Should You Use an IUL After Maxing Out Your 401(k)?

Your 401(k) is maxed.

You’re getting the employer match.

Your income is strong.

And there’s still money left over.

That’s a good problem to have.

But it creates a question that doesn’t get nearly enough attention:

“Where should the next retirement dollar go?”

Maybe you’re 48 and earning $250,000.

Maybe you’re 55 and earning $400,000.

Maybe you and your spouse are earning $500,000 together and have already accumulated well over $1 million across your retirement accounts.

You aren’t trying to figure out how to start saving.

You’ve already done that.

Your problem is different.

You’re trying to figure out how to build the next bucket without blindly creating more of the same retirement tax exposure.

Maxing Out Your 401(k) Doesn’t Mean Your Retirement Planning Is Finished

A 401(k) can be one of the most useful retirement tools available to an employee.

Employer contributions can be valuable.

Traditional pretax contributions can provide current tax advantages.

Roth contributions, when available and appropriate, can create a different tax bucket.

And the plan can give you access to market-based investments for long-term growth.

So this article isn’t about abandoning your 401(k).

It’s about what happens after you’ve already made good use of it.

The Next Dollar Has a Different Job

If you’re still trying to capture an employer match, that’s one conversation.

If you’re already maximizing the plan and still have $20,000, $30,000, $50,000 or more of annual cash flow available for long-term planning, that’s another.

Now you can ask:

• Do I want more taxable investments?
• Do I want more tax-deferred retirement money?
• Do I need another Roth-style tax bucket?
• Do I need permanent life insurance?
• How much liquidity do I want?
• How much market exposure do I already have?
• What kind of retirement income am I actually building?

That’s where an IUL may enter the conversation.

Why High-Income Earners Start Looking Beyond the 401(k)

High income can hide a retirement problem.

You make enough money that taxes hurt today.

So every current tax deduction feels valuable.

You put more money into tax-deferred accounts.

Then more.

Then more.

Twenty years later, you’ve built a very large retirement account.

And a very large amount of money that may eventually be taxable when distributed.

You Can Become Too Focused on This Year’s Tax Bill

Imagine you’re earning $350,000.

You look at your taxes and think:

“Anything I can legally defer sounds good to me.”

I understand that reaction.

But your retirement plan shouldn’t be built only around making April less painful.

You also need to ask:

“What happens when I need this money back?”

Tax Deferral Is Valuable, but It Isn’t Tax Elimination

Traditional pretax 401(k) contributions can reduce current taxable income when applicable.

The money can then grow tax-deferred.

Taxable distributions are generally treated as ordinary income under current federal rules.

So you’re moving taxation through time.

That can work very well.

But the future tax bill still belongs in the retirement projection.

Imagine Reaching Retirement With $2 Million in Pretax Accounts

You did everything right.

You saved.

You invested.

You didn’t raid the account.

You let compounding work.

Now you’re 65 and your retirement accounts show $2 million.

Then the thought hits you:

“I’ve never paid the income tax on most of this.”

That’s not a reason to regret the 401(k).

It’s a reason to think about tax diversification before retirement gets here.

What Do I Mean by Tax Diversification?

Think about retirement money in different tax buckets.

You might have:

• Pretax retirement accounts
• Roth accounts
• Taxable investments
• Cash
• Real estate
• Life insurance cash value

Those assets don’t all behave the same way when you need money.

That can give you choices.

And choices become valuable when your income, taxes, markets, or spending needs change.

An IUL Is Not a Roth IRA

This distinction matters.

An IUL is life insurance.

It isn’t a Roth IRA.

It doesn’t get Roth tax treatment because somebody calls it a “tax-free retirement account.”

Premiums generally aren’t income-tax deductible.

There are policy charges.

There are insurance costs.

There are underwriting requirements.

And there are rules around how policy value is accessed.

So Why Would a High-Income Earner Consider an IUL?

Because a properly structured and maintained non-MEC policy can potentially provide:

• Permanent life insurance protection
• Cash-value accumulation
• Indexed-crediting potential
• No direct negative indexed interest from a negative index result under an applicable 0% floor strategy
• No owner RMD structure like a qualified retirement account
• Potential access to policy values through withdrawals to basis and policy loans without current income taxation under current federal rules, subject to applicable requirements

Those features can make an IUL worth evaluating as an additional retirement bucket.

