What Is an IUL Spread and How Does It Affect Your Indexed Interest?

You understand the cap.

You understand the participation rate.

Then you open another IUL illustration and find one more term:

Spread.

And your first thought may be:

“What are they subtracting now?”

That’s actually a pretty good place to start.

Because a spread can reduce the positive index result used in an indexed-crediting calculation.

But a spread is not the same thing as a cap.

It’s not the same thing as a participation rate.

It’s not the same thing as a policy fee.

And it is definitely not the same thing as the policy-loan rate.

If you’re considering an indexed universal life policy for retirement, you need to know which number you’re looking at before you can decide whether the projection makes sense.

What Is an IUL Spread?

A spread is an amount that can be deducted from an applicable positive index result when determining indexed interest under a particular crediting strategy.

Here’s a simplified example.

Suppose the applicable index increases:

9%.

And suppose the indexed-crediting strategy has a:

2% spread.

A simplified calculation could look like:

9% – 2% = 7%.

So the applicable indexed-crediting result would be 7% in that simplified example, assuming no other provision changes the calculation.

What If the Index Goes Up 15%?

Using the same simplified 2% spread:

15% – 2% = 13%.

But now you have to ask another question.

Does a cap also apply?

If the strategy has a cap, the actual calculation has to follow the order and terms stated in the policy.

This is why looking at the spread by itself can be misleading.

A Spread Is Not a Cap

A cap places a ceiling on the applicable indexed-crediting result.

A spread generally works by reducing an applicable positive index result according to the crediting formula.

Those aren’t the same thing.

For example, suppose an index increases 12%.

Under a simplified strategy with a 10% cap, the result might be limited to:

10%.

Under a simplified strategy with no cap but a 2% spread, the calculation might instead produce:

12% – 2% = 10%.

Same answer in that one example.

Different mechanism.

Change the Index Result and You Can See the Difference

Suppose the index increases 7%.

With a 10% cap and no spread, the simplified result could remain:

7%.

With a 2% spread and no cap in this hypothetical example:

7% – 2% = 5%.

Now the results are different.

That’s why you need to understand the formula instead of simply comparing one headline number.

A Spread Is Not a Participation Rate Either

A participation rate generally determines how much of an applicable positive index change is used in part of the crediting calculation.

A spread generally subtracts an amount according to the applicable crediting method.

Let’s use an 8% positive index result.

With an 80% participation rate in a simplified example:

8% × 80% = 6.4%.

With a 2% spread instead:

8% – 2% = 6%.

Again, different mechanics.

So Which Is Better, a Cap, Participation Rate, or Spread?

That’s the wrong way to compare them.

You can’t say:

“A spread strategy is always better.”

Or:

“A cap strategy is always better.”

Or:

“The highest participation rate always wins.”

You need to run the actual crediting formula across different index results.

Here’s a Simple Comparison

Imagine three hypothetical crediting strategies.

Strategy A: 10% cap.

Strategy B: 80% participation rate.

Strategy C: 2% spread.

For simplicity, assume no other limitation applies in this example.

Now suppose the index increases 5%.

• Strategy A: 5%
• Strategy B: 4%
• Strategy C: 3%

Now suppose the index increases 15%.

• Strategy A: 10%
• Strategy B: 12%
• Strategy C: 13%

The strategy that looks best can change with the index result.

That’s why one number doesn’t tell you which crediting strategy is better.

What Happens With a Spread When the Index Is Negative?

The actual answer is controlled by the policy’s crediting terms.

If an applicable strategy also has a 0% indexed-crediting floor, a negative index calculation may result in 0% indexed crediting rather than the spread pushing the result further below zero.

For example, if the applicable index result is:

-10%.

You should not automatically calculate:

-10% – 2% = -12%.

If a contractual 0% indexed-crediting floor applies, the floor can control the minimum applicable indexed-crediting result.

Always follow the actual policy formula.

What If the Index Gain Is Smaller Than the Spread?

This is another useful question.

Suppose the index rises:

1%.

And the applicable spread is:

2%.

A raw subtraction would produce -1%.

But if the applicable crediting strategy has a 0% floor, the indexed-crediting result may be floored at 0%, subject to the actual contract.

