What Happens If You Can’t Qualify for Any More IUL JUMPs?

Maybe you completed the Year 3 JUMP.

Then Year 5.

Maybe Year 7 too.

But now something has changed.

Your health changed.

Your income changed.

Your occupation changed.

Your total amount of existing life insurance changed.

Or another underwriting issue makes additional death-benefit approval unlikely.

And this time, you’re not asking:

“What happens if I miss the next JUMP?”

You’re asking something bigger:

“What if I never qualify for another JUMP?”

Does the entire strategy stop working?

Do you lose the JUMPs you already achieved?

What happens to the Matching Indexed Participating Loans already in the policy?

And what happens to the retirement-income number you were planning around?

Those are the questions this article is going to answer.

First, Separate “No More JUMPs” From “No More Policy”

These are not the same thing.

Under the JUMP mechanics we’re discussing, reaching a point where no additional JUMPs are approved does not automatically mean the existing policy disappears.

It also does not automatically mean the matching-loan level you’ve already achieved goes back to zero.

What changes is the progression.

You stop climbing to higher JUMP levels.

Then you have to evaluate the strategy from the level you actually reached.

Think of It as Finding Your Final JUMP Level

Suppose the original strategy was designed to progress through JUMPs in:

Years 3, 5, 7, 9 and 11.

But you only qualify through Year 7.

Then Year 7 may effectively become the final achieved JUMP level in the analysis if no later increase is ever approved.

That is very different from pretending Years 9 and 11 still happen.

And it’s very different from pretending Years 3, 5 and 7 never happened.

Here’s the Full $10,000 Example

Now imagine the client successfully reaches Year 7.

At that point:

$10,000 comes from the client.

$30,000 comes from the Matching Indexed Participating Loan.

Total annual funding shown:

$40,000.

Now Assume Years 9 and 11 Never Happen

This is no longer a temporary missed-JUMP scenario.

We’re assuming no additional JUMP is ever approved.

Under the mechanics described for this strategy, the client does not automatically fall back to the original $10,000-only funding level simply because no future JUMPs occur.

The analysis can instead be built around the previously achieved $30,000 matching-loan level, subject to the actual policy contract and applicable procedures.

That Means the Strategy May Continue at the Achieved Level

Using this example:

$10,000 client contribution + $30,000 Matching Indexed Participating Loan = $40,000 total annual funding shown.

What disappears from the future projection are the planned increases to:

$50,000 total annual funding shown at the next level

and eventually:

$60,000 total annual funding shown at the later level.

Those increases never happened.

Don’t Confuse “Staying at the Level” With “Starting Over”

If you reached a $30,000 matching-loan level and never qualify for another JUMP, the relevant question is not:

“How do we get back to $30,000?”

You already reached it under the mechanics we’re discussing.

The question becomes:

“What does the policy look like if $30,000 is the highest matching-loan level we ever achieve?”

That’s a completely different analysis.

And Don’t Confuse It With the Loans Disappearing

The Matching Indexed Participating Loans created through successful prior JUMPs are actual policy loans.

They’re not free contributions.

They’re not bonuses.

They’re not an employer match.

They’re policy indebtedness.

So if future JUMPs stop, the loans already created do not magically disappear.

The Existing Loan Balance Still Matters

Prior loan activity remains part of the policy economics.

Applicable loan charges matter.

Policy charges matter.

Indexed crediting matters.

Cash value matters.

Death benefit matters.

And policy durability matters.

The fact that the JUMP progression has stopped does not erase any of those things.

This Is Where the Strategy Has to Prove Itself Without Future JUMPs

Here’s the test I care about.

Take every future JUMP out of the projection.

Not just the next one.

All of them.

Assume the level you’ve already achieved is the final level.

Now rerun the retirement math.

How Much Retirement Income Can the Policy Support Now?

That is the question.

Not:

“What did the original illustration say?”

The original illustration was built around assumptions that have now changed.

If future JUMPs were part of those assumptions, the old retirement-income projection needs to be replaced with an updated one.

The Original Retirement-Income Number Is No Longer the Number to Rely On

This is where someone can make a serious planning mistake.

