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IULs vs. Roth IRAs: What Every High Earner Should Know

If you’re a high-income professional searching for tax-free retirement income, two vehicles likely top your shortlist: the Roth IRA and the Indexed Universal Life (IUL) policy.

 

On the surface, they seem similar—both can provide tax-free growth and withdrawals. But once you dig into contribution limits, flexibility, liquidity, and legacy benefits, the difference becomes clear.

 

For high earners, the Roth IRA often falls short—not because it’s bad, but because it wasn’t built for your level of income, goals, or financial complexity.

 

Here’s what you need to know.

 

The Roth IRA: A Strong Start—With Serious Limitations

 

Roth IRAs offer one of the few ways to generate tax-free income in retirement. You contribute after-tax dollars, let your investments grow, and withdraw tax-free later.

 

But if you’re earning too much, you may not even be eligible to contribute.

 

Key Roth IRA Limits (2025):

  • Income Phase-Out Begins: $146,000 (single), $230,000 (married)

  • Contribution Limit: $7,000/year (+$1,000 catch-up for 50+)

  • No access to funds before age 59½ without penalty

  • No death benefit

  • Assets subject to market risk

 

For high-income professionals who need to contribute more, diversify risk, or protect their legacy, the Roth IRA becomes too small, too rigid, and too exposed.

 

The IUL Advantage: Built for Flexibility and Scale

 

An Indexed Universal Life (IUL) policy is not a retirement account—but it can be one of the most powerful retirement planning tools available for high earners.

 

It’s a permanent life insurance policy with a cash value component that grows tax-deferred, linked to a market index (like the S&P 500), and can be accessed tax-free through policy loans.

 

More importantly, there are no IRS income limits and no contribution caps—making it a preferred vehicle for executives, physicians, consultants, and dual-income professionals.

 

Side-by-Side Comparison: Roth IRA vs. IUL

Feature

Roth IRA

IUL

Contribution Limit

$7,000/year

No IRS-imposed limit

Income Restrictions

Yes

None

Tax-Free Growth

Yes

Yes

Tax-Free Withdrawals

Yes (after 59½)

Yes (via policy loans)

Market Risk

Full exposure

0% floor (no market risk)

Early Access to Funds

Penalties before 59½

Access anytime (no penalty)

Death Benefit

No

Yes (tax-free)

Living Benefits

No

Yes (chronic, critical, terminal illness riders)

 

Why IULs Are Ideal for High Earners

 

1.  You’re Already Maxing Out Qualified Plans

 If you’re hitting your 401(k) and HSA limits, there’s nowhere left to go with tax-advantaged contributions—unless you’re using an IUL.

 

2. You’re Over the Roth Income Threshold

 IULs don’t care how much you earn. You can fund an IUL with tens or hundreds of thousands annually and build a tax-free retirement asset, starting today.

 

3. You Want Tax-Free Liquidity, Not Just Retirement Income

 IULs allow for policy loans at any age, without penalty. Need funds for real estate, a business, or family needs? No 10% fee. No IRS forms. No waiting until you’re 59½.

 

4. You’re Planning for Family, Not Just Yourself

 A Roth IRA ends with you. An IUL offers a built-in, tax-free death benefit that can provide your family or heirs with liquidity, stability, and generational wealth.

 

Let’s Talk Strategy

 Roth IRAs are a smart tool—but they’re limited. And if your income exceeds the contribution limits or your goals stretch beyond retirement into legacy, flexibility, and financial access, you need a vehicle designed for scale.

 

IULs give high earners something the Roth IRA can’t: control.

 

At King Legacy Group, we help professionals use IULs not just as a supplement—but as a strategy. Whether you want to reduce your tax exposure, increase liquidity, or plan for your legacy, it’s time to consider what the Roth can’t do.

 

Schedule your complimentary consultation today to find out how to build your LivingLEGACY™.


 

 
 
 

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