Why Does the IUL JUMP Strategy Increase the Death Benefit Over Time?

You start an IUL with a certain death benefit.

Then a few years later, the JUMP Strategy calls for the death benefit to increase.

Then it may increase again.

And again.

So the obvious question is:

“Why are we increasing the life insurance if the main goal is retirement income?”

That’s exactly the question you should ask.

Because the death-benefit increases aren’t supposed to be random.

They’re connected to the funding mechanics of the strategy.

As the Matching Indexed Participating Loan level increases, the strategy is designed to put more money into the policy.

That creates another problem we have to manage:

How much money can the policy accept while maintaining the intended tax classification?

That’s where the death benefit and Modified Endowment Contract rules enter the conversation.

The Death Benefit Isn’t Just There for Your Beneficiaries

The death benefit obviously provides life insurance protection.

But in a cash-value life insurance strategy, it also interacts with how the policy can be funded.

You can’t simply treat an IUL like a savings account and pour unlimited premium into it.

Life insurance has federal tax rules that can affect the policy’s classification when too much premium is paid relative to the policy’s death-benefit structure.

One of the major issues is whether the policy becomes a Modified Endowment Contract, or MEC.

Why Does MEC Status Matter?

Because MEC status changes the federal tax treatment of distributions from the policy.

That can materially change how policy loans and withdrawals work from a tax-planning perspective.

If the goal is to use policy values later for retirement, that distinction can be extremely important.

So when the JUMP Strategy is designed around increasing policy funding, we don’t want to pretend MEC limits don’t exist.

They have to be part of the design.

Here’s the Simple Version

The strategy wants to increase the amount of funding going into the policy.

But the policy has tax-related funding constraints.

So the planned JUMPs include increases in death benefit designed to create additional funding capacity while seeking to preserve the intended non-MEC structure.

That’s the connection.

More planned funding can require more death benefit.

The Death Benefit Does Not Simply Double Every Time

This is an important correction because it’s easy to describe the strategy incorrectly.

The JUMP Strategy is not:

“Every few years, we double your death benefit.”

That’s not the mechanic.

The planned death-benefit increase is designed around the additional funding capacity needed for the next stage of the strategy.

So the increase should be tied to the policy design and the funding objective.

Not an arbitrary doubling schedule.

Look at the $10,000 Annual Contribution Example

Here’s the example we’ve been using throughout this series:

Look at what is actually happening.

The client’s planned contribution stays at:

$10,000 per year.

But the total amount of annual funding shown grows as the Matching Indexed Participating Loan level increases.

Year 3 Is the First JUMP in This Example

The client contributes:

$10,000.

The Matching Indexed Participating Loan adds another:

$10,000.

Total annual funding shown:

$20,000.

Now the policy needs to accommodate a higher funding level than it had in Years 1 and 2.

The planned death-benefit increase is part of creating that additional funding capacity while seeking to maintain the intended non-MEC design.

Then the Funding Level JUMPs Again

At Year 5 in the example:

$10,000 client contribution + $20,000 Matching Indexed Participating Loan = $30,000 total annual funding shown.

At Year 7:

$10,000 + $30,000 = $40,000.

At Year 9:

$10,000 + $40,000 = $50,000.

At Year 11:

$10,000 + $50,000 = $60,000.

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

The funding level is increasing because of the Matching Indexed Participating Loan.

So If I’m Only Putting In $10,000, Where Is the Other $50,000 Coming From?

That’s one of the most important questions in the entire strategy.

The answer is:

It’s being created as a policy loan.

At the $50,000 matching level, the strategy creates a $50,000 Matching Indexed Participating Loan and redeploys those proceeds into the same policy as additional funding.

It’s not free money.

It’s not a carrier contribution.

It’s not a bonus.

It’s not an employer match.

It’s policy indebtedness.

And the Loans Accumulate

Another important point:

A later JUMP does not simply replace the earlier loan.

The loans created through prior JUMPs remain part of the policy’s outstanding indebtedness under the mechanics we’re discussing.

So moving from a $10,000 matching-loan level to a $20,000 level does not mean the $20,000 loan pays off the previous $10,000 loan.

The strategy is layering additional loan activity as the progression advances.

Why Would You Borrow Money and Put It Back Into the Same Policy?

