to design and monitor the policy so it has enough durability under reasonable stress scenarios.

That’s very different from promising that failure is impossible.

What Does a Strong Stress Test Look Like?

Start with the current projection.

Then make it harder.

Test:

1. Lower indexed crediting.
2. Several 0% indexed-crediting periods.
3. The current applicable 5% loan rate.
4. The contractual maximum 6% loan rate.
5. No additional future JUMPs.
6. Earlier retirement.
7. Longer retirement.
8. Longevity to age 95 or beyond.
9. Higher retirement distributions.
10. The actual policy charges throughout the projection.

Then look at where the policy begins to fail.

That’s a Number I Actually Want to Know

People love asking:

“How much retirement income can this produce?”

I also want to know:

“How much can go wrong before the strategy stops working?”

That’s your margin for error.

What If the Policy Only Works Under the Best Assumptions?

Then I wouldn’t call that a strong retirement plan.

If the policy needs:

strong crediting every year,

the current loan rate forever,

every future JUMP to be approved,

and exactly the illustrated retirement lifespan,

you need to know that.

That’s a fragile model.

What If It Still Works Under Worse Assumptions?

Now the conversation changes.

If you lower crediting, raise the modeled loan cost, remove future JUMPs, extend longevity, include policy charges, and the strategy still produces a result you’re comfortable with, that’s useful information.

That’s what stress testing is for.

Now Put the Up-to-300% Number Through the Same Test

In certain modeled comparisons we’ve evaluated, the IUL JUMP Strategy has produced up to approximately 300% more projected retirement income than the 401(k), Traditional IRA, or comparable tax-deferred retirement strategy being evaluated.

That’s a large modeled difference.

So it deserves a large amount of scrutiny.

High IUL Fees Cannot Be Hidden From a 300% Comparison

If the comparison includes:

investment expenses on the 401(k),

taxes on the 401(k),

and other costs on the alternative strategy,

then the IUL’s applicable costs need to be included too.

Otherwise it’s not an apples-to-apples comparison.

What Should Be Included on the IUL Side?

• Client contributions
• Premium-related charges
• Cost of insurance
• Administrative charges
• Other applicable policy charges
• Indexed-crediting assumptions
• Caps
• Participation rates
• Spreads where applicable
• Matching Indexed Participating Loan mechanics
• Policy-loan costs
• Future JUMP assumptions
• Retirement distributions
• Longevity

Then Make the Alternative Strategy Compete Fairly

Use clearly stated assumptions for:

• Contributions
• Employer contributions where applicable
• Market returns
• Investment expenses
• Taxes
• Retirement distributions
• Longevity

Then compare projected spendable retirement income.

The 300% Number Isn’t the Reason to Buy Anything

It’s the reason to ask more questions.

Where did the difference come from?

Was it taxes?

Was it the Matching Indexed Participating Loan structure?

Was it the retirement-distribution mechanics?

Was it an aggressive assumption?

Were all costs included?

Was longevity treated the same?

The 300% isn’t the sales pitch. It’s the question.

And What About Approximately 40% More Than a Traditional IUL?

In certain modeled comparisons we’ve evaluated, the JUMP Strategy has produced approximately 40% more projected retirement income than the traditional IUL structure being compared.

That number needs the same treatment.

Don’t assume the difference is simply:

“Our fees are lower.”

The difference can come from multiple mechanics, including funding, loan structure, indexed-crediting assumptions, policy charges, death-benefit design, future JUMPs, and retirement distributions.

Show the complete comparison.

How Can You Tell If IUL Fees Are Becoming a Problem?

Don’t wait for a dramatic failure.

Monitor the policy.

Look for changes in:

• Actual policy values versus prior projections
• Outstanding policy indebtedness
• Loan costs
• Policy charges
• Cash surrender value
• Net death benefit
• Projected retirement-income durability
• Projected lapse age

If actual results begin drifting materially from the original model, rerun the retirement plan.

