What Happens If Your IUL Credits 0% While Your Policy Loan Costs 5%?

Here’s a question I would ask before using an IUL policy loan for retirement:

“What happens if my indexed crediting is 0%, but my policy loan still costs me 5%?”

That’s a much better question than only asking what happens in a good year.

Because a 0% indexed-crediting floor does not mean everything inside the policy stops costing money.

The policy loan doesn’t suddenly become free.

Policy charges don’t automatically disappear.

And if you’re already taking retirement income, those distributions don’t necessarily stop either.

So let’s look at exactly what a 0%-crediting/5%-loan-cost period means.

The Simple Math Is 0% Minus 5%

Start with the basic relationship.

Suppose the applicable indexed-crediting result for the period is:

0%.

The applicable policy-loan rate is:

5%.

The simplified economic relationship is:

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

That’s negative arbitrage.

But there’s an important distinction.

It Does Not Automatically Mean Your Entire Policy Lost 5%

This is where people can take the simple math too far.

The 5-percentage-point unfavorable relationship compares the indexed-crediting result being discussed with the applicable loan cost.

It does not mean:

Your entire cash value automatically fell exactly 5%
The policy posted a guaranteed negative 5% return
Every dollar in the policy was charged 5%
Your total policy performance was exactly negative 5%

The actual dollar effect is determined by the policy’s loan provisions, outstanding indebtedness, indexed account values, policy charges, timing, distributions, and other contractual mechanics.

So use the 0% versus 5% comparison to understand the economic pressure.

Don’t mistake it for a complete policy accounting statement.

Then What Does the 5-Point Difference Tell You?

It tells you something very useful:

The indexed-crediting side of that simplified comparison did not produce enough crediting to offset the applicable loan cost for that period.

That’s the problem you need to understand.

Doesn’t the IUL Have a 0% Floor?

Yes, in the example indexed strategy we’re discussing.

But the floor is commonly misunderstood.

A 0% indexed-crediting floor applies to the applicable indexed-crediting calculation.

It does not mean:

“Nothing inside my policy can ever go down.”

And it definitely does not mean:

“If my crediting is 0%, my policy loan also costs 0%.”

The Floor and the Loan Rate Are Two Different Things

Think about them separately.

Indexed-crediting floor: determines the minimum applicable indexed-crediting result under the strategy’s crediting mechanics for that period.

Policy-loan rate: determines the applicable cost associated with the outstanding policy loan under the contract’s loan provisions.

One does not automatically cancel the other.

That’s Why a 0% Year Can Still Cost You

Suppose the applicable index calculation hits the 0% floor.

You don’t receive a negative indexed-interest credit below that floor under the example.

That’s valuable.

But the policy can still experience:

Policy-loan costs
Cost-of-insurance charges
Administrative expenses
Other applicable policy charges
Retirement distributions

So total policy value can still decline even though the indexed-crediting result itself is 0% rather than negative.

This Is the Part the Phrase “You Can’t Lose Money From the Market” Can Hide

An IUL’s indexed account is not directly invested in the market.

So if the index falls sharply, you aren’t simply receiving that same negative market return in the indexed-crediting calculation.

But that doesn’t mean the policy has no downside pressures.

There are still costs.

There can still be loans.

There can still be distributions.

There can still be lapse risk.

That’s why I want to see the whole policy, not one attractive feature.

Let’s Make the Example More Concrete

Imagine a policy with outstanding participating-loan indebtedness.

During one applicable crediting period:

Indexed-crediting result: 0%

Applicable policy-loan rate: 5%

The simplified relationship is unfavorable by 5 percentage points.

At the same time, the policy may also be deducting its applicable insurance and administrative charges.

If the owner is retired, money may also be coming out to support retirement spending.

Now you can see why the policy’s total value may decline even with a 0% indexed-crediting floor.

What Happens to the Loan?

The outstanding policy indebtedness does not disappear because indexed crediting is 0%.

The applicable loan charge remains part of the policy economics.

Under the JUMP accumulation strategy we’re discussing, applicable loan charges are modeled as being carried forward rather than requiring the client to pay those charges out of pocket each year.

That does not mean the charge is forgiven.

It does not mean the loan is free.

It means the cost is being accounted for within the strategy rather than modeled as a separate annual out-of-pocket payment by the client.

