Updated: Oct 26
Contact Aaron at 844.711.1130 ext. 1 to get started with your IUL account today.
When comparing an IUL versus a Roth IRA as retirement vehicles for the most part, these two strategies have a lot in common.
There is a negative nuance to Roth IRAs, however, involving age limits for making contributions. In order to contribute to a Roth IRA indefinitely, you must receive "active taxable income" (IRS term), generally from a job. Not all self-employed income is subject to self-employment tax. So, some self-employed workers or business owners may not qualify.
An IUL has no such restriction on age limit for making contributions. So, for example, if you owned an apartment building and generate income as a landlord, because that income is not subject to self-employment tax, it doesn't qualify for Roth IRA contributions. In such a case, an IUL account would be the only option between the two.
Another glaring difference between IULs and Roth IRAs involves income limits. High income earners will not qualify to open a Roth IRA. Periodically, the IRS raises these limits. However, if you -- or you and your spouse -- earn more than the limit, then you will not qualify to contribute to a Roth IRA, plain and simple. Fortunately, IULs have no such income limitations.
IULs also have a life insurance component which guarantees your beneficiaries a tax-free inheritance. So, say that you open an IUL account with a $250,000 face amount and you pay your initial $200 premium. Unfortunately, however, you die the very next day in a car accident. What happens? Your beneficiaries inherit $250,000 tax-free.
The value of a Roth IRA can typically be left to your beneficiaries tax-free as well. However, in some cases, it may be taxed based on the time period of account seasoning when the Roth IRA owner dies. Perhaps more importantly, however, only the amount contributed to the Roth IRA plus any growth will be left to your beneficiaries because there is no life insurance component.
Another key difference when considering an IUL versus a Roth IRA is that a Roth IRA is typically invested directly in the market. So, if the market crashes, the Roth IRA account value can take a significant hit. In contrast, an IUL is never directly invested in the market so it enjoys the protection of a 0% floor in the case of a market crash.
All things considered, I'd say an IUL has all the advantages of a Roth IRA (and then some) but without any of the risks or limitations.
If you are considering opening an IUL, please feel free to contact my office any time 24 hours a day, 365 days a year. I will email or call you back if I am not immediately available. Please be sure that you provide me your correct phone number and, in your message, let me know the best times to reach you as well. It would be my pleasure to serve you. This process does not need to suck you into a vortex that takes endless amounts of time. We can keep it simple and get you set up for financial success for your future.
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Feel free to call: 844.711.1130 ext. 1.
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