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Life Insurance Basics

3 benefits of variable universal life insurance for retirement and tax

Learn why many people find the tax-deferred growth on cash value and tax-free loans on variable universal life policies beneficial.

For those who want the protection of a life insurance policy and don't mind paying extra for the added benefit of potentially being able to earn cash-value growth on their premium dollars, the dual nature of a variable universal life (VUL) insurance policy may be a good choice. In many cases, a VUL can serve as a resource for retirement and tax planning with its market-based cash value growth potential and tax advantages.

Here are some of the retirement and tax advantages that come with variable

1. Tax-deferred growth for retirement planning
With a VUL, the returns earned on any cash-value are tax-free. Moreover, there are no minimum required distributions or MRDs (as with some qualified retirement plans) value in your VUL to grow tax-deferred until you need it.

2. Tax-free* policy loans
Cash-value that you may have in your VUL can be taken out by way of a policy loan. That's money you can borrow tax-free. However, any policy loans that are not repaid, can reduce your death benefit.

3. You don't qualify for a Roth IRA
Roth IRAs can be a great way to save for retirement. However, if you're in a high-income tax bracket, you may not qualify for a Roth. The Internal Revenue Service has a set of rules to qualify individuals who can contribute to a Roth IRA. One set of rules pertains to income limits. If your income exceeds a certain amount, you will not be allowed to contribute to a Roth IRA. With a VUL, individuals in high-income brackets can allow any cash-value growth to build over time, similar to after-tax contributions to a Roth IRA. It should be noted that a VUL policy is more complex than many other forms of life insurance and should be monitored closely throughout the life of the policy. Also, VUL is typically subject to surrender charges for a period of up to 15 years (more or less depending on the carrier) which can be very high in the early years of the policy.

For more information on life insurance and retirement planning, visit the Protective Learning Center.


* Loans outstanding at policy lapse or surrender before the insured's death will cause immediate taxation to the extent of gain in the policy.



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Investors should carefully consider the investment objectives, risks, charges and expenses of the applicable variable universal life insurance policy and its underlying investment options before investing. This and other information is contained in the prospectuses for the applicable variable universal life insurance policy and its underlying investment options. Investors should read the prospectuses carefully before investing. Prospectuses for Protective Life VUL policies may be obtained by contacting PLICO at 800.265.1545

All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.