The Retirement Group | The Value of Vul | 800-900-5867

Oct. 2, 2010 - PRLog -- Why are there such conflicting opinions over VUL? Some syndicated financial columnists and “talking heads” (such as Suze Orman) often dismiss variable universal life insurance as a poor choice. Yet many financial advisors disagree and will tell you VUL is a great option. What gives?

Like any financial product, VUL has potential advantages and disadvantages. In addition to the opportunity for permanent life insurance coverage, the big appeal of VUL is the chance for considerable cash value accumulation. Because of that potential, VUL can be a hugely useful retirement planning tool. (It can also prove attractive to business owners, parents planning to meet college costs, and high net worth families planning estates.) The fees and premiums may be higher than on some other types of life insurance policies.

VUL is like universal life insurance taken a step further. A universal life policy commonly gives you some flexibility with regards to the premiums and the death benefit. A variable universal life policy offers you that plus a chance to invest in a tax-advantaged way.

VUL gives you a chance to control how your premiums are invested. VUL policies give you the option of placing some of your insurance savings in investment sub-accounts, often among a range of mutual funds (sometimes choices are broader). The investment returns come tax-free. (You can also arrange income tax-free withdrawals and loans from the policy’s accumulation account as long as the policy is adequately funded.)1

When stocks do well, VUL policyholders have every reason to smile. There is no ceiling, so to speak, limiting the maximum cash value of the policy. Over time, the tax-advantaged accumulation of the investment portion of the policy may be quite impressive.

In a bear market, things are different: poor investment returns on the sub-accounts may mean the policyholder has to pay higher premiums to keep the policy adequately funded. If the policyholder can’t do that, he or she runs the risk of the policy lapsing.

VUL is a long-term commitment. VUL is not for everybody; no single financial or insurance product is. It is a securities product, not a fixed insurance product. It is usually characterized as a poor choice for the risk-averse, and for people well into retirement who may not have decades to recover from the possibility of a bear market. But again, it can be a very useful club to have in the bag when it comes to retirement and estate planning, notably for those in mid-life who are in a high tax bracket. (This is why it is sometimes offered as a perk for corporate executives.)

So as this or that “personal finance expert” speaks about VUL on TV, remember that he or she is just issuing their opinion, not financial advice everyone should live by. That pundit doesn’t know you personally or your specific financial situation. In your particular situation and given your particular financial objectives and insurance needs, VUL could be a great option.

Maybe it’s time for a second look. A qualified financial services professional can help you explore VUL choices – all VUL contracts are not the same, and some may be more appropriate for you than others. Ask around – you may find that a VUL policy will fit nicely into your overall financial and insurance strategy.

The Retirement Group: http://www.theretirementgroup.com 

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Philip Catalan, Brent Wolf, Andy Starostecki and The Retirement Group or QA3 Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com,  hewitt.com, resources.hewitt.com,  access.att.com, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

Citations.
1 advisortoday.com/resources/retirementvul.html [2009]

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