Should You Fund an IUL If Your Employer Offers a 401(k) Match?

Your employer offers a 401(k) match.

You’re also looking at indexed universal life as another way to build retirement income.

So which one should get your money?

That’s where this conversation can get misleading fast.

One person tells you:

“Never give up free employer money.”

Another tells you:

“The IUL can produce more retirement income.”

Neither statement is enough to make the decision.

I want to see the numbers.

More specifically:

How much are you contributing?

How much is your employer actually contributing?

What does the 401(k) project at retirement?

What does the IUL project?

What happens when you start taking income?

And if someone claims one strategy produces dramatically more retirement income than the other:

Show me exactly where the difference comes from.

First, Don’t Ignore the Employer Match

If your employer is willing to contribute money to your 401(k) when you contribute, that employer contribution has real economic value.

It should be included in any legitimate comparison.

Suppose you put money into your 401(k) and your employer contributes additional money according to the plan’s matching formula.

If you stop contributing and lose that employer contribution, you haven’t simply moved your money from one strategy to another.

You’ve potentially given something up.

That needs to show up in the math.

A Bad IUL Comparison Can Make the 401(k) Look Weaker Than It Really Is

Here’s an easy way to rig the comparison.

Take the employee’s contribution to the 401(k).

Ignore the employer contribution.

Then compare that smaller number against the IUL.

Of course the comparison can look different.

But that’s not the employee’s actual situation.

If your employer is putting money into your retirement account, give the 401(k) credit for it.

I don’t want the IUL JUMP Strategy to win because we made the 401(k) look bad.

I want it to compete against the real 401(k).

The Employer Match and the JUMP “Match” Are Not the Same Thing

This is especially important with the strategy we’re discussing.

The IUL JUMP Strategy uses what we call a Matching Indexed Participating Loan.

The word “matching” can make people assume it’s similar to an employer match.

It isn’t.

Your employer’s 401(k) match is an employer contribution made under the terms of the retirement plan.

The Matching Indexed Participating Loan is an actual policy loan.

It’s borrowed money.

It creates policy indebtedness.

Under the JUMP design, those loan proceeds are redeployed into the same policy as additional funding.

Those are two very different mechanics.

So Should You Capture the 401(k) Match First?

If reducing your 401(k) contribution causes you to lose valuable employer contributions, quantify that loss before moving the money anywhere else.

Don’t guess.

Pull out the actual plan.

Find the employer matching formula.

Then ask:

“How much do I need to contribute to receive the full employer match available to me?”

That gives you a much better starting point.

Getting the Full Match Is Not the Same as Maxing Out Your 401(k)

These two ideas get mixed together constantly.

You might need to contribute a certain percentage of pay to capture the full employer match.

That doesn’t necessarily mean you’ve reached the maximum employee contribution allowed under current law and your plan.

So there can be two separate decisions.

Decision one: How much should I contribute to capture the employer money?

Decision two: Where should my additional retirement dollars go after that?

The second question is where the IUL conversation can become much more interesting.

Watch the 401(k) Employer Match vs. Matching Indexed Loan IUL Comparison

Rather than only talking about the concept, here’s a video built specifically around this comparison.

The example compares a 401(k) with an employer match at $1,000 per month against a Matching Indexed Loan IUL at $500 per month for a 30-year-old.

Don’t watch it just to find out which side ends with the bigger number.

Watch the assumptions.

Pay attention to:

• How much money is coming from the employee
• How the employer contribution affects the 401(k) side
• How the Matching Indexed Loan structure affects the IUL side
• How accumulation is modeled
• How retirement distributions are modeled
• How taxes affect spendable retirement income
• How policy loans affect the IUL projection
• What assumptions have to remain true for each projection to work

The goal isn’t to make one side win. The goal is to understand why the numbers are different.

After you watch it, don’t stop with:

“Wow, look at the difference.”

Ask:

“What caused the difference?”

That’s where the real education starts.

Why Can Retirement Income Look So Different From Accumulation Value?

This is one of the biggest mistakes people make when comparing retirement strategies.

They compare account balances.

Then they stop.

But you don’t retire on an account balance.

You retire on the money you can actually spend.

A $1 million balance in one strategy doesn’t necessarily create the same spendable retirement income as $1 million in another.

Taxes can be different.

Distribution rules can be different.

Market exposure can be different.

