Use our IUL Calculator below to estimate how much tax-free income your IUL can generate in retirement.
An IUL calculator estimates the cash value, death benefit, and tax-free retirement income an indexed universal life policy could build from a monthly deposit. Enter your age and savings amount to see your projections. Results aren’t guaranteed, since actual values depend on index credits, caps, and policy costs.
Every dollar you take out of a traditional 401(k) or IRA is taxed as income. An indexed universal life (IUL) policy, set up correctly, can give you retirement income that isn’t. Pick your age, enter a monthly amount, and see what yours could look like.
IUL CALCULATOR
Calculate your Indexed Universal Life insurance projections
Enter Your Information
NOTE: MINIMUM AMOUNT $353
Important Disclaimer:
PROJECTIONS BASED ON A NON-GUARANTEED 5.91% GROWTH RATE.
This calculator provides estimates based on simplified projections. Actual policy values may vary based on market performance, policy fees, and other factors. Please consult with a licensed insurance professional for personalized advice and accurate quotes.
What Your IUL Calculator Results Mean
- Initial insurance coverage: This is the death benefit the policy starts with. An IUL is life insurance first, and the death benefit is what makes the tax treatment possible.
- Projected cash value at 67: This is the savings side of the policy, after policy costs, using the growth rate shown under your results.
- Projected annual tax-free income from 67 to 100: This is what you could draw each year, mostly through policy loans, while keeping the policy in force.
- Total premiums paid vs. total income through age 100: Compare these two to see what your deposits could turn into over a full retirement.
What Moves Your Numbers
Starting younger helps a lot. You get more years of tax-deferred growth, and the cost of insurance inside the policy is lower. Contributing the maximum premium relative to the death benefit also helps, because more of each dollar goes to cash value. That approach is called a max funded IUL.
Your cash value isn’t invested in the market. It’s credited interest based on an index, like the S&P 500, within a cap, with a floor that’s often 0%. If the index gains 12% and your cap is 10%, you’re credited 10%. If the index drops 20%, you’re credited 0%. Policy costs still come out every month, so a zero-credit year can nudge your cash value down slightly.
Here’s the thing: these are projections, not promises. The calculator’s growth rate is a non-guaranteed assumption. Your real numbers come from a carrier illustration based on your age and health.
Get Your Personalized Illustration
401(k) vs. Roth IRA vs. IUL: How They Compare
| Feature | Traditional 401(k) | Roth IRA | IUL |
|---|---|---|---|
| Money going in | Pre-tax | After-tax | After-tax |
| Money coming out | Taxed as ordinary income | Tax-free if qualified | Tax-free through withdrawals to basis and policy loans, if set up and kept in force correctly |
| Contribution limits | Annual IRS limit | Annual IRS limit, plus income limits | No set dollar cap, but tax rules limit premium relative to the death benefit |
| Market losses | Can lose value | Can lose value | Floor (often 0%) protects against index losses. Policy costs still apply |
| Access before 59½ | 10% penalty on most withdrawals | Contributions anytime, earnings usually penalized | Policy loans available with no IRS age penalty, if not a MEC |
| Required minimum distributions | Yes, starting at 73 | No, for the original owner | No |
| Death benefit | No, the account balance passes | No, the account balance passes | Yes, generally income-tax-free to beneficiaries |
To be completely honest, an IUL isn’t a replacement for your 401(k), especially if your employer offers a match. Free match money is hard to beat. An IUL tends to fit best as a tax-free layer on top of what you’re already doing.
How Tax-Free Income From an IUL Actually Works
Under IRC Section 7702, the cash value in a life insurance policy grows tax-deferred. In retirement, you typically withdraw up to the amount you’ve paid in, which isn’t taxed. Then you switch to policy loans. A loan isn’t income, so it isn’t taxed or reported as income. When you pass away, the loan balance is repaid from the death benefit.
That tax treatment only holds if you follow the rules:
- Stay under the MEC limit. Fund the policy too fast and it becomes a modified endowment contract under Section 7702A. Loans are then taxed as income first, plus a 10% penalty before 59½.
- Keep the policy in force. If a policy lapses with a loan outstanding, the gain becomes taxable that year. Policies need regular reviews, not set-and-forget.
- Loans cost interest. Loan interest accrues every year, and how the carrier treats loaned cash value affects your long-term results.
That’s why design matters as much as the product itself.
Who an IUL Fits (and Who It Doesn’t)
An IUL account isn’t only for the wealthy, but it isn’t right for everyone either. We’ve been doing this for over 30 years, and here’s how we size it up.
An IUL may be worth a look if:
- You’re already contributing enough to get any employer match
- You expect your tax bracket in retirement to be the same or higher
- You can commit to funding the policy for 10 years or more
- You need life insurance anyway and want it to do more than one job
It’s probably not the right fit if you’ll need this money in the next few years, your budget makes missed premiums likely, or you’re carrying high-interest debt. Health matters too. An IUL requires medical underwriting, so two people the same age can get very different illustrations.
Frequently Asked Questions
Is an IUL calculator accurate?
It gives a reasonable estimate based on simplified assumptions, including a non-guaranteed growth rate. It doesn’t account for your health rating, a specific carrier’s charges, or current caps. For real numbers, you need a carrier illustration, which we can run for you.
Can you lose money in an IUL?
Index losses can’t reduce your cash value, because the floor keeps your credit from going below zero. But policy charges come out every month, so cash value can dip slightly in a zero-credit year. Underfunding the policy or taking heavy loans can also hurt it over time.
Is IUL retirement income really tax-free?
Generally, yes. Income taken through withdrawals up to your basis and through policy loans isn’t taxed, as long as the policy isn’t a MEC and stays in force until death. Break those rules and taxes can apply.
What’s the minimum for the IUL calculator?
The calculator starts at $353 a month. You can buy an IUL for less, but policy fees take a bigger bite out of smaller premiums, so less goes to cash value and the income numbers shrink.
How much should I put into an IUL each month?
Pick an amount you can comfortably keep paying for at least 10 years. Starting too high and then cutting back is one of the most common ways an IUL underperforms. We’ll help you find the right level for your age, goals, and budget.
Get Your Personalized IUL Illustration
Want to see real numbers for your age and health? Take our 3-minute survey and we’ll build a personalized IUL illustration showing your projected cash value, death benefit, and tax-free income. Prefer to talk it through? Call us at 800-712-8519.
Key Takeaways
- The calculator gives estimates, not promises. It uses a non-guaranteed 5.91% growth rate. Your real numbers come from a carrier illustration based on your age and health.
- IUL income can be tax-free if it’s set up right. You take withdrawals up to your basis, then policy loans, as long as the policy stays under the MEC limit and stays in force.
- The floor protects you from index losses, not from costs. Policy charges still come out in a zero-credit year, so cash value can dip slightly.
- Start younger and fund it fully. More years of growth and a max-funded design both raise your projected income.
- An IUL adds to your 401(k). It doesn’t replace it. Take any employer match first, then use an IUL as a tax-free layer on top.