Worth evaluating does not mean automatically worth buying.

First Question: Do You Actually Need Life Insurance?

This should come before the retirement-income illustration.

Maybe you have a spouse who relies on your income.

Maybe you have children.

Maybe you own a business.

Maybe you want to create a legacy.

Maybe permanent death-benefit protection fits your broader financial plan.

If there’s no legitimate insurance need or suitability case, don’t force an insurance product into the plan because somebody showed you a giant projected income number.

Second Question: How Much Market Exposure Do You Already Have?

High-income earners can accumulate a lot of market exposure without realizing how concentrated their retirement becomes.

You may have:

A large 401(k).

A spouse’s 401(k).

A brokerage account.

Company stock.

RSUs.

Stock options.

Maybe even a deferred-compensation plan tied to your employer.

Now ask:

“How many of my retirement buckets react badly at the same time if markets fall?”

That’s a Different Question at 55 Than It Was at 35

At 35, a major market decline can feel like an opportunity.

You have decades.

You keep buying.

At 60, the conversation changes.

Now retirement is close enough to see.

You aren’t just accumulating.

You’re preparing to distribute.

Sequence-of-Returns Risk Doesn’t Care How High Your Salary Was

Suppose you retire with $2.5 million across market-based accounts.

You need substantial annual income to maintain your lifestyle.

Then markets fall hard during your first few retirement years.

You still need money.

That means selling or withdrawing while account values may be depressed.

The order of returns can matter enormously once distributions begin.

How Does an IUL Handle Market Exposure?

An IUL isn’t directly invested in the S&P 500 or another referenced index.

Indexed interest is determined according to the policy’s applicable crediting terms.

Those can include:

• Caps
• Participation rates
• Spreads
• Crediting periods
• Indexed-crediting floors
• Other contractual provisions

Under an applicable indexed strategy with a 0% floor, a negative index result may produce a 0% indexed-crediting result rather than negative indexed interest.

But 0% Does Not Mean Nothing Can Go Down

This is one of the most important IUL distinctions.

A 0% indexed-crediting floor doesn’t mean your entire policy value is guaranteed never to decline.

Policy charges continue.

Cost of insurance continues.

Loan costs can continue.

Withdrawals can reduce values.

Policy loans can reduce values and increase policy risk.

So a 0% indexed-crediting result can still occur during a year when overall policy value declines.

The 401(k) Has an Upside Advantage Too

If your 401(k) owns market-based investments and those investments have a strong year, you can participate in their actual investment performance according to what you own.

An IUL’s indexed-crediting strategy may limit positive indexed interest through a cap, participation rate, spread, or other crediting provision.

Don’t compare the IUL floor without also comparing the upside limitation.

What About Roth 401(k) Contributions?

If your plan permits designated Roth contributions, this deserves serious attention.

Qualified Roth distributions are generally tax-free under current federal rules when applicable requirements are met.

That can give a high-income earner another way to build tax diversification inside the employer plan.

So if someone tells you:

“You need an IUL because every dollar in your 401(k) will be taxable.”

Stop.

Maybe that’s true of your current balance.

Maybe it isn’t.

Run your actual traditional and Roth balances.

What Happens After You’ve Used the 401(k) Options You Want?

This is the reader this article is really for.

You already understand the 401(k).

You’re already contributing aggressively.

You’ve considered the traditional versus Roth decision.

You still have significant annual cash flow available.

Now you need to decide what the next bucket should accomplish.

Maybe the Next Dollar Doesn’t Need Another Tax Deduction

This can be psychologically difficult for a high earner.

Paying taxes now feels painful.

But sometimes the better question isn’t:

“How do I reduce this year’s taxes as much as possible?”

It’s:

“How much control do I want over retirement taxation later?”

Those are different objectives.

How Can IUL Policy Value Be Accessed?

With a properly structured and maintained non-MEC life insurance policy, policy values may potentially be accessed through withdrawals to basis and policy loans without current income taxation under current federal rules, subject to applicable requirements.

That sounds attractive.