The Original Illustration Isn’t a Lifetime Permission Slip

You bought a policy.

You didn’t buy a guarantee that every nonguaranteed number on the original illustration will happen.

If you’re going to rely on the policy for retirement income, review it.

Update the assumptions.

See where you actually stand.

What Can You Do If the Policy Is Under Pressure?

The appropriate response has to be evaluated using the actual policy and the client’s circumstances.

Possible planning conversations can include reviewing:

• Future funding
• Retirement-distribution levels
• Loan activity
• Policy allocations
• Death-benefit structure
• Available contractual options
• Current versus projected policy performance

The key is identifying the problem early enough to evaluate available choices.

The Worst Time to Discover the Problem Is at 85

That’s the emotional part of this that spreadsheets don’t show.

At 58, you may still be earning good money.

You can adjust.

You can change contributions.

You can change retirement timing.

You can rethink the strategy.

At 85, your choices may feel very different.

This Is Really About Protecting Your Independence

Most people don’t tell me:

“My greatest fear is a rising mortality charge.”

That’s not how people think.

They think:

“I don’t want to run out of money.”

“I don’t want to find out too late that I misunderstood this.”

“I don’t want to ask my kids for help.”

“We should be able to handle this ourselves.”

“What if we mess this up and regret it?”

That’s why the stress test matters.

You’re Not Trying to Build a Perfect Illustration

You’re trying to build a retirement strategy that can handle an imperfect future.

There will be weak years.

There will be unexpected expenses.

You may live longer than you thought.

Crediting terms can change where permitted by the contract.

Loan rates can differ from today’s rate within contractual provisions.

Your retirement-income needs can change.

The policy has to live in that world.

The Bottom Line

Yes, policy charges can materially damage an IUL retirement strategy.

But the biggest danger usually isn’t one fee sitting by itself.

It’s what happens when costs combine with:

weak indexed crediting,

large policy loans,

unfavorable loan economics,

aggressive retirement distributions,

insufficient funding,

and a longer-than-modeled retirement.

That’s why the question shouldn’t be:

“Are the IUL fees high or low?”

Ask:

“After every cost is included and the assumptions are stress-tested, does the retirement strategy still work?”

How We Test This at FPP Financial

At FPP Financial, we use our Retirement Math Method™.

I don’t want to tell you the costs are fine.

I want to make the policy prove it.

We’ll look at the actual policy charges.

We’ll look at cost of insurance.

We’ll look at indexed-crediting assumptions.

We’ll look at the Matching Indexed Participating Loan mechanics.

We’ll look at outstanding indebtedness.

We’ll run the current applicable 5% loan rate.

We’ll stress-test the applicable contractual maximum 6% loan rate.

We’ll test weaker indexed crediting.

We’ll test 0% crediting periods.

We’ll test no future JUMPs.

We’ll test retirement distributions.

We’ll test longevity to age 95 or longer.

Then we’ll compare the projected retirement income with the alternatives you’re actually considering.

I don’t try to sell you on the strategy. I make the strategy prove itself with the math.

Want to Find Out How Much Can Go Wrong Before the Strategy Stops Working?

That’s the test I want to run.

Not just:

“How much can this make?”

Show me the downside.

Show me the charges.

Show me the loans.

Show me the bad crediting years.

Show me what happens at a 6% loan rate.

Show me what happens if future JUMPs stop.

Show me what happens if you live to 95.

Then tell me how much projected retirement income survives.

In certain modeled comparisons we’ve evaluated, the IUL JUMP Strategy has produced up to approximately 300% more projected retirement income than the 401(k), Traditional IRA, or comparable tax-deferred retirement strategy being evaluated.

But don’t buy it because of the 300%.

Try to break the model first.

Don’t just believe the 300% number. Make the strategy prove where the difference comes from with the math.

The number isn’t the reason to buy it. The assumptions behind the number are what you need to understand.

Show me exactly where the difference comes from.

