What are iuls vs roth iras – What is an IUL vs Roth IRA? 1-800-566-1002 . What are the best types of iuls vs roth iras and learn how you can avoid the most common mistakes that individuals have made when looking into an IUL vs Roth IRA.
IRA Strategy Plan: Your IRA or 401(K)

You are at a party and there is an IRS agent in the room (ok, it is not a very exciting party) and the agent over hears you tell your friend that you have $100,000 in your IRA or 401(k). The agent has every right to go over to you and point out the fact that if you are in a 25% tax bracket, your IRA is really worth only $75,000 to you because $25,000 belongs to your IRA partner, i.e., the IRS. Now is the time to fire that partner.

The Problem: Taxes (Which could go higher) The top tax rate in this country is 35% and considering that the average top tax rate since 1913 is 69% it is very possible that we will see significantly higher taxes in the future. All of your retirement accounts will all be subject to these tax rates when either you or your spouse or your heirs take out the money.

The Too Costly Solution: A Roth IRA Conversion.
One possible solution is to convert your IRAs/401(k)s to Roth IRAs and Roth 401(k)s. This will achieve a tax free retirement but you will have to report the conversion amount as income and pay taxes on that income. The cost of this conversion strategy is usually too much for most people.

The better Solution: IUL with a Policy Loan.
Index Universal Life Insurance has been around for about 10 years and many of the major insurance companies offer a version. The basic concept is that the policy takes advantage of the IRS tax code section 7702 and 72(e) which says that the cash value inside a life insurance policy grows tax free and can be withdrawn tax free as well. Due to the way the product is priced the returns in the policy cash value are much better than the market, usually between a floor of 0-2% and a cap of 13%-15%. Thus, even if the index that the policy is tied to (e.g., the S&P 500) goes down you cannot lose any money (and in some policies you will actually make money). On the other hand if the market goes up the policy cash value will gain up to the cap. These accounts have averaged better than 7% TAX FREE over the past 10 years even in this volatile market.

More important for the IRA strategy is the fact that the insurance company will allow you to take a non-recourse loan from your policy to pay the tax (note: IRA/401(k) money cannot be used to purchase life insurance. The funds must first be withdrawn from the IRA/401(k) and then the policy can be purchased. This withdrawal will cause a tax). This loan will accrue with interest in the policy but it does not have to be repaid until you pass on at which time the insurance company will take out the loan balance before they send your beneficiary the tax free death benefit. As stated before, the cash value account in the policy grows at a better than market rate and policy loans (even annual loans used as income) are tax free.

Basically with this strategy you are converting your taxable IRA or 401(k) to a tax free cash value life insurance policy with a tax free death benefit and then you are borrowing against the death benefit to pay the conversion tax.
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