Most advisers will default into an annuity when a client is looking for an income stream. But consider this scenario: your client, age 60 is healthy and has $500,000 in non-qualified assets that they would like to take income on in 10 years. In an annuity assuming a LIBR at 7.2% roll-up for 10 years, the client would have income of $62,659 per year for life. After 15 years of taking this income, at age 85, the principal is gone, but the LIBR would continue paying. In 20 years, at age 90 total income is $1,253,180. The client passes away at age 90 and there is no death benefit as the accumulation value has been used. The total tax paid, assuming a 25% tax bracket would be $188,295. 

Total after-tax income from the annuity would be $1,064,885.

Alternatively, we could take this same $500K in assets and fund an IUL for 5 years, making 5 equal payments of $107,000 with a growth rate of 2.5% in a premium deposit account. Here is the premium layout:

Year 1:      $107,000      Tax: 0

Year 2:      $107,000      Tax: $1,750

Year 3:      $107,000      Tax: $1,750

Year 4:      $107,000      Tax: $1,750

Year 5:      $107,000      Tax: $1,750

Year 6:      $0                 Tax: $1,750

Premium: $535,000      Tax: $8,750

We turn income on at age 70. Annual income is $62,349 and $0 tax.

By age 90, The clients total income is $1,246,980. A gain on income over the annuity by $182,095. At age 90 the client passes away. The remaining Tax Free Death Benefit at age 90 is $865,141

Your client just netted a total tax free income and death benefit of $2,112,121.

This beats the annuity payout by $1,047,236!

Plus, your commission on the IUL nets you over $7,000 in additional commissions vs. the annuity.