Again, the spread doesn’t exist in isolation.

The Floor Still Doesn’t Protect Your Entire Cash Value

If the indexed-crediting calculation produces 0%, that doesn’t mean nothing comes out of the policy.

Policy charges can still apply.

Cost of insurance can still apply.

Policy-loan costs can still apply.

Withdrawals can reduce policy values.

Outstanding indebtedness still matters.

A 0% indexed-crediting floor is not a 0% floor on every change in your total policy value.

Why Would an Insurance Company Use a Spread?

A spread is simply one way an indexed-crediting strategy can be structured.

Another strategy might use a cap.

Another might use a participation rate.

Some strategies can involve more than one crediting provision.

The fact that a strategy uses a spread doesn’t make it automatically good or bad.

You have to look at the complete economics.

Here’s Where People Get Tripped Up

Someone sees:

“No cap.”

And immediately thinks:

“That’s obviously better.”

Not necessarily.

What participation rate applies?

What spread applies?

What index is being referenced?

What crediting method applies?

What contractual provisions can change?

“No cap” is not the same thing as “I get the full market return.”

Remember, You’re Not Directly Invested in the S&P 500

The indexed account uses an external index as part of a crediting formula.

You don’t directly own the stocks represented by the index through the indexed account.

You don’t simply receive the S&P 500’s total return.

And dividends generally aren’t credited as though you directly owned the underlying securities.

That’s why a spread can be part of the contract’s indexed-crediting formula.

Is an IUL Spread a Fee?

Don’t casually lump the spread together with policy charges.

A spread affects the indexed-crediting calculation.

Policy charges are separate policy economics.

Those can include cost of insurance, administrative charges, and other applicable expenses.

If you want to know what the policy really costs, you need to examine those separately.

And an IUL Spread Is Not the Policy-Loan Rate

This distinction becomes especially important with the IUL JUMP Strategy.

Suppose an indexed-crediting option has a 2% spread.

And the applicable policy loan has a 5% current rate.

Those are not two names for the same cost.

The 2% spread affects the applicable indexed-crediting calculation.

The 5% policy-loan rate is associated with policy indebtedness.

Mix those numbers together and you’ll misunderstand the strategy.

Let’s Connect This to the IUL JUMP Strategy

The IUL JUMP Strategy uses a Matching Indexed Participating Loan.

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

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

That matching amount is not free money.

It isn’t an employer contribution.

It isn’t a carrier gift.

It’s policy-loan activity.

Think About the Strategy as Two Buckets

Bucket 1: the client’s own funded dollars.

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

Under the example we’ve been using, both buckets can participate in the same applicable indexed-crediting strategy.

The loan-funded bucket has an additional issue:

The applicable loan cost.

Where Does a Spread Enter the JUMP Math?

If the applicable indexed-crediting strategy uses a spread, that spread can affect the indexed-crediting result.

And the indexed-crediting result matters when evaluating the economics of the loan-funded portion.

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.

So we don’t just ask:

“What did the index do?”

We ask:

“After the applicable crediting formula is applied, what is the indexed-crediting result, and how does that compare with the applicable loan cost?”

Here’s a Simplified Example

Suppose an index increases 9%.

Assume a hypothetical 2% spread applies.

The simplified indexed-crediting calculation could produce:

9% – 2% = 7%.

Now compare 7% with a 5% policy-loan cost.

The simplified difference is:

7% – 5% = 2 percentage points.

That’s a favorable simplified relationship for that period.

Now Make the Index Result Weaker

Suppose the index increases 5%.

Using the same hypothetical 2% spread:

5% – 2% = 3%.

Against a 5% policy-loan cost:

3% – 5% = an unfavorable 2-percentage-point difference.

Same spread.

Same loan cost.

Different index result.

Different loan economics.

And If Indexed Crediting Is 0%?

Against a 5% applicable loan cost, the simplified relationship is:

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

That’s why positive arbitrage cannot be treated as a guarantee.

Positive Arbitrage Is a Relationship, Not a Product Feature That Always Pays

This distinction matters.

