IUL income illustrations assume level crediting and a full-equity benchmark, WealthManagement.com column says

According to a WealthManagement.com column, a recent indexed universal life projection showed an indefinite retirement income stream worth better than 9% of the policy's cash value at the start of retirement. The same policy credited less than 7%, the column says, and the rule of thumb for distributions from a policy is often meaningfully lower still.

Life insurance projections hold crediting constant at the same rate year after year, while real markets vary. The 4% or 5% withdrawal rate advisors commonly cite reflects the chance that markets are down early in retirement; a portfolio assumed to earn 8% every year on a level basis would support a larger draw.

IUL illustrations also use a full-equity benchmark: most run at maximum allowable rates, the column says, and use the S&P 500 price return, a 100% securities-based basket, while few retirees hold only equities. A 60/40 stock-bond mix lands closer to 8% than the 10%-plus figure Actuarial Guideline 49 rules produce. To compare the two on equal terms, the column says the IUL crediting assumption should fall to roughly 5.25%, and a more conservative portfolio would push it lower.

The column also flags a third practice it says is common in IUL income projections: bleeding net cash value down to a razor's edge to maximize the income stream.