Guaranteed vs. Non-Guaranteed IUL Values: What Do They Actually Mean?

You open an IUL illustration and see two sets of numbers.

One column says guaranteed.

Another shows nonguaranteed or projected values.

The projected side may show dramatically more cash value and retirement income.

So which number should you believe?

That’s the wrong question.

A better question is:

“What is the insurance company contractually guaranteeing, and what is being projected under assumptions that can change?”

Once you understand that distinction, an IUL illustration becomes much easier to evaluate.

A Projection Is Not a Promise

This is the first thing to get straight.

An illustration can show what a policy may look like under a particular set of assumptions.

That does not mean the insurance company is promising those values will occur.

If an illustration shows:

$1 million of projected cash value

or:

$100,000 of projected annual retirement distributions

you should not mentally turn those numbers into guaranteed future dollars.

They’re projections.

The assumptions behind them matter.

So What Does “Guaranteed” Mean?

Generally, a guaranteed policy element is governed by the guarantees contained in the actual insurance contract.

That can include contractual provisions such as guaranteed maximum charges, guaranteed minimum values or rates where applicable, and other contractual guarantees specific to the policy.

The exact guarantees vary by contract.

That’s why the policy itself matters more than a sales explanation.

Guaranteed Does Not Mean “This Is What We Expect to Happen”

That’s an important distinction.

The guaranteed column can be based on contractual guarantees rather than the current nonguaranteed assumptions being used to project policy performance.

Its job is not necessarily to represent the outcome anyone thinks is most likely.

Its job is to show values based on the applicable guaranteed assumptions and contractual provisions reflected in the illustration.

Then What Are Nonguaranteed Values?

Nonguaranteed values are projections using assumptions that are not promised by the contract to occur exactly as illustrated.

Those projections may be affected by things such as:

Indexed-crediting results
Caps
Participation rates
Spreads
Policy charges
Loan rates and loan activity
Premium funding
Withdrawals
Future death-benefit changes
Future underwriting approvals
Other nonguaranteed policy elements

Those are the numbers you need to understand before relying on projected retirement income.

Why Are the Nonguaranteed Numbers Usually the Ones Everyone Looks At?

Because they’re often the numbers connected to the strategy being discussed.

If someone is showing you how an IUL might accumulate cash value and potentially provide retirement distributions later, they’re usually discussing projected values.

That’s not automatically a problem.

Retirement planning uses projections all the time.

A 401(k) projection also needs an assumed future return.

A retirement plan may need assumptions about inflation, taxes, spending and longevity.

The problem starts when someone takes a projection and talks about it like a guarantee.

Don’t Ask, “Is the Illustration Guaranteed?”

That’s too broad.

Ask:

“Which specific elements are guaranteed?”

Then:

“Which elements are not?”

Then:

“How much of the retirement-income strategy relies on the nonguaranteed side?”

Now you’re asking useful questions.

The Indexed-Crediting Assumption Is Not a Guaranteed Future Return

Suppose an illustration uses an indexed-crediting assumption to project future values.

That doesn’t mean the policy is guaranteed to receive that crediting rate every year.

Indexed crediting is determined under the applicable policy terms.

Actual indexed results can vary.

And an IUL is not directly invested in the index.

The S&P 500 Connection Is Often Misunderstood

If the policy uses an S&P 500-based indexed strategy, that does not mean your policy cash value owns the S&P 500.

It doesn’t mean you own the underlying stocks.

And it doesn’t mean you receive the index’s total return.

Indexed interest is calculated according to the policy’s applicable crediting method.

Here’s the Historical Example We Use With the JUMP Strategy

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

Dividends were excluded.

The analysis applied a:

10% cap and 0% indexed-crediting floor.

Negative annual index 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 analysis produced a:

6.87% historical average indexed-crediting result.

Is 6.87% Guaranteed?

No.

And it should never be presented that way.

It is a historical calculation based on a specific period and a specific set of crediting assumptions.

It is not:

A guaranteed future indexed-crediting rate
A guaranteed cash-value growth rate
The historical total return of the S&P 500
A guaranteed policy return

Future results can be different.

What About the 0% Floor?

This is where the word “guaranteed” can create another misunderstanding.

A contractual 0% floor applicable to an indexed-crediting strategy does not mean:

“My total policy value is guaranteed never to decline.”

The floor applies to the applicable indexed-crediting calculation.

