Lock and Reset Vs The Market
Thursday, November 24, 2011
If you're feeling pangs of concern about your retirement nest egg and the increasingly volatile stock market, you're not alone.
The last 6 or 7 years have been filled with uncertainty for people whose serious retirement money is tied up in traditional retirement accounts like IRAs and 401(k)s. Some have seen as much as 30% of their retirement funds disappear into thin air.
The question on everyone's mind is how to protect your money from market uncertainty and how do you instead create stability?
Will Rogers is quoted as saying that "people are more concerned with the return of their money than with the return on their money." This is especially true for those who are still smarting from the losses they've experienced over the past few years.
Douglas Andrew of Missed Fortune has been a financial strategist and retirement specialist for the past 34 years. In his experience, the best vehicle for growing your serious money while avoiding the risks of market volatility is indexed universal life insurance.
This strategy requires you to maximum fund an insurance contract and the return the insurance company credits is then linked to an index such as the S&P 500, the Euro Stock Index or the Dow Jones. If the particular market your money is linked to loses value, you don't actually lose money because your money is not invested in the market itself.
This means that you're still getting a guaranteed 0-2% rate of return, even when the market goes down.
On the other hand, if the market is having a great year and growing, you get to participate 100% up to a certain cap of perhaps 12-15%. This strategy absolutely works in your favor for cash accumulation.
If a Vegas casino was to tell you that you could play there all day and they would cover your bets and even if you lost money, you'd still walk out of there at the end of the day with 1-2% more money than you came in with, you'd take notice, right? Now consider that if you actually won money, you still get to keep whatever you made, up to a cap of 12 or 15%, you'd probably choose to play in that casino.
You don't have to be a gambler to recognize that you're likely to come out ahead under those circumstances.
In essence, that's what an indexed universal life strategy can do for you.
By participating in the market indirectly, you eliminate the uncertainty and risk while still being able to benefit when the market grows. Your money isn't actually in the market, but the insurance company credits you when the market does well.
Here's an example to illustrate how this works:
From 2000 to 2007, if you would have invested $100,000 in the S&P during those volatile years, you'd have lost as much as 14-17% in the years 2001 and 2002. At the end of 2007, after the markets had rebounded, your account would only be worth $111,000 for an average annual return of 1.45%.
If you had used the indexing strategy instead, with a 1% guarantee in a down market and a 15% capped return in an up market, your account balance would be $164, 840. That's a full $53,800 more in just 8 short years for a 7.4% average annual rate of return during a period when most people were losing money.
If you had been using this Missed Fortune strategy of Lock & Reset since 1950, starting with that same $100,000, you'd have a cool $11 million in your nest egg vs. only having $8 million if that money had been at risk in the market.
That extra $3 million equals a great deal of certainty and peace of mind, doesn't it?
