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.