But don’t shorten it to:

“Tax-free retirement income.”

That leaves out too much.

Policy Loans Are Real Loans

They create policy indebtedness.

Applicable loan charges generally accrue.

Loans and withdrawals can reduce policy values and death benefits.

Large loan balances can increase lapse risk.

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

MEC status can also change the tax treatment of distributions.

That’s why policy management matters.

Now Add the IUL JUMP Strategy

The IUL JUMP Strategy uses a Matching Indexed Participating Loan to change the conventional funding structure.

The word “matching” can create confusion.

So let’s remove it immediately.

This is not an employer match.

It’s not free money.

It’s not a carrier gift.

It’s actual policy indebtedness.

The loan proceeds are redeployed into the same policy as additional funding under the JUMP design.

Here’s What That Can Look Like With a $10,000 Annual Client Contribution

Look carefully at Year 11.

The client isn’t writing a $60,000 check.

The client’s annual out-of-pocket contribution is still:

$10,000.

The additional $50,000 shown comes from the Matching Indexed Participating Loan.

That creates $60,000 of total annual funding shown in this example.

But the Additional $50,000 Is Borrowed Money

This can’t be buried in fine print.

The JUMP loans accumulate.

A later JUMP doesn’t simply erase an earlier loan.

So as the matching-loan level increases, policy indebtedness accumulates too.

If someone shows you only the increasing policy funding and hides the accumulating loans, you aren’t seeing the whole strategy.

Why Redeploy Borrowed Money Into the Policy?

Because the JUMP loan isn’t being taken out for consumption.

Imagine borrowing $50,000 from a policy to buy a car.

That $50,000 is outside the policy and being spent.

The JUMP structure we’re discussing is different.

The Matching Indexed Participating Loan proceeds are redeployed into the same policy.

Conceptually, think of two buckets.

Bucket One: client-funded dollars.

Bucket Two: accumulated Matching Indexed Participating Loan dollars.

Under the indexed strategy used in the example, both buckets have the same potential 10% cap and 0% indexed-crediting floor.

The loan-funded dollars also carry the applicable loan cost.

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%, with a contractual maximum loan rate of 6% for the applicable loan feature.

The current 5% rate should not be treated as if it can never change.

That’s why I want to see the strategy modeled at 5% and stress-tested at 6%.

Where Does the 6.87% Historical Indexed-Crediting Example Come From?

One historical analysis used with this strategy looked at annual S&P 500 price changes from 2006 through 2020.

Dividends were excluded because the policy isn’t directly invested in the index.

The analysis applied the strategy’s 10% cap and 0% indexed-crediting floor.

Negative annual index price changes were treated as 0% for purposes of the indexed-crediting calculation.

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

Under those assumptions, the period produced a:

6.87% historical average indexed-crediting result.

That’s not the historical return of the S&P 500.

It’s not a guaranteed future crediting rate.

It’s not a guaranteed policy return.

6.87% Minus the Current 5% Loan Rate Creates a 1.87-Point Modeled Spread

Under those assumptions:

6.87% – 5.00% = 1.87 percentage points.

That’s the modeled positive-arbitrage concept.

If applicable indexed crediting exceeds the loan cost, the loan-funded amount can experience favorable economics under the model.

But flip the year around.

Suppose indexed crediting is 0%.

The applicable loan cost is still 5%.

Now the spread is unfavorable.

Positive arbitrage isn’t guaranteed.

What Happens as Successive JUMPs Are Added?

Under assumptions used in one JUMP analysis, the combination of the base indexed-crediting assumption and the 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 are modeled effective results under the assumptions used in that analysis.

They aren’t S&P 500 returns.

They aren’t IUL indexed-crediting rates.

They aren’t guaranteed policy returns.

Applicable policy charges and other factors still matter.

Now We Get to the Question High-Income Earners Actually Care About

“What does all of this produce as retirement income?”

Because you don’t retire on an account type.

You retire on cash flow.

We’ve Seen Up to Approximately 300% More Projected Retirement Income in Certain Modeled Comparisons

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 number.

So don’t believe it just because somebody put it on a slide.

Make the comparison show you exactly where the difference came from.

Was the Difference Created by Taxes?

Maybe part of it.

