Why Doesn’t Every Person Own One of These?
Josh VerHoeve, VP Annuity and Life Distribution
What savings and income investment vehicle exists where you are able to save $1,000 a month for ten years, and have that investment pay you back $1,000 a month in income for the rest of your life, 100% tax free?* Fixed Indexed Universal Life (FIUL) is the one product that can do that for you. I ask myself constantly, “Why doesn’t every single person own one of these?”
In addition to tax-free income, FIUL as a savings and income vehicle also provides you with a death benefit which would pass on to your heirs 100% tax-free. It also provides additional tax-free living benefits if you get sick with a chronic or terminal illness.
The average top tax rate in the United States the last 100 years, is nearly 60%**. We’ve had periods of time in history with tax rates over 90%. Yes, you read that correctly…90%! Government spending and the National Deficit have grown at a rapid rate in the year 2020. Given our national debt and our current historic low tax rates, we would be ignorant to not think about taxes increasing in the near future. However, for same reason, savers in America continue to max out their 401(k) contributions. 401(k)s currently hold over $5.5 trillion in assets and make up almost 20% of retirement assets***. This leads me to believe that we are acting differently than we believe. Yes, 401(k)s allow you to save on taxes today, but by doing so you are taking serious risk on taxes in the future. The only time you know how much of your 401(k) belongs to you is when the government tells you how much belongs to them.
So I circle back to my question, “Why doesn’t every single person own one of these”? First, FIUL is not liquid in the early years. You do need ten years or more to make it work well. But, aren’t 401(k)s generally even longer term investments? A 35 or 40 year old saving in a 401(k) cannot access funds until age 59 ½. Maybe the other answer is that you have to qualify medically. Yes this is true, but with streamlined and accelerated underwriting, medical requirements have become less of a tedious process for an advisor or client. I think the answer to this question is quite simple…Education. Not enough savers are aware of FIUL. When you start your first job out of college, there is a pretty good chance you are introduced to a 401(k), but a much smaller chance that you know what FIUL is. This means it’s our job to educate prospects and clients on how FIUL can secure their retirement income. And since we find ourselves here in September, which is Life Insurance Awareness Month, if there was ever a good time to educate, now is that time. Finding an IUL prospect is the easiest prospect to find. Ask your client one simple question, “Do you contribute to a 401(k)?”. If that answer is “YES” then you are looking at your next sale.
Don’t forget to ask for a Planning Compass tutorial from one of the Asset Life Team Members, which helps you compare 401(k) benefits to that of an FIUL.
*45 Male Std NT saving $1,000 per month for ten years projected tax-free income of over $1,000 per month from age 56 for the rest of their life. Note that at younger ages, the income benefit can be higher, assumes a 6.00% rate of return during savings years and 5.50% during income years, both less than any 10-15-20-30 year historical.
*** Source www.ici.org