Is the IUL JUMP Strategy Worth It? Put It Through the Full Retirement Math Test

You’ve seen the illustration.

You’ve heard about policy loans.

You’ve heard about indexed crediting.

Maybe somebody showed you a retirement-income projection that made you think:

“There’s no way that’s real.”

Or maybe you saw the up-to-300% projected retirement-income comparison and thought:

“If the numbers are really that different, why wouldn’t I do this?”

Neither reaction answers the question.

Because the question isn’t:

“Can somebody make an IUL illustration look impressive?”

Of course they can.

The question is:

“Does this strategy still make mathematical sense after I understand how it works, what it costs, what has to go right, what can go wrong, and what happens if retirement doesn’t follow the original plan?”

That’s the full retirement math test.

And after 100 articles breaking down different pieces of this strategy, this is where everything comes together.

Start With the Most Important Question: What Job Are You Hiring the Policy to Do?

Before discussing caps, loans, JUMPs, or retirement distributions, answer this:

What problem are you actually trying to solve?

Are you trying to create another potential source of retirement income?

Reduce how heavily retirement depends on taxable distributions from tax-deferred accounts?

Create permanent life insurance?

Protect a spouse?

Leave money to children?

Create another financial bucket outside your 401(k) or IRA?

Or some combination of those?

If you don’t know the job, you can’t judge the tool.

An IUL Is Still Life Insurance

This should never get buried underneath the retirement-income conversation.

Indexed universal life is permanent life insurance.

It isn’t a 401(k).

It isn’t an IRA.

It isn’t an index fund.

It isn’t a savings account.

It isn’t directly invested in the S&P 500.

It has insurance costs, policy charges, contractual rules, underwriting requirements, and a death benefit.

So the first math test is also an insurance test.

Is there a legitimate need and financial basis for the life insurance being considered?

Math Test #1: Can You Comfortably Fund It?

Let’s use the $10,000 annual example we’ve used throughout this series.

That works out to roughly:

$833 per month.

The question isn’t:

“Can you technically make that payment?”

The better question is:

“Can you make it without weakening the rest of your financial life?”

I wouldn’t want someone funding an insurance strategy while they’re:

• Carrying expensive consumer debt they can’t manage
• Draining emergency reserves
• Leaving themselves without enough accessible cash
• Ignoring an employer retirement benefit without understanding what they’re giving up
• Committing money they realistically expect to need soon

A retirement strategy shouldn’t create a liquidity emergency on the way to retirement.

Math Test #2: Does the Strategy Work With Your Actual Contribution?

Don’t start by asking how much the policy can produce.

Start with what you’re realistically willing and able to fund.

$5,000?

$10,000?

$20,000?

Another amount?

Then model from there.

Don’t reverse-engineer your budget around the prettiest illustration.

Math Test #3: Understand Where Every Dollar Comes From

This is especially important with the IUL JUMP Strategy.

Using our standard example, the client contributes:

$10,000 per year.

Then the modeled funding structure changes over time.

Year 11 is where people naturally ask:

“If I’m only putting in $10,000, where is the other $50,000 coming from?”

That’s exactly what you should ask.

The additional $50,000 in this example comes from Matching Indexed Participating Loan activity.

It’s policy-loan-funded money.

It’s not free money.

It’s not a carrier gift.

It’s not an employer match.

It’s not a tax credit.

The loan proceeds are modeled as being redeployed into the same policy as additional funding.

And the loan economics remain part of the strategy.

Math Test #4: Understand the Two Buckets

A simple way to understand the structure is to separate the money mentally.

Bucket 1: Client-Funded Value

This is the money you personally contribute.

In our example:

$10,000 per year.

Bucket 2: Loan-Funded Value

This is value funded through Matching Indexed Participating Loan activity and redeployed into the policy under the modeled strategy.

In the example, both buckets are modeled with the same potential:

10% cap and 0% indexed-crediting floor.

But Bucket 2 carries something Bucket 1 doesn’t.

