Should You Pay IUL Policy Loan Interest Out of Pocket?

You open your annual IUL statement and see a charge associated with your policy loan.

Your first reaction might be:

“Do I need to write a check for this?”

Then another question follows:

“What happens if I don’t?”

Those are good questions.

But there’s another question I would ask first:

“Why did you take the policy loan?”

Because borrowing from an IUL to buy a boat is economically different from creating a policy loan whose proceeds are immediately redeployed into the policy as part of the IUL JUMP Strategy.

The loan may still have a cost in both cases.

What you’re doing with the borrowed money is completely different.

Do IUL Policy Loans Have Interest?

Generally, policy loans have an applicable loan charge under the insurance contract.

A policy loan isn’t free money.

It creates indebtedness against the policy.

That indebtedness can affect policy values, net death benefit and long-term policy durability.

So when someone tells you:

“You can borrow from your IUL without paying it back,”

I think that’s an incomplete way to explain it.

You need to understand what happens to the loan if you don’t repay it and how the applicable loan charges are handled.

Do You Have to Pay the Loan Interest With Outside Cash Every Year?

Not necessarily under the strategy mechanics we’re discussing.

With the IUL JUMP Strategy, applicable loan charges are modeled as being carried forward rather than requiring the client to pay those charges out of pocket each year during the accumulation design.

That does not mean:

“There is no interest.”

It means:

“The strategy is not modeled around the client writing a separate annual check for that loan charge.”

Those are very different statements.

The Cost Doesn’t Disappear Just Because You Don’t Write a Check

This is the part I want people to understand clearly.

If you don’t make an out-of-pocket payment toward an applicable loan charge, you should not mentally erase the cost.

The policy still has loan economics.

The outstanding indebtedness still matters.

The policy still has other charges.

And the long-term projection needs to account for all of it.

What Exactly Happens to Unpaid Loan Interest?

The exact accounting treatment is controlled by the insurance contract.

Do not assume every IUL handles unpaid loan charges identically.

For the JUMP Strategy, the public-facing way I describe it is simple:

The strategy is modeled with the applicable loan charges carried forward rather than requiring the client to pay those charges out of pocket each year.

When reviewing an actual policy, the current approved illustration and insurance contract should be used to verify how those charges are accounted for.

So Should You Pay the Interest Anyway?

There isn’t one automatic answer that should be applied to every policy loan.

I would first separate the loan into one of two categories.

Is the borrowed money still working inside the strategy?

Or:

Did you take the money out and spend it?

That distinction changes the analysis.

Scenario 1: You Borrow $50,000 and Spend It

Suppose you borrow:

$50,000.

Then you use the money to buy a boat.

The boat may be great.

But the $50,000 you borrowed is being consumed outside the policy.

Those dollars aren’t being redeployed into the policy as additional funding.

You still have the policy indebtedness.

You still have the applicable loan cost.

But the borrowed proceeds are no longer being used inside the policy strategy.

That Can Make Servicing the Loan Cost More Attractive

If the loan proceeds are being spent rather than redeployed, I would want to model what happens if the client services some or all of the applicable loan cost with outside cash.

Why?

Because carrying a growing loan balance for money that has already been consumed can put additional long-term pressure on the policy.

That does not mean every personal-use policy loan must be repaid immediately.

It means the cost should not be ignored.

Scenario 2: The Loan Proceeds Are Redeployed Into the Policy

Now consider the JUMP Strategy.

The Matching Indexed Participating Loan isn’t being created so the client can spend the money.

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

That creates a different economic setup.

The Borrowed Dollars Are Still Working Inside the Policy

Under the example we’re discussing, the client-funded value and the loan-funded value can participate in the same applicable indexed-crediting strategy.

The example has a potential:

10% cap

and:

0% indexed-crediting floor.

The difference is that the loan-funded side carries the applicable policy-loan cost.

