IUL for High-Income Couples: Should Both Spouses Own Their Own Policy?

You’re married.

You both earn good money.

Your retirement accounts are growing.

You’re already saving more than most people you know.

Then someone shows you indexed universal life as another potential retirement-income strategy.

The first question may be:

“Does this make sense for us?”

But another question usually comes right behind it:

“Do we both need one?”

That’s a much better question than it sounds.

Because two policies don’t simply mean twice the opportunity.

They can also mean two sets of policy charges, two underwriting decisions, two funding commitments, two loan structures, and two policies that have to remain healthy for decades.

So the goal isn’t to put an IUL on both spouses because you can afford it.

The goal is to determine what a second policy actually adds.

Start With the Household, Not the Policies

Imagine a couple in their early 50s.

One spouse earns $325,000.

The other earns $225,000.

Household income is approximately:

$550,000 per year.

They have:

• $1.8 million across Traditional 401(k)s and IRAs
• $300,000 in Roth assets
• $450,000 in taxable investments and cash
• A mortgage
• Existing employer life insurance
• Two children
• A goal of retiring around age 62 to 65

They’re doing well.

But that doesn’t answer whether one IUL or two makes sense.

The First Question Is Still Insurance

An IUL is permanent life insurance.

Before we start talking about retirement income, ask:

“What happens financially if either spouse dies?”

If Spouse A dies at 58, what income disappears?

If Spouse B dies at 61, what changes?

Would the surviving spouse still be able to retire on schedule?

Would the mortgage become a problem?

Would the survivor need to work longer?

Would the family still have enough liquidity?

Those questions can create legitimate insurance needs on both lives.

High Income Doesn’t Eliminate the Need for Life Insurance

Sometimes it increases the size of the financial hole created by an early death.

If one spouse earns $300,000 a year and dies 10 years before retirement, the household hasn’t simply lost one year’s salary.

It may have lost years of:

• Income
• Retirement contributions
• Employer contributions
• Investment growth
• Debt reduction
• College funding
• Future savings

That’s why the insurance analysis comes first.

But Don’t Use “You Both Need Life Insurance” as an Excuse to Oversell Two IULs

A permanent policy isn’t automatically the right answer for every insurance need.

Term insurance may solve some needs more efficiently.

Existing coverage may already solve part of the problem.

One spouse may have a stronger permanent insurance need than the other.

The retirement-income strategy and insurance need should support each other.

One shouldn’t be invented to justify the other.

Now Ask What One IUL Would Do

Suppose the couple funds one policy.

That policy could potentially provide:

• Permanent death-benefit protection on one spouse
• Cash-value accumulation potential
• Indexed-crediting strategies
• Access to available policy values
• Policy-loan provisions
• Another potential retirement-income source
• Potential legacy value

Then ask:

“What would adding the second policy improve?”

A Second Policy Needs Its Own Job

Maybe it provides a legitimate death benefit on the second spouse.

Maybe it creates another pool of policy value.

Maybe it creates more household retirement-income capacity in the model.

Maybe it reduces the amount of retirement income being asked from one policy.

Maybe it gives the couple more flexibility around which policy they access and when.

Or maybe it adds cost without adding enough benefit.

That’s what the math has to answer.

One Policy vs. Two Policies Is Not Simply a Contribution Question

Suppose the couple has $30,000 a year available for another long-term strategy.

You could model:

Scenario A: $30,000 toward one appropriately designed policy.

Scenario B: $15,000 toward a policy on each spouse.

Scenario C: Another funding allocation supported by their insurance needs and underwriting.

Those structures can produce different results.

Why?

Because life insurance economics are tied to the insured person.

The Two Spouses Are Not Interchangeable

They may be the same age.

They may earn similar incomes.

They may live in the same house.

But underwriting can be different.

One may receive a stronger underwriting classification.

One may have a health condition.

One may have a riskier occupation.

One may have an avocation that affects underwriting.

That can change policy economics.

Age Can Change the Comparison Too

Maybe one spouse is 48 and the other is 56.

That’s an eight-year difference.

The policies aren’t starting from the same place.

The older insured has fewer years before the household’s planned retirement date.

Insurance costs can also differ.

So don’t assume:

“If it works for me, we should just duplicate it for my spouse.”

Run each life separately.

Then Run the Household Together

This is the step that gets missed.

Policy A can look good.

Policy B can look good.

But the couple doesn’t retire as two separate spreadsheets.

They have one household.

One spending target.

One tax return in many years.

One mortgage.

One lifestyle.

And eventually, one spouse may outlive the other.

That Last Part Matters More Than People Think

A retirement plan for a married couple isn’t finished when both spouses are alive at age 65.

You also need to model:

What happens when one spouse dies first?

The surviving spouse may experience changes in:

• Household income
• Social Security income
• Pension income where applicable
• Tax filing status
• Tax brackets
• Living expenses
• Required distributions from retirement accounts
• Insurance proceeds
• Legacy goals

That survivor scenario belongs in the retirement math.

Two Policies Can Create Two Separate Death Benefits

If each spouse owns coverage on his or her life under the applicable structure, the household may have separate death-benefit protection associated with each insured.

That can matter because the financial effect of each death may be different.

But death benefit isn’t the only question.

We’re also evaluating retirement income.

Enter the IUL JUMP Strategy

The strategy we’re discussing uses a Matching Indexed Participating Loan during accumulation.

To understand why two policies could produce a different household result than one policy, first understand the mechanics on a single policy.

Let’s use the standard example where the client contributes:

$10,000 per year.

The Standard JUMP Example

The $50,000 in Year 11 Isn’t Free Money

The client still contributes:

$10,000 out of pocket.

The additional $50,000 shown comes from accumulated Matching Indexed Participating Loan activity under the example.

Those are policy loans.

They create policy indebtedness.

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

Why Is That Important for a Couple?

If you’re evaluating two separate policies, you aren’t simply doubling a savings account.

Each policy has its own:

• Insured
• Underwriting
• Death benefit
• Policy values
• Policy charges
• Policy indebtedness
• Loan activity
• Crediting results
• Future JUMP approvals where applicable

That means two policies need to be modeled individually and then combined at the household level.

Think of Each JUMP Policy as Having Two Economic Buckets

Bucket 1: Value associated with the client’s own contributions.

Bucket 2: Value associated with accumulated Matching Indexed Participating Loan-funded amounts.

Under the example, both participate under the same applicable indexed-crediting strategy with a potential 10% cap and 0% indexed-crediting floor.

The loan-funded side also carries the applicable loan cost.

The Current Applicable Loan Rate Is 5%

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

5%.

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

6%.

If you’re modeling two policies, stress-test both at 6%.

Don’t build a household retirement plan that only works if today’s applicable loan rate never changes.

Positive Arbitrage Is Part of the Math

Here’s the simplified idea.

Suppose applicable indexed crediting is:

8%.

And the applicable policy-loan cost is:

5%.

The simplified economic relationship is:

8% – 5% = a favorable 3-percentage-point spread.

That’s positive arbitrage in the simplified example.

But It Can Go the Other Direction

Suppose applicable indexed crediting is:

0%.

And the applicable loan cost remains:

5%.

Now the simplified relationship is:

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

That’s negative arbitrage.

Two policies don’t make that risk disappear.

And the 0% Floor Isn’t a 0% Loss Guarantee

The applicable indexed-crediting floor in the example applies to the indexed-crediting calculation.

Policy charges can continue.

Insurance costs can continue.

Loan costs can continue.

Distributions can reduce values.

Overall policy value can still decline.

Where Does the 6.87% Historical Example Come From?

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

The analysis applied:

A 10% cap

and:

A 0% indexed-crediting floor.