Policy charges still matter.

Cost of insurance still matters.

Loan charges still matter.

Withdrawals still matter.

So a 0% indexed-crediting result can coexist with a decline in overall policy value.

That’s Why You Have to Ask What Is Actually Being Guaranteed

“0% floor” sounds simple.

But you need the full sentence.

0% floor on what?

The answer matters.

What About the 10% Cap?

In the historical example we’re discussing, a 10% cap was applied to the annual index price changes.

That means an annual index increase above 10% was limited to 10% for that particular indexed-crediting calculation.

But don’t automatically assume every current nonguaranteed crediting term remains exactly the same for decades.

Review what the contract guarantees and which crediting elements can change.

Current Is Not the Same as Guaranteed

This is one of the easiest mistakes to make with any insurance illustration.

A current value may be what applies now.

A guaranteed value is what the applicable contract guarantees under its terms.

Those concepts should not be blended together.

The Same Rule Applies to Policy-Loan Rates

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.

Those statements mean different things.

Current applicable loan rate: 5%.

Contractual maximum applicable loan rate: 6%.

I would not tell someone the loan rate is guaranteed to remain at 5%.

That’s Exactly Why I Would Model the 6% Maximum

If you’re considering a retirement strategy that may involve substantial policy loans for years, don’t look only at the current rate.

Ask what the contract allows.

Then see what happens to the retirement projection at the applicable contractual maximum.

The goal isn’t to predict that the maximum will occur.

The goal is to understand the risk.

What About Positive Arbitrage?

This is especially important with the Matching Indexed Participating Loan mechanics used in the JUMP Strategy.

Under the strategy we’re discussing, loan proceeds are redeployed into the same policy as additional funding.

Those loan-funded dollars can participate in the applicable indexed-crediting strategy while carrying the applicable loan cost.

Using the historical example:

6.87% historical average indexed-crediting result – 5.00% current applicable loan rate = 1.87 percentage points.

That’s a modeled positive spread under those assumptions.

Is the 1.87% Positive Spread Guaranteed?

No.

This is crucial.

If indexed crediting is below the applicable loan cost, the economics become unfavorable for that period.

If indexed crediting is 0% and the loan cost is 5%, there is a negative spread for that period.

Positive arbitrage should never be treated as guaranteed profit.

What About the JUMP Strategy’s Higher Modeled Effective Results?

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

These numbers are exactly where understanding “guaranteed versus nonguaranteed” becomes critical.

17.35% Is Not a Guaranteed IUL Return

It’s not an indexed-crediting rate either.

And it’s not an S&P 500 return.

Under the assumptions used in that JUMP model, the combination of the base indexed-crediting assumption and the positive-arbitrage effect attributed to successive Matching Indexed Participating Loans produced a modeled effective result reaching approximately 17.35% by the Year 9 JUMP, before accounting for applicable policy charges and other factors.

That’s a model.

Not a contractual promise.

If Someone Says, “This IUL Is Guaranteed to Earn 17%,” Stop

Ask them to show you exactly where the insurance contract guarantees that.

Don’t accept:

“It’s in the illustration.”

An illustrated number and a contractual guarantee are not the same thing.

What About the Matching Indexed Participating Loan Itself?

Another distinction needs to be clear.

The “match” is not guaranteed free money.

Under the strategy we’re discussing, 100% of the matching amount is created as a policy loan.

The proceeds are then redeployed into the same policy as additional funding.

The associated indebtedness and applicable loan costs remain part of the policy economics.

Here’s What the Planned JUMP Progression Can Look Like

Policy Year	Client Contribution	Matching Indexed Participating Loan	Total Annual Funding Shown	Planned JUMP
Year 1	$10,000	$0	$10,000	No
Year 2	$10,000	$0	$10,000	No
Year 3	$10,000	$10,000	$20,000	Yes
Year 4	$10,000	$10,000	$20,000	No
Year 5	$10,000	$20,000	$30,000	Yes
Year 6	$10,000	$20,000	$30,000	No
Year 7	$10,000	$30,000	$40,000	Yes
Year 8	$10,000	$30,000	$40,000	No
Year 9	$10,000	$40,000	$50,000	Yes
Year 10	$10,000	$40,000	$50,000	No
Year 11	$10,000	$50,000	$60,000	Yes

Are All Those Future JUMPs Guaranteed?

No.