The applicable policy-loan cost.

That’s why looking only at the additional funding would give you half the story.

Math Test #5: Understand What the 0% Floor Actually Does

A 0% indexed-crediting floor can protect the applicable indexed-crediting calculation from receiving a negative credit due solely to a negative index result, subject to the contract’s terms.

It does not mean:

“Your policy can never lose value.”

The policy can still experience:

• Cost of insurance
• Administrative charges
• Other applicable policy charges
• Policy-loan costs
• Withdrawals
• Retirement distributions

Never confuse a 0% indexed-crediting floor with a 0% floor on total policy value.

Math Test #6: Understand the Historical 6.87% Example

One historical analysis we’ve used to explain the JUMP model looks at annual S&P 500 price changes from 2006 through 2020.

Dividends are excluded.

Then the analysis applies:

A 10% cap.

And:

A 0% floor.

Negative annual index-price changes are replaced with 0% for purposes of that historical indexed-crediting calculation.

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

The average of those annual capped-and-floored figures is approximately:

6.87%.

That’s not the historical total return of the S&P 500.

It’s not a guaranteed future IUL crediting rate.

It’s not a guaranteed policy return.

It’s a historical capped-and-floored calculation under the assumptions used in that analysis.

Math Test #7: Put the Loan Cost Next to the Crediting Assumption

With the policy structure we currently use for the IUL JUMP Strategy, the applicable loan rate is currently:

5%.

The applicable loan feature has a contractual maximum loan rate of:

6%.

Using the historical/modeling example:

6.87% – 5.00% = 1.87 percentage points.

That’s the simplified modeled favorable spread.

That’s where the positive-arbitrage discussion begins.

But don’t stop there.

Math Test #8: Make the Arbitrage Go Negative

What happens if indexed crediting is 0%?

With a 5% applicable loan cost, the simplified relationship becomes:

0% – 5% = an unfavorable 5-percentage-point spread.

Now run the strategy.

What happens to policy values?

What happens to outstanding indebtedness?

What happens if you’re already taking retirement distributions?

Positive arbitrage isn’t guaranteed.

So a strategy built around policy loans needs to show you unfavorable arbitrage too.

Math Test #9: Understand What the 17.35% Number Is and Isn’t

Under assumptions used in one JUMP analysis, the combination of the base indexed-crediting assumption and the positive-arbitrage effect attributed to successive Matching Indexed Participating Loans produced modeled effective results reaching 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 aren’t S&P 500 returns.

They aren’t IUL indexed-crediting rates.

They aren’t guaranteed policy returns.

They aren’t guaranteed compound annual growth rates.

They aren’t guaranteed net returns after every policy charge.

They are modeled effective results under assumptions used in the referenced JUMP analysis, before accounting for applicable policy charges and other factors.

If the strategy only sounds attractive after somebody calls 17.35% an IUL return, the explanation has already gone off track.

Math Test #10: Account for the Policy Charges

Now bring insurance costs back into the equation.

Look at:

• Cost of insurance
• Administrative charges
• Premium-related charges where applicable
• Rider charges where applicable
• Other contractual charges

Don’t look only at Year 5.

Look at 70.

80.

90.

95.

A retirement strategy has to survive retirement, not just look good during accumulation.

Math Test #11: Can You Actually Qualify for the Strategy?

Future JUMPs aren’t automatically guaranteed when the original policy is issued.

The standard example shows planned JUMPs in policy Years:

3, 5, 7, 9 and 11.

Each planned JUMP requires a new application and approval for the applicable death-benefit increase.

Future qualification can be affected by:

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

So if somebody shows you a projection containing every future JUMP, ask for another one.

Show me what happens if I never qualify for another JUMP.

Math Test #12: What Happens If a Future JUMP Is Missed?

Under the mechanics we’re discussing, a missed JUMP can pause the progression rather than automatically resetting the strategy.

Suppose you’ve successfully reached the $30,000 matching-loan level.

