Episode 237: Dave Ramsey Says Don’t Do an IUL Because of Its Surrender Charges (Is He Right?)

Dave Ramsey contends that the IUL is a ripoff primarily because of two reasons: high fees and surrender charges He also recommends that if you have an IUL to surrender it immediately, thereby incurring those surrender charges immediately. The reason companies have surrender charges is to cover the costs of getting the program off the ground. They start off high and reduce gradually over the first fifteen years or so. The question is, ‘Is the surrender schedule something that should weigh on your decision to do an IUL?’ The answer in most cases is no, as long as you plan on keeping the plan until death do you part. An IUL is like getting married. You have to investigate the alternatives before choosing the one that’s right for you. If Dave Ramsey adopted the same approach with the taxes and penalties in your 401(k), he would be singing a different tune. If you were to take $100,000 out of your 401(k) at the age of 40, you’d end up paying the penalty and taxes at your current tax bracket...