If the applicable indexed-crediting result exceeds the applicable loan cost, the modeled relationship can be favorable.

If indexed crediting is below the loan cost, the modeled relationship can be unfavorable.

A spread can influence the indexed-crediting side of that equation.

What About the 6.87% Historical JUMP Example?

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 strategy assumptions used for that example:

10% cap and 0% indexed-crediting floor.

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

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

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

6.87%.

Don’t Add a Spread to That Historical Example Unless the Strategy Actually Uses One

This is important.

The 6.87% historical example was calculated using the stated 10% cap and 0% floor assumptions.

You should not randomly subtract a hypothetical 2% spread from that 6.87% and claim the result represents the strategy.

If you want to test a different crediting strategy that uses a spread, you need to rerun the historical calculation according to that strategy’s actual crediting methodology.

That’s how you keep the comparison honest.

The 6.87% Number Is Not a Universal IUL Return

It’s not a guaranteed future rate.

It’s not the S&P 500’s total return.

And it’s not a number that should automatically be transferred to another indexed-crediting option.

Change the cap.

Change the participation rate.

Add a spread.

Change the index.

Change the crediting method.

You can change the result.

What About the 1.87% Positive-Spread Example?

Using the historical JUMP assumptions:

6.87% historical average indexed-crediting result

minus:

5.00% current applicable policy-loan rate

equals:

1.87 percentage points of modeled positive spread.

Now we have two different uses of the word “spread.”

And this is where people can get confused.

An Indexed-Crediting Spread and an Economic Spread Are Not the Same Thing

This distinction is critical.

An IUL indexed-crediting spread is a contractual component that can be applied in calculating indexed interest.

The 1.87 percentage-point modeled positive spread we’re discussing is the mathematical difference between the 6.87% historical indexed-crediting result and the 5% current applicable loan rate used in that model.

Same word.

Two completely different concepts.

Don’t Let Someone Blur Them Together

If you hear:

“The spread is 2%.”

Ask:

“Which spread?”

Are we talking about a contractual spread in the indexed-crediting formula?

Or are we talking about the modeled difference between indexed crediting and the policy-loan cost?

That one question can clear up a lot of confusion.

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 figures are not indexed-crediting spreads.

They aren’t cap rates.

They aren’t participation rates.

They aren’t S&P 500 returns.

And they aren’t guaranteed policy returns.

They’re Modeled Effective Results Under a Specific Set of Assumptions

That’s the label that matters.

If the indexed-crediting assumptions change materially, the modeled JUMP results can change too.

Which means a spread inside a crediting strategy can matter to the larger retirement-income model.

Why Can a Small Spread Matter Over 20 Years?

Because retirement planning is cumulative.

A one-year difference may not look dramatic.

Repeated differences in indexed interest over many crediting periods can affect long-term policy values.

Those policy values can eventually affect how much retirement income the policy can support.

When policy loans are also involved, weaker long-term indexed crediting can put additional pressure on the relationship between policy values and outstanding indebtedness.

That’s Why I Don’t Want to See Only the Best Illustration

If the retirement plan works beautifully under one favorable set of assumptions, that’s useful.

But it’s not enough.

I also want to know:

“What happens if the crediting economics aren’t as favorable?”

Stress-Test the Indexed-Crediting Assumptions

Use a lower long-term indexed-crediting assumption.

Include several weak or 0% indexed-crediting periods.

Use the current applicable 5% loan rate.

Then test the applicable contractual maximum 6% loan rate.

Look at the policy charges.

Look at the outstanding indebtedness.

Look at the retirement distributions.

Then see whether the policy remains durable.

And Stress-Test Future JUMPs

Future JUMPs require future underwriting and approval.

They aren’t guaranteed when the original policy is issued.

So if your retirement projection assumes future JUMPs, run a version where the progression stops earlier.

Under the mechanics we’re discussing, a missed future JUMP can pause the progression rather than automatically erasing the matching-loan level already achieved.

But the projected retirement-income number needs to be recalculated.

Now Let’s Challenge the Up-to-300% 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 number should immediately trigger a question:

“What crediting assumptions are behind it?”

If a contractual spread applies to an indexed-crediting strategy, was it accounted for?