Then your circumstances change and the next planned JUMP isn’t approved.

Under the strategy mechanics being modeled, that doesn’t automatically mean you fall all the way back to the original level.

You may remain at the previously achieved matching-loan level and may be able to reapply at a later policy anniversary if circumstances improve, subject to applicable rules and approval.

That’s better than pretending future JUMPs are guaranteed.

But it also means your retirement projection should be rerun.

Math Test #13: Look at the Accumulating Loan Balance

The JUMPs don’t erase earlier loans.

The loans accumulate under the strategy mechanics being modeled.

So as the additional loan-funded amount grows, you should also be watching:

Outstanding policy indebtedness.

Never let someone show you one side without the other.

Math Test #14: What Happens to the Loan Charges?

Under the JUMP strategy as modeled, applicable loan charges are carried forward rather than requiring the client to pay those charges out of pocket each year during the accumulation design.

That does not make the charges disappear.

It means they’re part of the policy economics that need to be monitored.

And because the exact contractual accounting mechanics control, the current approved illustration and actual policy contract need to be reviewed.

Math Test #15: Does the Retirement Income Actually Match What You Need?

This sounds obvious.

It’s often skipped.

Suppose the illustration shows:

$150,000 per year.

But you only need $90,000 from this particular retirement bucket.

Why automatically take $150,000?

Run $90,000.

See what happens to:

• Policy durability
• Outstanding indebtedness
• Policy value
• Projected net death benefit

The biggest illustrated income number isn’t automatically the right retirement-income number.

Math Test #16: Test the Approximately 12% Distribution Model

In modeling used with the IUL JUMP Strategy, we’ve evaluated retirement distributions at approximately:

12% per year of policy/account value

under specific assumptions.

That is a modeled distribution level.

It is not a universal safe withdrawal rate.

It isn’t guaranteed lifetime income.

It doesn’t mean every IUL can distribute 12% annually without eventually creating policy stress.

So don’t just run 12%.

Run other distribution levels too.

What happens at 9%?

What happens at 6%?

Or forget percentages entirely and model the actual dollar amount you expect to need.

Math Test #17: Retire Five Years Early

If the original projection assumes retirement at 70, run 65.

If it assumes 65, run 60.

Earlier retirement can mean:

Fewer accumulation years.

More distribution years.

More time for outstanding policy indebtedness to affect the strategy.

That’s a useful test.

Math Test #18: Live Longer Than Planned

Don’t stop the illustration at the age that makes the numbers look best.

Run 90.

Run 95.

Run beyond that where appropriate.

You’re not trying to predict your date of death.

You’re trying to answer:

“What happens if I live a very long time?”

Math Test #19: Put Weak Crediting in the Worst Possible Years

Averages can hide timing.

Several weak indexed-crediting periods early in accumulation may create a different outcome than weak periods after substantial policy loans and retirement distributions are already occurring.

So don’t just lower the average assumption.

Look at unfavorable timing too.

Especially during retirement.

Math Test #20: Run the 6% Loan Rate With Weak Crediting

This is one of my favorite tests.

Don’t run:

6% loan rate with everything else working beautifully.

Run:

6% loan rate + lower indexed crediting + retirement distributions + longer life.

Now you’re putting several pressures on the strategy at once.

That’s where you begin learning how much margin exists.

Math Test #21: What Happens If You Need More Money Than Planned?

Retirement isn’t a spreadsheet.

A roof fails.

A child needs help.

A spouse gets sick.

You move.

You buy a car.

Healthcare costs change.

Life happens.

So test an unexpected larger distribution.

Then look at the policy afterward.

Math Test #22: What Happens If You Need Money Before Retirement?

This matters because an IUL is usually being designed over a long time horizon.

Ask what happens if you need access earlier than expected.

What policy values are available?

What surrender charges may apply?

What happens if you take a withdrawal?

What happens if you take a policy loan?

What happens to the future retirement projection?

Don’t commit long-term money without understanding short-term access.

