What Is a $1 Million Baby?
- Independent Brokers of Orlando
- May 15
- 3 min read
What Is a $1 Million Baby?
Imagine giving your child a financial head start so powerful that by the time they retire, they could have $1 million or more saved in a protected, tax-free account—without relying on the stock market or government programs.
It’s called the $1 Million Baby strategy, and it’s built on a tool most people overlook: a permanent life insurance policy called Indexed Universal Life (IUL).
What Is the $1 Million Baby Plan?
When you open an IUL policy for your child shortly after birth, you’re not just securing life insurance—you’re giving them a long-term financial foundation.
By contributing as little as $150–$180 per month, the cash value in their policy can grow based on market index performance (like the S&P 500) without direct exposure to losses. Over time, this compounding effect can grow into a million-dollar cash account by retirement age.
What Makes It Different from a 529 or Roth IRA?
Unlike 529 plans or custodial accounts, an IUL isn’t restricted by how or when the funds can be used. And unlike traditional retirement accounts, it comes with built-in legal and financial protections that make it a powerful estate-planning tool:
Key Benefits of an IUL for a Minor
Uninterrupted Compound GrowthIndexed policies credit interest based on the market’s upside, but never lose value due to market downturns. Your child’s money grows steadily over time, even through recessions.
Tax-Free Access in the FuturePolicy loans are not considered taxable income, meaning your child can borrow from the policy for college, a first home, a business, or retirement—with no tax penalty.
Protected from Creditors and LawsuitsIn most states, cash value in a life insurance policy is protected from creditors, civil lawsuits, and bankruptcy. This means your child’s future isn’t exposed to someone else’s legal issues.
Not Divisible in Divorce (in many states)Life insurance policies owned by or for the benefit of a child are typically not subject to division in a parent’s divorce. They can remain a stable asset outside of marital disputes.
No Required DistributionsUnlike IRAs or 401(k)s, there are no required minimum distributions. The cash value grows uninterrupted, and the policy owner controls how and when to use it.
Living Benefits From Day OneMany IULs come with critical, chronic, and terminal illness riders, giving your child protection if they ever face a serious illness or disability—even before they’re old enough to work.
Locked-in Low PremiumsSince the policy is started in infancy, the premiums stay low for life—even if your child develops health issues later on.
Real-World Example
Start a policy at birth with:
$250,000 increasing death benefit
$180/month premium
By age 65, your child could have over $1 million in cash value, accessible tax-free, while still retaining life insurance protection.
Final Thoughts
Not every child qualifies. That’s why starting early is so important. Once a health issue appears or time goes by, the cost increases—or the opportunity may be lost altogether.
But when you act early, you're not just buying insurance. You're giving your child:
Lifetime financial security
Tax-free retirement options
Legal protections most assets don't offer
And a priceless head start on wealth-building
This is the true power of the $1 Million Baby Strategy.
Book a free consultation today to see how this could work for your family.
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