As mentioned in our earlier blog, when planning for retirement an IRA is an excellent choice. When making the maximum, tax deductible, annual contribution an IRA can pay off with a comfortable amount of cash flow when age 70 is reached. For financial advisors, it’s important to remember the value of combining an IRA with an Indexed Universal Life Insurance policy (IUL). Like an IRA, an IUL collects monetary contributions annually and grows in cash value. Unlike an IRA, an IUL creates tax free income when retirement age is met.

IUL’s also have other perks that, when paired with an IRA, create the greatest retirement benefit. For starters, many IUL’s offer flexible premiums and protect against economic uncertainty, all with the opportunity to earn better interest than comparable products. Making annual contributions to an IUL builds up cash value. When you combine this with better interest rates, the policy becomes cash rich by the time of retirement.

Investing in an IUL means investing money into a stable, long-term retirement program. First, when a premium is paid, it goes into a basic interest strategy which holds on to the premium to fund policy charges and insurance costs for a year. Next, the excess or remaining premium is put into segments that were previously selected for a specific amount of time, lasting from one to six years. These funds are locked into place for the duration of the segment terms. As the segment term ends, the money is placed back into the basic interest category and new premium money is moved into specific segments with terms attached. The money is moved around over fixed periods of time to create the maximum amount of interest. Interest generated is determined by the S&P 500, NASDAQ 100, Dow Jones Industrial Average and the Hang Seng.

While the above explanation is only a brief explanation of the process, the fact remains that pairing an IUL with an IRA provides the best return on investment when it comes to retirement. With both products cash flow is created without having to sacrifice lifestyle when retirement comes around. And honestly, we can all use a little more money come retirement time.