So the strategy is trying to create an economic relationship between:

what the loan-funded policy value may receive through indexed crediting

and:

what the applicable loan costs.

This Is Why the JUMP Loan Shouldn’t Automatically Be Treated Like the Boat Loan

In the boat example, the borrowed money leaves the strategy and gets spent.

In the JUMP example, the borrowed money is redeployed into the policy.

Both involve policy indebtedness.

Both involve applicable loan costs.

But the use of the proceeds is different.

That difference belongs in the math.

Let’s Look at the Basic JUMP Example

Suppose the client contributes:

$10,000 per year.

In Years 1 and 2:

$10,000 comes from the client.

There is no Matching Indexed Participating Loan yet in this example.

Then Year 3 arrives.

Year 3 Is the First Planned JUMP

The example shows:

$10,000 client contribution

plus:

$10,000 Matching Indexed Participating Loan

equals:

$20,000 total annual funding shown.

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

The other $10,000 is created through policy-loan activity and redeployed into the policy.

Then the Matching Level Can Increase

The example progression looks like this:

The Client Is Not Paying $60,000 in Year 11

This deserves repeating because it’s easy to misunderstand the chart.

The client is contributing:

$10,000.

The additional:

$50,000

shown in the example comes from Matching Indexed Participating Loan funding.

That $50,000 isn’t free.

It creates policy indebtedness and carries the applicable loan cost.

And Each New JUMP Does Not Pay Off the Old Loans

The loans accumulate under the strategy mechanics we’re discussing.

When the matching level increases from $10,000 to $20,000, that does not mean the old loan was simply erased.

Additional loan activity builds on the existing policy-loan structure.

That’s one reason the treatment of loan charges matters so much over time.

What Is the Current Loan Rate in the JUMP Structure?

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%.

I would model both.

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

Because the policy may be in force for decades.

Five percent is the current applicable rate.

It should not be treated as a promise that the rate will always remain 5%.

If the applicable contractual maximum is 6%, show me what the strategy looks like at 6%.

Especially if the plan is to carry loan charges forward rather than paying them out of pocket each year.

Now the Real Question Becomes: What Is the Loan-Funded Value Doing?

Suppose the applicable indexed-crediting result is:

8%.

And the applicable loan cost is:

5%.

The simplified economic relationship is:

8% – 5% = a favorable 3-percentage-point difference.

That’s the kind of environment where carrying the loan as part of the strategy can look attractive in a model.

But Now Make the Crediting Result 3%

Then:

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

The loan cost didn’t disappear.

The relationship turned negative.

And at 0% Crediting?

At:

0% indexed crediting

and:

5% applicable loan cost,

the simplified relationship is:

an unfavorable 5 percentage points.

That’s why the decision not to pay loan charges out of pocket should never be justified with:

“The indexed crediting will always beat the loan rate.”

There is no such guarantee.

What If the Loan Rate Is 6% and Crediting Is 0%?

The simplified relationship becomes:

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

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

It describes the unfavorable relationship between the applicable indexed-crediting result and loan cost being compared.

Should Negative Arbitrage Make You Immediately Pay the Loan Cost?

Not automatically.

One weak crediting period does not tell you everything about a policy that may exist for several decades.

I would look at:

• Total policy value
• Outstanding indebtedness
• Applicable loan rate
• Crediting results
• Policy charges
• Future funding
• Retirement distributions
• Net death benefit
• Policy durability

Then rerun the projection.

Paying Loan Interest Out of Pocket Has a Cost Too

This is easy to forget.

If you write a check to service the policy loan, that cash has to come from somewhere.

Maybe it comes from your checking account.

Maybe from savings.

Maybe from retirement income.

Maybe from another investment account.

So the question isn’t simply:

“Can paying the loan cost reduce policy indebtedness?”

The broader question is:

“Is that the best use of the outside cash?”

This Is Why I Want an Apples-to-Apples Comparison

Suppose Strategy A carries the applicable loan charges forward.