Because under the JUMP design, the borrowed dollars are not being taken out to buy a boat, pay for a vacation or spend outside the policy.

They’re being redeployed into the policy.

That means those loan-funded dollars can continue participating in the applicable indexed-crediting strategy while carrying the applicable loan cost.

That’s a very different economic setup from borrowing money and spending it.

Think About the Policy in Two Buckets

Bucket One: your money.

In our example, that’s the $10,000 annual client contribution.

Bucket Two: the accumulated Matching Indexed Participating Loan money being redeployed into the policy.

Under the indexed strategy used in this example, both buckets have the same potential:

10% cap and 0% indexed-crediting floor.

But Bucket Two carries the applicable policy-loan cost.

The Current Applicable Loan Rate Is 5%

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

That does not mean the loan rate is guaranteed to remain at 5%.

The 6% figure is the contractual maximum for the applicable loan feature under the structure we’re discussing.

And neither figure guarantees positive arbitrage.

Now You Can See Why the Death Benefit Matters

If the Matching Indexed Participating Loan allows the strategy to put progressively more funding into the policy, then the policy design has to support that funding.

The planned death-benefit increases are part of creating that additional funding capacity while seeking to preserve the intended non-MEC structure.

Without understanding that connection, the death-benefit JUMPs can look completely random.

They’re not supposed to be.

Does Increasing the Death Benefit Automatically Prevent a MEC?

No.

This is where I would be very careful with anyone who gives you a one-sentence explanation.

You cannot say:

“We increased the death benefit, so the policy can’t become a MEC.”

That’s too broad.

MEC testing is affected by the policy’s actual design, premium activity, benefit changes, applicable tax rules and other factors.

The death-benefit increases are designed to create additional funding capacity while seeking to maintain the intended non-MEC structure.

The actual policy still needs to be monitored.

Why Not Start With a Massive Death Benefit on Day One?

That’s a smart question.

If more death benefit creates more funding room, why not just buy an enormous death benefit from the beginning?

Because more death benefit isn’t automatically better.

Life insurance has costs.

The policy should be designed around the client’s actual insurance needs, financial circumstances, funding objectives and underwriting capacity.

Adding unnecessary insurance simply to create an oversized funding limit can change policy economics.

The goal is not:

“Buy the biggest death benefit possible.”

The goal is:

“Use the amount of death benefit appropriate for the intended policy design and funding strategy.”

Why Not Put All $60,000 Into the Policy From the Beginning?

Because that’s not what the example is modeling.

The client in this example is contributing $10,000 per year.

The Matching Indexed Participating Loan progression is introduced over time.

The example moves through planned JUMPs in:

Years 3, 5, 7, 9 and 11.

Each successful JUMP increases the matching-loan level.

That progression is a core part of the strategy being modeled.

Every Planned Death-Benefit JUMP Creates Another Question

If you’re asking for more death benefit, will the insurance company approve it?

That’s why future underwriting matters.

The original policy approval does not automatically guarantee every future death-benefit increase.

What Can Affect a Future JUMP?

Future underwriting can consider factors such as:

• Health
• Income
• Employment
• Existing life insurance
• Driving history
• Occupation
• Hazardous job duties
• Higher-risk hobbies or activities
• Other applicable underwriting factors

So when someone shows you a JUMP illustration that runs all the way through Year 11, don’t mentally convert every future death-benefit increase into a guarantee.

They’re planned future steps.

What If You Don’t Qualify for the Next Death-Benefit Increase?

This is where people sometimes assume the worst.

They think:

“If I miss one JUMP, does the whole strategy collapse?”

Under the mechanics we’ve been discussing, not necessarily.

A missed JUMP can pause the progression rather than automatically resetting the strategy.

Here’s What That Could Look Like

Suppose you successfully completed the Year 7 JUMP.

You’ve reached:

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

Then the Year 9 death-benefit increase isn’t approved.

Under the mechanics described here, the strategy may remain at the already-achieved $30,000 matching-loan level rather than automatically falling back to zero.

The actual policy contract and applicable procedures control the individual case.

So the Client Can Potentially Stay at the Level Already Achieved

In that example, annual funding shown could remain:

$10,000 client contribution + $30,000 Matching Indexed Participating Loan = $40,000.

