Does an IUL Get S&P 500 Dividends?

If your indexed universal life policy uses the S&P 500 for indexed crediting, you might assume you’re getting the same return an investor in the S&P 500 receives.

You’re not.

And one of the biggest reasons is dividends.

An IUL that uses an S&P 500-based indexed-crediting strategy does not mean you own the S&P 500.

You don’t own shares of the companies in the index through the policy.

And you generally don’t receive the dividends paid by those companies through the indexed-crediting calculation.

That distinction matters when someone compares an IUL to a 401(k), IRA, brokerage account, or S&P 500 investment.

Because if one side of the comparison includes dividends and the other doesn’t, you need to know that before trusting the numbers.

The Short Answer: Does an IUL Get S&P 500 Dividends?

No, not through the indexed-crediting strategy simply because that strategy references the S&P 500.

An indexed universal life policy is life insurance.

It is not an S&P 500 index fund.

The index is generally used as a reference for calculating potential indexed interest according to the terms of the policy.

That is very different from directly investing in the stocks that make up the S&P 500.

Why Does That Difference Matter?

Because there are several numbers people casually call the “S&P 500 return.”

They aren’t always talking about the same thing.

For example, there’s the change in the index’s price.

Then there’s total return, which generally includes reinvested dividends.

Those can produce very different long-term results.

So when someone says:

“The S&P averaged X%.”

My next question is:

“Are you talking about price changes or total return including dividends?”

That’s not nitpicking.

It’s necessary if you’re comparing the number to an IUL indexed-crediting strategy.

An IUL Is Not Directly Invested in the Market

This is the concept that clears up most of the confusion.

When your IUL references an index such as the S&P 500, your policy isn’t purchasing the underlying stocks for you.

Instead, the applicable index is used as part of a formula for determining indexed interest.

The actual formula is controlled by the policy.

That formula may involve things such as:

• A crediting period
• A starting index value
• An ending index value
• A cap
• A floor
• A participation rate
• A spread
• Other applicable crediting provisions

That means:

S&P 500 performance and IUL indexed crediting are not the same thing.

Here’s a Simple Example

Imagine the S&P 500 rises 15% over an applicable annual measurement period.

Now imagine the indexed-crediting strategy you’re evaluating has a 10% cap under the assumptions being used.

You should not assume the policy receives 15% indexed interest.

Under that simplified example, the applicable cap could limit the indexed-crediting result to 10%, before considering the specific contract terms and any other applicable crediting provisions.

And the dividends associated with owning the underlying S&P 500 stocks are not simply added on top.

Now Imagine the S&P 500 Falls 20%

If the applicable indexed-crediting strategy has a 0% floor and the index calculation is negative for the crediting period, the applicable indexed-crediting result may be floored at 0%, subject to the actual policy terms.

That doesn’t mean the policy received the S&P 500’s negative 20% price result.

But it also doesn’t mean the policy’s total cash value cannot decline.

Policy charges still apply.

Cost of insurance still applies.

Loan charges can still apply.

Withdrawals can still reduce policy values.

That’s why you can’t compare an IUL and the S&P 500 by looking at one percentage number.

The IUL Gives Up Something in Exchange for Different Mechanics

This is where the conversation becomes more useful.

With direct ownership of an S&P 500 fund, you generally participate in the market’s gains and losses and may receive the economic benefit of dividends through distributions or reinvestment, subject to the investment vehicle you’re using.

An IUL works differently.

You generally don’t receive those dividends through the indexed-crediting calculation.

You can also have limits on upside through caps, participation rates, spreads, or other crediting provisions.

In exchange, an applicable indexed-crediting strategy may include a floor that prevents a negative index result from creating a negative indexed-crediting rate below that floor.

That’s a different economic structure.

Not automatically better.

Not automatically worse.

Different.

This Is Why I Don’t Like the Phrase “The IUL Earns the S&P 500”

It doesn’t explain what is actually happening.