Negative annual price changes were replaced by 0% for purposes of that historical indexed-crediting calculation.

Positive annual price changes above 10% were capped at 10%.

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

6.87%.

6.87% Is Not an S&P 500 Return

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

It’s not a guaranteed future IUL crediting rate.

It’s not a guaranteed policy return.

It is the historical average credited result from that specific capped-and-floored analysis of annual S&P 500 price changes, excluding dividends.

The Simplified Historical/Modeling Spread

Using the current applicable 5% loan rate:

6.87% – 5.00% = 1.87 percentage points.

That’s the simplified favorable spread used in that historical/modeling example.

It isn’t guaranteed to occur in the future.

What Do Successive JUMPs Do to the Model?

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 reaching approximately:

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

Those figures are not S&P 500 returns.

They’re not indexed-crediting rates.

They’re not guaranteed policy returns.

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

Now Imagine Two Different Insureds

This is where the household analysis becomes interesting.

Spouse A may have one set of policy economics.

Spouse B may have another.

Even if both contribute the same amount, the policies may not produce identical projected results.

So I wouldn’t take one illustration, multiply everything by two, and call that the married-couple strategy.

That’s not enough.

What About Retirement Income?

Under modeling used with the IUL JUMP Strategy, we’ve evaluated retirement distributions at approximately 12% per year of policy/account value under specific assumptions.

That is a modeled distribution level.

It isn’t a universal safe withdrawal rate.

It isn’t guaranteed lifetime income.

Each policy needs to demonstrate durability under the actual assumptions being tested.

Two Policies Could Give You More Distribution Choices

Suppose the couple reaches retirement with two policies.

They don’t necessarily have to access both in exactly the same way every year.

They may be able to model different distribution patterns based on:

• Policy values
• Outstanding policy indebtedness
• Recent indexed-crediting results
• Loan costs
• Death-benefit objectives
• Other household assets

That can create another layer of flexibility.

But flexibility only has value if the underlying policies are healthy.

Don’t Double the Distribution Just Because You Have Two Policies

This is where people can get aggressive.

One policy shows a large projected retirement distribution.

The second policy shows another.

Suddenly the household starts treating both projections as guaranteed future paychecks.

They’re not.

Stress-test each policy individually.

Then stress-test the combined household income.

The Up-to-300% Comparison Still Has to Be Run Correctly

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.

For a high-income couple with substantial Traditional retirement balances, that can create a very interesting comparison.

But the number alone tells you almost nothing.

300% More Projected Retirement Income Does Not Mean 300% More Return

It doesn’t mean the IUL earns 300% more.

It doesn’t mean cash value is guaranteed to be 300% larger.

It doesn’t mean every couple should move money away from qualified retirement accounts.

And it doesn’t mean two policies automatically produce twice the modeled advantage.

The figure refers to certain modeled retirement-income comparisons under specific assumptions.

What Can Create the Modeled Difference?

The result can be affected by:

• Contributions
• Taxes
• Retirement age
• Distribution timing
• Distribution amounts
• Market assumptions
• Indexed-crediting assumptions
• Policy charges
• Insurance costs
• Matching Indexed Participating Loan mechanics
• Applicable loan costs
• Positive and negative arbitrage
• Future JUMP approvals
• Longevity
• Death timing

With two spouses, you also have two lives that can unfold differently.

The 300% Isn’t the Sales Pitch. It’s the Question.

If the model shows up to approximately 300% more projected retirement income, ask:

“Show me exactly where the difference comes from.”

Then change the assumptions.

If the result falls apart immediately, you learned something important.

What About Approximately 40% More Than a Traditional IUL?

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

That isn’t guaranteed either.

Funding design, policy charges, loan mechanics, crediting assumptions, distribution structure, underwriting, future JUMPs, retirement timing and longevity can materially change the result.

Here’s Another Reason Two Policies Need Careful Analysis

Future insurability isn’t guaranteed.

