Using a Traditional IUL to Supplement Retirement Income
Daniel knew saving wasn’t the problem — taxes were. With most of his retirement dollars sitting in accounts that could be heavily taxed later, he wanted a smarter way to balance his future income. The strategy he chose gave him both growth potential and downside protection, while opening the door to a stream of tax-free income in retirement.
Andrew Perez
September 17, 2025
Client profile
Age
40
Occupation
Corporate Executive (VP of Operations)
Marital Status
Married, two children (ages 8 and 11)
Annual Income
$280,000
Challenge
Daniel was concerned that taxes might be higher in the future when he starts taking distributions from his 401(k) and deferred comp plan. He wanted to create a tax-free income stream to balance his future taxable retirement income and reduce his exposure to market downturns right before retirement.
Solution
- Product Type: Indexed Universal Life (IUL) — maximum funded, non-MEC
- Premium Design: $30,000 per year for 20 years
- Funding Strategy: Out-of-pocket contributions annually to keep cash value growing
- Additional Features: Annual index allocation split between S&P 500 cap and uncapped strategies to optimize growth potential
Why It Worked
This design allowed Daniel to steadily accumulate a large pool of cash value over 20 years without overextending his budget. He liked that his money was protected with a 0% floor in down markets, giving him peace of mind compared to taxable brokerage accounts.
Outcome
At age 60, Daniel is projected to take $70,000 per year in tax-free withdrawals for 20+ years — on top of his other retirement income. He appreciates that the death benefit will still leave a legacy for his family if he doesn’t spend down the entire policy.