A better description is:

“The policy can use changes in an external index as part of the formula used to determine indexed interest, subject to the policy’s applicable crediting terms.”

It’s not as catchy.

But it’s much more accurate.

So Where Does the 6.87% Number We Use Come From?

This is especially important for understanding the IUL JUMP Strategy.

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

Dividends were excluded.

That’s intentional.

The analysis was not trying to claim the policy owned the S&P 500 or received the index’s total return.

Instead, the historical annual price changes were run through the crediting assumptions being evaluated.

Those assumptions included a:

10% cap and 0% indexed-crediting floor.

How Was the Historical Calculation Done?

At a simplified level:

If the annual S&P 500 price change was negative, the applicable result for the historical indexed-crediting calculation was replaced with 0%.

If the annual price change was positive but above 10%, it was limited to 10%.

If the annual price change was between 0% and 10%, that price change remained within the applicable range used in the calculation.

The resulting annual capped-and-floored figures were then averaged across the 2006 through 2020 period.

The result was approximately:

6.87%.

What Does the 6.87% Actually Represent?

This is where wording matters.

The correct way to describe it is:

In the historical period used for this analysis, from 2006 through 2020, applying the strategy’s 10% cap and 0% floor to annual S&P 500 price changes, excluding dividends, produced a 6.87% historical average indexed-crediting result.

That’s very different from saying:

“The S&P 500 averaged 6.87%.”

We’re not saying that.

And it’s different from saying:

“The IUL guarantees 6.87%.”

We’re definitely not saying that either.

Why Were Dividends Excluded From That Calculation?

Because the indexed-crediting strategy isn’t a direct investment in the S&P 500.

Including dividends in that historical indexed-crediting calculation would make the comparison less representative of the index input being modeled.

So when we’re explaining the 6.87% historical result, we specifically identify it as based on S&P 500 price changes excluding dividends.

That Makes the Comparison More Transparent

If you’re going to show someone a historical number, they should know exactly what went into it.

Was it price return?

Total return?

Were dividends included?

Was there a cap?

Was there a floor?

Was a participation rate applied?

What years were used?

Those questions matter much more than throwing out a historical average without explaining it.

What Happens in a Strong S&P 500 Year?

This is where direct market investing can have an advantage over a capped indexed-crediting strategy.

Suppose the S&P 500 has a very strong year.

A direct investor may participate in the market’s gains according to the investment owned and may also receive the economic benefit of dividends.

An IUL indexed-crediting strategy can be limited by its applicable cap, participation rate, spread, or other crediting terms.

If the cap in our simplified example is 10%, an index price increase well above 10% does not automatically create indexed crediting above that 10% cap.

So Why Would Anyone Accept a Cap?

Because you’re not evaluating the upside in isolation.

The other side of the indexed-crediting structure is the applicable floor.

If the index calculation is negative, the floor can prevent a negative indexed-crediting result below that floor for the applicable crediting period.

Again, that does not protect the policy from all losses or charges.

But it changes the pattern of indexed-crediting results.

That’s What the Historical 6.87% Example Is Trying to Measure

It isn’t asking:

“How much did an S&P 500 investor make?”

It’s asking something different:

“What would those annual S&P 500 price changes look like after applying the assumed 10% cap and 0% floor used in this indexed-crediting analysis?”

Those are two different questions.

Now Let’s Connect This to the IUL JUMP Strategy

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

Under the strategy we’re discussing, the matching amount is created as a policy loan.

It is not free money.

It is not an employer contribution.

It is not a carrier bonus.

And it is not a tax credit.

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

Think of the Strategy as Two Buckets

Bucket 1: the money the client contributes.

Bucket 2: the Matching Indexed Participating Loan dollars that have been redeployed into the policy.

Under the example we’re discussing, both buckets have the same potential 10% cap and 0% indexed-crediting floor.

But Bucket 2 has an additional factor.

The policy-loan cost.