A couple may both be healthy today.

Five years from now, one spouse may not be.

That can affect future insurance options and future JUMP approvals.

But Don’t Turn That Into a Fear-Based Sales Pitch

The fact that health can change doesn’t mean:

“Buy as much as possible on both spouses immediately.”

It means current and future insurability are legitimate factors in the planning process.

That’s different.

Financial Underwriting Matters Too

High household income can support a substantial financial profile.

But a requested death benefit still has to fit applicable underwriting standards.

And the analysis is tied to the insured and the purpose of the coverage.

A $500,000 household income doesn’t mean each spouse automatically qualifies for any amount of permanent life insurance requested.

Future JUMPs Aren’t Guaranteed

The standard JUMP example shows planned increases in policy Years:

3, 5, 7, 9 and 11.

Each planned JUMP requires a new application and approval for the applicable death-benefit increase.

Factors that can affect future approval include:

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

What If One Spouse Qualifies for a Future JUMP and the Other Doesn’t?

Now you have two policies following different paths.

That’s not automatically a disaster.

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

But the household projection needs to be updated.

You can’t keep showing future JUMPs in both policies after one spouse no longer qualifies for the assumed increase.

This Is Where #89 Stops and #94 Begins

The broader question here is whether both spouses should own an IUL at all.

The separate question of whether both spouses should specifically run the full JUMP progression requires deeper analysis of coordinated underwriting, future JUMP approvals, policy funding and household-level JUMP mechanics.

Those aren’t exactly the same decision.

What Happens When One Spouse Dies?

This scenario needs to be modeled before retirement.

Suppose each spouse has an individual policy.

One spouse dies at 72.

Subject to the actual contract and beneficiary structure, the applicable net death benefit is paid on that insured’s policy.

The surviving spouse’s separate policy continues under its own terms.

Now the household financial picture changes.

Outstanding Loans Matter at Death

If the deceased insured’s policy has outstanding policy indebtedness, that indebtedness generally reduces the net death benefit payable under the contract.

So don’t look only at the illustrated gross death benefit.

Look at:

Projected net death benefit after policy indebtedness.

The Survivor May Need More Income, Not Less

People often assume expenses get cut in half when one spouse dies.

They usually don’t.

The house may cost almost the same.

Property taxes don’t get cut in half.

Utilities don’t get cut in half.

Healthcare remains.

Transportation remains.

Travel and family commitments may remain.

Meanwhile, some household income may disappear.

Taxes Can Change Too

A surviving spouse may eventually move from married filing jointly to a different filing status under applicable tax rules.

That can change the tax math around Traditional retirement distributions and other income.

This is one reason married-couple retirement planning should include a survivor analysis rather than assuming both spouses live to the same age.

What If Only One Spouse Has the IUL?

That’s not automatically wrong.

Maybe one spouse has the stronger permanent insurance need.

Maybe one has much better underwriting.

Maybe the household cash flow only supports one properly funded policy.

Maybe one strong policy produces a better modeled household result than splitting the same funding between two smaller policies.

Maybe the second spouse is already adequately insured elsewhere.

Run it.

What If Both Spouses Have a Strong Insurance Need?

Then two policies may deserve serious consideration.

But even then, the policies don’t necessarily need to be funded identically.

One spouse could have a larger insurance need.

One could have a longer accumulation period.

One could have better underwriting economics.

The design should reflect the actual household.