That’s another major distinction between a modeled strategy and a contractual guarantee.

Future JUMPs require future approval for the applicable death-benefit increase.

Future underwriting can consider factors such as:

Health
Income
Employment
Existing insurance
Driving history
Occupation
Hazardous job duties
Risky hobbies or activities
Other applicable underwriting factors

Being approved for the original policy does not guarantee every future JUMP.

That Means a Retirement Projection Assuming Every JUMP Is Nonguaranteed Too

Think about this carefully.

If the projected retirement-income number assumes successful JUMPs in Years 3, 5, 7, 9 and 11, then future underwriting approvals are part of the model producing that number.

If some of those JUMPs never happen, you should rerun the projection.

Don’t keep the retirement-income number while removing one of the assumptions that helped create it.

A Missed JUMP Doesn’t Necessarily Mean Starting Over

Under the strategy mechanics we’re discussing, if a future JUMP is not approved, the progression can pause rather than automatically resetting to the original funding level.

The client may continue at the previously achieved matching-loan level, subject to the actual policy contract and applicable procedures.

But again, that doesn’t mean the original projected outcome is guaranteed to remain unchanged.

The math should be updated.

What About the Death-Benefit Increases?

Planned death-benefit increases are designed specifically enough to create additional funding capacity while seeking to maintain the intended non-MEC policy design.

But increasing a death benefit does not by itself guarantee that the policy will avoid Modified Endowment Contract status.

Actual tax testing, policy design, premium activity, benefit changes and applicable rules matter.

Non-MEC Status Should Not Be Treated Casually

This matters because retirement-income strategies using policy loans often rely heavily on the intended tax treatment of a properly structured and maintained non-MEC policy.

So if someone says:

“All your retirement income is guaranteed tax-free.”

That’s not how I would explain it.

Policy Loans Are Not the Same as Guaranteed Tax-Free Income

But tax treatment can be affected by:

Basis
MEC status
Policy lapse
Policy surrender
Outstanding indebtedness
Other tax circumstances

That is much more accurate than simply saying:

“IUL income is guaranteed tax-free.”

What Happens If a Policy Lapses With a Large Loan?

This is one reason the nonguaranteed projection needs monitoring.

If a policy lapses or is surrendered with gain and outstanding indebtedness, taxable income may result.

So a projected policy-loan retirement strategy isn’t something you should put in a drawer for 30 years and forget about.

What About the Projected Retirement Distribution?

In certain JUMP retirement analyses, approximately 12% per year of policy value may be evaluated as a modeled distribution level under the assumptions being tested.

Is that guaranteed?

No.

It is not a universal safe withdrawal rate.

It is not a contractual promise that every policy can distribute 12% annually for life.

The Distribution Has to Be Supported by the Actual Policy

That means looking at:

Actual policy values
Outstanding indebtedness
Loan costs
Policy charges
Actual crediting
Distribution timing
Longevity

If those things change, the sustainable retirement distribution can change too.

What About the Death Benefit?

Life insurance is built around a death benefit, but don’t confuse the illustrated gross death benefit with the amount beneficiaries may ultimately receive after policy indebtedness.

Outstanding policy loans generally reduce the net death benefit payable under the contract.

If legacy matters to you, look at the projected net death benefit after the planned retirement distributions and loan activity.

Ask to See It at Multiple Ages

What is the projected net death benefit at 75?

At 85?

At 95?

Now you’re seeing what the retirement-income strategy could potentially leave behind under the illustrated assumptions.

What Does “Guaranteed” Not Mean?

This is worth spelling out.

It doesn’t mean every number anywhere on the illustration is guaranteed.

It doesn’t mean a current crediting term is guaranteed to remain unchanged unless the contract says so.

It doesn’t mean the current loan rate stays unchanged unless the applicable contract guarantees that rate.

It doesn’t mean future underwriting approval is guaranteed.

It doesn’t mean future JUMPs are guaranteed.

It doesn’t mean positive arbitrage is guaranteed.

It doesn’t mean the projected retirement distribution is guaranteed.

And it doesn’t mean a projected cash value is guaranteed simply because it appears on an illustration.

What Does “Nonguaranteed” Not Mean?

It doesn’t automatically mean fake.

It doesn’t automatically mean unrealistic.

It doesn’t automatically mean the strategy is bad.