The Current Applicable Loan Rate Is 5%

With the policy structure we currently use for the IUL JUMP Strategy, the applicable loan rate is currently 5%, with a contractual maximum loan rate of 6% for the applicable loan feature.

That does not mean the current 5% rate is guaranteed to remain there forever.

The current rate and the contractual maximum are two different things.

Now You Can See Where the 1.87% Modeled Spread Comes From

Using the historical indexed-crediting example:

6.87% historical average indexed-crediting result

minus:

5.00% current applicable policy-loan rate

equals:

1.87 percentage points of modeled positive spread.

That spread is part of the economic logic being evaluated in the JUMP model.

But the 1.87% Is Not Guaranteed Either

This is critical.

The 6.87% is a historical calculation.

The 5% is the current applicable loan rate under the policy structure being discussed.

Future indexed-crediting results can be lower.

The applicable loan rate can change subject to the contract, up to the applicable contractual maximum we’ve discussed.

So positive arbitrage is not guaranteed.

What If the Indexed-Crediting Result Is 3%?

Using a 5% loan cost for a simplified example:

3% indexed crediting – 5% loan cost = an unfavorable 2-percentage-point spread.

That’s negative loan arbitrage for that period before considering other policy factors.

What If the Indexed-Crediting Result Is 0%?

Using the same simplified 5% loan-cost example:

0% indexed crediting – 5% loan cost = an unfavorable 5-percentage-point spread.

The 0% floor doesn’t make the loan cost disappear.

This is why you need to understand both sides of the equation.

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

These numbers can create confusion if they’re described carelessly.

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 numbers are not S&P 500 returns.

They’re not IUL indexed-crediting rates.

They’re not guaranteed policy returns.

And they don’t mean the S&P 500 somehow paid the policy 17.35%.

The 17.35% Number Is a Modeled Effective Result

Under the assumptions used in that JUMP model, the combination of the base indexed-crediting assumption and the positive-arbitrage effect attributed to successive Matching Indexed Participating Loans produced a modeled effective result reaching approximately 17.35% by the Year 9 JUMP, before accounting for applicable policy charges and other factors.

That’s the more accurate way to describe it.

Why Is This So Important?

Because there are at least four completely different numbers someone could be talking about:

1. The S&P 500’s price change
2. The S&P 500’s total return including dividends
3. The IUL’s indexed-crediting result
4. A modeled effective result from the broader JUMP Strategy

Those four numbers should never be treated as interchangeable.

Here’s a Question Worth Asking Any IUL Agent

“When you show me a percentage, what exactly does that percentage represent?”

If the answer is vague, keep asking.

Is it an index return?

An indexed-crediting rate?

A historical capped-and-floored calculation?

A policy cash-value result?

A modeled effective strategy result?

Those are not the same thing.

Now Let’s Compare an IUL With a 401(k) or IRA

This is where dividends matter even more.

Suppose a 401(k) or IRA owns an S&P 500 index fund.

The account may receive the economic benefit of dividends through the underlying investment, subject to the fund and account structure.

The IUL indexed-crediting strategy does not simply receive those S&P 500 dividends.

So an honest comparison needs to recognize that difference.

But You Can’t Stop the Comparison There

If the only question is:

“Which strategy receives S&P 500 dividends?”

the direct S&P 500 investment has the dividend exposure.

But retirement planning asks a bigger question:

“How much spendable retirement income can each strategy potentially produce under the assumptions being compared?”

That involves much more than dividends.

A Retirement-Income Comparison Can Include

• Contributions
• Employer matching contributions when applicable
• Investment returns
• Dividends
• Investment fees
• Policy charges
• Indexed-crediting assumptions
• Caps and other crediting provisions
• Policy-loan costs
• Matching Indexed Participating Loan mechanics
• Taxes on distributions
• Retirement timing
• Distribution amounts
• Longevity
• Legacy objectives

That’s the comparison I care about.

This Is Where the Up-to-300% Retirement-Income Result Needs Context

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 does not mean the IUL earned 300% more investment return.