Here’s the One-Policy-vs.-Two-Policy Test I’d Want to See

1. Calculate the permanent insurance need on Spouse A.
2. Calculate the permanent insurance need on Spouse B.
3. Review existing individual and employer coverage.
4. List household income by spouse.
5. List Traditional retirement balances.
6. List Roth balances.
7. List taxable investments and cash.
8. Identify household emergency reserves.
9. Identify the retirement-income target.
10. Choose the planned retirement age.
11. Model one appropriately designed IUL.
12. Model separate policies on both spouses.
13. Keep total household out-of-pocket funding comparable where appropriate.
14. Compare policy charges.
15. Compare underwriting results.
16. Compare projected policy values.
17. Compare projected policy indebtedness.
18. Compare projected net death benefits.
19. Run the current applicable 5% loan rate where applicable.
20. Stress-test the contractual maximum 6% loan rate.
21. Add weak and 0% indexed-crediting periods.
22. Run no additional future JUMPs.
23. Model one spouse failing to qualify for a future JUMP.
24. Model retirement five years early.
25. Model higher retirement spending.
26. Model Spouse A dying first.
27. Model Spouse B dying first.
28. Extend the survivor’s plan through age 95 and beyond.
29. Compare projected spendable household retirement income.
30. Determine what the second policy actually adds.

That Last Question Is the Whole Point

“What does the second policy actually add?”

If the answer is:

“Another commission for the person selling it,”

that’s not a reason.

If the answer is:

“A legitimate second death benefit, better household retirement-income flexibility, and a stronger modeled survivor plan that justifies the additional costs,”

now you have something worth evaluating.

High-Income Couples Can Still Overcommit

$500,000 of household income sounds like a lot.

But high-income households can also have:

• Large mortgages
• Private-school costs
• College funding
• Large tax bills
• Business obligations
• Multiple properties
• Aggressive retirement contributions
• High lifestyle expenses

Income isn’t the same thing as free cash flow.

Don’t Build Two Policies Around Your Peak Earning Years

Maybe you’re both 52 and earning more than ever.

Great.

What happens at 57 if one spouse wants to stop working?

What happens at 60 if you both decide you’ve had enough?

What happens if one career changes?

What happens if you need to help an aging parent?

The funding needs to survive real life.

There’s an Emotional Side to This Decision Too

High-income couples can get used to solving problems with income.

A big expense appears.

You earn more.

You save more.

You keep going.

Then retirement changes the equation.

You no longer want the plan to require two large paychecks forever.

And One Spouse Is Often More Worried Than the Other

One may say:

“We’re fine. Look at what we’ve accumulated.”

The other is quietly thinking:

“But what if something happens to you?”

Or:

“What happens if I’m the one left managing all of this?”

Those are not irrational concerns.

They’re planning questions.

Eventually the Independence Question Shows Up

You spent decades building a life where your family doesn’t have to worry about money every month.

You don’t want retirement to undo that.

“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?”

The purpose of modeling one policy against two isn’t to maximize how much insurance you buy.

It’s to find the structure that gives the household the strongest combination of protection, retirement income and flexibility for the cost you’re taking on.

When Might Two IUL Policies Be Worth Evaluating?

Two policies may deserve a serious comparison when:

• Both spouses have legitimate permanent life insurance needs
• The household has durable long-term cash flow
• Emergency reserves are already addressed
• Both spouses are insurable under acceptable terms
• The couple wants another potential source of retirement income
• The couple has substantial tax-deferred retirement assets
• Separate policies materially improve the modeled household strategy
• The couple understands policy-loan mechanics
• The couple understands future JUMPs require future underwriting
• The second policy adds enough value to justify its costs and complexity

When Might One Policy Be Enough?

One policy may deserve stronger consideration when:

• Only one spouse has a meaningful permanent insurance need
• One spouse has materially stronger underwriting economics
• Household cash flow supports one policy more comfortably than two
• Splitting available funding weakens both designs
• The second spouse already has adequate coverage
• The second policy adds little to projected household retirement income or legacy goals

When Should You Slow Down?

If someone recommends two policies before calculating the insurance need.

If the recommendation is based only on your income.

If nobody compares one larger policy with two separate policies.

If future JUMPs are treated as guaranteed.

If positive arbitrage is treated as guaranteed.

If the illustration only uses the current 5% applicable loan rate.

If nobody shows you the contractual maximum 6% rate.