If one strategy is modeled with taxable retirement distributions and another uses properly structured policy access without current income taxation under the assumptions used, that can materially change spendable income.

But that’s only one variable.

Was It the Matching Indexed Participating Loan?

Maybe.

The JUMP structure introduces additional loan-funded policy value.

That can change the accumulation and retirement-income projection.

But the associated indebtedness and loan costs have to stay in the model too.

Was It Market Sequence Risk?

Maybe.

A market-based retirement account and an indexed life insurance policy don’t respond to negative market years in the same way.

That can affect retirement distribution projections.

But you can’t assume the IUL wins every sequence.

Run the numbers.

Was It an Unrealistic IUL Assumption?

This is the question too many people are afraid to ask.

Maybe the IUL projection looks incredible because the assumptions are too aggressive.

If so, you need to know before you put a dollar into the policy.

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

Try to Break the 300% Projection

Lower the indexed-crediting assumption.

Raise the applicable JUMP loan rate to the contractual 6% maximum.

Combine lower crediting with the 6% loan rate.

Remove a future JUMP.

Run retirement to age 95.

On the 401(k) side, model the actual employer contributions.

Model the actual expenses.

Model traditional and Roth balances correctly.

Run strong market returns.

Run weak ones.

Then compare the retirement income again.

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

Why the Traditional IUL Comparison Matters Too

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 tells you something important.

The decision isn’t simply:

401(k) or IUL.

The design of the IUL itself can materially affect the projected outcome.

Loan mechanics matter.

Funding matters.

Policy costs matter.

Crediting assumptions matter.

Retirement distributions matter.

Future JUMPs Require Approval

This is another place where a retirement-account comparison can become misleading.

The future JUMP progression isn’t guaranteed when the original policy is issued.

Each planned JUMP requires a new application and carrier approval for the increased death benefit.

Qualification can be affected by:

• Health
• Income
• Employment
• Existing insurance
• Driving history
• Occupation
• Hazardous job duties
• Risky hobbies
• Other underwriting factors

High income can help support financial justification for larger amounts of insurance, but it doesn’t eliminate medical or other underwriting.

What If Your Income Drops?

Maybe you’re an executive earning $500,000 when the policy starts.

Five years later you leave corporate America.

Your income drops substantially.

Or you retire.

Or your health changes.

Those changes can affect future JUMP approval.

That’s why future increases shouldn’t be presented as guaranteed.

What If the Next JUMP Isn’t Approved?

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

Suppose you’ve already reached a $30,000 Matching Indexed Participating Loan level.

If the next JUMP isn’t approved, you don’t automatically lose the prior successful progression under the mechanics described here.

You can remain at the previously achieved matching-loan level and potentially reapply at a later policy anniversary, subject to actual carrier rules and approval.

But the retirement projection should be rerun.

Could You Use Both the 401(k) and the IUL?

For the person reading this article, that’s often the more useful question.

You aren’t necessarily choosing one or the other.

You’ve already chosen to use the 401(k).

You’re asking what to do next.

Maybe your retirement structure eventually looks like:

• Traditional 401(k) money
• Roth 401(k) or Roth IRA money when applicable
• Taxable investments
• Cash reserves
• IUL cash value
• Social Security
• Other assets

Now you have different buckets that can potentially do different jobs.

Why Not Just Put the Extra Money Into a Brokerage Account?

That’s a legitimate alternative.

A taxable brokerage account can offer investment flexibility and liquidity without requiring life insurance underwriting.

There are no IUL policy charges.

There are no policy loan mechanics.

There is no requirement to maintain a life insurance contract.

But taxable investment income, dividends, interest and realized capital gains can create tax consequences under applicable rules.

And market-based investments still carry market risk.

So the brokerage account deserves its own side-by-side analysis rather than being treated as an afterthought.

What About Paying Down Debt?

Also legitimate.

If you’re carrying debt, particularly expensive debt, directing additional cash flow toward repayment may be more compelling than funding another long-term financial strategy.

Again, the point isn’t:

“You maxed the 401(k), so buy an IUL.”

The point is:

“You maxed the 401(k). Now what should the next dollar accomplish?”

Here’s How I Want the Comparison Run

Take the same person.