Math Test #23: What Happens to the Policy at Death?

An IUL isn’t only a retirement-income strategy.

It’s life insurance.

Outstanding policy indebtedness generally reduces the net death benefit payable under the contract.

So don’t ask only:

“What’s the death benefit?”

Ask:

“What is the projected net death benefit after outstanding indebtedness?”

Math Test #24: Decide Whether Retirement Income or Legacy Matters More

Maybe your priority is:

“I built this money to use it. I don’t want to die with all of it.”

That’s legitimate.

Maybe your priority is:

“I want to make sure my spouse is protected if I’m gone.”

Also legitimate.

Maybe leaving a specific amount to your children matters.

Then put a dollar amount on it.

For example:

“I want at least $500,000 of projected net death benefit remaining for my family.”

Now the model has a target.

Retirement income and legacy can compete for the same policy economics.

You need to decide which job comes first.

Math Test #25: Understand the Tax Rules Without Turning Them Into a Slogan

“Tax-free retirement” sounds great.

It’s also incomplete.

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.

But:

• Basis matters
• MEC status matters
• Policy status matters
• Outstanding indebtedness matters
• Lapse matters
• Surrender matters

If a policy with gain and outstanding indebtedness lapses or is surrendered, taxable income can potentially result under applicable tax rules.

That’s why the policy needs to remain monitored.

Math Test #26: Understand the MEC Risk

A Modified Endowment Contract can have different tax treatment for distributions.

The planned JUMP structure uses death-benefit increases to create additional funding capacity under the intended design while managing applicable MEC limits.

But increasing death benefit does not magically guarantee non-MEC status.

Actual policy design, premium funding, tax rules, underwriting approval, carrier procedures, and the contract control.

Math Test #27: Compare the Strategy Against What You Would Actually Do Instead

This may be the most overlooked test.

Don’t compare the JUMP Strategy against a fictional bad alternative.

What would you actually do with the money?

Put it in your 401(k)?

Traditional IRA?

Roth IRA?

Taxable brokerage account?

Pay down debt?

Hold cash?

Fund another insurance strategy?

That’s the real comparison.

Math Test #28: If You’re Comparing It With a 401(k), Include the Employer Match

If your employer offers a match and you’re eligible for it, don’t pretend it doesn’t exist just to make the IUL comparison look better.

Put it in the model.

Then compare.

We’re trying to make a good decision.

Not protect a sales presentation.

Math Test #29: Compare Gross Income and Spendable Income Correctly

A $100,000 gross distribution from a tax-deferred retirement account isn’t automatically economically equivalent to $100,000 accessed through a properly structured life insurance strategy.

Tax treatment can differ.

So decide what you’re comparing.

Gross distributions?

Projected after-tax spendable income?

Ending wealth?

Legacy?

Use the same measurement on both sides.

Math Test #30: Now Test the Up-to-300% Claim

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 huge difference.

Don’t believe it because I wrote it here.

Make the comparison prove it.

And understand exactly what “300% more” means.

Suppose Strategy A produces:

$50,000 per year.

And Strategy B produces:

$200,000 per year.

The difference is $150,000.

$150,000 divided by $50,000 equals 300%.

Strategy B is producing four times the income, or 300% more than Strategy A, in that example.

That does not mean Strategy B earned a 300% return.

The 300% Does Not Mean Any of These Things

• 300% more investment return
• 300% more S&P 500 return
• 300% more indexed interest
• 300% more cash value
• 300% more death benefit
• 300% guaranteed retirement income
• 300% more for every client

It refers to certain modeled retirement-income comparisons.

That’s it.

Make the 300% Comparison Pass the Same Stress Tests

If the baseline model shows up to approximately 300% more projected retirement income, rerun it with:

• Lower indexed crediting
• Several 0% indexed-crediting periods
• The 6% maximum applicable loan rate
• 6% loan cost combined with weaker crediting
• No future JUMPs
• Earlier retirement
• Longer life
• Different retirement distributions
• Clearly stated tax assumptions
• All applicable policy charges

Then ask:

“How much of the advantage remains?”