If nobody models weak crediting.

If nobody models one spouse dying early.

If nobody models the survivor to age 95.

If nobody shows projected net death benefit after outstanding indebtedness.

That’s when the analysis needs more work.

The Bottom Line

Should both spouses in a high-income household own an IUL?

The right structure has to be proven at the household level.

One policy may be enough.

Two may create meaningful additional protection and retirement flexibility.

Or the second policy may add more cost than value.

That’s why I wouldn’t start with:

“How much can we put into two IULs?”

I’d start with:

“What problem does each policy solve?”

Then run the math.

Let the math do the talking.

How We Compare One IUL With Two at FPP Financial

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

We start with the household.

Both incomes.

Both retirement-account balances.

Roth assets.

Taxable assets.

Cash.

Debt.

Existing life insurance.

The insurance need on each spouse.

The planned retirement age.

The household retirement-income target.

The legacy objective.

Then we model the policy structures.

One policy.

Two policies.

Comparable household funding where appropriate.

We look at policy values.

We look at policy charges.

We look at Matching Indexed Participating Loan mechanics where applicable.

We look at outstanding policy indebtedness.

We run the current applicable 5% loan rate.

We stress-test the contractual maximum 6% rate.

We add weak and 0% indexed-crediting periods.

We run no additional future JUMPs.

We model one spouse dying first.

Then the other.

We extend the survivor’s plan through age 95 and beyond.

Then we compare projected spendable household retirement income and projected net death benefits under clearly stated assumptions.

We don’t sell you a retirement strategy. We run the math and let you decide.

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

Want to See Whether One IUL or Two Produces the Stronger Household Math?

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.

In certain modeled comparisons, it has also produced approximately 40% more projected retirement income than the traditional IUL structure being compared.

Those are modeled results, not guarantees.

And two policies do not automatically double either result.

The household comparison has to account for funding, underwriting, taxes, retirement timing, policy charges, loan mechanics, loan rates, crediting assumptions, future JUMPs, distributions, death timing and longevity.

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

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

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

• How Much Retirement Income Can an IUL Produce?
• What Happens to IUL Policy Loans When You Die?
• How to Stress-Test an IUL Before You Use It for Retirement

Disclosure

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

References to household income, ages, retirement balances, policy funding, death benefits, retirement ages, and retirement-income needs are hypothetical examples only. They do not establish suitability, insurance need, underwriting eligibility, appropriate funding, expected policy performance, or retirement-income results for any individual or couple.

Recommendations involving one policy versus separate policies on both spouses require individual insurance-needs analysis, underwriting, financial underwriting, household cash-flow analysis, policy design, and consideration of each spouse’s circumstances. Two policies do not automatically provide better economic results than one policy.

Projected retirement income from an indexed universal life policy is not guaranteed unless specifically identified as guaranteed under the applicable insurance contract. Nonguaranteed illustrated values can vary materially from actual policy results.

References to approximately 12% annual retirement distributions describe modeled distribution levels under specific assumptions. They should not be interpreted as universal safe withdrawal rates, guaranteed distribution rates, guaranteed lifetime income, or assurances that an indexed universal life policy can sustain those distribution levels for any particular period.

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. Cost of insurance, administrative expenses, policy-loan costs, distributions, withdrawals, and other policy mechanics can continue to affect policy values during a 0% indexed-crediting period.

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

References to a 10% cap and 0% indexed-crediting floor describe the example strategy discussed in this article. Actual caps, participation rates, spreads, crediting methods, indexed strategies, and other nonguaranteed elements are governed by the applicable insurance contract and current declarations and may change where permitted by contract.

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 create indebtedness under the applicable insurance contract and generally accrue applicable loan charges. Loan provisions, loan rates, repayment provisions, treatment of values associated with outstanding loans, and treatment of unpaid loan charges vary by insurance contract. Actual policy provisions control.