Let the math do the talking.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• What Fees Are Actually Inside an IUL Policy?
• How Do IUL Fees and Cost of Insurance Change as You Get Older?
• How to Stress-Test an IUL Before You Use It for Retirement

Disclosure

This material is for educational purposes only and is not intended as individualized investment, securities, tax, legal, underwriting, or insurance advice. Indexed universal life insurance is permanent life insurance and is not a qualified retirement plan, IRA, brokerage account, mutual fund, index fund, savings account, or direct investment in a market index.

Fees, expenses, insurance costs, and policy charges vary by insurance contract. Cost-of-insurance charges, premium-related charges, administrative expenses, rider charges, surrender charges, policy-loan costs, and other contractual expenses can affect policy values and policy durability. The actual insurance contract and current approved policy materials govern a specific policy.

Cost-of-insurance rates may vary with factors specified in the policy, which can include attained age, underwriting classification, sex where permitted, applicable amount of insurance risk, and other contractual factors. An increase in an applicable COI rate does not by itself establish the exact future dollar charge. Policy values, death-benefit structure, amount at risk, and other contractual mechanics can affect the actual calculation.

Indexed universal life insurance does not directly invest policy cash value in the S&P 500 or another market index and does not provide ownership of underlying index securities through the indexed account. Indexed-crediting results should not be confused with market-index returns or direct investment performance.

A 0% indexed-crediting floor applies to the applicable indexed-crediting calculation under examples discussed and does not guarantee that overall policy value cannot decline. Cost of insurance, administrative expenses, loan costs, withdrawals, retirement distributions, and other policy mechanics can continue to affect policy values during a 0% indexed-crediting period.

The sequence examples in this article are hypothetical and are provided to illustrate how multiple weaker indexed-crediting periods can interact with policy charges, loans, and distributions. They do not predict future index or policy performance.

The historical 6.87% indexed-crediting example discussed in this article is based on an analysis of annual S&P 500 price changes from 2006 through 2020, excluding dividends, and applying the stated 10% cap and 0% indexed-crediting floor. The resulting 6.87% figure is an arithmetic historical average of the applicable annual capped-and-floored results in that analysis. Historical results do not predict future policy performance and should not be interpreted as a guaranteed future indexed-crediting rate, compound annual growth rate, net policy return, or historical total return of the S&P 500.

The simplified 1.87-percentage-point modeled positive spread discussed in this article represents the mathematical difference between the 6.87% historical indexed-crediting result used in the referenced model and the current 5% applicable policy-loan rate. It is not a representation of net policy return after cost of insurance, administrative expenses, other policy charges, withdrawals, or other factors.

The modeled effective JUMP results of approximately 8.74%, 11.61%, 14.48%, and 17.35% are not S&P 500 returns, indexed-crediting rates, compound annual growth rates, net returns after policy charges, participation rates, cap rates, or guaranteed policy returns. They are modeled effective results under assumptions used in the referenced JUMP analysis, before accounting for applicable policy charges and other factors.

Life insurance illustrations contain assumptions and may include both guaranteed and nonguaranteed elements. Nonguaranteed values, indexed-crediting assumptions, policy values, death benefits, and retirement-income projections are not promises of future results. Actual policy performance can differ materially from illustrated results.

Matching Indexed Participating Loans are policy loans. They are not free contributions, employer matches, bonuses, tax credits, guaranteed gains, or direct investments in a market index. Under the strategy described here, Matching Indexed Participating Loan proceeds are modeled as being redeployed into the same policy as additional funding. Associated policy indebtedness and applicable loan costs remain part of the policy economics.

Policy loans generally accrue applicable loan charges and can reduce policy values and death benefits and increase lapse risk. Outstanding policy indebtedness generally reduces the net death benefit payable under the insurance contract.

The JUMP Strategy is modeled with applicable loan charges carried forward during the accumulation design rather than requiring the client to pay those charges out of pocket each year. This does not eliminate the economic cost of borrowing, guarantee positive arbitrage, or guarantee that policy values will remain sufficient to support outstanding indebtedness.