Imagine the original illustration showed a retirement-income amount based on successful JUMPs through Year 11.

You stop qualifying after Year 7.

But you continue mentally planning around the Year 11 income number.

That’s not a conservative assumption.

It’s using a projection that no longer matches reality.

Rerun the Policy From the Final Achieved Level

I want to know:

• What is the current policy value?
• What is the current outstanding policy indebtedness?
• What matching-loan level has actually been achieved?
• What happens if that level never increases again?
• What policy charges are projected?
• What loan rate is being modeled?
• What indexed-crediting assumption is being used?
• What retirement distribution is being modeled?
• How long is retirement being modeled?
• What happens to the net death benefit?
• How durable is the policy under tougher assumptions?

Now we’re looking at the policy you actually have.

The Current Applicable Loan Rate Matters Even More Now

With the policy structure we currently use for the IUL JUMP Strategy, the applicable loan rate is currently 5%, with a contractual maximum loan rate of 6% for the applicable loan feature.

The 5% figure is the current applicable rate.

It isn’t a promise that the rate remains 5% forever.

The applicable loan feature has a contractual maximum of 6% under the structure we’re discussing.

Why Stress-Test 6% If No More JUMPs Are Coming?

Because now you’re evaluating a strategy with a known achieved JUMP level and existing policy indebtedness.

You don’t want the plan to look durable only at the current loan rate.

Run 5%.

Then run 6%.

What happens to the projected retirement distributions?

What happens to policy values?

What happens to the loan balance?

What happens at age 90 or 95?

The Loan-Funded Dollars Can Still Participate

Under the JUMP design we’re discussing, the Matching Indexed Participating Loan proceeds are redeployed into the same policy as additional funding.

Think about the strategy in two conceptual buckets.

Bucket One: client-funded dollars.

In our example:

$10,000 per year.

Bucket Two: the accumulated Matching Indexed Participating Loan dollars redeployed into the policy.

Under the indexed strategy used in this example, both buckets have the same potential:

10% cap and 0% indexed-crediting floor.

Bucket Two also carries the applicable policy-loan cost.

Stopping Future JUMPs Does Not Mean Bucket Two Stops Existing

If successful prior JUMPs already created Matching Indexed Participating Loans, those loan-funded dollars are already part of the policy mechanics.

The strategy no longer receives the planned future increases.

But that doesn’t mean the previously created loan-funded portion vanishes.

Again, the actual policy values and indebtedness need to be reviewed.

Now Look at the Positive-Arbitrage Assumption

One historical analysis used with the strategy examined annual S&P 500 price changes from 2006 through 2020.

Dividends were excluded because the policy is not directly invested in the S&P 500.

The analysis applied the strategy’s 10% cap and 0% indexed-crediting floor to the annual price changes.

Negative annual price changes were treated as 0% for purposes of the indexed-crediting calculation.

Positive annual changes above 10% were capped at 10%.

Under those assumptions, the period produced a:

6.87% historical average indexed-crediting result.

That is not the historical return of the S&P 500.

It is not a guaranteed future indexed-crediting rate.

And it is not a guaranteed policy return.

6.87% Minus the Current 5% Loan Rate

Under those specific assumptions:

6.87% – 5.00% = 1.87 percentage points.

That’s the modeled positive spread.

If applicable indexed crediting exceeds the applicable loan cost, the loan-funded portion can experience favorable economics under the model.

If indexed crediting is 0% while the applicable loan cost is 5%, the economics are unfavorable for that period.

Positive arbitrage is not guaranteed.

What Happens to the Layered JUMP Math When the JUMPs Stop?

Under assumptions used in one JUMP analysis, successive Matching Indexed Participating Loans were associated with modeled effective results of approximately:

• 8.74% at the Year 3 JUMP
• 11.61% at the Year 5 JUMP
• 14.48% at the Year 7 JUMP
• 17.35% at the Year 9 JUMP

Those numbers are not S&P 500 returns.

They’re not IUL indexed-crediting rates.

They’re not guaranteed policy returns.

They’re modeled effective results under the assumptions used in that particular analysis, before accounting for applicable policy charges and other factors.

