Max Loan Challenge: Whole Life vs IUL in a Fixed Account

IUL and whole-life policies both have their place. Whole-life advocates prefer it because your cash value is guaranteed to increase each and every year as the IUL has growth that is tied to the upward movement of a stock market index.

The downside to the IUL is that down years do happen, and in those years you get credited a zero but still have the expenses associated with the IUL.

David goes through a scenario where all premiums within a LIRP go to the IUL’s fixed account. By allocating money in this way, you will net a consistent rate of return that is not linked to the upward movement of a stock market index, even during a down year.

By allocating your premiums to your IUL’s fixed account, you can recreate all the attributes of the whole-life policy inside the IUL, only on a supercharged basis.

To discover the companies that David used to model this scenario, email him at

The scenario takes a 40-year-old male contributing $20,000 per year until the age of 65. In either model, the factors were averaged out to make the comparison as fair as possible.

Starting with the whole-life policy, at age 66 it produced a loan of $42,675 every year until the age of 100. That is cumulative distributions of $1,493,625.

The IUL is able to produce a loan of $48,084 every year until the age of 100, with cumulative distributions of $1,683,940.

If you are just comparing maximum loans on the backend, the IUL comes out on top.

Whole-life policies do not have guaranteed zero-percent loan provisions which is one of the reasons that policy lags behind.

With that being said, you wouldn’t want to use an IUL for its fixed account.

Using a slightly different model, the benefit of the IUL races ahead considerably.

At 7% growth, the loan value jumps to $100,100 and the cumulative distributions go to $3,503,500.

By allocating your premiums to the fixed account inside of a maximum funded IUL, you can generate more income than you would inside a maximum funded whole-life policy.

By taking a little more risk in your IUL and tying the growth of your cash-value to the growth of a stock market index up to a cap, you can more than double your annual tax-free distributions.

Mentioned in this episode:

David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code (free video series)

@mcknightandco on Twitter 

@davidcmcknight on Instagram

David McKnight on YouTube

Get David’s Tax-free Tool Kit at

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