IUL JUMP Strategy vs. Solo 401(k): Which Can Produce More Retirement Income?

You own the business.

You control the cash flow.

And after years of putting almost everything back into the company, you’ve finally reached the point where there’s meaningful money available for your own retirement.

Now you have another decision to make.

“Where should I put it?”

If you’re self-employed with no common-law employees other than potentially your spouse, a Solo 401(k) can be an attractive option.

But maybe you’ve also been shown indexed universal life as another place to build retirement assets.

That’s when the conversation can become unnecessarily tribal.

One person tells you:

“Max out the Solo 401(k). Nothing else makes sense.”

Someone else tells you:

“Forget the 401(k). Put the money into IUL.”

I don’t like either answer without seeing the numbers.

Because the real question isn’t which product has the better sales pitch.

It’s:

“Which combination gives me the retirement outcome I’m actually trying to create?”

A Solo 401(k) and an IUL Are Not the Same Thing

A Solo 401(k), sometimes called a one-participant 401(k), is a qualified retirement plan designed for an owner-only business with no common-law employees other than a spouse.

An indexed universal life policy is permanent life insurance.

It provides a death benefit and can accumulate cash value.

When properly structured and maintained, those policy values may also become part of a retirement-income strategy.

So an IUL isn’t a replacement version of a Solo 401(k).

The two structures follow completely different rules.

Why Business Owners Like the Solo 401(k)

A Solo 401(k) can give an eligible business owner something powerful.

You can participate in the plan as both the employee and the employer, subject to applicable federal contribution rules and limits.

That can create meaningful retirement-funding capacity.

For someone with strong self-employment income, that’s worth paying attention to.

The Tax Deduction Can Be Attractive

Traditional pretax Solo 401(k) contributions can provide current tax advantages when applicable.

That’s especially attractive after a strong business year.

You already know the feeling.

Revenue was great.

Profit was great.

Then you see the projected tax bill.

Your first thought is:

“How much can I put away before I have to write that check?”

A qualified retirement plan can potentially help with that problem.

But I don’t want the entire retirement strategy built around reducing one year’s tax bill.

The Deduction Solves Today’s Problem

Retirement creates tomorrow’s problem.

Traditional pretax contributions and tax-deferred growth generally become taxable when distributed under current federal rules.

So you’re making a trade.

Potential tax savings now.

For:

Potentially taxable retirement distributions later.

That can still be a very good trade.

But it’s a trade.

Business Owners Are Often Very Good at Deferring Taxes

You’ve spent your career finding legitimate ways to control expenses and taxes.

Retirement accounts become part of that.

Year after year, more money goes into tax-deferred accounts.

Then you turn 60 and realize you have:

$800,000.

$1.2 million.

$2 million.

And a large portion has never been taxed.

That’s when you start thinking:

“How much of this is actually mine to spend?”

The Number on Your Solo 401(k) Statement Is a Gross Number

Imagine your account shows $1.5 million when you retire.

That’s a meaningful accomplishment.

But if the money is largely pretax, you still need to account for taxes when taxable distributions occur.

So don’t compare:

$1.5 million in a Solo 401(k)

against:

some projected IUL retirement-income number

without accounting for how each strategy is taxed.

A Solo 401(k) May Also Offer a Roth Option

This is important because not every Solo 401(k) comparison should assume all contributions are pretax.

A plan may permit designated Roth contributions when its terms allow them.

Those contributions generally don’t provide the same current federal income-tax deduction as traditional pretax employee deferrals.

But qualified Roth distributions are generally tax-free under current federal rules when applicable requirements are met.

That changes the comparison.

If your Solo 401(k) has a Roth component, model it.

Don’t Compare a Roth Solo 401(k) With a Traditional Solo 401(k) as If They’re Identical

They’re not.

If somebody shows you an IUL comparison and assumes every dollar in your Solo 401(k) will be taxed in retirement, but you’re actually building a significant Roth balance, the comparison is wrong before it starts.