It means the value relies on elements or assumptions that are not contractually guaranteed to occur exactly as illustrated.

That’s why you analyze them.

Almost Every Retirement Plan Has Nonguaranteed Assumptions Somewhere

Think about a 401(k).

If someone projects what your 401(k) could be worth at 65 using a 7% future return, that 7% isn’t guaranteed by the stock market.

Your future tax rate isn’t guaranteed.

Your retirement date isn’t guaranteed.

Your lifespan isn’t guaranteed.

Your spending isn’t guaranteed.

The fact that something is projected doesn’t automatically make the projection useless.

It means you need to understand the assumptions.

That’s the Standard I Apply to the IUL Too

I don’t want to reject a strategy simply because it uses nonguaranteed assumptions.

I also don’t want to buy one because the nonguaranteed illustration looks amazing.

I want to know:

What happens when those assumptions change?

This Is Where Stress-Testing Comes In

Take the nonguaranteed illustration.

Lower the indexed-crediting assumption.

Use the contractual maximum applicable loan rate.

Remove future JUMPs.

Start retirement earlier.

Extend the projection through age 95.

Then see what happens.

The goal isn’t to turn nonguaranteed values into guarantees.

You can’t.

The goal is to understand how much room the strategy has when reality is less favorable than the original projection.

Now Let’s Talk About the Up-to-300% Retirement-Income 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’s a projected comparison.

Not a contractual guarantee.

That distinction is absolutely critical.

The 300% Number Is Not Guaranteed

It’s also not:

300% more guaranteed return
300% more S&P 500 return
300% more indexed crediting
A result every client receives
A promise of future retirement income

It is an outcome that has appeared in certain modeled retirement-income comparisons under the assumptions being evaluated.

So What Should You Do With a Number Like 300%?

Question it.

Hard.

Ask:

“How much of this difference comes from the Matching Indexed Participating Loan mechanics?”

“How many JUMPs are assumed?”

“What indexed-crediting assumption is being used?”

“What loan rate is being used?”

“What policy charges are included?”

“What tax assumptions are being used on the 401(k) or IRA?”

“How long does the retirement-income comparison run?”

Then change the assumptions.

Make the 300% Number Prove Itself

Lower the crediting assumption.

Raise the loan rate to the applicable contractual maximum.

Remove future JUMPs.

Change retirement timing.

Extend longevity.

Then compare the strategies again.

If the projected advantage remains significant, that’s useful information.

If it shrinks substantially, that’s useful information too.

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.

Again:

Projected.

Not guaranteed.

The result can be affected by the specific policy design, funding, loan mechanics, policy charges, crediting assumptions, JUMP progression, retirement distributions and other assumptions used in the comparison.

This Is Why “Guaranteed vs. Nonguaranteed” Is More Than an Insurance Vocabulary Lesson

It changes how you think about the entire strategy.

If you believe the projected side is guaranteed, you may take far more risk than you realize.

If you believe every nonguaranteed value is meaningless, you may dismiss useful planning information.

The better approach is to understand what each number represents.

Here’s the Question I Would Ask on Every Major Number

“Is this guaranteed by the contract, current but changeable, historically calculated, or simply projected?”

Those four categories can clear up a lot of confusion.

Take the 5% Loan Rate

Current applicable rate.

Not the same as a forever-guaranteed 5% rate.

Take the 6% Loan Rate

Contractual maximum for the applicable loan feature under the structure we’re discussing.

Different category.

Take the 6.87% Number

Historical indexed-crediting calculation under a specific 2006 through 2020 methodology.

Not a guaranteed future rate.

Take 8.74%, 11.61%, 14.48% and 17.35%

Modeled effective JUMP results under the assumptions used in that analysis.

Not guaranteed returns.

Take the Up-to-300% Retirement-Income Difference

A modeled comparison result.

Not guaranteed retirement income.

That Is How I Want You Reading an Illustration

Don’t lump every number together.

Label it.

Understand where it came from.

Understand what can change it.

Then decide how much weight it deserves.

Why People Still Want to Hear the Word “Guaranteed”

Because uncertainty is uncomfortable.

Especially when you’re 55 or 60 and retirement is no longer some distant idea.

You start thinking:

“I don’t have another 30 years to recover from a major mistake.”

That’s the real pressure.

You don’t just want growth.

You want to know you’re not making an irreversible decision you’ll regret later.