If Year 7 Is Your Final JUMP, Don’t Pretend You Reached Year 9

This is where the analysis has to stay honest.

If the model associates a later result with a JUMP you never achieved, don’t keep using that later result.

Your final achieved level is your starting point for the updated analysis.

Then test the actual policy from there.

This Can Change the Up-to-300% Comparison

In certain modeled comparisons we’ve evaluated, the IUL JUMP Strategy has produced up to approximately 300% more projected retirement income than the 401(k), Traditional IRA, or comparable tax-deferred retirement strategy being evaluated.

That is a modeled result.

It isn’t guaranteed.

It isn’t 300% more investment return.

And it doesn’t mean every JUMP strategy will produce that result.

If the 300% Comparison Assumed More JUMPs Than You Actually Achieved, Rerun It

Don’t keep the result and delete the assumption.

If the model assumed successful JUMPs through Year 11 and your actual progression permanently stopped at Year 7, the comparison needs to reflect that.

Run the IUL using the final achieved JUMP level.

Then compare it again with the 401(k), Traditional IRA, or other strategy being evaluated.

Maybe the Difference Is Still Large

Good.

Then the numbers will show it.

Maybe the difference is much smaller.

Good.

You need to know that too.

Maybe the entire recommendation changes.

That’s why we rerun the math.

The 300% Number Has to Survive the New Assumptions

I would ask:

“How much projected retirement income do I have if I never receive another JUMP?”

Then:

“How does that compare with leaving the same dollars in the alternative strategy?”

Then:

“What happens if the loan rate reaches 6%?”

Then:

“What happens with lower indexed crediting?”

That’s the test.

Don’t just believe the 300% number. Make the strategy prove where the difference comes from with the math.

What About Approximately 40% More Than a Traditional IUL?

In certain modeled comparisons we’ve evaluated, the JUMP Strategy has produced approximately 40% more projected retirement income than the traditional IUL structure being compared.

That isn’t a universal result either.

If the original JUMP comparison assumed later increases that never occur, the comparison should be updated.

Loan mechanics, policy charges, crediting assumptions, funding and the final achieved JUMP level all matter.

Could the Strategy Still Work With Only One JUMP?

That’s a math question.

Not a slogan question.

If you only achieve the Year 3 JUMP, run the policy from there.

Look at projected retirement distributions.

Look at outstanding indebtedness.

Look at policy durability.

Look at the net death benefit.

Then compare the result with the alternatives.

What If You Made It Through Year 5?

Same process.

Using the example, the achieved level would be:

$10,000 client contribution + $20,000 Matching Indexed Participating Loan = $30,000 total annual funding shown.

If that becomes the permanent ceiling, model it as the permanent ceiling.

Don’t model Year 7, 9 or 11 as though they happened.

What If You Made It Through Year 9?

Then you’ve achieved a much later point in the planned progression.

Using the example:

$10,000 client contribution + $40,000 Matching Indexed Participating Loan = $50,000 total annual funding shown.

If Year 11 never occurs, evaluate the strategy at the Year 9 level.

Again, the answer comes from the updated policy projection.

There Is No Single “Minimum Number of JUMPs” That Makes Every Policy Work

That’s not how I would evaluate it.

The outcome is affected by the actual policy design, client funding, age, underwriting, loan activity, policy charges, crediting results, retirement timing, distribution amounts and longevity.

So I wouldn’t tell someone:

“As long as you get three JUMPs, you’re fine.”

That’s too broad.

Run the actual policy.

Could You Still Reapply Someday?

If circumstances change, another application may potentially be considered at a later policy anniversary under the strategy mechanics we’re discussing.

But for this stress test, I wouldn’t assume that happens.

I’d deliberately model:

No more JUMPs.

If you later qualify for another increase, you can update the projection again.

But don’t build your retirement around an approval you don’t have.

This Is a Better Way to Think About Future Underwriting

Hope for the next JUMP.

Plan around what has actually been approved.

That’s a much safer mental framework than treating future underwriting as guaranteed.

