Were You Promised Tax-Free Retirement Income from an Indexed Universal Life (IUL) Policy?
If an insurance agent or financial advisor told you that an Indexed Universal Life policy would provide tax-free income for life, it likely sounded like the perfect plan. No taxes, no market risk, and guaranteed income for retirement.
But for thousands of professionals, retirees, and business owners, these promises have collapsed into underperforming policies, mounting loan balances, and looming policy lapses.
With nearly a decade of concentrated experience in IUL litigation, Robert Rikard and RP Legal LLC have helped hundreds of victims nationwide who were sold the illusion of tax-free retirement through IULs. The firm’s work includes a major trial victory against one of the largest insurance companies in the IUL space, along with recoveries in cases involving high-net-worth clients, small business owners, and retirees from coast to coast.
The Sales Pitch: Tax-Free Income With No Downside
Advisors promoting IUL-based retirement plans often use polished presentations, graphs, and projection software to make the strategy seem foolproof. The common claims include:
- “Receive tax-free income in retirement”
- “Avoid the volatility of the stock market”
- “Protect your money from rising taxes”
- “Use what the wealthy use to build legacy wealth”
- “Create a private retirement account with no IRS restrictions”
Behind the marketing is a complex structure: your after-tax dollars are used to fund a permanent life insurance policy that grows based on stock market indexes. Instead of taking taxable withdrawals, you borrow against the policy’s cash value to generate “tax-free” income.
But what clients are almost never told is how fragile this system really is.
Why the Tax-Free IUL Retirement Strategy Fails
1. It’s Not Tax-Free — It’s Loan-Based
The income isn’t tax-free because of some special IRS rule. It’s tax-free because it’s a loan. You are borrowing money from the insurer using your own cash value as collateral. The loan accrues interest. If the loan balance outpaces the policy’s growth, the policy can collapse, triggering a massive tax bill on the gain.
2. The Loans Can Spiral Out of Control
The “income” you’re taking is actually reducing your policy’s ability to grow. This creates a dangerous spiral: less growth, more borrowing, mounting interest, and a shrinking buffer. If the loan balance exceeds the cash value, the policy lapses and you may owe taxes on phantom income you never received.
3. The Assumptions Are Unreliable
These policies are sold using illustrations that assume:
- Long-term index performance sometimes above 6 or 7 percent
- Consistent high cap rates
- Low and stable cost of insurance (COI)
- No missed premiums, no loan interest compounding, no administrative changes
In the real world, cap rates have declined dramatically, market returns are unpredictable, and insurers often raise internal costs without notice.
4. Fees Are Deducted Before Index Crediting
Every month, your policy deducts mortality charges, administrative fees, and asset-based charges—before any market-linked credit is applied. Even in good years, this can drastically reduce performance. In bad years, it can cause unrecoverable loss.
5. You Were Probably Told the Policy Would “Pay for Itself”
Most clients are told they will only need to pay premiums for 3 to 7 years. After that, they’re assured the policy will be self-sustaining. But that promise depends on ideal conditions that rarely materialize. Many clients are now being hit with unexpected premium demands just to keep their policies from lapsing.
This Isn’t Retirement Planning — It’s Insurance Marketing
Despite being marketed as retirement strategies, IULs are first and foremost life insurance products. The tax benefits depend entirely on the policy staying in force and performing well. But even small deviations in assumptions can cause these strategies to unravel completely.
If your retirement security is now tied to a life insurance policy built on loans, projections, and shifting variables, you deserve to understand your rights and options.
RP Legal LLC Has Unmatched Experience in IUL Litigation
RP Legal LLC is one of the only firms in the country solely focused on IUL litigation. The firm has successfully taken on insurance carriers, advisors, marketing organizations, and promoters who sold these policies under false or misleading pretenses.
Robert Rikard and his team have represented hundreds of IUL victims, including:
- Professionals who were told they could retire early using “tax-free loans”
- Business owners advised to move excess profits into IULs
- Retirees convinced to use premium financing to “supercharge” their policy
- Clients told their IUL was a better alternative to IRAs, 401(k)s, or pensions
With deep technical knowledge of how IULs are structured and how they fail, RP Legal LLC offers a level of precision, focus, and results few others can match.
How to Know If You Were Misled
Ask yourself:
- Did the advisor promise tax-free income for life?
- Were you told the policy would pay for itself after just a few years?
- Were you never warned about the risk of loan collapse or policy lapse?
- Did the advisor fail to explain the monthly costs and performance risks?
If so, your policy may have been sold using misrepresentations that give rise to a legal claim for recovery.
What You Can Do Now
- Request a Policy Review – We’ll analyze your policy illustration, premium history, and loan structure to assess the risk of failure.
- Receive a Legal Evaluation – If your policy was misrepresented, we’ll help you understand your rights and build a strategy for recovery.
- Act Before It’s Too Late – Policies often lapse after years of slow decline. We can intervene early and help prevent devastating losses.
Don’t Let a Life Insurance Policy Destroy Your Retirement
If your retirement plan depends on an IUL policy, you deserve to know the truth behind the sales pitch. These are not guaranteed income vehicles. They are complex financial contracts that often fail quietly until it’s too late.
RP Legal LLC has led the fight to hold the IUL industry accountable—and we’re here to help you reclaim your future.
Call (803) 805-7546 or complete the confidential case review form today.