Returns in Some IUL Policies for 2019 were Stunning (one returned 29%)
If you want to learn about the IUL policy that credited 29% in 2019, click on the following link:
If you want to learn about my favorite IUL, click on the following link:
Now that 2019 is behind us, we can take a look back at what was a historic year in the stock market and how that translated into returns in Indexed Universal Life (IUL) policies.
S&P 500 index-Most IULs have as their baseline option a crediting method for growth that is pegged to the S&P 500 (minus dividends). Products vary with their S&P 500 caps. Some are as low as 10% and others are as high as 14%.
Let’s look at the obvious returns of an IUL with various caps in 2019.
10% cap = 10% return
11% cap = 11% return
12% cap = 12% return
13% cap = 13% return
14% cap = 14% return
Not bad in a product that has no risk of loss, locks in gains every year, and allows money to grow tax-free and come out tax-free. (If you have not considered using IUL as an asset class for clients under the age of 60, you are making a mistake).
How did IUL that use Volatility Control Indexes (VCIs) do in 2019?
Because the cost to hedge the S&P 500 is high and because IUL companies are looking for better returns, many have turned to VCIs. If you are not familiar with VCIs, I highly recommend you read my VCI White Paper (click on the following link to read it).
VCIs come in many different flavors. They have different risk profiles and peg their growth to different mixes of investments. This newsletter isn’t meant to go into the nuances of VCIs. I just wanted to report the returns for a few of them.
200% participation rate VCI—28.68% in 2019
My favorite IUL’s VCI—18.92% in 2019
Are you using IUL as an asset class?
Unfortunately, the answer is that most advisors are NOT using IUL as an asset class. Most B/Ds can’t spell IUL and don’t want their advisors using them. Fee-only advisors despise anything having a commission and even most RIAs/IARs who are my favorite types of advisors don’t use them.
Why? The answer can be summed up in one word…IGNORANCE.
Most advisors have not put in the time to learn about IULs. If you don’t know how a product works and what the risk and expected rate of return for clients will be over time, how can you decide if you should be using it to help clients grow wealth? The answer is you can’t.
Want to learn the pros and cons of IUL products? If your answer is YES (and it should be for EVERYONE giving financial planning advice to clients), all you need to is download and read my book Retiring Without Risk. It’s the best book in the industry when learning the pros and cons of IUL products.
To download Retiring Without Risk for FREE, click on the following link or on the image below:
Roccy DeFrancesco, JD