Now Stress-Test Retirement Distributions

In retirement modeling for this strategy, approximately 12% per year of policy value may be evaluated as a distribution level under specific assumptions.

That is not a universal safe withdrawal rate.

It is not a guarantee that every IUL can distribute 12% indefinitely.

It is a modeled distribution level that has to be tested against actual policy values, indebtedness, loan costs, policy charges, crediting and longevity.

If No More JUMPs Occur, Don’t Assume the Same 12% Distribution Still Works

This is critical.

If the original retirement model assumed more JUMPs and therefore more policy funding, removing those future JUMPs can change the retirement distribution the policy can support.

So rerun it.

Maybe 12% remains supportable under the assumptions.

Maybe a lower amount produces better durability.

The illustration should answer that.

Run the Retirement Phase at Lower Crediting

Don’t build the retirement plan around one favorable assumption.

Lower the indexed-crediting assumption.

Use the 6% contractual maximum loan rate.

Assume no more JUMPs.

Then look at the policy through age 95.

That’s the scenario I want to see.

What Happens If the Policy Starts Getting Weak Later?

Then you need to know before it reaches a crisis.

Potential responses can involve adjusting distributions, reviewing policy funding, reviewing loan activity, or evaluating other available policy-management options under the actual contract.

The correct action has to be based on the actual policy at that time.

The key is monitoring.

Don’t put a policy on a shelf for 25 years and assume the original illustration is still reality.

The Strategy Needs Ongoing Reviews

Especially once policy loans become substantial.

Review actual crediting.

Review actual policy charges.

Review the loan balance.

Review the applicable loan rate.

Review projected policy durability.

Review the projected net death benefit.

Review the retirement-income plan.

If something changes, update the strategy.

The Worst Response Is Pretending Nothing Changed

If you can no longer qualify for additional JUMPs, something changed.

The correct response isn’t panic.

And it isn’t denial.

It’s recalculation.

This Is Where the Emotional Pressure Gets Real

Imagine you’re 58.

You started the strategy years ago.

You thought you would complete every planned JUMP.

Now you’re being told no additional increases are likely.

You don’t hear:

“One assumption changed.”

You hear:

“What if our retirement plan doesn’t work anymore?”

That’s a very different feeling.

Then the Late-Night Questions Start

“Did we count on too much?”

“Should we have done something else?”

“Do I have enough time to fix this?”

And eventually:

“What if we mess this up and regret it?”

What You’re Really Trying to Protect Is Independence

The retirement-income number isn’t just a number.

It’s the mortgage.

It’s groceries.

It’s travel.

It’s medical expenses.

It’s the ability to help your kids instead of needing them to help you.

“I don’t want to ask my kids for help.”

“We should be able to handle this ourselves.”

That’s why I would rather know what the strategy looks like with zero future JUMPs than hide behind the original illustration.

A Strong Strategy Should Be Able to Face an Uncomfortable Scenario

What if no more JUMPs happen?

What if the loan rate reaches 6%?

What if indexed crediting is lower?

What if you live to 95?

What if retirement starts early?

What if you need more income?

Those aren’t negative questions.

They’re retirement-planning questions.

So, What Happens If You Can’t Qualify for Any More IUL JUMPs?

The future JUMP progression stops.

Under the mechanics we’re discussing, that does not necessarily mean the previously achieved matching-loan level automatically resets to zero.

The strategy can potentially continue at the level already achieved, subject to the actual policy contract and applicable procedures.

But the original retirement projection should no longer be used if it assumed future JUMPs that will not occur.

Your New Starting Point Is the Final Level You Actually Achieved

If that’s the Year 3 level, model Year 3.

If it’s Year 5, model Year 5.

If it’s Year 7, model Year 7.

If it’s Year 9, model Year 9.

Then assume:

No more JUMPs.

Now test the retirement strategy.

Don’t Ask Whether the Original Strategy Still Works

Ask:

“Does the strategy I actually have now still work?”

That’s the question that matters.

How We Look at This at FPP Financial

At FPP Financial, we use our Retirement Math Method™.

If future JUMPs are no longer realistic, I’m not interested in keeping the old projection alive just because it has the prettier retirement-income number.