Loan mechanics can be different.

That’s why I want to compare income, not just accumulation.

The 401(k) Has Some Powerful Advantages

Let’s give it credit.

An employer match can be extremely valuable.

Traditional pretax contributions can provide current federal income-tax benefits when applicable.

Your money can receive long-term market exposure through the investments available inside the plan.

Some plans have very low-cost investment options.

Some plans also offer Roth contributions.

And you don’t need life insurance underwriting to participate in your employer’s 401(k).

Those are real advantages.

Traditional 401(k) Tax Deferral Has Another Side

If you’re making traditional pretax contributions, you’re generally postponing income taxation rather than eliminating it.

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

That can work extremely well.

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

Imagine you’re 60.

You look at your statement and see:

$1.5 million.

That feels good.

Then you realize:

“Most of this has never been taxed.”

Now the question becomes:

“How much of this balance actually becomes spendable retirement income?”

What If Your 401(k) Has a Roth Option?

Then we need to give that option credit too.

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

So I don’t want to compare an IUL against a fictional 401(k) where every dollar is automatically taxable if your actual plan includes Roth money.

Use the strategy you’re actually considering.

Traditional.

Roth.

Or a combination.

Where Does IUL Fit?

Indexed universal life is permanent life insurance.

It isn’t a 401(k).

It isn’t a Roth IRA.

And it isn’t a direct investment in the stock market.

A properly structured IUL can potentially provide:

• Permanent life insurance protection
• Cash-value accumulation
• Indexed-crediting potential
• A different downside-crediting structure from direct market investing
• No owner RMD structure like a qualified retirement account
• Potential access to policy values through withdrawals and policy loans when properly structured and maintained

Those features can make IUL worth evaluating as part of a broader retirement-income strategy.

But an IUL Has Costs

This can’t be skipped.

It’s life insurance.

Policy charges matter.

Cost of insurance matters.

Surrender provisions can matter.

Funding matters.

Loan costs matter.

Underwriting matters.

If someone compares an IUL against a 401(k) and hides the insurance costs, don’t trust the comparison.

The IUL Isn’t Actually Invested in the S&P 500

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

Those can include:

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

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

A 0% Floor Does Not Mean Your Policy Can’t Lose Value

This gets oversimplified all the time.

The floor applies to the applicable indexed-crediting calculation.

Policy charges can still occur.

Cost of insurance can still occur.

Loan costs can still occur.

Withdrawals and policy loans can affect values.

So the statement:

“You can never lose money because there’s a 0% floor”

isn’t an accurate explanation of how the entire policy works.

The 401(k) Has an Upside Advantage Too

If your 401(k) owns market-based investments and those investments perform strongly, you can participate according to the actual investments you own.

An IUL indexed strategy may limit positive indexed interest through caps, participation rates, spreads, or other applicable provisions.

So don’t compare the IUL’s floor without also comparing its upside limitations.

Now Let’s Look at What Makes the IUL JUMP Strategy Different

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

Again, this is not free money.

It’s not an employer contribution.

It’s not a tax credit.

It’s an actual policy loan.

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

Here’s What the JUMP Funding Progression Can Look Like

Using the $10,000 annual client-contribution example we’ve discussed:

Look carefully at Year 11.

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

The client’s annual out-of-pocket contribution in this example remains:

$10,000.

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

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

But the Loans Don’t Disappear

This is critical.

The $50,000 isn’t free additional funding.

It’s policy indebtedness.

The JUMP loans accumulate.

A later JUMP doesn’t simply pay off the previous loan.

So if the presentation shows you increasing loan-funded policy value, it also needs to show you the associated indebtedness.

Both sides of the transaction matter.

Why Put the Borrowed Money Back Into the Policy?

Because the JUMP loan is being used differently from a normal consumption loan.

Suppose you borrow $50,000 from an IUL and spend it on a boat.

That $50,000 is now outside the policy.

It’s being consumed.

Under the JUMP design we’re discussing, the Matching Indexed Participating Loan proceeds are redeployed into the same policy.

Conceptually, think of two buckets.

Bucket One: client-funded dollars.

Bucket Two: accumulated Matching Indexed Participating Loan dollars.

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

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

The Current Applicable JUMP Loan Rate Is 5%

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

That doesn’t mean the applicable rate is guaranteed to stay at 5%.