That’s more useful than protecting the original 300% headline.

Math Test #31: Test the Approximately 40% Traditional-IUL Comparison

In certain modeled comparisons we’ve evaluated, the JUMP Strategy has also produced approximately:

40% more projected retirement income than the traditional IUL structure being compared.

Again, don’t believe the percentage without examining the assumptions.

Compare:

• The same client contribution
• The same funding period
• Comparable indexed-crediting assumptions
• Policy charges
• Loan provisions
• Loan costs
• Retirement ages
• Distribution periods
• Longevity
• Projected net death benefits

Then see where the difference actually comes from.

Math Test #32: Can You Explain the Strategy Without Using the Word “JUMP”?

This is a surprisingly useful test.

Forget the name.

Can you explain:

How much you’re contributing?

Where the additional funding comes from?

Why the death benefit changes?

What requires future underwriting?

What the loans cost?

Where positive arbitrage can occur?

Where negative arbitrage can occur?

What happens if you miss a future increase?

How retirement distributions are modeled?

What happens to the loans at death?

If you can’t explain those things, you don’t understand the strategy well enough yet.

Math Test #33: Can the Person Presenting It Explain the Bad Scenario?

Ask:

“Show me how this fails.”

That’s a good question.

If all you hear is why everything should work, you’re missing half the analysis.

You should understand the conditions that can create policy stress, including:

• Weak indexed crediting
• Unfavorable loan economics
• Higher applicable loan costs
• Large retirement distributions
• Growing policy indebtedness
• Policy charges
• Long life
• Unexpected liquidity needs
• Failure to qualify for future JUMPs

Math Test #34: What Happens If the Policy Lapses?

Don’t treat lapse as an abstract insurance word.

Understand what it could mean.

A lapse can terminate the coverage.

And if the policy has gain and outstanding indebtedness, a lapse can potentially create taxable income under applicable tax rules.

That’s one reason aggressive policy-loan strategies need ongoing monitoring.

Math Test #35: Are You Comfortable With Nonguaranteed Results?

An IUL illustration contains guaranteed and nonguaranteed elements.

The retirement-income strategy generally relies heavily on nonguaranteed policy performance.

So ask yourself:

“Am I comfortable owning something where the actual outcome can differ materially from the original projection?”

If the answer is no, that’s important information.

Math Test #36: Does the Strategy Still Make Sense Without the Best-Case Outcome?

This might be the cleanest test of all.

Suppose you don’t get the maximum projected retirement income.

Suppose the indexed-crediting results are lower.

Suppose future JUMPs stop earlier.

Suppose the loan rate moves from 5% toward 6%.

Suppose you live longer.

Does the strategy still accomplish something valuable for you?

If the entire reason for owning it disappears unless every assumption works beautifully, that’s something you need to know before buying it.

So Who Might Want to Put the IUL JUMP Strategy Through the Math Test?

Someone may want to evaluate it if they’re looking for a combination of:

• Permanent life insurance
• Potential cash-value accumulation
• Another potential retirement-income source
• Tax diversification
• Legacy planning
• A strategy outside traditional tax-deferred retirement accounts

But wanting those things doesn’t automatically make the strategy appropriate.

Funding ability, liquidity, insurance need, insurability, objectives, time horizon, and comfort with the policy’s risks and nonguaranteed elements still matter.

Who Should Be Especially Careful?

I would want much more analysis when someone:

• Needs the contributed money back soon
• Has weak emergency reserves
• Cannot comfortably maintain the planned funding
• Doesn’t understand policy loans
• Believes the illustration is guaranteed
• Is choosing the strategy solely because of the 300% number
• Has no meaningful insurance need or financial justification for the coverage being considered
• Is uncomfortable with long-term policy monitoring

The goal isn’t to make the policy fit everyone.

It’s to find out whether the math fits the person.