It does not mean the S&P 500 returned less.

It does not mean dividends don’t matter.

And it does not mean every IUL will produce that result.

The 300% Number Is About Modeled Retirement Income

That’s the key distinction.

The modeled difference can be affected by the entire retirement-income structure, including:

• How much money is funded
• How the Matching Indexed Participating Loan mechanics are modeled
• Indexed-crediting assumptions
• Policy charges
• Loan costs
• Future JUMPs
• Taxes on the alternative strategy
• Distribution timing
• Longevity

So if somebody hears “up to 300% more” and thinks:

“The IUL must earn three times the S&P 500 return.”

No.

That’s not what the claim means.

In Fact, the Direct Market Investment Can Earn a Higher Investment Return and Still Produce a Different Retirement-Income Result

This is where people often mix up accumulation and distribution.

The investment with the highest gross return does not automatically produce the highest after-tax spendable retirement income under every modeled scenario.

Taxes matter.

Distribution mechanics matter.

Sequence and timing matter.

Policy-loan economics matter.

Costs matter.

And the amount of money actually working inside each strategy matters.

That’s Why We Compare Retirement Income, Not Just Return

If your goal is retirement income, the final question isn’t:

“Which account had the highest percentage on a chart?”

It’s:

“How much can I potentially spend, for how long, under the assumptions we’re testing?”

But the Comparison Still Has to Be Fair

This is where I want the math to be ruthless.

If we’re comparing the JUMP Strategy with a 401(k), include the employer match when the client actually receives one.

If the 401(k) investment receives dividends, account for them in the return assumption being used.

Include applicable investment fees.

Include IUL policy charges.

Include policy-loan costs.

Include taxes where appropriate.

Use the same contribution assumptions unless there is a clear reason not to.

Then show me the result.

Don’t Remove Dividends Just to Make the IUL Look Better

That’s not the point of understanding this distinction.

If a competing investment receives the economic benefit of dividends, an apples-to-apples comparison should account for that appropriately.

What we don’t want to do is pretend the IUL itself receives S&P 500 dividends through its indexed-crediting strategy when it doesn’t.

Transparency works both ways.

And Don’t Give the IUL an Unrealistically Favorable Crediting Assumption

Run the strategy with reasonable assumptions.

Then lower them.

What happens if indexed crediting comes in below the historical 6.87% example?

What happens if several periods produce 0%?

What happens if the loan rate is 6% instead of the current 5%?

What happens if positive arbitrage disappears for several years?

Those are the scenarios worth seeing.

Future JUMPs Matter Too

The JUMP Strategy can include planned future death-benefit increases that create additional funding capacity under the intended design.

Those future JUMPs require future underwriting and approval.

They are not guaranteed when the original policy is issued.

So if a retirement-income projection assumes successful future JUMPs, that assumption should be visible.

Run the Comparison Without All the Future JUMPs

This is one of my favorite tests.

What happens if the strategy reaches a certain matching-loan level and never advances again?

Does the projected retirement-income advantage remain?

How much does it shrink?

Does the policy still meet the client’s goal?

The answer is more useful than pretending every future event is guaranteed.

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 isn’t because one IUL magically receives S&P 500 dividends and another doesn’t.

The difference is tied to the specific designs being compared, including funding structure, loan mechanics, policy charges, crediting assumptions, and retirement distributions.

Again, make the strategy prove where the difference comes from.

What About Taxes?

This is another reason comparing only investment returns can be misleading.

Traditional 401(k) and Traditional IRA distributions are generally included in taxable income under current federal rules, subject to the taxpayer’s circumstances.

Life insurance works under a different set of tax rules.

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.

But don’t shorten that to:

“IUL income is guaranteed tax-free.”

That’s too broad.

Policy Status Matters

MEC status matters.

Basis matters.

Lapse matters.

Surrender matters.

Outstanding policy indebtedness matters.

