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Step Up and Lock In: A strategy that works September 23, 2013

Posted by shaferfinancial in Uncategorized.

The insurance industry has found a winning strategy for folks looking for reduction of market risk and good returns.

This strategy can be found on both the Equity Indexed Universal Life Product and the Fixed Indexed Annuity Product.

They credit interest in both these products the same way.  Each year you are credited with an interest amount that is connected to a stock index or group of indexes.  But, you never receive a negative interest credit. You do have a “cap” on how high the interest credit can be.  So each year you get an interest credit that is somewhere between 0 and the cap rate.  Now here is the important part; you are then locked in with that value.  You never lose it, no matter what happens in the market.

This strategy produces more value on a year to year basis for those who intend to use the funds at some time in the future by eliminating the “sequence of return risk” that plagues market driven products.  It also eliminates the scary downdrafts in value that lead to fear selling and major mistakes.  These products are superior “retirement income” products to any alternative current active in the market [with the exception of real estate investing, but real estate investing means taking on more risk].

You need to ask yourself why you haven’t been “sold” these products by your current financial advisors.  If you are still investing in market driven products like mutual funds for your retirement income, you need to really think about why you are taking on that risk. You need to ask your current advisors about “sequence of return risk” and the Dalbar Studies. It’s as simple as that.




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