Max Funded Iul Calculator

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Max Funded IUL Calculator

Projection Summary

Years of Accumulation:

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Total Contribution:

–

Est. Cash Value at Retirement:

–

Est. Annual Tax-Free Income:

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*Projections account for estimated 1.5% annual cost of insurance (COI) and policy charges. Actual results depend on carrier-specific caps, participation rates, and floor guarantees.

Understanding Max Funded IUL

A Maximum Funded Indexed Universal Life (IUL) policy is a financial strategy designed to maximize the cash value growth of a life insurance policy while keeping the death benefit at the minimum required level to satisfy IRS Section 7702. By doing this, the majority of your premium goes toward the cash accumulation account rather than the cost of insurance.

How Max Funding Works

Unlike traditional life insurance where you buy the most death benefit for the least cost, a Max Funded IUL flips the script. You contribute the maximum allowable premium up to the "MEC limit" (Modified Endowment Contract). This allows the cash value to grow tax-deferred and provides a source of tax-free retirement income through policy loans later in life.

Key Components of the Calculation

  • Accumulation Period: The number of years between your current age and when you plan to start taking distributions. Time is the most critical factor in compounding growth.
  • Index Credit Rate: This is the interest credited to your account based on a market index (like the S&P 500). Most IULs feature a "floor" (usually 0%) to protect against market losses.
  • Cost of Insurance (COI): Even in a max-funded policy, there are internal costs for the death benefit and administration. This calculator estimates these at a conservative 1.5% drag on performance.
  • Tax-Free Income: In retirement, instead of withdrawing money (which could be taxable), policyholders often take "Participating Loans," which allow the cash value to keep growing even while you spend the borrowed funds.

Example Scenarios

Starting Age Annual Premium Years to Growth Proj. Income (Annual)
25 $6,000 40 Years $42,000+
35 $12,000 30 Years $48,000+
45 $24,000 20 Years $45,000+
function calculateIUL() { // Inputs var currentAge = parseFloat(document.getElementById('currentAge').value); var retirementAge = parseFloat(document.getElementById('retirementAge').value); var annualPremium = parseFloat(document.getElementById('annualPremium').value); var indexRate = parseFloat(document.getElementById('indexRate').value) / 100; // Validation if (isNaN(currentAge) || isNaN(retirementAge) || isNaN(annualPremium) || isNaN(indexRate)) { alert("Please enter valid numerical values."); return; } if (retirementAge <= currentAge) { alert("Retirement age must be greater than current age."); return; } var years = retirementAge – currentAge; var totalPaid = annualPremium * years; // Net Rate calculation (Index rate minus estimated internal policy costs/COI) // Average internal drag on a max-funded policy is approx 1.5% var netRate = indexRate – 0.015; if (netRate < 0) netRate = 0; // Future Value of an Annuity Due formula: P * [((1 + r)^n – 1) / r] * (1 + r) var cashValue = 0; if (netRate === 0) { cashValue = totalPaid; } else { cashValue = annualPremium * ((Math.pow(1 + netRate, years) – 1) / netRate) * (1 + netRate); } // Tax-Free Income Projection (conservative 5% loan distribution rate) var annualIncome = cashValue * 0.055; // Formatting var formatter = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD', maximumFractionDigits: 0 }); // Display Results document.getElementById('resYears').innerText = years + " Years"; document.getElementById('resTotalPaid').innerText = formatter.format(totalPaid); document.getElementById('resCashValue').innerText = formatter.format(cashValue); document.getElementById('resIncome').innerText = formatter.format(annualIncome); document.getElementById('iul-results').style.display = 'block'; }

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