While many advisors have long offered IULs as a way to help their clients supplement their retirement income (structured correctly, TAX-FREE), many are now turning to this product as a way to help control volatility within their retirement portfolios.
A jolting reminder of past market downturns, recent market swings have left many individuals feeling uneasy about the negative impact market volatility could potentially pose to their hard-earned retirement savings. Just the other day, (8/24/2015), the Dow Jones opened and immediately started plummeting, hitting an historic 1000 point drop after the unsettling results of the Chinese Shanghai Composite, which itself declined an astonishing 8.5%. Not only was it a record historic drop, but the VIX Index indicated some of the highest levels of volatility, peaking at 53.29, not last seen since late January of 2009.
The market is still unpredictable
Although many anticipated and speculated on the potential detrimental effects of China’s over leveraged borrowing economy and the Chinese government’s intravenous inflated market corrections; the Dow Jones 1000 point drop was still completely unpredictable. Even Goldman Sachs Asset Management division ended up releasing a statement to their stockholders (read it here) in loom of the nearly 600 point closing loss day for the Dow Jones.
Diversification is not always enough
In Goldman Sachs Asset Division statement mentioned above they state, “Moments such as these can, in our view, demonstrate the merits of well-diversified portfolios.”
Although having a diversified portfolio is vital component to smart investing, is it always enough? According to Investopedia, Forbes, Mark Cuban, MarketWatch and even Warrant Buffett, it’s not. In fact, Investopedia and Warren Buffet speak out about the potential dangers of over-diversification in Investopedia’s article, ‘The Dangers Of Over-Diversifying Your Portfolio’. Where Buffett is quoted as saying, “wide diversification is only required when investors do not understand what they are doing” and Investopedia then goes on to clarify, “In other words, if you diversify too much, you might not lose much, but you won’t gain much either”.
Why IUL Now Makes More Sense Than Ever
If you’re not familiar with IUL by now, let’s start with the basics. IUL is short for Indexed Universal Life, and is an insurance policy. You may be scratching your head thinking, what does a life insurance policy have to do with market volatility? Well as it turns out, IUL’s are amazing savings vehicles which have multiple upsides without many of the downsides found in your traditional 401ks or IRA accounts.
One of those amazing upsides, along with being the premise of this article, is that of the locked in market gains and the shielding of market losses that IUL savings vehicles can provide. That’s right, IUL’s enable market growth gains, and locking in of those gains; while not being susceptible to any loss of principal. I know it sounds too good to be true, but it is. IUL’s can only sink to as low as ZERO net gains, never falling into the negative. This enables the ride of market upsides, without facing the negative downsides that can bring portfolio performance down to null.
In times such as these, where international markets appear unstable, and the constant speculation of the FEDs increasing interest rates at any time; IUL’s are a great way to help provide your clients a safer, much less volatile retirement savings vehicle.
As a direct mail marketing company, Resource Solutions offers a unique and highly targeted complete turn-key marketing program for IUL as well as a complete marketing/selling system for Social Security Maximization. If you’re interested in learning more about these programs, feel free to contact us toll free to speak with a marketing specialist: 1(866) 855-3710