If a policy lapses or is surrendered with gain and outstanding indebtedness, taxable income may result.

So the tax advantages need to be evaluated together with policy durability.

What Does This Mean for Someone Trying to Choose Between an IUL and the Market?

Don’t make the decision based on one feature.

Not dividends.

Not the floor.

Not the cap.

Not tax treatment.

Not the 300% modeled comparison.

Look at the whole retirement equation.

If Maximum Market Growth Is Your Only Goal

A capped indexed-crediting strategy is not the same thing as directly owning an uncapped equity investment.

You should understand that before buying an IUL.

Strong equity-market years can produce gains above an IUL’s applicable cap, and direct investors may also receive the economic benefit of dividends.

That is a real tradeoff.

If Your Goal Is Retirement Income

Now the conversation gets broader.

You may care about:

• Market-loss exposure
• Tax treatment
• Policy-loan access
• Retirement distributions
• Legacy
• Death benefit
• Sequence risk
• Long-term policy durability

That’s why the answer can’t simply be:

“The S&P 500 gets dividends, so it wins.”

Or:

“The IUL has a floor, so it wins.”

Neither statement tells you enough.

Here’s the Comparison I Want to See

Put the strategies side by side.

Use the same client.

Use the same out-of-pocket contribution when appropriate.

Account for employer contributions where they actually exist.

Use clearly stated market-return assumptions.

Account for dividends appropriately on the investment side.

Use clearly stated indexed-crediting assumptions on the IUL side.

Include policy charges.

Include loan costs.

Include taxes.

Then compare projected retirement income.

Then Make Both Sides Worse

Lower market returns.

Lower IUL indexed-crediting assumptions.

Raise the IUL loan rate to the applicable contractual maximum used in the analysis.

Remove future JUMPs.

Extend retirement.

Now look again.

That’s how you learn what you’re actually buying.

Here’s the Question Behind the Dividend Question

Most people asking whether an IUL gets S&P 500 dividends aren’t really obsessed with dividends.

They’re asking:

“Am I giving up too much upside by doing this?”

That’s a legitimate concern.

Especially when you’re 55 or 60 and you don’t feel like you have unlimited time to fix a mistake.

You’re Trying to Avoid Two Different Regrets

One regret sounds like:

“What if I put money into this policy and the market does great for 15 years?”

The other sounds like:

“What if I leave everything exposed to the retirement risks I’m worried about and something goes wrong right when I need the money?”

Those fears pull in opposite directions.

That’s why the answer isn’t a slogan.

And Underneath Both Is the Bigger Fear

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

You’ve spent decades building your retirement.

You don’t want to make one big decision at the end and realize later that you misunderstood how it worked.

You want to stay independent.

You want your spouse protected.

You want your kids to remain your kids, not become your retirement backup plan.

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

“We should be able to handle this ourselves.”

That’s why I would rather show you the tradeoffs than pretend the IUL gives you every benefit of the stock market with none of the disadvantages.

It doesn’t.

Questions to Ask Before Comparing an IUL With the S&P 500

1. Is the S&P 500 number being quoted price return or total return?
2. Are dividends included in the market-return assumption?
3. Does the IUL indexed-crediting calculation include dividends?
4. What cap is being used?
5. What floor is being used?
6. Are participation rates, spreads, or other crediting provisions involved?
7. Can those nonguaranteed crediting terms change?
8. What indexed-crediting assumption is being used?
9. What policy charges are included?
10. What loan rate is being assumed?
11. What happens if indexed crediting falls below the loan cost?
12. How much policy indebtedness is projected?
13. How many future JUMPs are assumed?
14. What happens if future JUMPs aren’t approved?
15. What tax assumptions are being used on each side?
16. What retirement distribution is being compared?
17. How long does the retirement-income projection run?
18. What happens to the projected net death benefit?

The Biggest Takeaway

An IUL does not receive S&P 500 dividends through its indexed-crediting strategy simply because the policy references the S&P 500.

