How Do IUL Fees and Cost of Insurance Change as You Get Older?

You open an IUL illustration and look at age 60.

The cash value looks good.

Then age 70.

Still good.

Age 80.

Age 90.

And eventually a question hits you:

“Wait. I’m getting older this entire time. What happens to the cost of the life insurance?”

That’s exactly the question you should be asking.

Indexed universal life is permanent life insurance.

It has a cash-value component, but it also has insurance costs and other policy charges.

And when you’re planning to use an IUL for retirement income, you don’t just care what those costs look like today.

You care what happens when you’re 75, 85, or 95 and potentially taking money from the policy.

Does the Cost of Insurance in an IUL Increase as You Get Older?

Cost of insurance, often called COI, is generally based on policy-specific factors that can include the insured’s attained age, underwriting class, sex where permitted, and the amount of insurance risk represented under the policy’s mechanics.

Age is a major reason this deserves attention.

The cost associated with providing life insurance protection can become more expensive at older attained ages under the applicable COI schedule.

But that does not mean you can look at age alone and know the dollar amount that will be deducted from the policy.

The COI Rate and the Actual Dollar Charge Are Not the Same Thing

This is one of the most useful distinctions to understand.

There can be a cost-of-insurance rate.

Then there is the actual dollar charge deducted from the policy.

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

So saying:

“COI rates increase with age, therefore my policy costs will explode every year.”

is too simplistic.

But saying:

“The cash value is growing, so I never have to worry about rising insurance costs.”

is too simplistic too.

What Is the Net Amount at Risk?

A useful concept here is the net amount at risk.

In simplified terms, this represents the portion of the insurance benefit for which the insurer is actually carrying mortality risk after accounting for policy value under the applicable death-benefit mechanics.

Imagine a simplified policy with:

$500,000 of death benefit

and:

$300,000 of applicable policy value.

The insurance company’s mortality exposure is not necessarily equivalent to charging the COI rate against the entire $500,000 as though no policy value existed.

The actual calculation is governed by the policy contract.

Why Does That Matter as Cash Value Grows?

Because rising attained-age COI rates are only one part of the calculation.

The amount of insurance risk can also change.

That means you need to look at both:

the applicable COI rate

and:

the amount to which that rate is being applied.

This is one reason a well-designed policy cannot be judged by one fee percentage.

Here’s a Simplified Example

Suppose a hypothetical monthly COI rate rises as the insured gets older.

If the amount of insurance risk remained exactly the same, a higher rate would generally create a larger COI charge.

But if the applicable amount at risk becomes smaller while policy value grows, that can change the dollar-cost calculation.

The point isn’t that rising COI no longer matters.

It does.

The point is that the policy has to be modeled as an insurance contract rather than reduced to:

“You’re older, so the fee is X% higher.”

Are Cost-of-Insurance Charges the Only Fees in an IUL?

No.

An IUL can contain other policy charges and expenses.

Those can include charges associated with policy administration, premium activity, riders, surrender provisions, and other contractual features.

We’ll break those down separately in the next article.

For this article, the important distinction is that COI is not simply another name for every fee inside an IUL.

Why Does COI Matter So Much for Retirement Planning?

Because the policy may need to remain healthy for decades.

If you buy an IUL at 50 and plan to use it for retirement income beginning around 65, the policy doesn’t stop at 65.

It may need to support your strategy at:

70.

80.

90.

95.

Maybe longer.

That means the later years matter just as much as the accumulation years.

A Policy Can Look Great at Retirement and Still Need to Survive Another 30 Years

This is where I want people to change how they read an illustration.

Don’t just ask:

“How much cash value do I have at 65?”

Ask:

“What happens after I start taking retirement income?”

That’s when multiple pressures can start interacting.

In Retirement, You May Have Several Things Happening at Once

Premium contributions may stop.

Retirement distributions may begin.

Policy loans may be outstanding.

Loan costs may continue.

Cost of insurance continues to matter.

Other policy charges can continue.

Indexed-crediting results can vary.

And you’re getting older every year.