Same age.

Same annual out-of-pocket dollars.

Same retirement age.

Same retirement-income target.

Then compare the available choices.

On the Existing 401(k) Side, Show Me:

• Current balance
• Annual contributions
• Employer contributions
• Traditional versus Roth balances
• Investment allocation
• Plan and investment expenses
• Projected retirement balance
• Projected retirement withdrawals
• Estimated taxes on taxable distributions
• Applicable RMD assumptions
• Projected value at age 80, 90 and 95

On the IUL JUMP Side, Show Me:

• Client contributions
• Policy charges
• Cost of insurance
• Indexed-crediting assumptions
• Matching Indexed Participating Loans
• Accumulated policy indebtedness
• The current 5% applicable loan rate
• The contractual maximum 6% loan rate
• Future JUMP assumptions
• Projected retirement distributions
• Policy durability
• Projected net death benefit

And If We’re Comparing a Brokerage Account, Show That Honestly Too

• Investment assumptions
• Investment expenses
• Tax assumptions
• Dividend and interest treatment
• Capital-gain assumptions
• Retirement withdrawals
• Market volatility
• Projected ending value

No rigged comparison.

No making one side look artificially bad.

No hiding the IUL costs.

No ignoring the tax advantages of the 401(k).

No pretending the brokerage account has no advantages.

The High-Income Earner Has a Different Emotional Problem

From the outside, people assume you’re set.

You earn $300,000.

Maybe $500,000.

You have a seven-figure retirement balance.

You have a nice house.

Your kids are doing well.

People look at your life and think:

“What could they possibly be worried about?”

You know the answer.

Maintaining it.

You Don’t Want Retirement to Feel Like a Massive Pay Cut

You’ve built your lifestyle around strong income.

Maybe you travel several times a year.

You help your kids.

You eat where you want.

You don’t panic when the air conditioner breaks.

You’ve spent decades creating financial breathing room.

Then you look at retirement and think:

“How much income is it going to take to keep living like us?”

And You Know Your Salary Isn’t Coming Back

This is where the pressure changes.

At 52, you can recover from a bad investment decision.

You have a large paycheck arriving every month.

At 68, you may not.

That’s why retirement mistakes feel more permanent.

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

High Income Doesn’t Remove the Independence Fear

In some ways, it makes it stronger.

You’ve handled your own life.

You’ve paid your own bills.

You’ve probably helped your children financially.

The thought of reversing those roles is uncomfortable.

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

Then comes the pride underneath it:

“We should be able to handle this ourselves.”

That’s what a strong retirement-income strategy is really protecting.

Not just money.

Independence.

So, Should You Use an IUL After Maxing Out Your 401(k)?

It may deserve consideration if you’re already making strong use of your employer plan, have additional long-term cash flow, have an appropriate life insurance need, can qualify for coverage, and want to evaluate another retirement-income bucket with different characteristics.

But maxing out your 401(k) does not automatically make an IUL appropriate.

You still need to compare it against:

• Roth opportunities
• Taxable investing
• Debt reduction
• Cash reserves
• Other retirement-plan opportunities
• Your actual insurance need

Then make the IUL prove why it deserves the next dollar.

How We Do That at FPP Financial

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

I don’t want to tell you:

“You’re maxing out your 401(k), so now you need an IUL.”

That’s a sales pitch.

I want the strategy to earn its place.

Show me the 401(k).

Show me the employer money.

Show me the traditional and Roth balances.

Show me the taxable investments.

Show me the retirement tax assumptions.

Then show me the IUL.

Show me the policy charges.

Show me the loan mechanics.

Show me the current 5% applicable loan rate.

Stress-test 6%.

Lower the crediting assumption.

Remove a future JUMP.

Run the retirement longer.

Then tell me what happens to the income.

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

Want to See Where Your Next Retirement Dollar Should Go?

If you’re already maxing out your 401(k) and still have meaningful cash flow available for retirement, we can compare the choices side by side.

We’ll give your 401(k) credit for the benefits it actually provides.

We’ll account for the costs and risks of the IUL.

We’ll stress-test the JUMP assumptions.

And we’ll compare projected retirement income instead of stopping at accumulation value.

If another strategy produces the stronger result, you should see it.