“I Didn’t Write a Check” Does Not Mean “There Was No Cost”

This is a really important distinction.

You can have an economic cost without writing a separate check that year.

That’s why I don’t want someone looking at a loan-charge statement and thinking either extreme:

“I have to panic and immediately pay everything.”

or:

“I never have to care about this because the strategy handles it.”

Neither is a good way to manage a long-term retirement strategy.

Look at the actual policy projection.

Now Bring in the Matching Indexed Participating Loan

The IUL JUMP Strategy uses what we refer to as a Matching Indexed Participating Loan.

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

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

That loan-funded value can participate in the same applicable indexed-crediting strategy while the policy carries the associated loan indebtedness and applicable loan cost.

Why Does That Matter in a 0% Year?

Because the strategy is designed around the idea that loan-funded value continues participating.

When crediting is favorable relative to the loan cost, that relationship can potentially help the modeled economics.

But if the indexed-crediting result is 0%, the participating side isn’t producing a positive indexed-crediting result for that period.

The applicable loan cost still exists.

That’s the unfavorable side of the strategy.

Think About the JUMP Strategy as Two Buckets

Bucket 1: the client’s own funding.

Bucket 2: the accumulated Matching Indexed Participating Loan funding.

Under the example we’re discussing, both buckets can participate in the same applicable indexed-crediting strategy with a potential:

10% cap

and:

0% indexed-crediting floor.

But Bucket 2 carries the applicable policy-loan cost.

That’s the difference.

So What Happens to the Two Buckets in a 0% Crediting Period?

At a conceptual level, neither bucket receives positive indexed crediting under the 0% result in this example.

But the loan-funded side still carries the applicable loan economics.

That’s why the 0% period is more consequential to the borrowed side of the strategy.

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%.

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

6%.

That means I don’t want to test only:

0% crediting versus 5% loan cost.

I also want to test:

0% crediting versus 6% loan cost.

At 6%, the Simplified Stress Test Gets Worse

The math becomes:

0% – 6% = an unfavorable 6-percentage-point relationship.

Again, that does not mean the entire policy automatically loses 6%.

It tells you the loan relationship is even less favorable under that scenario.

Why Test 6% If the Current Rate Is 5%?

Because retirement planning can stretch across decades.

If the applicable loan feature has a contractual maximum of 6%, I want to know what the policy looks like there.

You don’t want the first time you see that projection to be after the loan rate has already changed.

Now Ask the Question That Really Matters: What If 0% Happens More Than Once?

One 0% indexed-crediting period is one thing.

Several weak periods are another.

Suppose the applicable indexed-crediting sequence looks something like:

0%, 4%, 0%, 7%, 2%, 0%.

That’s not a prediction.

It’s a stress test.

During the 0% periods, the loan cost can still apply.

During the 4% and 2% periods, the applicable crediting is also below a 5% loan cost in this simplified comparison.

Only the 7% period in that hypothetical sequence produces a favorable spread against a 5% loan rate.

This Is Why an Average Can Mislead You

You don’t live inside an average.

You experience individual years and individual crediting periods.

A long-term average may look reasonable while hiding several periods where the policy-loan relationship was unfavorable.

That’s why the sequence matters.

Now Compare That With the Historical 6.87% Example

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

Dividends were excluded because the indexed strategy is not a direct investment in the S&P 500.

The analysis applied the example strategy’s:

10% cap

and:

0% indexed-crediting floor.

Negative annual S&P 500 price changes were replaced by 0% for purposes of the historical indexed-crediting calculation.

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

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

6.87%.

Then the Simplified Positive-Arbitrage Example Uses 5%

Using that historical average and the current applicable 5% loan rate:

6.87% – 5.00% = 1.87 percentage points.

That’s the modeled positive spread discussed in the JUMP analysis.

But notice what happens when you move away from the average.

At 0%, the Relationship Flips Completely

Instead of:

+1.87 percentage points

using the historical-average comparison,

you have:

-5 percentage points

during a 0%-crediting/5%-loan-cost scenario.

That’s why positive arbitrage cannot be treated as a guaranteed annual event.

Does One 0% Year Wipe Out Years of Positive Arbitrage?

Not automatically.

You cannot answer that from the two percentages alone.