That’s why retirement-income durability has to be tested, not assumed.

Does a 0% Floor Protect You From Rising Insurance Costs?

No.

A 0% indexed-crediting floor applies to the applicable indexed-crediting calculation.

It doesn’t freeze the policy’s insurance costs.

It doesn’t eliminate administrative charges.

It doesn’t eliminate policy-loan costs.

And it doesn’t guarantee that total policy value cannot decline.

Imagine a 0% Crediting Year at Age 82

The indexed-crediting result for the applicable segment might be 0% under the assumed floor.

But the policy is still a life insurance contract.

Applicable COI and other charges can still be deducted.

If policy loans are outstanding, applicable loan costs still matter.

If you’re also accessing money for retirement, those distributions matter too.

This is why:

“You can’t lose money because there’s a 0% floor”

is not an accurate description of the entire policy.

What Happens If You Have Several Weak Crediting Years Later in Life?

Now the issue becomes more serious.

One 0% indexed-crediting period may be manageable under a particular policy design.

Several weak periods while you’re also taking retirement distributions can create more pressure.

Why?

Because policy values may not be receiving the indexed interest assumed in the original projection while charges, loan economics, and retirement distributions continue.

That’s exactly the kind of scenario you should stress-test.

Don’t Test Only the Accumulation Years

Someone can build a beautiful illustration from age 50 to 65.

That doesn’t prove the retirement strategy works.

I want to see age 75.

I want to see age 85.

I want to see age 95.

And I want to see those ages under assumptions that are less favorable than the sales illustration.

Why Policy Design Matters

If an IUL is being designed primarily for retirement accumulation, the relationship between death benefit, premium funding, policy values, insurance costs, and tax rules matters.

More death benefit is not automatically better for a cash-value-focused retirement design.

Less death benefit is not automatically better either.

The policy has to satisfy the applicable insurance and tax requirements while being structured around the client’s actual objective.

This Is Also Why “Minimum Death Benefit” Gets Oversimplified

You may hear someone say:

“Just use the minimum death benefit and maximum premium.”

That’s not a complete policy-design process.

You still have to account for:

• Applicable tax rules
• MEC limits
• Death-benefit option
• Funding schedule
• Underwriting
• Insurance need
• Policy charges
• Future policy changes
• Retirement-income objective

The policy has to work as a life insurance contract first.

Now the JUMP Strategy Adds Another Consideration

The IUL JUMP Strategy uses planned death-benefit increases to create additional policy funding capacity under the intended design.

Those increases are not simply:

“Let’s buy more death benefit because more is always better.”

They’re connected to the planned funding progression and the goal of maintaining the intended non-MEC structure, subject to actual tax rules, underwriting, policy design, and carrier approval.

The Death Benefit Does Not Simply Double Every Few Years

This is important.

Under the JUMP mechanics we’re discussing, the death benefit is increased by an amount designed to create the additional intended funding capacity.

It isn’t a blanket rule that the death benefit doubles.

And future increases require future underwriting and approval.

Here’s the Example JUMP Schedule

Suppose the client contributes:

$10,000 per year.

The example progression looks like this:

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

The client is still contributing $10,000 out of pocket in the example.

The additional amount comes from Matching Indexed Participating Loan activity.

Those matching amounts are policy loans.

They are not free contributions.

Why Bring the JUMP Structure Into a Conversation About Insurance Costs?

Because the death-benefit structure changes as the strategy progresses.

And when death benefit changes, you need to understand how that change affects the policy’s economics.

Don’t simply look at the extra funding capacity.

Look at the resulting policy charges too.

The Right Question Is Not “Does the Death Benefit Go Up?”

The better question is:

“What does the death-benefit increase do to the entire policy projection?”

How much additional funding capacity does it create?

What happens to cost of insurance?

What happens to cash value?

What happens to the loan structure?

What happens to projected retirement income?

That’s the math that matters.

Future JUMPs Also Require Future Underwriting

The example JUMPs occur in Years 3, 5, 7, 9, and 11.

But those future increases are not guaranteed when the original policy is issued.

