Tax-Free Retirement Income

The Search for the Right Financial Tool for Retirement

In this present, uncertain economy, there is an ongoing search for a financial tool that will provide both security and growth. Depending on one’s financial goal, current financial situation, and risk tolerance, the investor will lean toward security or toward maximum growth (risk).

This explains why some will place their retirement money (or money that will be their retirement nest egg) in a CD, providing miniscule gain—currently averaging .25%, which is one quarter of one percent!, on $100,000 for a 5-year CD (which means your money would be tied up for 5 years for that mini growth). Others are comfortable placing their trust in higher-risk, potentially higher reward ventures, such as IPOs or just placing all of their retirement hope in the market (whether individual mutual funds, stocks, bonds, 401k plans, etc.), while still others take the middle ground between total security and the opportunity for bigger reward (growth).

Tax Savings

Aside from the straddle between security and growth potential, one other major consideration in investment is concerned with tax ramification. In other words, as important as it to not lose your retirement money and to get good growth on your investment, but it is equally important to gain a tax advantage on your gains. After all, you might brag that you had 5% growth on your money, but if taxes on your investment take 2% of your gain, then your net is only 3%. This is why many are drawn to a tax-deferred instrument, such as an annuity or 401k, for examples, which provide a tax advantage by not paying taxes until you take income on your money (with the philosophy that you will be taxed at a lower tax rate at that point).

While a tax-deferred instrument may lower your taxation, what if you could escape paying taxes altogether on your growth? So, what if you get to keep the entire growth of your money? And what if you could combine that amazing feature with the kind of security in which you can’t lose one penny of your principal? That would be an extremely attractive financial instrument!

Indexed Universal Life Insurance (IUL): A Tax-Free Solution

Well, that financial instrument is available—and, with some qualification, it is offered to the average investor. In fact, if you are able to set invest, on average, $200 per month, this financial tool may serve you very well.

This investment tool is an indexed universal life insurance policy. The understanding that the medium used for this investment is life insurance communicates a couple of important factors.

IUL Premium Factors

First, because it is life insurance, an individual looking at this for tax-free income would need to health qualify. That means this instrument works better for one who is healthy; and the healthier one is, the lower will be your cost of life insurance which means that more of your money will be used for growth.

Second, because it is a life insurance instrument, age also plays a factor. The younger a person is when entering this contract, the lower will be the cost of insurance and the more of his or her money will be utilized for growth. In the opinion of this writer, an indexed universal life policy can be a good tool toward retirement for those who enter the policy during ages of 20s – 50s.

That it is a universal life product reveals that it is a permanent life insurance product. Because this plan operates differently from whole life, it is important that your insurance agent direct you to put target premium into your policy rather than minimum premium. Though target premium is higher than minimum premium, it provides for the plan to be funded properly so it doesn’t collapse down the road (as some 1980s universal life policies later did). The money you place into this product beyond the target premium will be your investment money directed toward growth.

IUL: Growth on Your Money without Fear of Loss

As mentioned, the focus of this article is on an indexed universal life policy. “Indexed” refers to how your money is credited or the index into which your money is invested.

Typically, insurance companies that offer indexed universal life plans provide various options where you can direct your money. For example, you can place your money into the Dow Jones, the S&P 500, the Russell 1000, the NASDAQ composite, EURO STOXX 50, etc.; and you can change your index annually, which gives you some freedom on your investment. In addition, you can spread your money around, putting some of it, for example, into a fixed account (of guaranteed growth), some into the S&P 500, and some into EURO STOXX.

However, while you have the opportunity to invest in an index, your money is not in the market. This provides you with protection and security; for, if the index takes a dive, your money won’t dive with it.

Here is the way it works. If, for example, your crediting method is an annual one, the gain will be computed on an annual basis. If the market is up over the course of a year, your money gains (up to a point—see below), but if the market is down over the next year, you lock in your previous gain, and you hold. Then, if the market rises over the next year, you get that gain (up to the cap amount—see below). Essentially, that means that, on the money you put into your policy over and above the cost of life insurance, you will get the gain of the market without any of the loss. That provides you with security, and you won’t have to worry about making up lost ground as do those who invest directly in the market.