Strategy B has the client pay those charges every year with outside cash.

If you compare the two strategies but ignore the additional outside cash going into Strategy B, the comparison isn’t fair.

Count every dollar the client actually spends.

External Cash Flow Matters

If someone contributes $10,000 per year to one strategy and $10,000 plus thousands of dollars of annual loan servicing to another, those aren’t equal out-of-pocket commitments.

That doesn’t automatically make one strategy better.

It means the extra cash flow needs to be visible.

What About 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 policy is not directly invested in the S&P 500.

The analysis applied the example strategy’s:

10% cap

and:

0% indexed-crediting floor.

Negative annual index 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%.

Now Compare 6.87% With the Current 5% Loan Rate

The simplified modeled relationship is:

6.87% – 5.00% = 1.87 percentage points.

That’s the positive-arbitrage example used in the JUMP modeling.

But 6.87% is a historical average from that specific analysis.

It is not a guaranteed future indexed-crediting rate.

And 1.87 percentage points is not guaranteed annual arbitrage.

So Don’t Base the Loan-Interest Decision on 1.87% Happening Every Year

That’s not a realistic way to model it.

Some periods may produce a favorable relationship.

Some may produce an unfavorable relationship.

The policy needs to withstand both.

What About the Modeled JUMP Results?

Under assumptions used in one JUMP model, the base 6.87% historical indexed-crediting assumption and the modeled positive-arbitrage effect attributed to successive Matching Indexed Participating Loans produced modeled effective results of approximately:

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

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

They are not S&P 500 returns.

They are not indexed-crediting rates.

They are not guaranteed policy returns.

And they are not a reason to ignore loan costs.

Carrying the Loan Charge Forward Needs to Survive a Stress Test

If the strategy is modeled without an annual out-of-pocket loan-charge payment, I want to know what happens when:

• Indexed crediting is lower
• Several 0% crediting periods occur
• The applicable loan rate reaches 6%
• Future JUMPs stop
• Policy charges are included
• Retirement begins earlier
• Retirement distributions are higher
• The insured lives to 95 or longer

If the strategy only works when the loan relationship is favorable every year, that’s a problem.

What If You Pay the Interest Every Year Instead?

Then model that too.

Show the policy with the applicable loan charges carried forward under the strategy.

Then show what happens if outside cash is used to service some or all of those charges.

But don’t stop at the policy value.

Count the additional cash the client had to contribute.

Then compare the retirement income.

What If You Pay Only Part of the Loan Cost?

That can also be modeled when permitted under the policy’s provisions.

The point isn’t that you have only two choices:

Pay everything

or:

Pay nothing.

The actual policy and planning objective may allow other approaches.

But the contract governs what is available.

Should You Pay Down the Loan Principal Too?

That’s a separate question from servicing the applicable loan charge.

A policy owner may have reasons to reduce outstanding indebtedness, especially when the loan was used for outside spending or the policy is showing increasing pressure.

But again, outside cash used to reduce a policy loan has an opportunity cost.

Model the choice before moving money.

What Happens If You Never Pay the Loan Back?

Don’t interpret “you don’t necessarily have to repay a policy loan during life” as “the loan has no consequences.”

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

It can affect policy values.

It can increase lapse risk.

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

That Makes Policy Monitoring Critical

You don’t want to borrow for 20 years and stop looking at the policy.

Get updated values.

Watch the loan position.

Watch the applicable loan rate.

Watch actual policy performance.

Rerun retirement distributions when necessary.

What Happens to the Loan at Death?

Outstanding policy indebtedness generally reduces the net death benefit paid to beneficiaries under the contract.

So if the gross death benefit is larger than the amount beneficiaries ultimately receive, outstanding policy indebtedness may be one reason.

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

What If Your Goal Is Maximum Retirement Income?

Then paying loan charges with outside cash isn’t automatically the winner.

