Frequently Asked Questions
Q. Why havenít I heard about IUL?
A. IUL has been available for almost 20 years, however, everything changed after the market crash of 2008, when people lost up to 40% of their retirement savings. Prior to that no one wanted a cap on their upside growth potential. Since then, the volatility of the stock market and the instability of the world-wide financial situation has created a need for a strategy that offers safety and protection of principal first and foremost. The IUL protection against market losses is a small trade-off for a cap on earnings, and has become an attractive alternative for investing and retirement planning.
Q. Who needs IUL?
A. Individuals and families who are saving for college or retirement, and business owners and professionals who are concerned with losing their investment principal, frustrated by record low rates of return and high taxes and want to supplement their traditional retirement plans.
Q. Why do I need IUL if I already have life insurance?
A. IUL isnít like a traditional life insurance policy focused primarily on death benefits, but rather itís designed to benefit you more as an investment vehicle during your life. All of the typical attributes of term and permanent life insurance policies are included within each IUL strategy that we create. However, IUL is the only type of policy that allows you to participate in the upside potential of the market while eliminating your downside exposure. IUL grants permanent death benefits, tax-free, while the policy builds liquid cash value. Term life insurance doesnít provide that combination of advantages.
Q. What are the advantages of IUL?
A. IUL, a critical component of any retirement and college funding strategy, is designed to protect your assets and still offer upside growth opportunity for you and your beneficiaries. The policies provide a unique combination of benefits that allow you to access your cash value tax-free and insulate you from stock market losses without sacrificing profit potential when the market is up. The policy value increases with the S & P 500 index, but never goes negative.
Click here for the Top Ten Reasons CPAs Recommend IUL Over Traditional Retirement Plans.
Q. What are the disadvantages of IUL?
A. The upside growth potential is capped at 13-15%, so if the markets are up 20%, your growth is capped at 13-15% (RAF believes this is a worthwhile trade-off for the downside protection previously mentioned).
Secondly, IUL is a long term investment strategy, so not appropriate for short term needs. Just like short term investments don't look good in the long term, long term investments don't perform as well in the short term.
Q. What are the fees and expenses of owning an IUL?
A. In comparison to the average managed account (i.e. mutual funds) which costs typically 2%, and a 401K which typically costs 3%, IUL fees are approximately 1%. Unlike the managed account, where the fees get bigger as the balance gets larger, with IUL, the fees get smaller as your balance grows.
Q. How do Financial Advisors feel about IUL?
A. Since most financial advisors are compensated by assets under management, itís not in their best interest to recommend a strategy that will deplete assets that they are currently controlling and earning income on. RAF is happy to have conversations and meetings with your team of advisors to help explain the value of IUL and determine whatís best for you and your individual needs.
Q. Why do I need an IUL policy, since I already have a 401K/IRA?
A. Unlike a 401K or an IRA, IUL never decreases in value due to financial downturns in the markets.
Secondly, with a 401K/IRA, every dollar you take out is subject to ordinary income taxes. Moreover, if you access this money prior to age
59 Ĺ you also incur penalties on top of the taxes. With IUL you can access your money at any age, for any reason, both income-tax and penalty free.
Q. Why do I need an IUL to save for college? I thought a 529 plan is the way to go.
A. 529 plans have limitations that IUL overcomes. A 529 plan offers no protection against losing savings because of a decline in the stock market; with IUL you are protected from any loss due to market downturns. IUL has no limit on how or when you can withdraw your funds, giving you greater flexibility. Additionally, monies invested into IUL can be accessed for any purpose, at any time, not just college funding.
Click here for a comparison chart.
Q. How will RAF Strategies work with my existing advisors?
A. RAF Strategies often teams with both CPAs and attorneys to provide its expertise on the proper structuring and funding of IUL to meet the clientsí goals. RAFís comprehension of tax law and years of experience with IUL bring a specialized level of knowledge that augments what your advisors already know.
Q. I already have a life insurance agent that I work with. Why do I need RAF Strategies?
A. Most life insurance salespeople do not know about or specialize in IUL policies, which is why they probably havenít discussed IUL with you. They donít possess the legal, tax and estate knowledge and experience to craft individual solutions based on each clientís unique circumstances. Rob is not only an advisor and strategist, but he and his wife own
four IUL policies for their family, making him your go-to source for IUL.
Q. Whatís the benefit of working with RAF Strategies?
A. RAF has multiple skill-sets that combine knowledge of tax law, estate planning, business structures, financial planning and life insurance to maximize return and minimize risk. We are unique in our service offerings, and often receive referrals from CPAs and fellow attorneys for our expertise. In fact, Rob is such a believer in the strategy that he recommends to his clients, that he and his wife have
four IUL contracts that they fund for their own retirement and childrenís college educations.
Q. How can I learn how IUL can benefit my particular financial situation?
A. In addition to reading through our site, please visit our blogs at
www.saving4college.wordpress.com. Rob will be happy to arrange a complimentary consultation by phone or in-person to discuss your goals and concerns, as well as to identify any ways to improve your wealth building and retirement planning. Please call Rob Fink at (858) 625-0800 or
click here to send an email.