Written by David Shafer
This week I thought I would give readers a different funding example for EIULs. I recently had a man contact me who is 36 years old, in great health and wanted to put $500/ month into an EIUL until he retired and then pull out income during retirement. I used the same assumptions as I told you about last week. 8.26% average crediting rate [11% below 20-year look back], and a variable rate loan on disbursement of funds set at 6.75%. However, because it is a monthly premium we set it up as a level face value.
We pay monthly premiums until social security age of retirement at 67. At that point we start pulling out income until age of 84, which is 7 years past average age of death for his cohort. At age 84 roughly 70% of his cohort has died. So, again we have used conservative assumptions.
He buys $495,000 of insurance. What we find is that he can pull out $66,962 of annual tax free income and when he dies his heirs get an additional $109,623 for a total tax free payout of $1,247,977. Not too shabby for $500/month which is, frankly, very affordable. So, maybe you haven’t been able to start your real estate investing yet or you have a son or daughter that you would like to help out, doesn’t this make sense to get started now?
Now, because you are not able to max-fund over the 5 premium payments, the expenses go up. However, in the previous example the maximum costs as a percentage is 1.37% if you die at age 75. Well below the average expenses in a mutual fund.
Let’s try another example, this time a women at age 30. Her cohort’s average age of death is 81 so I gave her income from age 68 until age 88. At age 88 over 70% of her cohort has died. Same $500/month until social security age of retirement.
She buys $734,000 of insurance. She get’s $105,334 of annual income and $346,648 for her heirs at death for a total of $2,558,662.
Personally, I think these are superior savings plans to anything out there. No panic when the market goes south. Tax free access to reserves without the government strings and penalties at any time. Death protection for your family. Set them side by side to other savings plans and see what you get! And remember I was conservative in my assumptions. if the market acts the same in the future as it acted over the past you will do even better. And best of all you can get started now!
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About David Shafer
Just wanted to point out to the readers that all EIULs are structured for each individuals needs. The examples described are general examples and any specific illustrations I create are designed after extensive questioning about you and your needs!