Future approval can be affected by factors such as:

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

That creates another reason to stress-test the retirement projection.

What If You Don’t Qualify for a Later JUMP?

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

Suppose you successfully reach the Year 7 level.

That example shows:

$10,000 client contribution + $30,000 Matching Indexed Participating Loan = $40,000 total annual funding shown.

If the next JUMP is not approved, the strategy may remain at the already-achieved $30,000 matching-loan level rather than automatically dropping back to zero matching.

The client may also be able to reapply at a later policy anniversary if circumstances improve, subject to applicable underwriting and policy rules.

But the Retirement Projection Has to Change

If the original projection assumed successful future JUMPs and those JUMPs never happen, don’t keep using the original retirement-income number.

Rerun it.

Use the JUMP level actually achieved.

Use the actual policy values.

Use the actual outstanding indebtedness.

Use the current policy economics.

Now Add the Policy-Loan Cost

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%.

Those loan costs are separate from the cost of insurance.

That’s another distinction you need to keep clear.

COI and Loan Interest Are Not the Same Charge

Cost of insurance relates to the life insurance risk under the policy’s mechanics.

Policy-loan costs relate to outstanding policy indebtedness.

If you’re evaluating a JUMP Strategy, both can matter at the same time.

Don’t combine them into one vague number called “fees.”

And Don’t Assume a Favorable Loan Relationship Eliminates COI

Suppose indexed crediting is favorable relative to the applicable loan cost during a particular period.

That can create favorable modeled loan economics.

It does not mean cost of insurance disappears.

The policy still has insurance costs.

The entire policy needs to be modeled after those costs.

Let’s Use the Historical 6.87% Example Carefully

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

Dividends were excluded.

The analysis applied the example strategy’s:

10% cap

and:

0% indexed-crediting floor.

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

6.87%.

Against the current applicable 5% policy-loan rate used in the model, the simplified economic difference is:

1.87 percentage points.

But 1.87% Is Not “Profit After All Fees”

This is a critical distinction.

You cannot take:

6.87% – 5% = 1.87%

and then say:

“Great. That’s my net return after every policy cost.”

No.

That simplified calculation compares the historical indexed-crediting result used in that model with the current applicable loan rate.

Cost of insurance and other applicable policy charges still need to be accounted for in the overall policy projection.

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 are not net returns after every policy cost.

They are not guaranteed policy returns.

They are not indexed-crediting rates.

And they do not mean COI disappears.

Under the assumptions used in that model, they are modeled effective results before accounting for applicable policy charges and other factors.

This Is Exactly Why Policy Costs Need Their Own Analysis

If someone shows you a large modeled effective result but never shows you the insurance charges, you haven’t seen enough.

I want to know:

What are the policy charges?

How do they change?

What happens as the insured gets older?

What happens after retirement distributions begin?

What happens with outstanding loans?

What happens if indexed crediting is weaker?

Can Rising COI Cause an IUL to Lapse?

Rising insurance costs can be one source of pressure on a policy, particularly when combined with other unfavorable factors.

But policy lapse risk should not be reduced to one cause.

A policy can come under pressure from the interaction of:

• Lower-than-modeled indexed crediting
• Policy charges
• Increasing insurance costs
• Large outstanding loans
• Loan charges
• Large withdrawals
• Insufficient funding
• Long retirement periods

That’s why we test the entire policy.

What Happens If the Policy Lapses With a Large Loan?

This can become a serious issue.

If a life insurance policy with gain and outstanding indebtedness lapses or is surrendered, taxable income can potentially result under applicable tax rules.

That’s one reason retirement policy-loan strategies need ongoing monitoring.

You don’t just take loans for 25 years and stop looking at the policy.

“Set It and Forget It” Is Not How I Would Treat Retirement Loans

If you’re going to rely on an IUL for retirement income, monitor it.

Look at the actual policy values.

Look at outstanding indebtedness.

Look at the current loan rate.

Look at actual charges.

Look at the current retirement-income projection.

Then rerun it periodically.

What Should You Stress-Test?