If the IUL JUMP Strategy produces substantially more projected retirement income, you should see exactly why.

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

Show me exactly where the difference comes from.

Let the math do the talking.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• IUL JUMP Strategy vs. 401(k): Which Can Produce More Retirement Income?
• IUL JUMP Strategy vs. Roth IRA: Which Can Produce More Retirement Income?
• 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, retirement-plan or insurance advice. A 401(k) is a qualified retirement plan and is fundamentally different from indexed universal life insurance. Eligibility, contribution limits, employer contributions, plan provisions, investment options, Roth availability, distribution rules, expenses and tax treatment vary and are governed by applicable law and the specific plan.

Traditional pretax 401(k) contributions may provide current federal income-tax benefits when applicable. Taxable distributions from traditional pretax accounts are generally subject to ordinary income taxation under current federal rules. Designated Roth contributions and qualified Roth distributions have different tax treatment. Applicable contribution limits, required minimum distribution rules and other retirement-plan requirements can change.

Employer matching or other employer contributions can materially affect the value of a 401(k). Any comparison should include the actual employer contribution rather than comparing only the employee’s out-of-pocket contribution.

Market-based investments held through a 401(k) or taxable investment account can fluctuate in value and can lose principal. Past performance does not guarantee future results. Investment choices, expenses and tax consequences vary.

Indexed universal life insurance is permanent life insurance and is not a qualified retirement plan, Roth IRA, brokerage account or direct investment in a market index. IUL policies do not own the underlying index securities and do not receive index dividends. Indexed interest is determined according to the policy’s applicable crediting terms, which may include caps, participation rates, spreads and other provisions.

A 0% indexed-crediting floor does not guarantee that overall IUL policy value cannot decline. Policy charges, cost of insurance, loan costs, withdrawals and other policy mechanics continue to apply. Caps, participation rates, spreads, loan rates and other nonguaranteed elements may change when permitted by the insurance contract.

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

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, Modified Endowment Contract status, policy lapse, surrender and other circumstances. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income.

Matching Indexed Participating Loans are policy loans, not employer contributions, free matching dollars, bonuses, guaranteed gains or direct investments in a market index. Under the JUMP Strategy described here, Matching Indexed Participating Loan proceeds are modeled as being redeployed into the same policy as additional funding. The associated indebtedness and applicable loan costs remain part of the policy economics.

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.

References to the $10,000 annual contribution example, JUMP progression, 6.87% historical indexed-crediting example, 1.87 percentage-point modeled positive spread, modeled effective results of 8.74%, 11.61%, 14.48% and 17.35%, current 5% loan rate, contractual maximum 6% loan rate, approximately 40% more projected retirement income, or up to approximately 300% more projected retirement income are illustrative and are not guarantees of future policy performance, positive arbitrage, policy durability, funding capacity, non-MEC status, future JUMP approval, death benefit or retirement 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 should not be interpreted as a claim that every 401(k) comparison will produce the same result. Any comparison should use the actual employer plan, contributions, employer contributions, traditional and Roth balances, investment expenses, investment assumptions, tax assumptions, retirement distributions and other relevant factors.

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 and does not guarantee future retirement income.

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. The modeled effective JUMP results discussed above are not S&P 500 returns, indexed-crediting rates or guaranteed policy returns.

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.

Future JUMPs and associated death-benefit increases are subject to carrier approval and applicable medical, financial, occupational and other underwriting requirements. Future approval is not guaranteed. Income, employment, health and other circumstances can affect future underwriting. Failure to complete a planned future JUMP can materially change projected funding, policy values, indebtedness, death benefits and retirement-income results.

Policy-specific guarantees, nonguaranteed elements, loan provisions, loan rates, caps, participation rates, spreads, crediting methods, expenses, surrender provisions, MEC testing, lapse provisions and death-benefit provisions should be verified against current carrier-approved illustrations and the actual insurance contract.

Tax laws and retirement-plan rules can change. The tax consequences of 401(k) contributions, Roth contributions, taxable investments and life insurance transactions vary with individual circumstances. FPP Financial does not provide tax or legal advice. Consult qualified tax, legal and retirement-plan professionals regarding your individual circumstances.