The Real Decision Usually Isn’t About an IUL

It’s about retirement.

You’re 55.

60.

Maybe 65.

You’ve accumulated $750,000.

$1 million.

$2 million.

You’ve spent decades doing what you were supposed to do.

Save.

Work.

Don’t touch the retirement money.

Keep going.

Now you’re getting close enough to retirement that the question changes.

It’s no longer:

“How much can I accumulate?”

It’s:

“How do I turn what I’ve built into a life I can actually live?”

And That’s Where the Fear Shows Up

You don’t have another 30 working years to recover from a major mistake.

So you look at a strategy like this and think:

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

Then:

“We should be able to handle this ourselves.”

And maybe the one you don’t say:

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

You want enough income to enjoy retirement.

But you don’t want to get greedy.

You want to use the money you’ve built.

But you don’t want to destroy the safety you’ve spent decades creating.

You want to leave something behind.

But you don’t want to spend retirement afraid to spend your own money.

That’s the actual decision.

There Is No Reason to Rush the Math

A permanent life insurance strategy may be with you for decades.

Take enough time to understand it.

Ask uncomfortable questions.

Make somebody explain the loan balance.

Make them show you the charges.

Make them show you the nonguaranteed values.

Make them remove future JUMPs.

Make them raise the loan rate.

Make them lower the crediting assumption.

Make them run age 95.

If the strategy is worth considering, understanding it shouldn’t ruin it.

The Full IUL JUMP Retirement Math Checklist

Before making a decision, I would want answers to all of these:

1. Why do I need the life insurance?
2. How much am I contributing out of pocket?
3. Can I comfortably maintain that contribution?
4. How much liquidity am I giving up?
5. What are the policy charges?
6. What values are guaranteed?
7. What values are nonguaranteed?
8. How does indexed crediting actually work?
9. What does the 0% floor protect?
10. What does it not protect?
11. Where does Matching Indexed Participating Loan funding come from?
12. How much policy indebtedness is created?
13. What is the current applicable loan rate?
14. What is the contractual maximum applicable loan rate?
15. What happens during positive arbitrage?
16. What happens during negative arbitrage?
17. What happens after several 0% indexed-crediting periods?
18. Which future JUMPs require underwriting?
19. What happens if I don’t qualify?
20. What happens if I never qualify for another JUMP?
21. What retirement distribution is being modeled?
22. Why was that amount selected?
23. What happens if I retire early?
24. What happens if I live to 95 or beyond?
25. What happens if I need more money?
26. What happens if the policy lapses?
27. What happens to the loans when I die?
28. What is the projected net death benefit after indebtedness?
29. How does the strategy compare with what I would actually do instead?
30. What assumptions create the up-to-300% projected retirement-income difference?
31. How much of that difference remains after stress testing?

Now Ask One Final Question

“If we remove the sales pitch, does the math still make sense?”

That’s it.

Not:

“Is IUL good?”

Not:

“Is IUL bad?”

Not:

“Can somebody show me a huge number?”

Can this specific strategy, funded with your actual dollars, under assumptions you understand, survive realistic stress tests and still help accomplish the retirement goals you actually care about?

That’s a much harder question.

It’s also the one worth answering.

The Bottom Line: Is the IUL JUMP Strategy Worth It?

The answer should not come from a slogan.

It shouldn’t come from a single illustration.

It shouldn’t come from the 17.35% modeled effective result.

It shouldn’t come from the approximately 40% modeled traditional-IUL comparison.

And it shouldn’t come from the up-to-300% projected retirement-income comparison.

Those numbers can start the investigation.

They shouldn’t finish it.

Put the strategy through the full retirement math test.

Understand where the additional funding comes from.

Understand the loans.

Understand the costs.

Understand the underwriting.

Understand the tax considerations.

Understand the retirement distributions.

Understand the death benefit.

Understand what happens when the assumptions don’t cooperate.

Then compare it with the alternatives you would realistically use.

