While this may draw a few detractors and skeptics, we feel the value presented is significant enough to post this and bring it to light.

First and foremost, if you think we are insinuating that one should close their IRA or remove any investments you may have in the stock market and put all of your money into this concept, we are not.  If you do…well, frankly speaking…you need to have your head examined and you no doubt have no clue as to what you are doing anyhow.

You still need the growth that will come out of the market.  This should be a part of your financial plan because it provides you safe money with guarantees; downsides – market protection and growth.

However, we are proposing a concept that has many benefits:

  • As it is actually a life insurance policy, it will pay a tax-free guaranteed death benefit to your loved ones or provide business continuation.
  • It will provide guaranteed  tax-free growth.
  • It can provide tax-free income to supplement your retirement.
  • You can use your life insurance while you’re still alive!  It will provide money up front if you become terminally ill, have a heart attack, stroke or suffer a chronic illness and cannot work for a while or have to go to a nursing home.
  • It will provide protection from downside risk through a minimum interest guarantee – which means dependent on the carrier, if the S&P® has a negative performance, you are guaranteed either a floor of 0% or a 1% credit to your account with no loss to principal or interest.

Now that we have summarized what it will do, let’s discuss what it is not:

  • It is not an investment in the stock market and does not participate in any index fund, stock, or equity investment contract.
  • You do not buy or participate in an index.  The indexes are simply measuring tools that are used to determine the amount of index credit the insurance company will credit to the policy.
  • It is not a policy where the account value is based upon performance of a variable investment option, such as in the case with variable universal life insurance.
As we said in the beginning, we focus on safe money.  We help people build a strong financial foundation so our clients never lose their principal or interest in a market downturn.
Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1.
Once you take a loss in the market, it can take a substantial amount of time to make it up. When talking about our retirement, time is no friend.
– Warren Buffett
If all or a part of your retirement funding comes from the stock market – the market is uncertain, risky, and gives you absolutely no control over your money.  Your future is tied to market performance.Indexed Universal Life Insurance (IUL)  is a great tool to use for your supplemental retirement planning.  As stated above, IUL allows you to participate in stock market gains without taking the loss of a market downturn.  Just as  most IULs have  a “cap” on the gains you can have, they also have a “floor” that prevents any loss of your existing gains and principal.

What is the “cap” you ask?  A cap sets the maximum percentage of indexed interest your cash value can earn. The cap can be on a monthly or annual basis, depending on the crediting method you choose. The insurer establishes the cap on the policy anniversary and guarantees it for one year.  Most caps are around 12%.

The “floor” is just that – a floor.  If the market drops, it cannot go below the floor causing a loss.  The floor is generally 0% although the are carriers that will guarantee 1% to be credited to your account in the event of a market downturn at the end of the crediting period.

As you can see in the 2014 S&P chart below, the market started January at 1842.37.  In February, it dropped down 59.78 to 1782.59.  If you were invested solely in the S&P, the loss would have been 106.90 to your IRA.  With the IUL, you would have held at 1848.38 because of the floor.  No Loss.  Your next move would have been in April up to 1878.04. However while the gain here is 29.66, you have a 12% cap so your gain was actually the 12% again, bypassing the loss and trying to make up a -5.08% loss.


An Indexed Universal Life Insurance Policy is a flexible premium adjustable policy that offers a death benefit to the beneficiaries of the policy and may be purchased to meet life insurance needs.  While the policy surrender values may be determined by reference to an index-linked crediting strategy, such surrender values support the death benefit offered under the policy.  The policy does not participate in any index fund, stock, or equity investments.  The policy is not a variable contract or an investment contract.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC (“SPDJI”).  Standard & Poor’s®, S&P®, and S&P 500® are registered trademarks of Standard & Poor’s Financial  Services LLC (“S&P”).  This indexed universal life insurance policy (the “Policy”) is not sponsored, endorsed, sold or promoted by SPDJI, S&P, any of their respective affiliates and none of such parties make any representation regarding the advisability of paying premiums for the Policy nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

All guarantees are based on the financial strength and claims-paying ability of the prospective life insurance company.

F.J. Wood and Associates do not give tax, legal, accounting or lending advice.  This information is general in nature and you should seek advice from your tax and legal advisors regarding your individual situation.