If the crediting terms can change, what happens under less favorable assumptions?

If indexed crediting is lower, what happens to the policy-loan economics?

If the loan rate reaches 6%, what happens?

If future JUMPs stop, what happens?

The 300% Number Is Not an Indexed-Crediting Claim

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

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

It doesn’t mean the policy gets 300% of the S&P 500.

And it doesn’t mean a spread creates 300% more retirement income by itself.

The figure refers to projected retirement income in certain modeled comparisons.

Where Can the Modeled Difference Come From?

The calculation can be affected by:

• Client contributions
• Employer contributions where applicable
• Market-return assumptions
• Taxes
• Investment expenses
• Indexed-crediting assumptions
• Caps
• Participation rates
• Spreads
• Policy charges
• Matching Indexed Participating Loan mechanics
• Policy-loan costs
• Future JUMPs
• Distribution timing
• Retirement longevity

That’s why I don’t want the 300% number standing by itself.

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.

If the two IUL structures use different crediting strategies, you need to account for that.

One could use a cap.

Another could use a participation rate.

Another could use a spread.

They may have different loan provisions and policy charges.

So don’t automatically attribute the entire projected difference to one feature.

Run the actual policies side by side.

Can a Higher Spread Be Bad?

All else equal in a simple subtraction-based crediting formula, a larger spread can reduce the applicable positive indexed-crediting result more than a smaller spread.

But “all else equal” is doing a lot of work in that sentence.

The rest of the crediting strategy can differ.

That’s why you shouldn’t shop for an IUL by finding the smallest spread printed on a page.

Can a 0% Spread Be Better?

Not automatically.

A strategy with no spread may have a cap or participation rate that changes the result.

It may use a different index or crediting method.

The contract may have different guarantees.

You need the whole formula.

Don’t Shop for an IUL Like You’re Comparing Gas Prices

This one says 10% cap.

That one says 140% participation.

Another says 0% spread.

Those numbers don’t exist in a vacuum.

The biggest or smallest headline number doesn’t tell you which policy will produce the strongest long-term result for your situation.

What Questions Should You Ask About an IUL Spread?

1. Does this indexed-crediting strategy use a spread?
2. What is the current applicable spread?
3. Exactly how is the spread applied?
4. At what point in the crediting formula is it applied?
5. Is the spread guaranteed?
6. Can the spread change?
7. What contractual limits apply?
8. Does the strategy also have a cap?
9. What participation rate applies?
10. What floor applies?
11. What index is being referenced?
12. What crediting method is being used?
13. Are dividends included in the indexed-crediting calculation?
14. What happens if the index gain is smaller than the spread?
15. What happens if the index is negative?
16. How would a less favorable spread affect indexed interest?
17. How would lower indexed interest affect policy-loan economics?
18. How would it affect projected retirement income?
19. What happens if the applicable policy-loan rate reaches 6%?
20. What happens if future JUMPs stop?

There’s Another Question I Want You to Ask

“When you say spread, are you talking about the indexed-crediting spread or the difference between crediting and the loan rate?”

Don’t assume.

Make the person explaining the policy define the number.

Why This Matters More as Retirement Gets Closer

When you’re 55 or 60, you aren’t just comparing insurance terminology.

You’re trying to decide what will eventually replace your paycheck.

You may only have five, ten, or fifteen years before retirement.

That changes how a mistake feels.

You’re not thinking:

“I’ll just fix it 25 years from now.”

You’re thinking:

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

You Don’t Want to Discover the Fine Print After the Paychecks Stop

That’s the real fear.

Not the word “spread.”

The fear is making a decision you thought you understood and finding out later that the retirement-income math worked differently.

You want to stay independent.

You want to make the decision yourselves.

You don’t want your children becoming your backup financial plan.

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

“We should be able to handle this ourselves.”

So ask the uncomfortable questions now.

The Bottom Line

An IUL spread is a component that can reduce an applicable positive index result when indexed interest is calculated under a particular crediting strategy.

It is not the same thing as a cap.

It is not the same thing as a participation rate.

It is not automatically a policy charge.

And it is not the same thing as the policy-loan rate.