You need to compare:

How much outside money goes in

against:

How much projected retirement income comes out.

That’s the metric I care about.

What If Your Goal Is Preserving More Death Benefit?

Then the analysis can look different.

Reducing outstanding policy indebtedness may affect the projected net death benefit available to beneficiaries.

So retirement-income maximization and legacy maximization are not automatically the same objective.

Know which problem you’re trying to solve.

Now Let’s Put the Up-to-300% Retirement-Income Result Through This Test

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.

If the JUMP model carries applicable loan charges forward rather than requiring additional annual out-of-pocket payments, that treatment needs to be clearly visible in the comparison.

Otherwise you don’t know what you’re comparing.

Don’t Hide Extra Out-of-Pocket Cash on One Side of the Comparison

If the IUL client is required in one model to contribute additional outside cash every year to service loan charges, count it.

If the JUMP model carries those applicable charges forward, show that too.

Then compare the resulting:

• Total client out-of-pocket contributions
• Policy values
• Outstanding indebtedness
• Projected retirement income
• Net death benefit
• Policy durability

That’s a real comparison.

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

How was the loan cost handled?

Was it paid with outside cash?

Was it carried forward?

What loan rate was used?

What crediting assumption was used?

What happened during 0% periods?

Were all policy charges included?

How much did the client actually contribute?

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

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.

Loan treatment can be one contributor to that difference.

But the comparison needs to use clearly stated assumptions.

If one strategy pays loan charges out of pocket and the other carries them forward, show the additional cash flow.

If the loan mechanics differ, show them.

If policy charges differ, show them.

If crediting assumptions differ, show them.

What Should You Ask Before Deciding Whether to Pay IUL Loan Interest Out of Pocket?

1. Why was the policy loan taken?
2. Were the proceeds spent outside the policy or redeployed into the policy?
3. What does the actual contract say about the loan charge?
4. How is an unpaid loan charge accounted for?
5. What is the current applicable loan rate?
6. Can that rate change?
7. What is the contractual maximum loan rate?
8. How much outstanding indebtedness exists?
9. What policy value supports the current loan position?
10. What happens if indexed crediting is below the loan cost?
11. What happens during several 0% crediting periods?
12. What happens if I pay the loan cost with outside cash?
13. How much additional cash will I contribute over 10, 20 or 30 years?
14. What happens if I carry the applicable loan charges forward instead?
15. How does each scenario affect projected retirement income?
16. How does each scenario affect net death benefit?
17. How does each scenario affect policy durability?

Then Ask to See Both Versions

This is the question I’d use:

“Show me the policy if I pay the applicable loan cost out of pocket, and show me the policy if I don’t. Count every dollar I contribute in both scenarios.”

Now you’re making a decision with numbers instead of assumptions.

Because the Real Fear Isn’t the Interest Statement

If you’re approaching retirement, you’re probably not scared of receiving a piece of paper showing a loan charge.

You’re scared of making the wrong decision with it.

“Am I supposed to pay this?”

“If I don’t, am I quietly creating a problem that won’t show up for 20 years?”

“If I do pay it, am I sending money into the policy that I didn’t actually need to?”

Those are reasonable questions.

And You Don’t Want to Discover the Answer at 82

That’s the emotional part of this decision that rarely shows up on an illustration.

You want to remain in control.

You want to understand what you’re doing while you still have plenty of time to make adjustments.

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

“We should be able to handle this ourselves.”

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

The answer isn’t to avoid policy loans automatically.

The answer is to understand the loan before you rely on it.

The Bottom Line

You should not automatically assume that every IUL policy-loan charge must be paid out of pocket each year.

You also should not assume that carrying the charge forward means the loan costs nothing.

The purpose of the loan matters.

If the proceeds were borrowed and spent outside the policy, servicing the loan cost may deserve serious consideration.

