What is the recommended “best practice” when it comes to running the IUL illustration?

Be conservative

As you will find out when using the software, even very conservative illustrations beat using taxable accounts or 401(k) plans/IRAs (IUL even beats Roth plans).

Take the default rate of the IUL company and discount it by 15-20%. Then run the illustration where you show borrowing only until age 90 (most clients are not going to live longer than age 90 and if they do they won’t be in any shape to borrow from an IUL to “enjoy” their retirement).

Mutual fund expense

We recommend 1.2% which is less than the average.

Money management fee/wrap fee

We recommend starting with zero (0) even though the average fee is 1% if the client has another advisor or money in a 401(k) plan.

Capital gains taxes

We recommend 15%. Keep in mind this is the tax on the growth of a brokerage account. Even if the client is a buy and hold investor, if they are in mutual funds, those funds are buying and selling stocks and the client will incur taxes when there are gains.