Retirees can strategically convert their traditional retirement accounts to Roths, paying the income tax at their own, likely lower, rate. This allows their high-earning children to inherit the funds completely tax-free, avoiding a larger tax bill that would have been calculated at the children's peak-earnings tax rate.

Proponents of IULs often deflect criticism by claiming negative outcomes result from 'improperly structured' policies. However, a 'properly structured' policy requires paying exorbitant premiums relative to the death benefit (e.g., $1,000/month for a $150k policy), making it a financially illogical choice for most consumers.

For high earners, strategic tax mitigation is a primary wealth-building tool, not just a way to save money. The capital saved from taxes represents a guaranteed, passive investment return. This reframes tax planning from a compliance chore to a core financial growth strategy.

A predatory sales tactic involves agents targeting immigrant communities and falsely claiming that their non-citizen status prevents them from accessing standard retirement accounts like a Roth IRA. They position expensive IUL policies as the only viable alternative for building wealth in the U.S.

If an IUL policy lapses while loans are outstanding, a disastrous tax event occurs. The entire amount loaned out beyond the premiums paid (cost basis) becomes immediately taxable as ordinary income, leaving the former policyholder with a massive, unexpected tax bill.

As a policyholder ages, the internal cost of insurance within an IUL policy increases annually. If premium payments remain flat, the policy begins to cannibalize its own cash value to cover these rising costs, eventually draining the account and causing the policy to lapse.

Indexed Universal Life (IUL) policies are marketed with downside protection, promising a 0% return in a down market. However, this ignores the significant fees and cost of insurance that are still deducted, resulting in an actual loss of principal for the policyholder.

Many investors focus on diversifying assets (stocks, bonds) but overlook diversifying their accounts by tax treatment (pre-tax 401k, after-tax brokerage, tax-free Roth). This 'tax diversification' provides crucial flexibility in retirement, preventing a situation where every withdrawn dollar is taxable.

Contrary to common advice, withdrawing from an IRA and paying taxes to clear high-interest debt offers a guaranteed, risk-free return. This "return" from debt elimination can be financially superior to the potential, yet risky and unguaranteed, returns from keeping the money invested in the stock market.