After a vicious bear market, stocks have started to recover. Certainly, stocks are more attractive now, with the S&P 500 Index around 1200, than they were back in 2007, when that index was over 1500.
Stocks may be even more appealing if you hope for tax-free gains. You have that potential with variable universal life (VUL) insurance; unlike IRAs, VUL doesn’t come with income restrictions or limits on the amount you can invest. If you truly need life insurance, you might help yourself as well as your beneficiary by buying VUL.
With a VUL policy, you can invest your premium payments among several stock funds and bond funds. If your account grows, no taxes will be due as long as the money stays in the VUL policy. Even if you take out money, you may be able to avoid income tax.
* You can take tax-free withdrawals until you reach the amount of the money you’ve contributed.
* Then you can take tax-free policy loans. These loans typically have extremely low interest rates now. Instead of paying the interest, you can have the amount that you owe reduce the policy’s cash value and death benefit. To make a VUL policy work, plan to hold the policy for 10 years or longer, giving the policy enough time for possible tax-free compounding to outweigh the upfront costs.
