An advisor is trying to push me into an EIUL, stating that is would be a “nestegg builder” for 3-5 years, then we would convert it to a VUL. What do you think?

Hopefully some of my questions helped others as well. Thanks for the explanations!

Your first question is a little hard for me to answer, because it is not clear to me what you are trying to do. As I pointed out in the post, EIULs are for hedging against inflation and taxes assuming you have a wealth creating engine up and running. If you don’t have a wealth creation plan, up and running, then it is a little premature to think about EIULs.

Question: Do you have 6 months reserves in a liquid account?
Question: What is your wealth creating plan?
Question: How much insurance do you need right now to protect your family?
Question: How much do you have each month to put into an investment plan?

Basically, EIULs are a long term solution to cash buildup problems. They are expensive, compared to term life policies which give you only the insurance each year. To make them work properly that have to be set up to minimize the face value of insurance and maximize the cash value side. They also have front loaded fees which create short term problems with the cash value. So in other words, if you aren’t planning to allow 10 years to elapse until you start accessing the cash value, then EIULs is not a great product for you.
Now, if you have a wealth building plan in place, you have cash flow being created that needs to be protected against future taxes, and you have all the basics covered (reserve account, term insurance for short term protection of family, etc.) then you should consider an EIUL which should give you a moderate rate of return, protection from the tax man, ability to withdraw cash value tax free, and a death protection that passes to your heirs tax free (unless you break the estate tax limit).

I know this is a little long winded, but I don’t want to misrepresent what EIULs are and what they are properly used for. Further, I hope you talk to me 727.804.9271 or dave@shaferwealthacademy.com in order to get a handle on your total wealth building picture. Because blogs don’t allow for the totality of expression that needs to happen in order to understand each other!

My question in response would be.. how am I paying for the insurance part of it?

If I take out a $1m policy via a EIUL how much must I put in just to pay for the policy and what portion of that amount would be cash I could take out?

Maybe it would be boiling it down to too simple of terms but would this describe a EIUL more easily for newbies like me to understand?

“So I have a savings account, that gives me a death benefit, where I can earn interest and add/widthraw unlimited amounts of money totally tax free for the life of the account”

Does that boil it down? Also, am I allowed to pick my own investments with in it or is it managed for me?

Look at me blabber on… I’ll leave it at those questions for now. Thanks!

Don’t be a stranger.

In order for a distribution or withdrawal from your Roth IRA to be TAX FREE it has to be qualified. For distributions to be qualified, they must not be made until five years after the Roth IRA is set up. In addition to the five year test, a qualified distribution must be made for one of the following reasons:

the owner reaches age 59 1/2
the death of the owner
the disability of the owner
first time home buyer expense up to $10,000

There is also the problem of an upper limit of $5,000 per year inputs, which might not matter now, but likely will in the future.

Joshua, take the match, but don’t put a penny more in.

Finally, you are seriously underinsured. $50,000 will last your family exactly how long? I mean at your age, unless you have serious health issues you can get $1M term insurance for peanuts!