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Hi cla,

I haven't crunched the numbers yet, but are there any thoughts on this? Is this a sensible way to avoid taxes, or is this a sweet deal for my broker to score on some fees?

You have no obvious use for life insurance death benefits, at this point... so the annual renewable term coverage that comes with a VUL is pointless... the benefits it brings are available in another strategy much more cheaply.

VULs are (IMO) atrocious... the worst of all worlds;
1. Unlimited market downside exposure,
2. High expenses (typically 1.75%-2.5%+, even ignoring the term insurance premium wrapped around the cash account value.)

The UL chassis does provide tax-free growth and distribution... but so do ROTH IRAs (which you have no contribution limits to, if you use the 'backdoor ROTH' strategy... opening & funding a non-qualified (post tax contributions) traditional IRA, and immediately rolling it into a tax-free ROTH.) Using a ROTH, instead, will give you every positive financial performance benefit the VUL would have, at a fraction of the fees.

The word 'Variable' in the cash account world means 'at market risk.' If you don't mind the risks of principal loss, and you do not have a need for life insurance, use a ROTH account.

Dave Donhoff
Leverage Planner
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