Use the account you actually have.

What About Market Growth?

A Solo 401(k) can provide access to investments based on the plan and provider.

That can include market-based assets.

If those investments perform well, you participate in those results according to the investments you own.

There’s no IUL-style cap automatically limiting the investment return of a stock fund simply because the market had a strong year.

That’s a legitimate advantage.

But You Also Own the Downside

If the market falls, your market-based Solo 401(k) investments can fall too.

At 42, you may not care much.

You keep contributing.

You have years to recover.

At 64, it feels different.

Now the business sale is approaching.

Your regular income may be about to stop.

And you’re preparing to turn investments into a paycheck.

Sequence Risk Becomes Real When the Paychecks Stop

Imagine retiring with $1.3 million.

You plan to take $70,000 per year.

Then the market drops sharply during your first two retirement years.

You still need $70,000.

So you’re taking money from an account while the investments are down.

That combination can hurt more than a market decline during accumulation.

An Average Return Doesn’t Show You the Order

This is why I don’t like retirement projections built around one smooth average return.

Real markets don’t move in a straight line.

You can get:

Great year.

Bad year.

Terrible year.

Great year.

Flat year.

The order matters when you’re taking money out.

How Is IUL Different?

An indexed universal life policy isn’t directly invested in the S&P 500 or another referenced market index.

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

Those terms 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 the Policy Cannot Lose Value

This needs to be clear.

Policy charges continue.

Cost of insurance continues.

Loan costs can continue.

Withdrawals and policy loans can reduce policy values.

So a 0% indexed-crediting result can still be accompanied by a decline in overall policy value.

The floor applies to the applicable indexed-crediting calculation.

Not every moving part inside the policy.

And IUL Gives Up Some Market Upside

Suppose the S&P 500 has a very strong year.

A market-based investment can participate in its investment return according to what you own.

An IUL indexed strategy may be limited by its applicable cap, participation rate, spread, or other crediting provision.

That’s part of the tradeoff.

You don’t get to talk about the floor without talking about the cap.

What About RMDs?

Traditional qualified retirement-plan assets can eventually become subject to applicable required minimum distribution rules under current federal law.

That can create taxable distributions later in retirement even if you don’t need the money for spending.

An IUL isn’t a qualified retirement plan and doesn’t have the same owner RMD structure.

That can give the policy owner more control over when policy values are accessed.

But it doesn’t mean the IUL has no rules.

It has a completely different set of rules.

How Can You Access IUL Policy Value?

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

That’s one of the reasons people consider IUL for retirement.

But policy loans aren’t free distributions.

They’re actual policy indebtedness.

Applicable loan charges generally accrue.

Outstanding loans can reduce policy values and the net death benefit.

Excessive indebtedness can increase lapse risk.

What Happens If the Policy Lapses?

If a policy lapses or is surrendered with gain and outstanding indebtedness, taxable income can potentially result.

That’s why I don’t like the phrase:

“Just borrow tax-free money forever.”

That’s not enough information.

The policy needs to remain healthy enough to support what you’re asking it to do.

Now Add the IUL JUMP Strategy

The JUMP Strategy changes the conventional IUL funding model by using a Matching Indexed Participating Loan.

That phrase needs to be understood correctly.

The “match” is an actual policy loan.

It’s not free money.

It’s not an employer contribution.

It’s not a bonus deposit.

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

Here’s the $10,000 Annual Funding Example

By Year 11, the business owner is still contributing:

$10,000 out of pocket.

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

Total annual funding shown becomes $60,000.

But don’t say:

“I put in $10,000 and the insurance company gave me another $50,000.”

That’s not what happened.

The additional $50,000 is borrowed through the policy loan structure.

The Loans Accumulate

The next JUMP doesn’t erase the previous loan.

The loans accumulate.

So as the matching-loan level grows, outstanding policy indebtedness grows too.