Instead of advancing to:

$10,000 + $40,000 = $50,000.

The progression pauses.

It does not automatically mean every prior successful JUMP disappears.

Can You Try for the Death-Benefit Increase Again Later?

Under the strategy mechanics we’re discussing, another application may potentially be considered at a later policy anniversary.

Maybe the underwriting issue changes.

Maybe health improves.

Maybe income changes.

Maybe employment changes.

Maybe another relevant circumstance changes.

But another application still requires approval.

Future JUMPs are opportunities for future approval, not contractual promises that every increase will happen.

How Does the Death-Benefit Progression Connect to Positive Arbitrage?

Now we can connect the entire strategy.

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

Dividends were excluded because the policy is not directly invested in the S&P 500.

The analysis applied the strategy’s 10% cap and 0% indexed-crediting floor to each annual price change.

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

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

Under those assumptions, the period produced a:

6.87% historical average indexed-crediting result.

That is not the historical return of the S&P 500.

It is not a guaranteed future crediting rate.

And it is not a guaranteed policy return.

Then Compare 6.87% With the Current 5% Loan Rate

Under those particular assumptions:

6.87% – 5.00% = 1.87 percentage points.

That’s the modeled positive spread.

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

If the policy credits 0% while the applicable loan cost is 5%, the economics are unfavorable for that period.

Positive arbitrage is not guaranteed.

Now Layer in the Successive JUMPs

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

Be very careful with those numbers.

They are not S&P 500 returns.

They are not IUL indexed-crediting rates.

They are not guaranteed policy returns.

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

The Death-Benefit Increase Is Part of the Path to Those Modeled Results

This is the part I don’t want lost.

You can’t look at the later JUMP numbers and ignore how the strategy got there.

The progression requires more loan-funded dollars.

More loan-funded dollars mean more policy funding.

More planned funding can require additional funding capacity.

The strategy uses planned death-benefit increases to create that additional capacity while seeking to maintain the intended non-MEC structure.

Those death-benefit increases require future approval.

That’s the chain.

Now Let’s Talk About the Up-to-300% Retirement-Income Number

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 major projected difference.

But if you’re evaluating that number correctly, your next question shouldn’t be:

“Where do I sign?”

It should be:

“Show me what had to happen for the model to produce that result.”

One of Those Assumptions May Be Successful Future Death-Benefit Increases

If the comparison assumes JUMPs in Years 3, 5, 7, 9 and 11, those future steps matter to the result.

So ask:

“What happens to the projected retirement income if I qualify through Year 7 but don’t receive approval for the Year 9 JUMP?”

Then run it.

Don’t guess.

What If You Get Every Planned JUMP?

Run that scenario.

Then run fewer JUMPs.

Then run lower indexed crediting.

Then run the contractual maximum 6% loan rate.

Then combine the tougher assumptions.

That’s how you find out whether the projected advantage is robust or fragile.

The 300% Is Not a Guaranteed Result

It isn’t a guaranteed return.

It isn’t a guaranteed retirement-income increase.

And it isn’t something every IUL produces.

It refers to certain modeled comparisons using specific assumptions.

Those assumptions can include:

• Contribution levels
• Successful future JUMPs
• Death-benefit increases
• Future underwriting approval
• Indexed-crediting assumptions
• Loan rates
• Policy charges
• Tax assumptions
• Distribution amounts
• Distribution timing
• Longevity
• Policy durability

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.

Again, the difference isn’t simply:

“This is a better IUL.”

The strategy design and loan mechanics can change the modeled retirement-income result.

And the death-benefit progression is part of making the additional funding progression possible under the intended design.

Here’s the Question I Would Ask About Any JUMP Illustration

“Show me the death benefit at every JUMP.”

Then:

“Show me why it increased by that amount.”

Then:

“Show me how much additional funding capacity that creates.”

Then:

“Show me what happens if the next increase isn’t approved.”

Now you’re understanding the mechanics instead of staring at the final retirement-income number.

Ask to See the MEC Line Too

If the strategy is being designed around increasing funding while maintaining the intended non-MEC structure, the MEC considerations shouldn’t be hidden.

You should understand why the policy is being funded at the level shown.

You should understand why the death benefit changes.

You should understand that MEC status has tax consequences.