We’ll identify the final JUMP level actually achieved.

We’ll identify the client-funded dollars.

We’ll identify the accumulated Matching Indexed Participating Loan activity.

We’ll look at outstanding policy indebtedness.

We’ll remove unapproved future JUMPs from the projection.

We’ll model the current applicable 5% loan rate.

We’ll stress-test the contractual 6% maximum.

We’ll lower indexed-crediting assumptions.

We’ll test retirement distributions.

We’ll run the policy through a longer retirement.

Then we’ll compare the updated projected retirement income with the alternatives you’re actually considering.

I don’t try to sell you on the strategy. I make the strategy prove itself with the math.

Want to Know What Your JUMP Strategy Looks Like With Zero Future JUMPs?

That’s a scenario worth seeing before you rely on the policy for retirement.

We’ll take the level you’ve actually achieved.

We’ll assume you never receive another JUMP.

We’ll account for existing policy indebtedness.

We’ll test the current 5% applicable loan rate.

We’ll test the contractual 6% maximum.

We’ll lower the indexed-crediting assumptions.

We’ll test the projected retirement distributions.

Then we’ll compare that result with your 401(k), IRA, traditional IUL, or other retirement strategy being evaluated.

In certain modeled comparisons, the IUL JUMP Strategy has produced up to approximately 300% more projected retirement income than the 401(k), Traditional IRA, or comparable tax-deferred retirement strategy being evaluated.

But if the original comparison assumed future JUMPs you will never receive, that 300% result needs to be recalculated.

Don’t just believe the 300% number. Make the strategy prove where the difference comes from with the math.

The number isn’t the reason to buy it. The assumptions behind the number are what you need to understand.

Show me exactly where the difference comes from.

Let the math do the talking.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• Why a Missed IUL JUMP Doesn’t Necessarily Reset the Strategy
• What Happens If You Don’t Qualify for Your Next IUL JUMP?
• What Is the IUL JUMP Strategy and How Does It Work?

Disclosure

This material is for educational purposes only and is not intended as individualized investment, securities, tax, legal, underwriting or insurance advice. Indexed universal life insurance is permanent life insurance and is not a qualified retirement plan, IRA, brokerage account or direct investment in a market index.

The description of an IUL JUMP Strategy potentially continuing at a previously achieved matching-loan level when no additional JUMPs are approved reflects the strategy mechanics discussed in this article. Actual treatment of an individual policy, existing matching-loan levels, future loan activity, premium capacity, death-benefit changes and policy funding is governed by the actual insurance contract, applicable procedures, underwriting decisions and policy circumstances. Policy-specific treatment should be confirmed using current approved policy information and the actual contract.

Future JUMPs and associated death-benefit increases are subject to future underwriting and approval. Initial policy approval and prior successful JUMPs do not guarantee future increases. Health, income, employment, existing insurance, driving history, occupation, hazardous job duties, risky hobbies and other applicable underwriting factors may affect eligibility for additional coverage.

A policy owner may potentially be able to apply for additional coverage at a later policy anniversary if circumstances change. Any future application remains subject to applicable underwriting requirements and approval. Reapplication does not guarantee approval. A projection assuming no future JUMPs should not assume that a later application will ultimately be approved.

Planned death-benefit increases under the JUMP Strategy are intended to create additional policy funding capacity while seeking to maintain the intended non-MEC structure. A death-benefit increase does not by itself guarantee that a policy will avoid Modified Endowment Contract status. MEC testing is affected by actual policy design, premium activity, benefit changes, applicable tax rules and other factors.

Matching Indexed Participating Loans are policy loans. They are not free contributions, employer matches, bonuses, tax credits, guaranteed gains or direct investments in a market index. Under the strategy described here, Matching Indexed Participating Loan proceeds are modeled as being redeployed into the same policy as additional funding. Associated policy indebtedness and applicable loan costs remain part of the policy economics.

Prior policy loans do not automatically disappear because no additional JUMPs occur. Policy loans generally accrue applicable loan charges and can reduce policy values and death benefits and increase lapse risk. Outstanding policy indebtedness generally reduces the net death benefit payable under the insurance contract.

