Self-Funding an IUL to Build Tax-Free Retirement Income
What if you could fund a retirement strategy in just three years — and then let it pay for itself, tax-free, for decades to come? That was the path Samantha discovered when she turned her business surplus into a self-funding plan, creating future flexibility and a stream of retirement income without market downside risk.
Andrew Perez
September 17, 2025
Client profile
Age
42
Occupation
Marketing Agency Owner
Marital Status
Married, two teenage children
Household Income
$350,000
Challenge
Samantha had significant cash flow from her business but was already maxing out qualified retirement plans (401(k) + profit sharing) and still had $75,000 per year in additional investable surplus. She wanted to create a tax-free retirement income stream, with flexibility to pause or adjust premiums if her business had a slower year in the future.
Solution
- Product Type: Indexed Universal Life (IUL) structured as a Self-Funded 3-Pay Plan
- Premium Design: $75,000 per year for 3 years
- Funding Strategy: After year 3, annual policy loans are taken from the growing cash value to cover years 4+ premiums — eliminatingadditional out-of-pocket contributions.
- Additional Feature: Overfunded to the MEC limit to maximize cash accumulation without triggering MEC status.
Why It Worked
The short funding period matched Samantha’s willingness to commit to higher premiums while her business was thriving. After three years, the policy’s cash value growth was sufficient to “self-pay” future premiums using policy loans, allowing her to redirect business cash flow elsewhere.
Outcome
Samantha will have projected tax-free retirement income starting at age 60 of approximately $70,000 per year for 20+ years, with a remaining death benefit for legacy. She appreciates that the strategy essentially creates a perpetual, self-funded retirement account without market downside risk or contribution limits.