So I want to see two projections.

One using the current 5% rate.

Another stress-testing the 6% contractual maximum.

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

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

Dividends were excluded because the policy isn’t directly invested in the S&P 500.

The analysis applied a 10% cap and 0% indexed-crediting floor.

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

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

Under those assumptions, the period produced a:

6.87% historical average indexed-crediting result.

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

It is not a guaranteed future IUL crediting rate.

It is not a guaranteed policy return.

Now Compare the 6.87% With the Current 5% Loan Rate

Under those assumptions:

6.87% – 5.00% = 1.87 percentage points.

That’s the modeled positive-arbitrage concept.

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

But don’t stop there.

Flip the scenario.

Indexed crediting comes in at 0%.

The applicable loan rate is 5%.

Now the economics are unfavorable for that period.

Positive arbitrage is not guaranteed.

What Happens as Successive JUMPs Are Added?

Under assumptions used in one JUMP analysis, the combination of the base indexed-crediting assumption and the positive-arbitrage effect attributed to successive Matching Indexed Participating Loans produced modeled effective results of approximately:

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

Read that carefully.

Those aren’t S&P 500 returns.

They aren’t IUL indexed-crediting rates.

They aren’t guaranteed policy returns.

They are modeled effective results under the assumptions used in that analysis.

Policy charges and other factors still matter.

Now We Can Ask the Real Question: What Happens to Retirement Income?

This is where the employer-match comparison becomes interesting.

Maybe the 401(k) gets more money upfront because of the employer contribution.

That’s valuable.

Now follow those dollars all the way through retirement.

How do they grow?

How are they taxed?

What happens during market declines?

How much can be distributed?

How long does the projected income last?

Then ask the same questions about the IUL.

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

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

That’s a big number.

And this article is exactly where that claim needs to be challenged rather than blindly repeated.

Because if we’re comparing against an employer-matched 401(k), I want to know:

Did the 401(k) side receive full credit for the employer contribution?

If it didn’t, rerun the comparison.

Don’t Believe the 300% Number Because I Said It

Make the strategy prove it.

Ask:

How much of the projected difference came from taxes?

How much came from the Matching Indexed Participating Loan structure?

How much came from modeled positive arbitrage?

How much came from retirement distribution mechanics?

How much came from market-sequence assumptions?

How much came from the assumptions themselves?

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

Show me exactly where the difference comes from.

Then Try to Break the Projection

This is where I think retirement comparisons get much more useful.

Don’t only run the pretty version.

Lower the IUL indexed-crediting assumption.

Raise the applicable loan rate from the current 5% to the contractual 6% maximum.

Then do both at the same time.

Remove a future JUMP.

Run retirement longer.

Increase retirement withdrawals.

Then make the 401(k) side stronger too.

Include every employer dollar the employee is projected to receive.

Use the actual investment expenses.

Use the actual traditional and Roth mix.

Run stronger market returns.

Run weaker market returns.

Then compare the retirement income again.

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

What About the Approximately 40% Difference Versus a Traditional IUL?

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

That’s another reason I don’t like the question:

“Is an IUL better than a 401(k)?”

Which IUL?

How is it funded?

How are policy loans structured?

What are the charges?

What crediting assumptions are being used?

How is retirement income being modeled?

Two IUL strategies funded with the same client dollars can potentially produce very different modeled outcomes.

There’s Another Major Difference: Future JUMPs Require Approval

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

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

Qualification can be affected by factors including:

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

That needs to be included when you’re comparing a long-term JUMP projection against a 401(k).

What If You Don’t Qualify for the Next JUMP?

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

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

Your health changes.

Or your income changes.

Or another underwriting factor prevents approval of the next planned increase.

Under the mechanics described here, you don’t automatically lose the prior successful progression.

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

But the retirement projection should be updated immediately.

That’s Another Stress Test I’d Run

Show me the projected retirement income if every planned JUMP is approved.

Then show me what happens if the progression stops earlier.

If the strategy only looks attractive when every future assumption works perfectly, I want to know that before starting.

Could the Best Answer Be Using Both?

Absolutely.

This doesn’t have to be:

401(k) or IUL.

For some people, the better structure may be:

Capture the employer match.

Then evaluate where additional retirement dollars should go.

That could include additional 401(k) contributions.

It could include Roth contributions when available and appropriate.