And that’s okay.

It just means you need to understand what you’re actually comparing.

Direct market investing and indexed universal life use different mechanics.

One shouldn’t be disguised as the other.

How We Compare the Numbers at FPP Financial

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

I’m not interested in telling you the IUL gets all the upside of the S&P 500.

It doesn’t.

I’m not interested in hiding dividends from the investment side of a comparison either.

I want to see what each strategy actually does.

We’ll identify the market-return assumptions.

We’ll identify whether dividends are included.

We’ll identify the indexed-crediting assumptions.

We’ll look at the cap and floor.

We’ll look at policy charges.

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

We’ll look at the current applicable 5% loan rate and stress-test the contractual maximum applicable 6% loan rate.

We’ll look at future JUMP assumptions.

We’ll look at taxes.

Then we’ll compare projected retirement income.

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

Want to See the Comparison Without Hiding the Dividends?

Good.

That’s how it should be done.

If we’re comparing an IUL JUMP Strategy with a 401(k), Traditional IRA, or another investment strategy, I want the assumptions visible on both sides.

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 believe that number because it’s big.

Ask what market return was used.

Ask whether dividends were accounted for.

Ask what indexed-crediting assumption was used.

Ask what policy charges were included.

Ask what loan rate was used.

Ask how many JUMPs were assumed.

Ask what taxes were assumed.

Then change the assumptions and run it again.

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 Happens to an IUL If the S&P 500 Has a Bad Decade?
• What IUL Illustration Assumptions Should You Question Before You Buy?
• What Is the IUL JUMP Strategy and How Does It Work?

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, or direct investment in a market index.

Indexed universal life insurance does not directly invest in the S&P 500 or another market index and does not own the underlying index securities. An indexed-crediting strategy that references the S&P 500 generally does not receive or credit S&P 500 dividends as though the policy directly owned the underlying stocks. Indexed interest is determined according to applicable policy terms, which may include caps, participation rates, spreads, floors, crediting methods, and other provisions.

References to S&P 500 investment returns and dividends are provided to explain the distinction between direct market investment returns and IUL indexed-crediting mechanics. Investment products, funds, and retirement accounts can differ in how dividends, expenses, taxes, and distributions are handled.

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. Historical results do not predict future policy performance and should not be interpreted as a guaranteed future indexed-crediting rate, policy return, or as the historical total return of the S&P 500.

A 0% indexed-crediting floor applies to the applicable indexed-crediting calculation under the example discussed and does not guarantee that overall policy value cannot decline. Policy charges, cost of insurance, loan costs, withdrawals, and other policy mechanics continue to apply.

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.

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. Policy charges and other expenses must also be considered when evaluating overall policy performance.

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

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.

Planned death-benefit increases under the JUMP Strategy are intended to create additional policy funding capacity while seeking to maintain the intended non-MEC structure. A death-benefit increase does not by itself guarantee that a policy will avoid Modified Endowment Contract status. MEC testing is affected by actual policy design, premium activity, benefit changes, applicable tax rules, and other factors.

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, S&P 500 performance, or indexed crediting. Results can change materially with contributions, employer contributions, market-return assumptions, dividends, taxes, investment fees, indexed-crediting assumptions, 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. The specific traditional IUL design, loan mechanics, policy charges, funding, crediting assumptions, JUMP progression, and retirement distributions can materially alter the comparison.

Comparisons between an IUL and a 401(k), IRA, brokerage account, index fund, or other retirement strategy should use clearly stated assumptions appropriate to each strategy. Direct investments and retirement accounts may receive the economic benefit of dividends, while an IUL indexed-crediting strategy uses different mechanics. Comparisons should not remove legitimate benefits or costs from either side solely to create a favorable modeled result.

Policy-specific guarantees, nonguaranteed elements, underwriting requirements, death-benefit options, MEC limits, loan provisions, loan rates, caps, participation rates, spreads, crediting methods, policy charges, surrender provisions, 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.