The Motley Fool Discussion Boards
Investing/Strategies / Retirement Investing
|Subject: Re: 7702 Private Plans (indexed universal life)||Date: 3/27/2013 7:05 PM|
|Author: Dwdonhoff||Number: 71517 of 78299|
And the gains are tax free!
There is no gain anywhere that is "tax-free". Not if you are a US citizen. The IRS isn't in the business of letting people make money without taking a cut of it. Don't confuse "tax free" with "tax deferred".
Uh, Ray... ever heard of the newfangled IRS code regarding "ROTH" accounts?
Yeah... 'tax free'...
Oh... and when you have time on your hands, you can look up the IRS code referenced in this very thread subject title... it will give you a clue about how you can grow money tax free. Even as a U.S. citizen.
That's like the gullible people who fall for the bit about dividends from a whole-life policy being tax free. What they actually are is not dividends but return of excess overpayment -- so says the IRS, which is why they don't get taxed.
Excellent point... but irrelevant.
IUL's are indexed to the raw value of the index, EXCLUDING dividends. People kinda think, "No big deal, the dividends are pretty small, so I'm not missing out on much." Wrong.
Actually, people think "who gives a crap what its indexed to... at 8%-ish tax free it oculd be indexed to the snail trails on the sidewalk after a rain, for all I care!
If you started out with $10,000 in the S&P in 1993, using the price-only index it would be worth $34,000 today. But including dividends it would be worth $50,000. That's 45% more.
We've already been around this mulberry bush before, remember?
The floor/cap indexing strategy