A PPLI break-even calculation compares policy cash value with taxable investing under explicit charges, tax rates and an exit assumption. Here, break-even means the first whole year of a positive policy lead that persists through the selected horizon. It may never occur or an earlier lead may reverse. Enter the complete cost assumptions, inspect the annual ledger, and test different exits. A favorable calculation does not establish policy qualification, suitability or access to the same investments.
Start with the same available cash budget, a specified allocation and a stated endpoint. Identify what the calculation leaves out. This page compares hypothetical cash values. It does not value an actual death benefit, price insurance coverage, recommend a contract or determine the legal outcome.
Tax character and realization timing affect the taxable path. Current income and recognized gains can produce different payments even at the same stated tax rates. Actual basis, dividend qualification, turnover, loss offsets and special tax rules matter. A label such as private credit or public equity does not by itself establish an annual tax cost.
Record charges from a current proposal, including their bases and payment dates. Identify amounts deducted from premium, from policy value or from external cash, and check whether an expense is included elsewhere. PPLI costs and economics separates those questions. The calculator supplies no insurer quote.
Apply the chosen endpoint consistently. Holding leaves potential realization tax unpaid. Full surrender and a taxable-account sale apply different assumed tax rates to their respective gains. The death sensitivity assumes qualifying treatment for both paths and uses policy cash value. None of those assumptions automatically establishes the tax treatment of a real arrangement.
The taxable projection follows the same pooled-basis method as the Wealth Simulator, with no withdrawals in this comparison. The Portfolio Tax Drag calculator separately models taxable rebalancing and excludes investment fees. Its output should not be treated as an identical input without reconciling assumptions.
Starting taxable basis equals starting capital. Each year, target weights allocate aggregate value and basis across the asset classes. The model assigns current income and appreciation after flat investment costs, representing a net fund allocation rather than a personal deduction. It taxes current income and a chosen share of positive accumulated gains. Basis rises by current income and recognized gain, less current tax. Actual rebalancing trades and their tax are not calculated.
premium = (starting budget - external setup) / (1 + excise rate)
initial value = premium × (1 - premium-load rate)
annual charges = opening value × applicable account-charge rate
+ scheduled insurance charge + administration
paid charges = min(opening value, annual charges)
closing value = (opening value - paid charges)
× (1 + weighted gross return - weighted investment cost)
On the policy side, external setup is paid first. The remaining budget funds premium plus the assumed excise cost. Premium load reduces the account value available for investment. Modeled investment in the contract equals the premium, including load but excluding external setup and excise. Annual account charges, insurance charges and administration are deducted before the portfolio earns its return after investment costs.
A charge on account value before growth is different from subtracting the same percentage points from a return. For example, a 1% account charge followed by a 10% net investment return gives 0.99 × 1.10 = 1.089, or 8.9% growth before any other charge. It does not give 9%. A real contract may use different charge bases or timing; this model’s convention must be reconciled with the proposal.
For surrender, each year’s displayed policy endpoint deducts the ordinary rate on positive value above modeled contract investment. The taxable endpoint deducts the preferential rate on its remaining positive gain. Those are hypothetical alternatives at each year, not repeated annual surrender payments. The qualifying death sensitivity applies no terminal gain tax to either side, but excludes actual death benefits, estate tax and exceptions. Continuing to hold deducts no final realization tax.
A sustained lead must remain positive in every modeled year from the reported year through the chosen horizon. A temporary lead or a tie does not count. The tool does not extrapolate beyond that horizon. If the account cannot pay scheduled annual charges, the ledger records the available amount as paid, allocates it proportionally among the due charge categories, and records the unpaid remainder. A zero account value is not continuing insurance coverage.
The following limits apply to every balance, crossover and sensitivity cell.
The initial 1% account charge is a hypothetical input. Other monetary policy charges begin at zero. Review the complete schedule and identify bundled costs before marking the inputs reviewed. A separate insurance-charge line can be inappropriate if its cost is already included elsewhere. User confirmation does not verify a quote or establish the actuarial sufficiency of the charges.
Returns are constant, with no volatility or return-sequence analysis. The inputs permit 0% to 40% annual gross return and 0% to 10% flat investment cost. Costs can exceed return, but negative gross-return scenarios are outside this tool. A late crossover is sensitive to the assumed path; this calculator assigns no probability to reaching it.
The tool models full surrender, continued holding or a qualifying death sensitivity. It does not model partial withdrawals, loans, modified-endowment-contract distributions, surrender charges or lapse taxation. Liquidity and policy loans discusses separate contract and tax questions. Do not interpret a full-surrender calculation as a loan or withdrawal strategy.
Favorable policy taxation requires the relevant life-insurance definition, variable-contract diversification and investor-control requirements, among other rules. Sections 7702, 817(h) and 7702A are not tests performed by this calculator. Read the definition and diversification framework and investor-control analysis. Actual qualification requires the contract and surrounding facts.
