jump to navigation

Hearing from many clients lately April 6, 2020

Posted by shaferfinancial in Uncategorized.

Been hearing from some of my clients lately. They are thanking me for getting them into an EIUL policy. This is typical when we see large stock market drops like we have seen. It is also very gratifying!

Had one client with an interesting point of view and plan of action. This client was a few months short of their 8th year anniversary of their EIUL. They had max-funded their policy, which means making 5 annual payments and then stopping. They had not decreased their face value as of yet.

In preparing for the conversation I ran their numbers and found that they had an average interest return of 8.52%. They had remained in the original suggested option of the S&P 500. Now 8 years ago when we first set it up that was the best option and their 8.5% return suggested it had worked pretty well for them. Since the cap rates for that option have gone down significantly there are several new options added on to their policy that demonstrate better historic numbers. So we discussed changing over to one of those new options.

But, what they suggested was they had a significant amount of cash in a savings account getting a small percentage of interest and they wanted to know if they could move it over to the policy. We found they could. So they are able to leverage their policy as a safe place to put their cash and gain a much higher return. In two years they will have gotten through those 10 years of high expenses and adding in money now doesn’t increase the expenses. So it was a great place to put their money. They are getting up there in years (late 50s) and getting close to retirement so this will up the amount they can take out annually significantly.

As an aside, I tried to talk the husband into getting an index annuity a few years ago as he closed in on retiring. He wasn’t convinced at the time. He could have gotten into a product that guaranteed him 10 years of 7.5% returns every year (as long as he took it as income). Instead he has a significant amount of market risk now. This along with the virus causing him business slowdown has caused him concern. This life insurance policy is their port in the storm and I thought adding in an annuity with the 7.5% with some of their retirement would make it bulletproof.

Finally, the Covid19 virus has caused the cap rates and participation rate for the uncapped option to drop for every policy out there. This is a reaction to the economy crashing and market variance going ballistic. It was nice that none of the clients I have talked to were worried about it, and most thought as I do that once we get the economy back moving the cap rates/participation rates would go back up.

Finally, a comment on the 8.52% my client has gotten inside her policy. I regularly check these out for my long term policies and this is marginally higher than the average I have looked at. The range for long term policies seems to be 7.8% to 8.8%. Note these are actual returns, not illustrated ones.


No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: