Written By — David Shafer
This week we take a look again at using an EIUL as a savings vehicle. We use as an example, a 28-year-old female, who has that same $300 per month available for savings. Using the same assumptions as our 32-year-old male we adjust her premium 4% each year for inflation and have her making 30 years worth of premiums until she is 58 years old. We add the waiver of premium agreement, which pays for her premiums if she gets disabled before age 60. We assume the same 8.5% crediting average.
The premium starts out at $300/month and 15 years later is $520/month. Initially she has $385K in insurance, which rises to $911K by age 58.
If she retires at age 67 and starts to take income, which could last until she is age 100, she can take out $88,500 per year tax-free. The total cost never goes up to 1% under this assumption.
If she is disabled at age 50, the last 8 years of premiums are paid for. She can take out $122K per year from age 67 to age 80 tax-free.
If she needs to start taking out income at age 51 because of the disability, she can take out $28K until age 70 or $25,800 to age 77.
If she wants to take out more per year starting at age 67 she could take out $138,000 to age 80. If she dies that year she would have received a total pay out, tax free, of $2,163,850.
If she dies at age 60 the insurance proceeds would be $911K. At age 70, under the above situation, $1,208,000. At age 50, $639,000, which represents a 7.62% internal rate of return, tax-free.
Let’s Review
Access to your money, when you need it without penalties [after the 10 year surrender period]. Premium payments made in case of disability [a far more likely occurrence than any of us would like to admit]. Total costs less than 1%. Tax avoidance. Decent crediting returns tied to the success of a stock index. No losses in accounts.
What are you waiting for?
BawldGuy Here: This is the exact program I’m talkin’ about with my 25 year old daughter. She’s got a lot on her plate these days, mainly a wedding in a few weeks, gulp, but this plan is perfect for her. My new son-in-law-to-be should be doin’ it too. Nothing like $150,000 a year tax free retirement income to go along with all your real estate investment income. That’s what we call a magnificently abundant retirement around here.
Contact Dave for more info. Have a good one.
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