The IUL Cap (Ceiling)

Indexed universal life policies have a cap, or ceiling, on the percentage of gain you can be credited in a crediting period (such as a year). A select few plans have a cap as high as 14%, which means that, if the market gains 14% or higher in your crediting period, you will be credited with a 14% gain. That is a big upside for a secure investing tool.

Tax-Free Income

Now we get to the best part of this tool—the tax-free income you can enjoy into your retirement years. As long as you follow the IRS guidelines, after putting ample premium into an indexed universal life policy—over the course of a number of years—you can draw out an income stream which is tax-free! (The IRS requires a certain amount of life insurance per the amount of premium you put into the plan. An experienced insurance agent can help you set up your plan so that it fits these guidelines.) The IRS allows this on non-MEC plans (plans that fit the IRS guidelines), if the income stream is set up as a “loan.” In that case, the IRS recognizes that money as yours, so no taxation occurs.

Some insurance companies provide plans in which, once you begin drawing income from the plan, you are guaranteed that income for life! This means that with the right plan, with the right insurance company, once you begin drawing income on the plan, you can have a tax-free income stream for the rest of your life! How sweet is that!


This writer is not advocating for you to place all of your retirement eggs into one basket, meaning that, in addition to the indexed universal life tool, you should also look at other strategies to prepare for retirement. However, an indexed universal life policy is virtually the only tax-free tool available to the average investor. So, if you are in your 20s – 50s, are healthy, and are looking for a financial tool that will provide you with security, good growth on your money, with a tax-free income benefit, an indexed universal life insurance policy may just be what you have been searching for. If so, explore this possibility with an experienced, trustworthy agent who will be able to answer your questions.