The JUMP Strategy is modeled with applicable loan charges carried forward during the accumulation design rather than requiring the client to pay those charges out of pocket each year. This does not eliminate the economic cost of borrowing, guarantee positive arbitrage or guarantee that policy values will remain sufficient to support outstanding indebtedness.

With the policy structure discussed in this article, the applicable loan rate is currently 5%, with a contractual maximum loan rate of 6% for the applicable loan feature. The current rate should be verified against current approved policy information. The 6% contractual maximum does not guarantee positive arbitrage or favorable policy performance.

Indexed universal life insurance does not directly invest in the S&P 500 or another market index, does not own the underlying index securities and does not receive index dividends. Indexed interest is determined according to applicable policy crediting terms, which may include caps, participation rates, spreads and other provisions.

A 0% indexed-crediting floor applies to the applicable indexed-crediting calculation under the example discussed and does not guarantee that overall policy value cannot decline. Policy charges, cost of insurance, loan costs, withdrawals and other policy mechanics continue to apply.

Policy values from a properly structured and maintained non-MEC life insurance policy may potentially be accessed through withdrawals to basis and policy loans without current income taxation under current federal rules, subject to applicable requirements. Tax treatment can be affected by basis, MEC status, policy lapse, surrender and other circumstances. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income.

The approximately 12% annual retirement-distribution level referenced in this article is a modeling assumption used in certain strategy analyses. It is not a universal safe withdrawal rate, guaranteed distribution rate or promise that any policy can support distributions at that level for life. Sustainable distributions are affected by actual policy values, loan balances, policy charges, loan costs, crediting, distribution timing and longevity.

References to the $10,000 annual contribution example, JUMP progression, 6.87% historical indexed-crediting example, 1.87 percentage-point modeled positive spread, modeled effective results of 8.74%, 11.61%, 14.48% and 17.35%, current 5% loan rate, contractual maximum 6% loan rate, approximately 40% more projected retirement income, or up to approximately 300% more projected retirement income are illustrative and are not guarantees of future policy performance, positive arbitrage, policy durability, funding capacity, non-MEC status, future JUMP approval, death benefit or retirement income.

The up-to-approximately-300% projected retirement-income result cited in this article refers to certain modeled comparisons involving the IUL JUMP Strategy and a 401(k), Traditional IRA or comparable tax-deferred retirement strategy. It is not a universal result or guarantee. When the modeled comparison assumes successful future JUMPs that do not ultimately occur, the projected comparison can materially change and should be recalculated using the JUMP level actually achieved.

The approximately-40% projected retirement-income result refers to certain modeled comparisons involving the JUMP Strategy and the traditional IUL structure being evaluated. It is not a universal result or guarantee. The final achieved JUMP level, loan mechanics, policy charges, crediting assumptions, funding and other factors can materially alter the modeled comparison.

The historical 6.87% indexed-crediting example discussed in this article is based on an analysis of annual S&P 500 price changes from 2006 through 2020, excluding dividends, and applying the stated 10% cap and 0% indexed-crediting floor. Historical results do not predict future policy performance. The modeled effective JUMP results discussed above are not S&P 500 returns, indexed-crediting rates or guaranteed policy returns.

Positive arbitrage is not guaranteed. Periods in which indexed crediting is below the applicable loan cost can produce unfavorable loan economics. Policy charges and other expenses must also be considered when evaluating overall policy performance.

Illustrations are not guarantees of future performance. If actual JUMP progression, underwriting results, loan rates, policy charges, indexed crediting, retirement distributions, timing or other assumptions differ from an original illustration, updated policy projections should be reviewed.

Policy-specific guarantees, nonguaranteed elements, underwriting requirements, death-benefit options, MEC limits, loan provisions, loan rates, caps, participation rates, spreads, crediting methods, policy charges, surrender provisions, lapse provisions and distribution mechanics should be verified against current approved illustrations and the actual insurance contract.

FPP Financial does not provide tax or legal advice. Consult qualified tax, legal and financial professionals regarding your individual circumstances before purchasing or modifying life insurance or implementing any retirement-income strategy discussed here.