Maximum cash accumulation IUL - Life Insurance Recommendations

IUL case study: Male age 40

June 1, 2023

10:38 AM

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In your 40's, indexed life insurance, Maximum cash accumulation IUL

Male age 40, preferred non-tobacco rate

Indexed Universal Life (IUL)

Goal #1: maximum cash value accumulation, income disbursements after retirement, no premiums in retirement

Design: minimum face amount, non-MEC (Modified Endowment Contract)
S&P 500 annual annual point-to-point with 100% Participation
5.00% index crediting all years
$500 monthly premium years 1-25, zero premiums thereafter to age 120
increasing death benefit years 1-25, level death benefit thereafter
maximum distributions years 26-30 (5 years) switch at basis from withdrawals to loans
$6,000 annual premium: guideline level premium $6,000.02 (non-MEC since it’s below guideline level)

Results: Company A
$104,115 increasing initial death benefit
non guaranteed results:
cash value accumulation $268,559 year 25.
Maximum disbursements for 5 years, $59,640 assuming 4.50% variable rate. total $298,200 distributions over 5 years. Total premiums years 1-25: $150,000; net outlay ($148,200)
the policy projects coverage to age 120 without further premiums.

Goal #2: target premium in order to build cash value and for coverage to last to age 120, flexible premiums for coverage to age 120 and cash value accumulation

Design: target premium
S&P 500 annual annual point-to-point with 100% Participation
5.00% index crediting all years
increasing death benefit all years

Results: Company A

$250 monthly premium (target premium)
$209,644 initial increasing death benefit
guideline level premium: $11,992.02 (maximum non-MEC annual)
maximum non-MEC annual premium $14,535.83, 7 pay test (annual)
monthly initial minimum premium $69.26
cash value accumulation $105,527 year 25

$500 monthly premium (target premium)
$491,287 initial increasing death benefit
guideline level premium: $23,898.08 (maximum non-MEC annual)
maximum non-MEC annual premium $29,071.64, 7 pay test (annual)
monthly initial minimum premium $125.29
cash value accumulation $216,825 year 25.

So with an IUL you can choose a target premium as your budget allows and have lots of flexibility to change premiums as circumstances warrant over the years from minimum to maximum non-MEC. A target premium will not build as much cash value as in the Goal #1 design, minimizing the face amount and the maximum non-MEC premium, but it does quite well in building cash value and that does give you a much higher death benefit.

Please call with any questions, and to find out the name of the high performing carrier quoted.

Reviewing Global Indexed UL (IUL): American General and ING

by Sean Drummey

March 29, 2013

3:24 PM

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American General recently introduced the Indexed Universal Life (IUL) product “Elite Global Plus II”. The choices for indexes are the S & P 500 annual point-to-point, or a 5 year point-to-point blended index: S&P 500®, the EURO STOXX 50® Index, and the Hang Seng Index. This blended index performance is weighed 75% best index, 25% second best index multiplied by the participation rate. There is a guaranteed interes of .25% annually.

American General’s product is very similar to ING with their “ING IUL-Global Choice.” ING also has a blended index using the same indexes and weight, though ING also offers a 2 year point-to-point as well as the 5 year point-to-point. Participation rates are the focus rather than cap rates on these 5 year point-to-point products. Both products offer a 15% guaranteed participation rate.

The strength of this index selection and weighted approach are hypothetical high rates of return as gauged by historical averages. Very high. ING has put out some impressive historical data to back up that assertion. American General shows a 9.28% interest rate as current illustrative rate for the 5 year point-t0-point. That rate is based on an historical average from December 31, 1992 through December 31, 2012.

The American General product has a Choice Loan and a Standard Loan. It’s not easy to discern all the loan provisions from the producer guide, but running an illustration states “6.00 Effective Annual Rate – Guaranteed Charge” for the Choice Loan.

Testing product performance is a matter of running illustrations side by side with another carrier using the same premium and structure and see which project better cash value accumulation and loans for retirement income . Cash value accumulation involves running maximum premium below the MEC, or Modified Endowment Contract, by using guideline level premium test or 7 pay premium test. I ran American General and ING, illustrations with $500 a month, age 30, male preferred non tobacco, at guideline annual, increasing face amount, 30 years of premium, and then zero premium thereafter and maximum loans for retirement income years 31 to age 100, assuming 7% interest, same index: 5 year point-t0-point. I usually run test illustrations at 5% interest, but I have been comparing lately at 7%, so I used that as a benchmark. American General illustrated at a 65% participation rate, or par, ING illustrated at a 75% par. American General had better cash value accumulation, however ING had higher loans for retirement income. As a practical matter the loan income figure is more important than cash value accumulation.