You need to know:

How much policy value exists
How much outstanding indebtedness exists
When the 0% period occurs
What prior crediting results were
What later crediting results are
What policy charges apply
Whether retirement distributions are occurring
How long the policy needs to remain in force

That’s why the complete illustration and in-force values matter.

A 0% Year at Age 45 Is Not Necessarily the Same as a 0% Year at Age 80

This is where timing becomes important.

At 45, you may still be contributing to the policy.

You may have decades before retirement.

At 80, you may have stopped contributing years ago.

You may be taking substantial retirement distributions.

You may have significant outstanding policy indebtedness.

Applicable insurance costs may also be different later in life.

The exact same indexed-crediting result can land in a very different policy environment.

This Is a Sequence Problem

When retirement income is coming out, a string of weak periods can matter more than the same weak periods occurring earlier during accumulation.

That’s why a retirement-income illustration should not be judged only by its average crediting assumption.

Ask what happens when weak years show up at the wrong time.

Now Add Retirement Distributions

Under modeling used with the JUMP Strategy, retirement distributions can be modeled at approximately:

12% per year of policy/account value

under specific assumptions.

That is not a universal safe withdrawal rate.

It is not guaranteed.

And a policy should not be assumed to sustain that level regardless of actual future results.

What Happens to a 12% Modeled Distribution During a 0% Crediting Year?

That’s exactly what should be tested.

You could have:

0% indexed crediting
5% applicable loan cost
Ongoing policy charges
Retirement distributions

all occurring in the same general period.

Now ask:

Does the projected retirement income still work?

That’s the real question.

What If You Get Several 0% Years After Retirement Starts?

Now I want a new projection.

Not reassurance.

Not:

“Don’t worry, the market always comes back.”

This isn’t a direct stock-market account in the first place.

I want the actual policy math.

Show me what happens to:

Policy values
Outstanding loans
Net death benefit
Projected retirement income
Policy durability

Can You Reduce Retirement Income After a Weak Period?

Potentially, adjusting future distributions can be one planning consideration when policy performance differs from the original projection.

The actual response should be based on the current policy values, loan position, contract provisions, retirement needs, and updated projection.

The point is that retirement-income planning should not be placed on autopilot for 30 years.

The Policy Needs to Be Monitored

If actual results differ materially from the original model, rerun it.

If loan rates change, rerun it.

If future JUMPs don’t happen, rerun it.

If you retire earlier, rerun it.

If you need more income, rerun it.

If you live longer than originally modeled, keep monitoring it.

What Happens If Future JUMPs Stop Too?

Now you’re combining two stress scenarios.

The example JUMP progression includes planned increases in Years:

3, 5, 7, 9, and 11.

Those future JUMPs require future underwriting and approval.

They are not guaranteed when the original policy is issued.

If a future JUMP isn’t approved, the progression can pause rather than automatically resetting under the mechanics we’re discussing.

Imagine You Reach the Year 7 JUMP

In the example:

$10,000 client contribution

plus:

$30,000 Matching Indexed Participating Loan

equals:

$40,000 total annual funding shown.

Now suppose the next planned JUMP isn’t approved.

Under the mechanics we’re discussing, the client may remain at the previously achieved $30,000 matching-loan level rather than automatically falling back to the original funding level.

But the original projection should be rerun without assuming the later JUMPs.

Now Add Several 0% Crediting Periods

This is the kind of combined stress test I want to see.

No future JUMPs.

Several 0% crediting periods.

Current 5% loan cost.

Then 6% loan cost.

Ongoing policy charges.

Retirement distributions.

Longevity to age 95 or longer.

Now show me the retirement income.

That’s How You Find the Margin for Error

A strong retirement strategy should not only look attractive under the original assumptions.

You need to know what happens when several assumptions become less favorable at the same time.

Can a 0% Crediting Year Cause an IUL to Lapse?

One 0% indexed-crediting period does not automatically cause an IUL to lapse.

Lapse risk is affected by the overall policy position and contractual provisions.

But repeated weak crediting can contribute to pressure when combined with:

Large outstanding policy indebtedness
Loan costs
Policy charges
Large retirement distributions
Insufficient policy values
Longer-than-modeled longevity

That’s why monitoring matters.

Why Is Lapse Risk More Serious When Loans Are Large?