Ordinary, short-term and preferential tax rates stay fixed for the selected horizon. The sensitivity matrix changes only asset-return inputs and the initial account-charge rate. It does not vary tax law, tax brackets or other inputs. If a later charge-change year is enabled, that year and later rate remain fixed across every cell.
Insurance need, insurer exposure, liquidity, estate treatment, creditor protection, reporting and governance require separate analysis. A larger cash value does not establish suitability; a lower one does not decide every ownership or insurance question. This model also excludes contributions, withdrawals and a tax cost for transferring existing appreciated assets.
Published by PPLI.com. Reviewed 17 September 2026. The comparison passed 144 preset, horizon, endpoint and charge-change cases plus 100 independent future-value calculations. Additional checks cover account exhaustion, unpaid charges, numerical ties and invalid inputs. These verify the stated arithmetic, not a policy’s legal qualification. See editorial standards.
Each case begins with $10 million for 30 years under the qualifying death sensitivity. Ordinary and short-term rates are 40%; the preferential rate is 25%. The illustrative costs are a 1.2% premium load, zero excise cost, $150,000 external setup, a 1% account charge, $45,000 first-year insurance charge growing 4% annually and $20,000 annual administration. No later account-rate change is applied. These are assumptions, not quoted prices.
| Measure | Income-heavy | Equity-heavy |
|---|---|---|
| Assumed gross return | 6.70% | 6.98% |
| Flat investment costs | 93.2 bps | 38.2 bps |
| Investment tax, year one | 168.3 bps | 64.2 bps |
| Year-one return after investment costs and tax | 4.08% | 5.95% |
| Policy charges, year one / starting budget | 162.3 bps | 162.3 bps |
| Modeled premium and contract investment | $9,850,000 | $9,850,000 |
| Taxable value at year 30 | $31,053,350 | $49,021,032 |
| Policy cash value at year 30 | $32,448,912 | $41,731,535 |
| Taxable taxes paid through year 30 | $10,667,515 | $8,813,001 |
| Policy charges paid through year 30 | $8,916,877 | $9,784,679 |
| Lead sustained through year 30 | Year 18 | None within 30 years |
| Policy less taxable at year 30 | $1,395,562 | -$7,289,497 |
The Income-heavy preset allocates 20% to public equity, 30% fixed income, 10% hedge funds, 25% private credit, 10% real estate and 5% cash. It ends with policy value of $32,448,912 and taxable value of $31,053,350. The policy lead is $1,395,562, sustained from year 18 through year 30. The first-year tax and charge figures do not explain that result on their own; the changing annual values and tax basis do.
The Equity-heavy preset allocates 85% to public equity, 5% fixed income, 5% private equity and 5% cash. It has no sustained policy lead. The policy ends $7,289,497 below the taxable account. Its smaller current-tax assumption and different return path produce a different cost comparison. This example cannot establish the usual outcome for all equity portfolios.
Switch the Income-heavy case to full surrender and liquidation. The policy then ends at $23,409,347, compared with $30,374,738 for the taxable account, a difference of -$6,965,391. There is no sustained lead through year 30. The death comparison applied no endpoint gain tax to either side; the surrender comparison applies each side’s specified tax on remaining gain. Neither case calculates an actual death benefit or estate tax.
The sources explain specific US tax distinctions. They do not verify the tax treatment of a proposed contract, the inputs entered here or the availability of particular investments.
Section 101 provides the general death-proceeds exclusion, subject to exceptions and additional rules. Publication 525 describes transfers for value, reportable policy sales, interest and other circumstances that can affect treatment. The calculator assumes qualifying treatment and does not test those exceptions. Read Publication 525.
Section 1014 can adjust basis for qualifying property acquired from a decedent, generally by reference to its date-of-death value. The rule is not universal and the adjustment can be downward. Income in respect of a decedent has different treatment. Publication 551 and Publication 559 explain the distinctions. This sensitivity assumes the taxable assets qualify.
On a full cash surrender, proceeds above investment in the contract generally produce taxable income. Publication 525 describes how prior refunds, distributions or loans can affect contract investment. This model begins with a new single premium and no prior transactions. It does not model the ordering or penalties for partial withdrawals or modified endowment contracts. Read the surrender guidance.
Section 4371 governs excise tax on certain premiums paid to foreign insurers. The model’s 0% and 1% buttons are cost assumptions, not an eligibility finding. Confirm the issuer’s tax status, any section 953(d) election, relevant exemptions and treaty conditions. Form 720 instructions and the IRS excise-exemption guidance describe reporting and treaty considerations.
A tax statute does not establish an insurer’s policyholder charge schedule. Confirm premium taxes, insurer loads and services from their actual sources and terms. Revenue Rulings 2003-91 and 2003-92 address investor control and diversification; Publication 550 explains investment tax distinctions. For charge questions, see costs and economics.
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