I would want to see at least:

• A current/base illustration
• Lower indexed-crediting assumptions
• Several 0% indexed-crediting periods
• The current applicable 5% loan rate
• The applicable contractual maximum 6% loan rate
• No additional future JUMPs
• Later retirement
• Earlier retirement
• Different retirement-distribution levels
• Longevity to age 95 or longer

And I would want the actual policy charges included in the projection.

Don’t Hide the Charges to Make the Retirement Number Look Better

This should be obvious.

But it needs to be said.

If the strategy only looks compelling when you talk about indexed interest and ignore the insurance costs, that’s not a retirement analysis.

That’s a sales pitch.

The charges belong in the math.

Now Let’s Put the Up-to-300% Number Under 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 here’s the question:

Were the IUL’s actual policy costs included?

They need to be.

You Don’t Get to Compare a Gross IUL Number With a Net 401(k) Number

If you’re going to compare retirement strategies, make the assumptions visible.

For the IUL side, account for:

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

For the 401(k) or IRA side, account for the assumptions appropriate to that strategy too, including contributions, employer contributions where applicable, market-return assumptions, investment expenses, taxes, and distributions.

Then compare the projected retirement income.

The 300% Number Isn’t a Claim That IUL Fees Don’t Matter

Quite the opposite.

If someone claims a strategy can produce up to approximately 300% more projected retirement income in certain modeled comparisons, you should inspect the costs even more carefully.

Don’t ask me to hide them.

Make me show them to you.

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

Show me exactly where the difference comes from.

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 comparison also needs to include the actual policy economics on both sides.

If one policy has different insurance costs, show them.

If one has different loan provisions, show them.

If death-benefit structures differ, show them.

If funding differs, show it.

If indexed-crediting assumptions differ, show that too.

Otherwise the 40% number doesn’t tell you enough.

Can You Know Exactly What Future COI Charges Will Be?

You need to distinguish contractual guarantees from nonguaranteed illustration values.

The policy contract sets the applicable contractual framework and guaranteed maximum provisions.

Illustrations can show current and guaranteed values according to applicable illustration assumptions.

That is why you should look at more than one column.

Ask to See the Guaranteed Side Too

The guaranteed column may look ugly.

That’s okay.

Its job isn’t to make you feel good.

Its job is to show what the contract guarantees under the applicable assumptions.

Then compare that with the nonguaranteed/current illustration.

The gap between those two tells you something important about where assumptions enter the projection.

What Questions Should You Ask About IUL Cost of Insurance?

1. How is the cost of insurance calculated under this policy?
2. Does the COI rate change with attained age?
3. What amount is the COI rate applied to?
4. How does the death-benefit option affect the insurance amount at risk?
5. How does growing policy value affect that calculation?
6. What are the current COI charges?
7. What are the guaranteed maximum COI provisions?
8. What other policy charges apply?
9. How do those charges change over time?
10. What happens to charges after retirement distributions begin?
11. What happens during several 0% indexed-crediting periods?
12. What happens with large outstanding policy loans?
13. What happens if the loan rate reaches 6%?
14. What happens if future JUMPs stop?
15. Does the policy remain projected in force to age 95 or longer?
16. What happens if I take more retirement income than originally illustrated?

And Ask One Question Most People Forget

“Can you show me the policy charges in actual dollars over time?”

Not:

“Are the fees low?”

That’s a sales answer waiting to happen.

Show me the dollars.

Show me age 60.

Show me age 70.

Show me age 80.

Show me age 90.

Then show me how those charges interact with the rest of the policy.

This Is Where Retirement Psychology Gets Very Real

When you’re 58, you aren’t worried about becoming an expert in mortality charges.

You’re worried about making a mistake you discover too late.

Maybe the policy looks great now.

But you’re thinking:

“What happens when I’m 85 and I don’t want to deal with this anymore?”

That’s a fair question.

You Want the Strategy to Support Your Independence, Not Threaten It

You don’t want your retirement plan becoming a complicated mess your children have to fix.

You don’t want to discover at 82 that you misunderstood what the policy costs.