The Fear Underneath the Illustration Is Bigger Than the Illustration

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

That’s the thought.

Not:

“I hope my participation rate is competitive in Year 23.”

You’re thinking about whether the money lasts.

Whether you stay independent.

Whether your spouse is okay if something happens to you.

Whether your kids end up becoming the emergency plan.

That’s Why These Thoughts Matter

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

“We should be able to handle this ourselves.”

You don’t solve those fears by pretending every projection is guaranteed.

You solve them by understanding what is guaranteed, identifying what isn’t, and testing the strategy against less favorable outcomes.

Here’s My Guaranteed vs. Nonguaranteed Checklist

Which values on the illustration are contractually guaranteed?
Which values are nonguaranteed projections?
What indexed-crediting assumption creates the projected values?
Which caps, participation rates or spreads can change under the contract?
What policy charges are guaranteed maximums versus current charges?
What is the current applicable loan rate?
What is the applicable contractual maximum loan rate?
Is positive loan arbitrage being assumed?
What happens if that arbitrage becomes negative?
Which future JUMPs require future underwriting approval?
How does the projection change if those JUMPs never happen?
What retirement distributions are projected rather than guaranteed?
How does outstanding indebtedness affect the projected net death benefit?
What tax assumptions are being made?
What could cause the policy to lapse?
What happens if the nonguaranteed results are lower than illustrated?

Don’t Buy the Guaranteed Column or the Nonguaranteed Column

Buy only after you understand the contract and the strategy.

The guaranteed side tells you one part of the story.

The nonguaranteed side tells you another.

The stress tests tell you another.

And the comparison against your other retirement options tells you another.

You need the whole picture.

How We Look at Guaranteed and Nonguaranteed Values at FPP Financial

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

I’m not interested in hiding the guaranteed side because the projected side looks prettier.

And I’m not interested in pretending a projected retirement-income number is a promise.

We’ll identify what’s guaranteed.

We’ll identify what’s nonguaranteed.

We’ll identify the current assumptions.

We’ll look at the Matching Indexed Participating Loan mechanics.

We’ll look at the current applicable 5% loan rate.

We’ll look at the contractual maximum 6% applicable loan rate.

We’ll identify which future JUMPs require future approval.

We’ll look at the projected retirement distributions.

Then we’ll make the nonguaranteed assumptions less favorable and see what happens.

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

Want to Know Which Numbers in Your IUL Illustration You Can Actually Count On?

Bring the illustration.

We’ll separate the contractual guarantees from the current values, historical calculations and nonguaranteed projections.

Then we’ll look at what happens when those projections change.

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.

That number is not guaranteed.

And that’s exactly why I want to show you the assumptions behind it.

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.

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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 exact contractual guarantees of an indexed universal life insurance policy are determined by the actual insurance contract. Illustration terminology, guaranteed values, nonguaranteed values, charges, crediting provisions, loan provisions, death benefits and other policy features can vary by policy. Current approved illustrations and the actual contract should be reviewed before making a decision.

Life insurance illustrations contain assumptions and may include both guaranteed and nonguaranteed elements. Nonguaranteed values, indexed-crediting assumptions, policy values, death benefits and retirement-income projections are not promises of future results. Actual policy performance can differ materially from illustrated results.

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.

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.

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 applicable rate should not be interpreted as a guarantee that the rate will remain at 5%. Current and guaranteed loan provisions should be verified against current approved policy information and the actual contract.

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, policy indebtedness, 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. It should not be interpreted as 300% more investment return or 300% more indexed crediting. Results are affected by the assumptions used for each strategy, including contributions, taxes, returns or indexed crediting, policy charges, loan costs, future JUMPs, distribution timing and longevity.

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 specific traditional IUL design, loan mechanics, policy charges, funding, crediting assumptions, JUMP progression and retirement distributions can materially alter the 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 of approximately 8.74%, 11.61%, 14.48% and 17.35% are not S&P 500 returns, indexed-crediting rates or guaranteed policy returns. They are modeled effective results under the assumptions used in the referenced JUMP analysis, before accounting for applicable policy charges and other factors.

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.

Current caps, participation rates, spreads, loan rates, charges and other nonguaranteed elements should not be assumed to remain unchanged unless guaranteed by the applicable insurance contract. The actual contract controls policy guarantees.

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.

Guaranteed vs. Non-Guaranteed IUL Values: What Do They Mean?