Because if a policy with gain and outstanding indebtedness lapses or is surrendered, taxable income can potentially result under applicable tax rules.

That’s a very different outcome from the retirement plan someone thought they had.

Policy loans are powerful planning tools when used appropriately.

They are not something to ignore after the money has been accessed.

What Happens at Death?

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

So the policy loan doesn’t simply disappear without economic consequence.

Life insurance death benefits are generally received income-tax-free under current federal law, subject to applicable exceptions and individual circumstances.

But the net amount beneficiaries receive can be affected by outstanding policy indebtedness.

Now Let’s Talk About the 300% Retirement-Income Comparison

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 large modeled difference.

And this 0%-crediting/5%-loan-cost scenario is exactly the kind of test that number should have to face.

Don’t Show Me 300% More Only Under Favorable Loan Economics

If positive loan economics contribute to the modeled retirement-income advantage, show me what happens when they turn negative.

Use 0% crediting.

Keep the 5% loan cost.

Then run 6%.

Include policy charges.

Include retirement distributions.

Remove future JUMPs.

Extend longevity.

Then compare again.

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

How much of that modeled difference survives?

Does the JUMP Strategy still produce more projected retirement income?

By how much?

What assumptions are doing the heavy lifting?

At what point does the advantage disappear?

That’s what I want to know.

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

And 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.

That modeled difference also needs to survive fair stress testing.

If the JUMP Strategy experiences a 0% crediting period, don’t quietly give the traditional IUL a better crediting assumption in the comparison.

Use clearly stated, apples-to-apples assumptions.

What Should You Ask When Someone Shows You an IUL Loan Strategy?

What happens if indexed crediting is 0%?
Does the applicable policy-loan cost continue?
What is the current applicable loan rate?
What is the contractual maximum loan rate?
What happens at a 6% loan rate?
What policy charges continue during a 0% crediting period?
How much outstanding indebtedness develops over time?
What happens if there are several weak crediting periods?
What happens if those weak periods occur after retirement starts?
What happens if future JUMPs stop?
What happens if I need more retirement income than projected?
What happens if I live to 95 or longer?
At what point does the projected retirement income need to be reduced?
At what point does policy lapse become a serious concern?

Then Ask for the Ugly Illustration

Most people are shown the illustration that makes them excited.

I want you to see the one that makes you uncomfortable too.

Show me:

0% crediting.

5% loan cost.

6% loan cost.

No future JUMPs.

Long retirement.

Ongoing policy charges.

Retirement distributions.

Now tell me if the strategy still makes sense.

Because That’s the Scenario You’ll Think About at 2 A.M.

You’re probably not lying awake thinking:

“I wonder what my indexed-crediting floor is.”

You’re thinking:

“What if this thing doesn’t work the way they showed me?”

“What if we have a bad stretch right after I retire?”

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

Those are the real questions.

You’re Protecting More Than an Illustration

You’re protecting your independence.

You don’t want to reach your 80s and discover the retirement strategy requires a major rescue.

You don’t want your children trying to understand a policy problem you didn’t see coming.

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

“We should be able to handle this ourselves.”

Then make the strategy show you its bad years before you rely on its good years.

The Bottom Line

If your IUL receives a 0% indexed-crediting result while the applicable policy loan costs 5%, the simplified economic relationship is an unfavorable:

5 percentage points.

That does not mean your entire policy automatically lost exactly 5%.

It means the indexed-crediting result being compared did not offset the applicable loan cost for that period.

Policy charges can still apply.

Retirement distributions can still occur.

Outstanding indebtedness still matters.

And several weak periods can create more pressure than one isolated year.

That’s why the 0% floor should never be interpreted as:

“Nothing can go wrong.”

How We Test the 0%-Versus-5% Scenario at FPP Financial

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

I don’t want to show you only the favorable spread.

We’ll test the ugly one too.

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

We’ll test 0% indexed crediting against the current applicable 5% loan rate.

We’ll stress-test 0% indexed crediting against the contractual maximum 6% loan rate.

We’ll keep applicable policy charges in the model.

We’ll test multiple weak periods.

We’ll test no future JUMPs.

We’ll test retirement distributions.

We’ll test earlier retirement.

We’ll test longevity to age 95 or longer.