If the loan proceeds are being redeployed into the policy as part of the JUMP Strategy, the economic analysis is different because the borrowed dollars are being used inside the policy structure.

Either way, the loan cost remains real.

Model it.

How We Analyze Loan-Interest Payments at FPP Financial

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

I don’t want to tell you:

“Never pay the interest.”

And I don’t want to tell you:

“Always pay the interest.”

I want to run both scenarios.

We’ll look at why the loan exists.

We’ll look at whether the proceeds are being spent or redeployed.

We’ll look at the actual policy-loan provisions.

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

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

We’ll test lower indexed crediting.

We’ll test 0% periods.

We’ll account for policy charges.

We’ll test future JUMPs and no future JUMPs.

We’ll test retirement distributions.

We’ll test longevity.

And if we’re comparing an out-of-pocket loan-payment strategy with a carry-forward strategy, we’ll count the actual outside cash used in each.

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

Want to See Whether Paying the Loan Cost Helps or Hurts Your Retirement Math?

Don’t guess.

Run both versions.

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.

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

Those are modeled results, not guarantees.

And if loan charges are part of the strategy, you should understand exactly how they’re treated before you believe the final retirement-income number.

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.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• Fixed vs. Participating IUL Loans: What’s the Difference?
• Can IUL Policy Loan Arbitrage Turn Negative?
• What Happens to IUL Policy Loans When You Die?

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.

Policy loans create indebtedness under the applicable insurance contract and generally accrue applicable loan charges. Loan provisions, loan rates, repayment provisions, the treatment of unpaid loan charges, and the treatment of values associated with outstanding loans vary by insurance contract. Actual policy provisions control.

The JUMP Strategy described in this article 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 description should not be interpreted as a statement that loan charges disappear, are forgiven, do not affect the policy, or never need to be considered. The exact accounting treatment of loan charges should be verified against the applicable current approved illustration and insurance contract.

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.

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.

Paying policy-loan charges or principal with outside cash can change policy values, outstanding indebtedness, net death benefit, projected retirement income and policy durability. It also requires additional external cash. Comparisons should account for all client out-of-pocket contributions rather than evaluating policy values alone.

Whether servicing or reducing policy indebtedness is appropriate for a particular policy owner requires evaluation of the actual contract, policy values, loan balance, purpose of the loan, available outside assets, retirement-income needs, legacy objectives, tax circumstances, and other individual factors.

Simplified examples comparing indexed crediting with an applicable policy-loan cost illustrate only the economic relationship between the two rates. They do not represent the policy’s complete return, guaranteed profit or loss, or exact dollar effect on policy values. Actual results are affected by policy values, outstanding indebtedness, timing, crediting mechanics, cost of insurance, administrative expenses, other policy charges, withdrawals, distributions, and other contractual factors.

Positive arbitrage is not guaranteed. Periods in which applicable indexed crediting is below the applicable policy-loan cost can create unfavorable loan economics. A 0% indexed-crediting result with a 5% applicable loan cost represents a simplified unfavorable 5-percentage-point relationship, not a guaranteed 5% loss on the entire policy.

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.

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.

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 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 and is not guaranteed to occur.

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

Policy loans generally 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. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income under applicable tax rules.

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.

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, loan arbitrage, net policy return, or S&P 500 performance. The treatment of policy-loan charges, client out-of-pocket contributions, taxes, market assumptions, indexed-crediting assumptions, policy charges, insurance costs, loan rates, future JUMPs, retirement distributions, and longevity can materially alter 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. Funding, crediting assumptions, policy charges, loan provisions, treatment of loan charges, future JUMPs, death-benefit structure, retirement distributions, and longevity can materially alter the comparison.

Comparisons involving payment of policy-loan charges with outside cash should include that additional cash flow. Failing to count additional out-of-pocket payments can make one strategy appear more efficient than it actually is.

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, repayment options, 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, taking or repaying policy loans, or implementing any retirement-income strategy discussed here.