References to loan-funded policy value continuing to participate in an applicable indexed-crediting strategy describe the strategy mechanics being modeled and should be verified against the applicable current approved illustration and actual insurance contract. Policy-specific loan and crediting provisions govern actual results.

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 maximum loan provisions should be verified against current approved policy information and the actual insurance contract.

Simplified examples comparing indexed crediting with an applicable policy-loan cost illustrate only the economic relationship between the two rates. They do not represent the policy’s complete return, guaranteed profit or loss, or exact dollar effect on policy values. Actual results are affected by policy values, outstanding indebtedness, timing, crediting mechanics, cost of insurance, administrative expenses, other policy charges, withdrawals, distributions, and other contractual factors.

Positive arbitrage is not guaranteed. Periods in which applicable indexed crediting is below the applicable policy-loan cost can create unfavorable loan economics. Prolonged unfavorable loan economics combined with policy charges and distributions can place additional pressure on policy values and long-term policy durability.

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. Negative annual price changes were replaced by 0% and positive annual price changes above 10% were capped at 10% for purposes of that historical analysis. The resulting annual capped-and-floored figures averaged approximately 6.87%. Historical results do not predict future policy performance and should not be interpreted as a guaranteed future indexed-crediting rate, compound annual growth rate, net policy return, or historical total return of the S&P 500.

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

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

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.

Financial underwriting may limit the amount of life insurance available based on applicable underwriting standards and each insured’s financial circumstances. High household income does not by itself guarantee approval for a requested amount of coverage on either spouse or for future death-benefit increases.

Death-benefit increases associated with planned JUMPs are designed to create additional funding capacity under the intended policy design while managing applicable MEC limits. Increasing death benefit does not by itself guarantee non-MEC status. Actual policy design, premium funding, tax rules, underwriting approval, applicable procedures, and contract provisions control.

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 projections should be updated when future JUMP assumptions change.

Policy loans generally 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. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income under applicable tax rules.

Life insurance death benefits are generally received income-tax-free by beneficiaries under current federal law, subject to applicable exceptions and individual circumstances. Outstanding policy indebtedness generally reduces the net death benefit payable under the 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, MEC status, policy lapse, surrender, outstanding indebtedness, and other circumstances.

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, policy-loan arbitrage, net policy return, sustainable withdrawal rate, guaranteed lifetime income, or S&P 500 performance. Using separate policies for two spouses does not automatically double or otherwise multiply this modeled result. Contributions, taxes, retirement timing, market assumptions, indexed-crediting results, policy-loan mechanics, loan rates, policy charges, underwriting, future JUMPs, distributions, death timing, longevity, and other assumptions can materially alter the comparison.

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. Using two policies does not automatically double or otherwise multiply this modeled result. Contributions, indexed-crediting assumptions, distribution patterns, policy charges, loan provisions, loan costs, future JUMPs, death-benefit structure, underwriting, retirement timing, death timing, and longevity can materially alter the comparison.

Comparisons involving one IUL policy versus separate policies on two spouses should use clearly stated assumptions and account for each insured’s age, health, underwriting classification, insurance need, death benefit, policy charges, funding, loan mechanics, retirement horizon, and household objectives. Simply dividing or doubling the values from one illustration is not an adequate analysis.

Survivor scenarios may involve changes in household income, Social Security benefits, pensions, retirement distributions, filing status, tax brackets, expenses, insurance proceeds, and estate considerations. Actual tax and legal effects should be reviewed with qualified professionals using the couple’s individual circumstances and current law.

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

FPP Financial does not provide tax, legal, accounting, investment, securities, or estate-planning advice. Couples should consult qualified tax, legal, accounting, insurance, financial, estate-planning, and other appropriate professionals regarding their individual circumstances before purchasing or modifying life insurance, changing retirement-plan contributions, taking policy loans, accessing policy values, changing beneficiary arrangements, or implementing any retirement-income strategy discussed here.