It could include an IUL.

It could include taxable investments.

It could include more than one of them.

The goal is not to pick a financial team.

The goal is to build retirement income.

Here’s the Comparison I Want to See

Same person.

Same age.

Same retirement date.

Same out-of-pocket cash flow.

Same retirement-income objective.

Then give each strategy everything it legitimately gets.

On the 401(k) Side, Show Me:

• Employee contributions
• Employer matching or other employer contributions
• Vesting provisions
• Traditional versus Roth treatment
• Current modeled tax benefit
• Investment allocation
• Plan expenses
• Investment expenses
• Projected accumulation value
• Projected retirement distributions
• Estimated taxes on taxable distributions
• Applicable RMD assumptions
• Projected ending value

On the IUL JUMP Side, Show Me:

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

Then Show Me Spendable Retirement Income

This is the number I care about.

Not:

“Which account has the biggest balance at 65?”

I want to know:

“How much money can this person actually live on?”

Then:

“How long does that income last under the assumptions?”

Then:

“What happens if the assumptions get worse?”

Because Retirement Changes the Way You Think About Risk

When you’re 35, a bad financial year can feel recoverable.

You still have decades of income ahead of you.

At 60, it feels different.

You start looking at your retirement date instead of your next promotion.

You realize there may come a point when the paycheck stops.

And suddenly decisions that once felt theoretical become very real.

The Real Fear Isn’t Missing a Few Percent of Return

It’s getting retirement wrong.

Maybe you’ve saved for 30 years.

You have $1 million, $1.5 million, maybe $2 million or more.

Your kids think you’re financially set.

Your friends think you’re financially set.

But late at night you’re doing the math.

“How much can we actually spend?”

“What happens if taxes go up?”

“What happens if the market crashes right after I retire?”

“What if one of us lives to 95?”

And then comes the thought you probably don’t say out loud:

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

You’ve Spent Your Whole Life Being the One Who Helps

You don’t want retirement to reverse that.

You don’t want your children quietly wondering if Mom and Dad are running out of money.

You don’t want to make that phone call.

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

“We should be able to handle this ourselves.”

That’s why this isn’t just an argument over 401(k)s and life insurance.

It’s about protecting your ability to remain financially independent.

So, Should You Use an IUL If Your Employer Offers a 401(k) Match?

Don’t throw away an employer match because somebody showed you an attractive IUL illustration.

Start by calculating the value of the employer contribution.

Know how much you need to contribute to receive the full match available under your plan.

Know the vesting rules.

Know whether you’re contributing pretax, Roth, or both.

Then look at your additional retirement dollars.

That’s where an IUL may deserve consideration if you have an appropriate life insurance need, sufficient long-term cash flow, can qualify for coverage, and the retirement-income math supports it.

Don’t Compare Labels. Compare Outcomes.

The employer match is valuable.

That doesn’t automatically mean every additional dollar belongs in the 401(k).

The JUMP Strategy can produce compelling modeled retirement-income results.

That doesn’t automatically mean you should redirect money away from the 401(k).

Both statements can be true.

The question is what the actual numbers show for you.

How We Compare It at FPP Financial

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

I don’t want to start the meeting by telling you:

“The IUL is better.”

I want your current strategy on the screen.

Show me your 401(k).

Show me what you’re contributing.

Show me what your employer is contributing.

Show me the vesting.

Show me the traditional and Roth balances.

Show me the investment expenses.

Then show me the IUL JUMP Strategy.

Show me the client contribution.

Show me the Matching Indexed Participating Loans.

Show me the policy charges.

Show me the accumulated indebtedness.

Show me the current 5% applicable loan rate.

Then stress-test 6%.

Lower the crediting assumption.

Remove a future JUMP.

Run retirement longer.

Then compare the projected retirement income.

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

Want to Run Your Own 401(k) Match vs. JUMP Comparison?

The video above shows you what this type of comparison can look like.

Your numbers will be different.

Your age may be different.

Your contribution may be different.

Your employer match may be different.

Your current 401(k) balance may be different.

Your retirement date may be different.

That’s why the next step isn’t blindly copying somebody else’s illustration.

It’s running your own.

We’ll give your 401(k) credit for the employer contribution.

We’ll account for traditional and Roth money.

We’ll account for the IUL’s policy charges and loans.

We’ll stress-test the JUMP assumptions.