And you should understand that increasing the death benefit does not magically guarantee that MEC treatment can never occur.

Why Does This Matter So Much in Retirement?

Because the tax treatment of policy distributions is one of the reasons someone may consider an IUL for retirement in the first place.

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

But MEC status changes the tax treatment of distributions.

Policy lapse or surrender can also create tax consequences.

So the tax classification isn’t a minor technical detail.

Don’t Let Someone Turn “Tax-Free Retirement” Into a Magic Phrase

There are rules behind it.

There are policy mechanics behind it.

There are loan balances behind it.

There are charges behind it.

There are MEC rules behind it.

And there is lapse risk behind it.

That’s why I prefer:

“Show me how the policy is designed to work.”

Not:

“Just trust me, it’s tax-free.”

Why Not Keep the Death Benefit as Low as Possible Forever?

When an IUL is being designed heavily around cash value, people often hear:

“Keep the death benefit low and stuff as much premium into the policy as possible.”

That idea is trying to reduce unnecessary insurance costs and improve cash-value efficiency.

But “as low as possible” does not mean “ignore the funding rules.”

If the planned funding level increases materially, the death-benefit structure may need to change too.

The design has to balance insurance, funding capacity, costs, tax rules and the retirement objective.

The Death Benefit Is a Tool, But It’s Still Real Insurance

Don’t treat it like a fake number on an illustration.

If the insured dies, the death benefit matters.

Outstanding policy indebtedness generally reduces the net death benefit payable under the contract.

The amount of insurance can affect underwriting.

The amount can affect policy charges.

And changes to the death benefit can interact with tax rules and policy design.

It’s real insurance with real consequences.

What Happens to the Death Benefit in Retirement?

The retirement phase has to be modeled as part of the entire policy.

If policy loans are used to access value during retirement, outstanding indebtedness generally affects the net death benefit payable.

That doesn’t mean the death benefit becomes irrelevant.

It means you should look at both sides of the strategy:

How much projected retirement income is being accessed?

And:

What projected net death benefit remains?

Should You Maximize Retirement Income or Preserve More Death Benefit?

That’s a separate decision we’ll cover later in this series.

But the tradeoff should be visible.

If one distribution strategy produces more projected retirement income but leaves less projected net death benefit, you should see that.

If another leaves more for heirs but produces less retirement income, you should see that too.

The client should choose after seeing the numbers.

Here’s How I Would Stress-Test the Death-Benefit JUMP Strategy

First, run the planned progression.

Years 3, 5, 7, 9 and 11.

Then run a version where the progression stops after Year 5.

Run another where it stops after Year 7.

Now compare projected policy values and retirement income.

Then Stress-Test the Loan Cost

Run the current applicable 5% loan rate.

Then run the contractual maximum of 6%.

Combine the 6% loan rate with fewer future JUMPs.

Then lower the indexed-crediting assumption.

Now look at the policy again.

Then Look at the Policy at Age 90 or 95

Don’t stop the illustration at the prettiest age.

If you’re planning for retirement, longevity matters.

What happens to the policy values?

What happens to outstanding indebtedness?

What happens to the death benefit?

What happens if the insured lives longer than expected?

That’s where durability matters.

There Is an Emotional Reason People Miss This

You’re looking at a retirement-income projection.

You see a number that’s dramatically higher than what your 401(k) or IRA model showed.

Your attention immediately goes to the retirement-income column.

Of course it does.

That’s the number you’re going to live on.

But the hidden question is:

“What had to happen inside this policy for that number to appear?”

The death-benefit progression is part of that answer.

You Don’t Want to Discover the Assumption at Age 60

Imagine you’ve been planning around the Year 11 projection for years.

Then you discover that future death-benefit increases were never guaranteed.

Or you discover you don’t understand why the death benefit was being increased.

Or you discover you assumed a death-benefit increase automatically prevented MEC treatment.

That’s not when you want to learn the mechanics.

You want to understand them before you start.

Because Late-Life Financial Mistakes Feel Different

At 30, you feel like you have time to recover.

At 55 or 60, the thought changes.

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

You don’t want to become financially dependent on your children because a retirement strategy was built around assumptions you never understood.

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

“We should be able to handle this ourselves.”

That independence is worth protecting.

And one of the best ways to protect it is to understand the mechanics before relying on the projection.