A proper analysis has to show both sides.

The additional funding.

And:

The accumulated indebtedness.

Why Redeploy the Loan Into the Policy?

This is one of the most important mechanics behind the strategy.

If you take a policy loan and spend the money on a boat, the borrowed dollars aren’t sitting inside the policy continuing to participate in the applicable indexed strategy.

With the JUMP design we’re discussing, the borrowed dollars are redeployed into the same policy.

Think about two conceptual buckets.

Bucket One: the client’s contributed 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 bucket also carries the applicable 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 5% is guaranteed to remain the applicable rate.

So I want to see the strategy modeled at 5%.

Then I want to see it stress-tested at 6%.

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

It’s not a guaranteed IUL crediting rate.

And it’s not a guaranteed policy return.

Now Compare 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 loan cost, the loan-funded amount can have favorable economics under the model.

If the policy receives 0% indexed crediting while the applicable loan cost is 5%, the spread is 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

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

They are not S&P 500 returns.

They are not IUL indexed-crediting rates.

They are not guaranteed policy returns.

Policy charges and other factors still matter.

Now We Can Compare Retirement Income

This is where the Solo 401(k) versus JUMP conversation gets useful.

Take the same business owner.

Same out-of-pocket contribution.

Same retirement age.

Same desired retirement income.

Then run both strategies.

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.

Because a Solo 401(k) is a 401(k) arrangement, that’s obviously a comparison worth investigating.

But don’t turn that statement into:

“Every Solo 401(k) produces 300% less retirement income.”

That’s not what the modeled result says.

The actual Solo 401(k) needs to be run.

A Fair Solo 401(k) Comparison Has to Include Its Tax Advantages

If pretax contributions reduce the business owner’s current taxes, put that value into the analysis.

If the plan has Roth money, model it correctly.

If the spouse participates in the business and is eligible under the plan, account for that.

If the investment expenses are low, use the actual expenses.

If the investment allocation is aggressive, don’t model it like a conservative portfolio just to make the IUL look better.

Give the Solo 401(k) its real advantages.

Then Make the JUMP Strategy Earn Its Advantage

If the JUMP model still produces substantially more projected retirement income, ask:

“Why?”

How much of the difference comes from taxes?

How much comes from the Matching Indexed Participating Loan?

How much comes from the modeled positive-arbitrage effect?

How much comes from the retirement distribution mechanics?

How much comes from avoiding direct negative indexed crediting during down index years?

How much comes from the assumptions?

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

Then Try to Break It

This is where I want to spend time.

Lower the indexed-crediting assumption.

Raise the applicable loan rate to the contractual 6% maximum.

Do both at the same time.

Remove a future JUMP.

Run a longer retirement.

On the Solo 401(k) side, run a poor sequence of market returns near retirement.

Then run a strong sequence.

Run different tax assumptions.

Run a Roth-heavy Solo 401(k).

Compare again.

If the JUMP advantage survives those tests, now you have something worth discussing.

The JUMP Strategy Has Also Produced About 40% More Projected Income Than a Traditional IUL in Certain Comparisons

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 matters because “IUL” alone doesn’t tell you the retirement outcome.

Policy design matters.

Loan mechanics matter.

Funding matters.

Charges matter.

Crediting assumptions matter.

Distribution mechanics matter.

Future JUMPs Are Not Guaranteed

This is a major difference from simply making another retirement-plan contribution.

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

Qualification can be affected by:

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

Financial underwriting can be especially relevant for business owners.

Your income and financial circumstances need to justify the requested amount of insurance.

What If Your Business Income Falls?

Imagine you start the strategy during a great year.

Then three years later:

Your biggest customer leaves.

You reduce your workload.

You sell part of the company.

Or your income drops for another reason.

That could affect future financial underwriting.

So future JUMPs should never be treated as guaranteed at original policy issue.

What If the Next JUMP Isn’t Approved?