With the policy structure discussed in this article, the applicable loan rate is currently 5%, with a contractual maximum loan rate of 6% for the applicable loan feature. The current applicable rate should not be interpreted as a guarantee that the rate will remain at 5%. Current and guaranteed loan provisions should be verified against current approved policy information and the actual insurance contract.

Positive arbitrage is not guaranteed. Periods in which indexed crediting is below the applicable loan cost can produce unfavorable loan economics. Insurance costs, administrative expenses, and other policy charges remain relevant regardless of whether a particular period produces favorable or unfavorable modeled loan economics.

Future JUMPs and associated death-benefit increases are subject to future underwriting and approval. Initial policy approval and prior successful JUMPs do not guarantee future increases. Health, income, employment, existing insurance, driving history, occupation, hazardous job duties, risky hobbies, and other applicable underwriting factors may affect eligibility for additional coverage.

Under the strategy mechanics described, failure to qualify for a future JUMP does not necessarily mean prior successful JUMPs or the previously achieved matching-loan level automatically disappear. Actual policy rules govern each case, and retirement-income projections should be updated when future JUMP assumptions change.

References to approximately 12% annual retirement distributions describe a modeled distribution level under specific assumptions and should not be interpreted as a universal safe withdrawal rate, guaranteed distribution rate, or assurance that an IUL can sustain that level of distributions. Policy durability should be evaluated using actual policy values, indebtedness, charges, crediting assumptions, loan provisions, distribution timing, and longevity.

A life insurance policy can lapse if it does not have sufficient value to support applicable contractual requirements, subject to any guarantees or other provisions of the specific contract. Lapse risk can be increased by insufficient funding, policy charges, loans, loan costs, withdrawals, unfavorable crediting, and other factors. No statement in this article should be interpreted as a guarantee that a policy will remain in force for life.

Policy values from a properly structured and maintained non-MEC life insurance policy may potentially be accessed through withdrawals to basis and policy loans without current income taxation under current federal rules, subject to applicable requirements. Tax treatment can be affected by basis, MEC status, policy lapse, surrender, outstanding indebtedness, and other circumstances. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income.

The up-to-approximately-300% projected retirement-income result cited in this article refers to certain modeled comparisons involving the IUL JUMP Strategy and a 401(k), Traditional IRA, or comparable tax-deferred retirement strategy. It is not a universal result or guarantee and should not be interpreted as 300% more investment return, indexed interest, net policy return, or S&P 500 performance. Policy charges and applicable loan costs should be included in a meaningful policy projection. Results can change materially with contributions, employer contributions, market-return assumptions, taxes, investment expenses, indexed-crediting assumptions, insurance costs, policy charges, loan costs, future JUMPs, distribution timing, and longevity.

The approximately-40% projected retirement-income result refers to certain modeled comparisons involving the JUMP Strategy and the traditional IUL structure being evaluated. It is not a universal result or guarantee. Differences in policy charges, funding, indexed-crediting assumptions, loan mechanics, future JUMPs, death-benefit structure, and retirement distributions can materially alter the comparison.

Comparisons between an IUL and a 401(k), IRA, traditional IUL, or another retirement strategy should use clearly stated assumptions appropriate to each strategy. Different strategies have different costs, tax characteristics, contribution rules, market exposure, insurance features, and distribution mechanics.

Policy-specific guarantees, nonguaranteed elements, underwriting requirements, death-benefit options, MEC limits, cost-of-insurance provisions, premium charges, administrative charges, rider charges, surrender provisions, loan provisions, loan rates, caps, participation rates, spreads, crediting methods, lapse provisions, and distribution mechanics should be verified against current approved illustrations and the actual insurance contract.

FPP Financial does not provide tax or legal advice. Consult qualified tax, legal, and financial professionals regarding your individual circumstances before purchasing or modifying life insurance or implementing any retirement-income strategy discussed here.