Interest Rate Floor
When interest rates drop, people lose money in a 401K because the value of your money follows the market into “negative rates”. The Roth IUL has a FLOOR, meaning in market downturns it cannot go below ZERO, which protects your account value from market volatility.
Everyone knows someone who has lost money in their 401K when the stock market takes a downturn. The reason this happens is because they have “no bottom”, meaning they can take a loss. At a time in life when you can least afford it, losing your hard earned money can set you back and the last thing you want to think about is going back to work, or having to sell off your house in order to pay your bills in retirement. If you remember back in 2008 when we hit a recession, many people lost 50% or more of their retirement 401K’s. It many cases it took 5 to 8 years for their funds to grow back to 2008 levels. Who wants to lose money in their retirement?
Frequently Asked Questions
Most (nearly all) retirement plans such as 457B’s, 401K’s, IRA’s, 403B’s…even Social Security, are “taxable” which means you are taxed at the prevailing (current) tax rate, as you receive the money. Just like as you work now and your wages are taxed, so are retirement accounts. Tax-free Roth IRA’s and Tax-free Roth IUL’s are free from taxes, meaning the money receive is net, after tax and is not reportable as income. This can save the average taxpayer as much as 20% to 25% each year on taxes.
Yes, you can have both and the limits from your Roth IRA do not affect how much you can put into your Roth IUL, and the reverse is true as well.
Accounts that are “indexed” are not invested in the stock market, but instead only copy the gains of the stock market, but NOT the losses. You are protected against market downturns of any kind.
William Roth, the Senator from Delaware (1971 – 2001) who was the namesake of the Roth IRA, is the inspiration behind the Tax Free Roth IUL. Our agency, Life Legends adopted the name “Roth IUL” as a description of the tax-free aspect of the Roth IUL. If you click on this link (link to Roth IRA vs Roth IUL) for a full comparison. But, both allow you to remove money in retirement Tax-Free.
IUL is the abbreviation for Indexed Universal Life. When something is Indexed, it means that it follows a certain kind of strategy (S&P 500, or Bloomberg… or some other earning strategy) and it mirrors the activity of how it performs in the market. Universal Life is a permanent cash value life insurance plan that includes “living benefits” as well. It is through this component of the Roth IUL, that allows it be tax-free income.
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