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

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

If the next JUMP isn’t approved, the previous successful progression doesn’t automatically disappear under the mechanics described here.

You can 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 needs to be updated.

The Solo 401(k) Has a Flexibility Advantage in Bad Business Years

Business income isn’t predictable.

That’s something a W-2 retirement article can easily miss.

One year you’re buried in work.

The next year is slower.

A Solo 401(k) contribution strategy can be adjusted within applicable plan and tax rules as business circumstances change.

An IUL is a long-term insurance contract.

Funding changes can affect policy performance.

So don’t design an IUL around the biggest year your company has ever had.

Build Around What You Can Sustain

The policy doesn’t care that your business had an unusual year.

If you design around a premium that becomes uncomfortable later, you’ve created a problem for yourself.

I want to know:

“What can you reasonably support even if the business has an average year?”

Then stress-test a bad year.

Do You Actually Have to Choose One?

No.

This is where the either-or argument falls apart.

You may decide to use the Solo 401(k) for part of your retirement savings.

You may use Roth contributions for part of the plan when appropriate.

You may direct another portion toward an IUL strategy.

You may keep additional money liquid or invested elsewhere.

Different buckets can solve different problems.

What About Your Spouse?

If your spouse legitimately works in the business and is eligible to participate under the plan, the Solo 401(k) can become even more interesting.

Now you’re not just planning around one person’s retirement contributions.

You’re potentially building retirement assets for both spouses through the business, subject to applicable plan and tax rules.

That should be included before comparing the Solo 401(k) with an insurance strategy.

What About Life Insurance?

The Solo 401(k) and IUL also solve different legacy problems.

An IUL includes a life insurance death benefit while the policy remains in force.

The Solo 401(k) is a retirement account with beneficiary provisions.

That’s not the same thing.

But if you’re using policy loans for retirement, don’t compare the original IUL death benefit with the Solo 401(k) account value.

Look at the projected net death benefit after outstanding policy indebtedness.

Here’s the Side-by-Side Comparison I Want

Use the same business owner.

Same age.

Same retirement date.

Same out-of-pocket cash flow.

Same retirement-income objective.

On the Solo 401(k) Side, Show Me:

• Employee deferrals
• Employer contributions
• Traditional versus Roth contributions
• Current modeled tax benefits
• Plan expenses
• Investment expenses
• Investment assumptions
• Projected retirement balance
• Projected retirement distributions
• Estimated taxes on taxable distributions
• Applicable RMD assumptions
• Projected beneficiary 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
• The current 5% applicable loan rate
• The contractual maximum 6% loan rate
• Future JUMP assumptions
• Projected retirement distributions
• Policy durability
• Projected net death benefit

Then Stress-Test Both Strategies

Don’t stop with the pretty projection.

What happens if the Solo 401(k) gets a terrible market sequence during the first five years of retirement?

What happens if it gets a great sequence?

What happens if retirement taxes are lower than expected?

What happens if they’re higher?

On the IUL side, what happens if indexed crediting is lower?

What happens if the applicable loan rate reaches 6%?

What happens if lower crediting and the 6% loan rate occur together?

What happens if a future JUMP isn’t approved?

What happens if retirement lasts to age 95?

Now you’re doing retirement planning.

The Business Owner’s Real Question Is Usually Bigger Than the Account

Maybe you’re 56.

The business is finally running well without you touching every decision.

You have money in the bank.

You have a Solo 401(k).

You have equity in the company.

From the outside, you’ve made it.

But you know something other people don’t.

A huge amount of your financial life is still tied to decisions you have to get right.

So you think:

“Have I actually built a retirement, or have I just built a business?”

Business Owners Are Used to Being in Control

You made the decisions.

You signed the checks.

You solved the problems.

People came to you when something went wrong.

That’s part of your identity.

Then retirement forces you to think about a future where you may not want to work anymore.

That’s uncomfortable.

Because now the money has to do the work.