So, Why Does the IUL JUMP Strategy Increase the Death Benefit Over Time?

Because the strategy is designed to increase policy funding as successive JUMPs occur, and the planned death-benefit increases are used to create additional funding capacity while seeking to maintain the intended non-MEC structure.

The death benefit does not simply double on an arbitrary schedule.

The planned increase is connected to the policy design and additional funding objective.

And because you’re requesting additional life insurance, future death-benefit increases can require new underwriting and approval.

The Entire Chain Looks Like This

Successful JUMP

leads to:

Higher Matching Indexed Participating Loan level

which creates:

More planned policy funding

which can require:

Additional funding capacity

which is supported through:

A planned increase in death benefit

which can require:

New underwriting and approval.

That’s the mechanic I want you to understand.

How We Look at This at FPP Financial

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

I don’t want to show you a giant retirement-income number and skip over the machinery that created it.

We’ll show you the client contribution.

We’ll show you the Matching Indexed Participating Loan.

We’ll show you the total funding progression.

We’ll show you the planned death-benefit increases.

We’ll explain why they’re there.

We’ll identify which future increases still require approval.

We’ll look at MEC considerations.

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

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

We’ll lower the indexed-crediting assumption.

We’ll test what happens if future JUMPs stop early.

Then we’ll compare the projected retirement income against 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 Why the Death Benefit Changes in Your Own JUMP Projection?

We’ll walk through the policy year by year.

You’ll see what you’re contributing.

You’ll see what is being created through the Matching Indexed Participating Loan.

You’ll see when each planned JUMP occurs.

You’ll see why additional death benefit is being requested.

You’ll see which future steps still require approval.

And we’ll stress-test what happens if those steps don’t all occur.

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

But don’t buy a strategy because someone showed you 300%.

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

Show me exactly where the difference comes from.

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

Let the math do the talking.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• What Is a MEC in an IUL? Why It Matters for Retirement Income
• Why Do Future IUL JUMPs Require New Underwriting?
• How Can $10,000 a Year Turn Into $60,000 of Annual IUL Funding?

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 or direct investment in a market index.

Planned death-benefit increases under the IUL JUMP Strategy are intended to create additional policy funding capacity while seeking to maintain the intended non-MEC structure. A death-benefit increase does not by itself guarantee that a policy will avoid Modified Endowment Contract status. MEC testing is affected by actual policy design, premium activity, benefit changes, applicable tax rules and other factors. Policy-specific MEC calculations should be verified using current approved policy information and appropriate professional guidance.

Modified Endowment Contract status can materially affect the federal income-tax treatment of policy distributions. Policy owners should consult qualified tax professionals regarding the application of MEC rules and other tax provisions to their individual circumstances.

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

Under the strategy mechanics described in this article, failure to obtain approval for the next planned JUMP may pause future progression rather than automatically eliminating prior successful JUMPs or returning the strategy to its original matching-loan level. Actual treatment of an individual policy is governed by the insurance contract, applicable procedures, underwriting decisions and circumstances at that time.

A policy owner may potentially be able to apply for additional coverage at a later policy anniversary if circumstances change. Any future application remains subject to applicable underwriting requirements and approval. Reapplication does not guarantee approval.

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.

Prior policy loans do not automatically disappear when later JUMPs occur. 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 rate should be verified against current approved policy information. The 6% contractual maximum does not guarantee positive arbitrage or favorable policy performance.

Indexed universal life insurance does not directly invest in the S&P 500 or another market index, does not own the underlying index securities and does not receive index dividends. Indexed interest is determined according to applicable policy crediting terms, which may include caps, participation rates, spreads and other provisions.

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

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 and other circumstances. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income.

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 is not a universal result or guarantee. When a modeled comparison assumes successful future JUMPs and associated death-benefit increases, future underwriting approvals are assumptions within the projection. Failure to achieve a planned increase can materially change the projected result.

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 loan mechanics, funding, policy charges, crediting assumptions and future JUMP progression can materially alter the modeled comparison.

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.

Life insurance death benefits are generally received income-tax-free under current federal law, subject to applicable exceptions. Outstanding policy indebtedness generally reduces the net death benefit payable. Individual tax treatment should be reviewed with a qualified tax professional.

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

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