Then we’ll compare projected retirement income.

If the 401(k) produces the stronger modeled outcome, you should see it.

If a combination of the employer-matched 401(k) and the IUL JUMP Strategy produces a stronger modeled retirement structure, you should see that too.

And if the JUMP Strategy produces substantially more projected retirement income under the comparison, don’t stop at the headline number.

Make it prove why.

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

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

• Should You Max Out Your 401(k) Before Funding an IUL?
• Should High-Income Earners Use an IUL After Maxing Out a 401(k)?
• IUL JUMP Strategy vs. 401(k): Which Can Produce More Retirement Income?

Disclosure

This material is for educational purposes only and is not intended as individualized investment, securities, tax, legal, retirement-plan or insurance advice. Examples, videos, illustrations and modeled comparisons are hypothetical or illustrative unless expressly identified otherwise and should not be interpreted as guarantees of future results.

A 401(k) is a qualified retirement plan and is fundamentally different from indexed universal life insurance. Eligibility, contribution limits, employer contributions, matching formulas, vesting, plan provisions, investment options, Roth availability, distribution rules, expenses and tax treatment are governed by applicable law and the specific employer plan.

Employer matching and other employer contributions can materially affect the economics of a 401(k). Any comparison between a 401(k) and another financial strategy should include the employer contributions the participant is reasonably expected to receive and retain under applicable plan terms. Matching formulas and vesting provisions vary by employer plan.

The video embedded in this article is provided for educational illustration of a 401(k) employer-match versus Matching Indexed Loan IUL comparison. The example shown should not be interpreted as a recommendation, guarantee, or representation that another person’s circumstances will produce the same accumulation values, policy values, tax results, retirement income, or other outcomes. Individual results are affected by contributions, employer plan provisions, employer contributions, investment performance, taxes, policy design, underwriting, policy charges, loan costs, crediting results, distributions, longevity and other factors.

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

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

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

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

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

Policy values from a properly structured and maintained non-MEC life insurance policy may potentially be accessed through withdrawals to basis and policy loans without current income taxation under current federal rules, subject to applicable requirements. Tax treatment can be affected by basis, Modified Endowment Contract status, policy lapse, surrender and other circumstances. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income.

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

The JUMP Strategy is modeled with applicable loan charges carried forward during the accumulation design rather than requiring the client to pay those charges out of pocket each year. This does not eliminate the economic cost of borrowing, guarantee positive arbitrage or guarantee that policy values will remain sufficient to support outstanding indebtedness.

References to the $10,000 annual contribution example, JUMP progression, 6.87% historical indexed-crediting example, 1.87 percentage-point modeled positive spread, modeled effective results of 8.74%, 11.61%, 14.48% and 17.35%, current 5% loan rate, contractual maximum 6% loan rate, approximately 40% more projected retirement income, or up to approximately 300% more projected retirement income are illustrative and are not guarantees of future policy performance, positive arbitrage, policy durability, funding capacity, non-MEC status, future JUMP approval, death benefit or retirement income.

The up-to-approximately-300% projected retirement-income result cited in this article refers to certain modeled comparisons involving the IUL JUMP Strategy and a 401(k), Traditional IRA or comparable tax-deferred retirement strategy. It should not be interpreted as a claim that an individual should forfeit an employer 401(k) match or that every employer-matched 401(k) comparison will produce the same result. Any comparison should include actual employee contributions, employer contributions, vesting, traditional and Roth treatment, investment assumptions, expenses, tax assumptions, retirement distributions, IUL policy costs, loan assumptions and other relevant factors.

The approximately-40% projected retirement-income result refers to certain modeled comparisons involving the JUMP Strategy and the traditional IUL structure being evaluated. It is not a universal result and does not guarantee future retirement income.

The historical 6.87% indexed-crediting example discussed in this article is based on an analysis of annual S&P 500 price changes from 2006 through 2020, excluding dividends, and applying the stated 10% cap and 0% indexed-crediting floor. Historical results do not predict future policy performance. The modeled effective JUMP results discussed above are not S&P 500 returns, indexed-crediting rates or guaranteed policy returns.

Positive arbitrage is not guaranteed. Periods in which indexed crediting is below the applicable loan cost can produce unfavorable loan economics. Policy charges and other expenses must also be considered when evaluating overall policy performance.

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

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

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