And You Don’t Want Your Kids Becoming Plan B

You don’t say that when you’re talking about contribution limits.

But it’s there.

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

You spent your life being the person who helped everyone else.

“We should be able to handle this ourselves.”

And because retirement decisions feel harder to reverse:

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

That’s the real pressure behind the spreadsheet.

So, Is an IUL or Solo 401(k) Better for a Business Owner?

A Solo 401(k) can offer substantial advantages for an eligible owner-only business.

It can provide meaningful retirement-funding capacity, potential current tax benefits, Roth options when offered by the plan, and access to market-based investments.

Those are legitimate strengths.

An IUL provides permanent life insurance, indexed-crediting potential and a different structure for accessing policy values.

The IUL JUMP Strategy adds Matching Indexed Participating Loan mechanics that can materially change projected retirement-income results under certain modeled assumptions.

But neither strategy automatically wins.

The Solo 401(k) has to prove itself.

The IUL has to prove itself.

The JUMP Strategy has to prove itself.

With the same client’s numbers.

How We Compare the Strategies at FPP Financial

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

I don’t want to tell a business owner:

“Stop funding your Solo 401(k).”

That plan may be doing exactly what you need it to do.

I also don’t want to say:

“Keep putting every retirement dollar there because that’s the conventional answer.”

Run the numbers.

Show the current tax benefit.

Show the Roth portion.

Show the investments.

Show the expenses.

Show the retirement taxes.

Show the projected income.

Then run the IUL JUMP Strategy.

Show the policy costs.

Show the loans.

Show the current 5% applicable loan rate.

Stress-test 6%.

Lower the crediting assumption.

Remove a future JUMP.

Run both strategies deep into retirement.

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

Want to Compare Your Solo 401(k) With the IUL JUMP Strategy?

If you own a business and you’re deciding where your next retirement dollar should go, we can run the strategies side by side.

We’ll give your Solo 401(k) credit for the tax advantages, Roth options and investment flexibility it actually provides.

We’ll account for the costs, underwriting, loan mechanics and risks of the IUL.

Then we’ll compare projected retirement income under multiple assumptions.

If the Solo 401(k) produces the stronger result for your goals, you should see it.

If the IUL JUMP Strategy produces substantially more projected retirement income, you should see exactly where the difference came from.

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

• IUL JUMP Strategy vs. SEP IRA for Business Owners
• IUL JUMP Strategy vs. 401(k): Which Can Produce More Retirement Income?
• 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, retirement-plan or insurance advice. A Solo 401(k), also commonly called a one-participant 401(k), is a qualified retirement plan and is fundamentally different from indexed universal life insurance. Eligibility, contribution limits, plan provisions, tax treatment, Roth availability, distribution rules, investment options and administrative requirements are governed by applicable law and the specific plan.

Solo 401(k) eligibility generally requires an owner-only business with no common-law employees other than a spouse who would otherwise require coverage under applicable plan rules. Changes in the business or workforce can affect plan obligations and eligibility. Business owners should review their specific circumstances with qualified retirement-plan and tax professionals.

Traditional pretax Solo 401(k) contributions and earnings are generally subject to ordinary income taxation when distributed under current federal rules. Designated Roth contributions and qualified Roth distributions have different tax treatment. Applicable contribution limits, required minimum distribution rules and other retirement-plan requirements can change.

Market-based investments held through a Solo 401(k) can fluctuate in value and can lose principal. Past investment 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, 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 the policy’s applicable 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, not employer contributions, employee deferrals, free matching dollars, bonuses, 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 every Solo 401(k) comparison will produce the same result. A Solo 401(k) comparison must be modeled separately using the actual contributions, employer contributions, traditional and Roth allocations, current tax effects, expenses, investment assumptions, retirement tax assumptions, distribution strategy 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. Business 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, and the tax consequences of Solo 401(k) contributions, Roth contributions, business deductions 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.