The exact effect of a spread is controlled by the policy’s actual crediting methodology.

How We Evaluate Spreads at FPP Financial

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

I don’t want to tell you:

“This policy has a low spread, so it’s better.”

That proves almost nothing by itself.

I want to see the entire formula.

We’ll look at the spread.

We’ll look at the cap.

We’ll look at the participation rate.

We’ll look at the floor.

We’ll look at the indexed-crediting methodology.

We’ll look at policy charges.

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

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

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

We’ll look at future JUMP assumptions.

We’ll look at retirement distributions.

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 What a Spread Actually Does to the Retirement Math?

Don’t just look at the word on an illustration.

Run the numbers.

Show me the index result.

Show me the spread.

Show me the cap.

Show me the participation rate.

Show me the indexed-crediting result after the applicable formula.

Then show me the policy-loan cost.

Then show me the retirement income.

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 buy the strategy because somebody puts 300% on a screen.

Make us show you what assumptions created it.

Then make those assumptions worse.

And run it again.

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

• What Is an IUL Participation Rate and Why Does It Matter?
• How Does an IUL Cap Affect Indexed Interest?
• 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.

An indexed-crediting spread is one component that may be used in an applicable indexed-crediting methodology. The exact definition, amount, order of operations, and manner in which a spread, cap, participation rate, floor, or other provision is applied are controlled by the applicable insurance contract and crediting method. Simplified examples in this article are for conceptual education and should not be interpreted as the formula for a particular policy.

An indexed-crediting spread should not be confused with the economic difference between an indexed-crediting result and a policy-loan rate. These are separate concepts. A spread used in an indexed-crediting formula can reduce an applicable positive index result, while a policy-loan rate relates to policy indebtedness.

Caps, participation rates, spreads, bonuses, crediting methods, and other nonguaranteed policy elements may change if permitted under the insurance contract. Current values or terms should not be assumed to remain unchanged for the life of a policy. Policy-specific guarantees and contractual limits should be verified using current approved policy information and the actual insurance contract.

Indexed universal life insurance does not directly invest policy cash value in the S&P 500 or another market index and does not provide the policyholder with 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.

An indexed-crediting strategy that references the S&P 500 generally does not credit S&P 500 dividends as though the policy directly owned the underlying stocks. Direct investments and investment funds have different market exposure and can handle dividends, expenses, taxes, and distributions differently.

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. Policy charges, cost of insurance, loan costs, withdrawals, and other policy mechanics continue to apply.

The historical 6.87% indexed-crediting example discussed in this article is based on an analysis of annual S&P 500 price changes from 2006 through 2020, excluding dividends, and applying the stated 10% cap and 0% indexed-crediting floor. Historical results do not predict future policy performance and should not be interpreted as a guaranteed future indexed-crediting rate, policy return, or the historical total return of the S&P 500.

The 6.87% historical result is tied to the specific assumptions and methodology used in the referenced analysis. A different spread, participation rate, cap, floor, index, crediting method, or historical period can produce materially different results. A hypothetical spread should not simply be subtracted from the 6.87% historical result unless that calculation accurately reflects the applicable crediting methodology.

Life insurance illustrations contain assumptions and may include both guaranteed and nonguaranteed elements. Nonguaranteed values, indexed-crediting assumptions, caps, participation rates, spreads, 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. Changes in spreads, participation rates, caps, crediting methods, or other indexed-crediting terms can affect indexed-crediting results and therefore can affect the modeled relationship between indexed crediting and policy-loan costs.

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

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

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 and carrier 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, S&P 500 performance, or a result created solely by an indexed-crediting spread. Results can change materially with contributions, employer contributions, market-return assumptions, dividends, taxes, investment fees, indexed-crediting assumptions, caps, participation rates, spreads, policy charges, loan costs, future JUMPs, distribution timing, and longevity.

The approximately-40% projected retirement-income result refers to certain modeled comparisons involving the JUMP Strategy and the traditional IUL structure being evaluated. It is not a universal result or guarantee. Differences in spreads, participation rates, caps, crediting methods, loan mechanics, policy charges, funding, future JUMPs, 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, and distribution mechanics from life insurance.

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.