Then we’ll compare the projected retirement income with 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 Your Retirement Projection Looks Like in a 0% Crediting Scenario?

Don’t ask me to show you only the best version.

Ask me to try to break it.

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 not a guarantee.

And the 300% number isn’t what should convince you.

Make the model show you what happens when indexed crediting is 0% and the loan still costs 5%.

Then make it show you 6%.

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

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

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

Show me exactly where the difference comes from.

Let the math do the talking.

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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, savings account, or direct investment in a market index.

The 0%-crediting/5%-loan-cost example in this article is a simplified illustration of the economic relationship between an applicable indexed-crediting result and an applicable policy-loan cost. An unfavorable 5-percentage-point relationship should not be interpreted as a guaranteed 5% loss on the entire policy, a total policy return, or the exact dollar effect on policy values.

Actual policy results are affected by policy-specific loan provisions, outstanding indebtedness, crediting mechanics, timing, indexed account values, cost of insurance, administrative expenses, premium-related charges, rider charges, other contractual expenses, withdrawals, retirement distributions, death-benefit structure, and other policy mechanics.

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

A 0% indexed-crediting floor applies to the applicable indexed-crediting calculation under the example discussed and does not guarantee that overall policy value cannot decline. Cost of insurance, administrative expenses, policy-loan costs, withdrawals, retirement distributions, and other policy mechanics can continue to affect policy values during a 0% indexed-crediting period.

The historical 6.87% indexed-crediting example discussed in this article is based on an analysis of annual S&P 500 price changes from 2006 through 2020, excluding dividends, and applying the stated 10% cap and 0% indexed-crediting floor. Negative annual price changes were replaced by 0% and positive annual price changes above 10% were capped at 10% for purposes of that historical analysis. The resulting annual capped-and-floored figures averaged approximately 6.87%. Historical results do not predict future policy performance and should not be interpreted as a guaranteed future indexed-crediting rate, compound annual growth rate, net policy return, or historical total return of the S&P 500.

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

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.

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

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

Periods in which indexed crediting is below the applicable loan cost can produce unfavorable loan economics. Repeated unfavorable periods can increase policy pressure when combined with outstanding indebtedness, policy charges, retirement distributions, insufficient policy values, and longevity. No simplified spread calculation by itself determines whether a policy will remain in force.

Hypothetical crediting sequences used in this article are stress-test examples only and are not predictions of future index performance, future indexed-crediting results, or actual policy performance.

References to approximately 12% annual retirement distributions describe a modeled distribution level under specific assumptions and should not be interpreted as a universal safe withdrawal rate, guaranteed distribution rate, or assurance that an IUL can sustain that level of distributions. Policy durability should be evaluated using actual policy values, indebtedness, charges, crediting assumptions, loan provisions, distribution timing, and longevity.

Life insurance illustrations contain assumptions and may include both guaranteed and nonguaranteed elements. Nonguaranteed values, indexed-crediting assumptions, policy values, death benefits, loan-arbitrage assumptions, and retirement-income projections are not promises of future results. Actual policy performance can differ materially from illustrated results.

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 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.

Life insurance death benefits are generally received income-tax-free under current federal law, subject to applicable exceptions and individual circumstances. Outstanding policy indebtedness generally reduces the net death benefit payable under the contract.

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, positive arbitrage, net policy return, or S&P 500 performance. Periods of 0% indexed crediting, unfavorable loan economics, changes in loan rates, policy charges, failed future JUMPs, distribution changes, and longevity can materially alter projected results.

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 funding, indexed-crediting assumptions, policy charges, loan mechanics, loan costs, future JUMPs, death-benefit structure, retirement distributions, and unfavorable crediting periods can materially alter the comparison.

Comparisons between an IUL and a 401(k), IRA, traditional IUL, or another retirement strategy should use clearly stated assumptions appropriate to each strategy. Different strategies have different costs, tax characteristics, contribution rules, market exposure, insurance features, risks, and distribution mechanics.

Policy-specific guarantees, nonguaranteed elements, underwriting requirements, death-benefit options, MEC limits, cost-of-insurance provisions, policy charges, surrender provisions, loan provisions, loan rates, caps, participation rates, spreads, crediting methods, lapse provisions, 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.

What Happens If Your IUL Credits 0% While Your Loan Costs 5%?