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Should I Buy Equity-Indexed Life Insurance?

Question: As a 60-year old, should I buy equity-indexed life insurance?

Answer: Most 60-year-olds don’t need equity-indexed life insurance, says Jorie Johnson, a certified financial planner at Manasquan, New Jersey-based Financial Futures.  The reason: this product is better suited for younger investors – those in their 30s and 40s – who have a long time to build up the equity-indexed cash value of the account and are more likely to have families who might need the death benefit, says Dan Cotter, a principal and director of risk management at Rahmann Financial in Cleveland, Ohio.  Furthermore, you probably shouldn’t even consider such a policy unless you’ve already maxed out other tax-favored accounts like a 401(k) and IRA.  Even then, you might want to consider an annuity over this product, says Johnson.

Equity-indexed universal life insurance (EIUL) is a life insurance policy merged with an investment account. Part of the premium pays for the cost of insurance; the other part builds up cash value by investing in a stock index like the S&P 500. The main criticism of this and other universal life insurance products is that they can be expensive, with surrender charges for policies canceled within the first ten years and significant administrative, mortality and investment fees. On top of that, equity-indexed life insurance products tend to cap the amount of annual gains at between 11 – 14%.

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    • It’s great to have the business Development advisory article. This is obviously a good quality business article.
      Thanks
      Jenny Tabassum
      “Private equity Bahamas”

    • If you want the insurance saleman to make a ton of money, go ahead, or if your relative is selling it. Other than that, waste of money.

    • The reality with utilizing IUL as a retirement alternative is that the concept can work for a 60 year old client just as well as it works with a 40 year old client. The important consideration is “how long does the client have until he/she needs to harvest the policy?” If the client is looking to retire at age 65 and start pulling moneys out of the IUL at that time then I agree it doesn’t make much sense. However, if the client has other assets to sustain retirement income for some time and the IUL can “cook” for at least 10-15 years before being used for income then in a lot of circumstances it still makes sense to look at the IUL as an alternative. The problem with addressing questions like this without all the facts is you rarely can answer them. That is why financial planners need to spend time with clients understanding the totality of their circumstances. AMZ Financial has the ability to walk a financial professional through the entire process that needs to be used with clients while providing tools needed to work with those clients. Please see http://www.amzfamily.com for more information.

      Jason Konopik (F.S.A., M.A.A.A.)
      CFO – AMZ Financial

    • You don’t know what you are talking about. Tax favored for uncle sam not the consumer. Tax favored means you’ll pay the taxes on principle and gains upon withdrawal and possibly at a higher tax rate. In addition, non spousal heirs will be taxed much more upon the transfer of qualified money. You must learn about the tax-free advantages of indexed life insurance before making such irresponsible statements.

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