You don’t want to call your son or daughter and say:

“Can you help me figure this out?”

The thoughts underneath that are very real:

“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 you ask the hard questions before you buy the policy.

The Bottom Line

Cost of insurance is a real part of an indexed universal life policy.

The applicable COI rate can increase as the insured gets older under the policy’s contractual schedule.

But the actual dollar charge is affected by more than age alone.

The applicable amount of insurance risk, death-benefit structure, policy values, and other contract mechanics can also matter.

So don’t evaluate an IUL by asking only:

“Do the fees go up?”

Ask:

“What do the actual policy costs look like over my lifetime, and can the retirement strategy still work after those costs are included?”

How We Evaluate IUL Costs at FPP Financial

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

I don’t want to tell you:

“Don’t worry about the fees.”

I want to put them into the calculation.

We’ll look at policy values.

We’ll look at the death-benefit structure.

We’ll look at the applicable insurance costs.

We’ll look at the indexed-crediting assumptions.

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

We’ll look at the current applicable 5% loan rate.

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

We’ll test what happens if future JUMPs stop.

We’ll test retirement distributions.

We’ll test longevity.

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 See What the Policy Costs Actually Do to the Retirement Math?

Don’t accept:

“The fees are low.”

Make us show you.

Show me the policy charges.

Show me the insurance costs.

Show me the loans.

Show me the projected retirement distributions.

Show me what happens at 85.

Show me what happens at 95.

Then make the assumptions worse and run it again.

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 while ignoring the policy costs.

Make the costs part of the proof.

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

• Does IUL Indexed Interest Compound? How It Builds Over Time
• Why Does the IUL JUMP Strategy Increase the Death Benefit Over Time?
• 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.

Cost-of-insurance charges, mortality charges, administrative charges, premium-related charges, rider charges, surrender charges, and other policy expenses vary by policy and contract. Cost-of-insurance rates and actual dollar charges are not necessarily the same thing. Applicable charges are governed by the insurance contract and should be reviewed using current approved policy materials and the actual contract.

Cost-of-insurance rates may vary with factors specified in the policy, which can include attained age, underwriting classification, sex where permitted, and applicable insurance amounts. The actual dollar cost can also be affected by the policy’s death-benefit mechanics, policy values, amount at risk, and other contractual provisions. Simplified examples in this article are conceptual and are not the formula for a specific policy.

References to net amount at risk are simplified for educational purposes. The actual amount used to calculate insurance charges can vary based on death-benefit option, policy values, contractual definitions, timing, and other policy mechanics. The applicable insurance contract governs.

Current policy charges and nonguaranteed illustrated values should not be assumed to remain unchanged for the life of a policy. Guaranteed maximum provisions, current charges, nonguaranteed values, and other contractual terms should be distinguished when evaluating an illustration.

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 the 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 charges, other policy charges, loan costs, withdrawals, and other policy mechanics can continue to affect policy values during a 0% indexed-crediting period.

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, 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, taxes, 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, net returns after policy charges, participation rates, cap 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.

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. Policy charges and cost of insurance are separate from the simplified comparison between indexed-crediting results and policy-loan costs and must be accounted for when evaluating overall policy performance.

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 in the JUMP Strategy are intended to create additional policy funding capacity under the intended design and are not a guarantee that the policy will avoid MEC status. Actual MEC testing, applicable tax law, policy design, funding, death-benefit changes, carrier procedures, and other factors govern.

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.

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 cost of insurance must be included in a meaningful policy projection. Results can change materially with contributions, employer contributions, market-return assumptions, taxes, investment expenses, indexed-crediting assumptions, policy charges, insurance costs, 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, cost of insurance, 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, brokerage account, index fund, traditional IUL, or another retirement strategy should use clearly stated assumptions appropriate to each strategy. Direct investments and retirement accounts have different market exposure, costs, tax characteristics, contribution rules, and distribution mechanics from life insurance.

Policy-specific guarantees, nonguaranteed elements, underwriting requirements, death-benefit options, MEC limits, cost-of-insurance provisions, 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.