Linda WilliamsLinda Williams
10:08 12 Jul 23
I had a 5 star experience and would recommend him. Always returning my calls promptly, very helpful and informative, listened to what my needs was regarding my Medicare. I truly felt comfortable with John's help to navigate through the maze of Medicare
Cindy KulakCindy Kulak
14:51 18 Jun 23
John is very knowledgable, honest and ethical in helping clients evaluate Medicare options and get enrolled. He made the process extremely easy for myself and my husband.
Leeann MoosLeeann Moos
17:26 06 Apr 23
When I became eligible for Medicare, my phone was constantly under attack from Medicare options sales folk. Since I needed help understanding my options and life is too short to do business with annoying people a little research was in order. Thats how I found John. His other customers seem very pleased with his service and I decided to give him a try. I was NOT disappointed! He did an excellent job for me, is extremely personable and I could not be happier. Thank you John
Rose WrightRose Wright
16:07 05 Apr 23
I am so thankful for the help that Mr. John was able to assist me with medicare information. After being bombarded with letters and phone calls you just need someone who can walk you through the confusion. And after getting all the info and the best plan and benefits for what i needed. I am glad that He was there for me.Thank you so very much,Rose Wright
Steve HenselSteve Hensel
21:08 04 Apr 23
Claeys Group is great to work with. John is truly professional, knowledgeable and makes the entire process flow so much more smoothly than I expected. I would highly recommend him.
Deborah RounsavallDeborah Rounsavall
14:25 07 Mar 23
I changed from my person finance planning group to John for help. Others led me astray. John is very responsive and follows up promptly. Even helped me on the weekend at the end of year to get all my documents in on time so I didn't lose insurance coverage. Explains all the options in a manner that us rookies can understand it. I highly recommend John.
Setella ParksSetella Parks
13:12 07 Mar 23
John's knowledge is invaluable when it comes to navigating the murky water of Medicare plans. He answered all our questions in a manner we could understand and helped us compare benefits between plans, services, and providers readily available in our area. I am so happy we called on him to assist us! He handled EVERYTHING professionally and patiently and has followed up to make sure we are good. Highly recommend his 5 star service!
Sherry JonesSherry Jones
21:01 23 Feb 23
John was recommended by my sister-in-law, who spoke very highly of him. He wrote out the differences between policies and explained it step by step to me so I could understand which policy would be best for my needs. He was professional but also down to earth so I could be at ease. He did this at my bed side which was such a blessing for me. I highly recommend John for your Insurance needs.
19:40 20 Feb 23
We were recommended by friends to call John Claeys for our insurance. He came twice to gather information on what we were looking for and returned with information and details. We are delighted to have John Claeys as our agent and would recommend to our friends and anyone else to call John Claeys today.Tom and Debbie
Joyce SandvikJoyce Sandvik
20:32 30 Aug 22
John Claeys came to our house to talk about all aspects of Medicare. He wrote out some information on a notepad as he talked and answered our questions. He gave us the handwritten notes along with printouts of more information specific to my needs. My husband and I took o a few days to discuss the options. John took a list of my medications and researched all the available prescription insurance policies for me. He narrowed it down to the best policy (best prescription prices) for me. It was so easy and I felt confident I was getting exactly what I need when I turn 65. Every September, he will research prescription policies from my updated list of medications to find the best policy for my needs. Thanks to John Claeys for making this transition extremely easy and effortless.
Marilyn ScottMarilyn Scott
09:35 23 Jul 22
John enrolled my husband into Medicare 4 years ago. I knew then I wanted him to help me with my Medicare when it was my time to enroll. John helped me recently. He is very knowledgeable, humble and so patient. He made sure I had the best plan for me. He genuinely cares about his clients. He is the best insurance consultant! I highly recommend John for your Medicare needs!!
James MartinJames Martin
20:31 20 Jun 22
John did a great job of providing many options for my insurance. He is very thorough.
Judy MarkmanJudy Markman
17:02 20 Jun 22
John goes above and beyond to find the best insurance to fit your needs at an affordable price. I definitely recommend!
Dave LemingDave Leming
16:56 20 Jun 22
John was referred to my wife and I as we began to transition to use Medicare as our insurance options. He was very knowlegeable about all things related to government programs and supplemental options as well. I would strongly recommend his services to anyone requiring such support.
Ed HareEd Hare
14:16 08 Jun 22
John was recommended to us by a friend as we were turning 65 and having to make decisions on our medicare and advantage plan choices.John was thorough, informed, patient and engaged in helping us wade through all the minutia we were receiving to package the best set of programs for our future healthcare needs.We are happy and confident as healthcare needs arise having John at our side.Debi and Ed Hare
Julie SimpsonJulie Simpson
02:36 14 May 22
We selected an awesome advisor in John Claeys! John was dedicated to our needs in counseling our new Insurance choices with Medicare. He is sincere in getting his customers into the program that is best for their situation. John was sincere in explaining the process and we are happy to refer him to others! Steve and Julie Simpson
Sherry HilliardSherry Hilliard
16:55 18 Feb 22
John was extremely helpful when I had to select my Medicare supplemental policy. He is very knowledgeable in the various insurance products. I would recommend John to anyone needing insurance, and in fact, I have recommended him to several of my friends.
Margie SmithMargie Smith
01:08 16 Feb 22
Highly recommend Claeys Group Ins Service, John has assisted with my Medicare supplement and RX choices for past couple years. He is very knowledgeable of the various companies and policies available. Saved money and introduced me with a 5star company.
16:56 10 Feb 22
John came to my house and explained the process of signing up to Medicare in an understandable way. He gave me the steps to take and assisted in the planning. With his help, I got it done. Before he came, it all seemed overwhelming. He's so genuinely nice, and I felt like I had known him for a long time. I highly recommend him, and in fact, already have recommended him to friends and family.
Rebecca NelsonRebecca Nelson
21:00 04 Feb 22
John Claeys is a great individual to work with you on insurance needs. He searched out the best policy and an affordable one that I could handle. He researches every year to be sure I’m getting the most for my money! Highly recommend this group.
Dorys GardensDorys Gardens
12:20 23 Jan 22
John was so pleasant to work with. He explained everything clearly and did not pressure me to make a decision one way or the other. He shopped for the best customized drug plan which will be saving me money in the long run. I highly recommend letting him guide you through the medicare process.

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