After an initial look, ING appears to be a stronger product for those interested in this sort of 5 year blended international indexes approach. Granted that is based on only one example, and many more comparisons for different ages, health classification, premium amounts and length of premium contributions is necessary before making a more definitive judgement.

Best Indexed Universal Life (IUL) for retirement income: How does AXA Equitable measure up?

by Sean Drummey

November 22, 2011

4:29 PM

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Which is the best Indexed Universal Life (IUL) carrier for tax-free policy loans for retirement income? AXA Equitable has been in 2011 a consistently leading seller for Indexed UL. Let’s compare AXA side-by-side with other carriers to see how it performs. AXA product features include four index options. But beyond reviewing specs like rate caps and guarantees, the most useful way to evaluate carriers is to run policy illustrations using the the same premium and death benefit and compare projected returns.

The Indexed UL structure employed here is to overfund premiums with the minimum amount of death benefit to stay within IRS rules for tax advantaged life insurance. Then in retirement income take the maximum amount of tax free loans while still retaining a lifetime death benefit.

This Indexed UL strategy is an alternative for someone in their 30’s, 40’s and 50’s to directly investing in equity markets for retirement. IULs allow you to take advantage of market gains without the downside risk.

Here’s what it looks like for a male age 44 putting in $25,000 a year for 20 years, and then starting at age 65 taking the maximum out in tax free policy loans for retirement income for the next 20 years, while retaining at least a $100,000 death benefit to age 121. The death benefit starts at about $540,000 for each carrier and increases for years 1 – 20.

Carrier	Cash Value Year 20	Death Benefit Year 20	Loan Amount Years 21-40	Cash Value Year 41	Death Benefit Year 41
Lincoln	1,072,791	1,611,714	145,602	826,476	1,115,403
North American	1,144,104	1,683,029	147,248	658,775	981,056
Minnesota Life	1,100,898	1,655,898	137,217	584,737	876,987
John Hancock	1,085,171	1,323,908	139,719	614,556	913,093
Transamerica	1,065,637	1,630,637	95,000	215,254	346,582
AXA Equitable	995,284	1,534,207	86,402	98,473	212,604
Aviva	972,524	1,527,524	120,188 * *yrs. 21-31 only	83,677	204,366

I quoted AXA Equitable’s S & P 500 current rate which assumes 7.55% which is below the 8% plus range of S & P 500 rates assumed by other carriers, and that does have something to do with its lower cash value and death benefit accumulations on the chart at year 20.

Regardless, AXA only uses a variable loan rate which is currently illustrated at 3% policy yeas 1-10 and 2% thereafter. The rate is the greater of 3% or published monthly average Moody’s Corporate Bond Yield. Guaranteed not to exceed 15%. They do not offer a fixed rate.

Since those loan payouts are not competitive with Lincoln’s 5% fixed rate or higher variable rates assumed by the other carriers, AXA Equitable does not appear be competitive. Best way to find out which carrier is right for you is to request that I email you free quotes in the form of policy illustrations.

Carriers & Products quoted:

Lincoln National Life Insurance Company: “Lincoln LifeReserve Indexed UL (2011)”
North American Company for Life and Health Insurance: “Rapid Builder IUL”
Minnesota Life Insurance Company: “Eclipse Indexed Life”
John Hancock Life Insurance Company: “Indexed UL”
Transamerica Life Insurance Company: “Freedom Global IUL II”
Aviva Life and Annuity Company: “Advantage Builder Series IV”
AXA Equitable Life Insurance Company: “Athena Indexed Universal Life”

call Sean (910) 328-0447
email: spdrummey@gmail.com

Disclaimer: Information and quotes are current and accurate to the best of my knowledge on November 22, 2011. Product features and rates are subject to change. Quotes are non-guaranteed projections based on current interest rates and cost of insurance. Tax information is general information only. Please seek professional tax advice for personal income tax questions and assistance.