Don’t buy an IUL because somebody showed you a big retirement-income number.

Don’t reject one because the number looks too good to be true.

Make the strategy explain itself.

Make it survive the stress test.

Make it prove where the difference comes from.

Let the math do the talking.

How FPP Financial Runs the Full Retirement Math Test

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

The point isn’t to make one strategy win.

The point is to make the assumptions visible.

We look at:

• Your actual contribution
• Your retirement date
• Your retirement-income goal
• Your existing retirement assets
• Your liquidity
• Your insurance need
• Your legacy goals
• Your tax assumptions
• Policy charges
• Guaranteed and nonguaranteed values
• Indexed-crediting assumptions
• Matching Indexed Participating Loan activity
• The current applicable 5% loan rate
• The contractual maximum 6% loan-rate stress test
• Outstanding policy indebtedness
• Future JUMP assumptions
• No-future-JUMP scenarios
• Weak indexed-crediting scenarios
• 0% indexed-crediting periods
• Earlier retirement
• Different retirement-distribution levels
• Projected net death benefit
• Longevity through age 95 and beyond where appropriate

Then we compare the strategy against the alternatives you’re actually considering.

If the JUMP Strategy produces more projected retirement income, we want to know why.

If it doesn’t, we want to know that too.

If the advantage disappears when we make the assumptions more conservative, that’s useful information.

If it remains meaningful, that’s useful information too.

We don’t sell you a retirement strategy. We run the math and let you decide.

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

Ready to Put Your Retirement Numbers Through the Test?

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.

In certain modeled comparisons, it has also produced approximately 40% more projected retirement income than the traditional IUL structure being compared.

Neither result is guaranteed.

Neither result should be accepted because it sounds impressive.

And neither result tells you whether the strategy makes sense for you.

That’s what the math is for.

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.

The 300% isn’t the sales pitch. It’s the question.

Show me exactly where the difference comes from.

Then show me what happens when things don’t go according to plan.

Let the math do the talking.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• What Is the IUL JUMP Strategy and How Does It Work?
• Can the IUL JUMP Strategy Really Produce Up to 300% More Retirement Income?
• How to Stress-Test an IUL Before You Use It for Retirement

Disclosure

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

Indexed universal life policies contain costs, limitations, risks, and contractual requirements. Suitability and appropriate policy design are determined by individual circumstances, insurance needs, insurability, financial resources, liquidity, objectives, time horizon, and the terms of the applicable insurance contract.

Projected retirement income, policy values, death benefits, indexed-crediting results, and other nonguaranteed illustrated values are not guaranteed unless specifically identified as guaranteed under the applicable insurance contract. Actual policy performance may differ materially from illustrated or modeled results.

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. Cost of insurance, administrative expenses, policy-loan costs, withdrawals, distributions, and other policy mechanics can continue to affect policy values during a 0% indexed-crediting period.

Indexed universal life insurance does not directly invest policy cash value in the S&P 500 or another market index and does not provide ownership of underlying index securities through the indexed account. Indexed-crediting results should not be confused with market-index returns or direct investment performance. Dividends from the S&P 500 are not received as they would be through direct ownership of the underlying securities.

Caps, participation rates, spreads, crediting methods, loan rates, and other policy elements may be guaranteed or nonguaranteed as specified by the applicable insurance contract. Nonguaranteed elements may change where permitted by contract. Current approved policy information and the actual insurance contract should be reviewed before purchase.

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, outstanding indebtedness, and other circumstances.

Policy loans create indebtedness and generally accrue applicable loan charges. Policy loans can reduce policy values and death benefits and can increase lapse risk. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income under applicable tax rules.

Life insurance death benefits are generally received income-tax-free by beneficiaries under current federal law, subject to applicable exceptions and individual circumstances. Outstanding policy indebtedness generally reduces the net death benefit payable under the applicable insurance contract.

Modified Endowment Contract status can materially change the tax treatment of policy distributions. Increasing death benefit does not by itself guarantee that a policy will avoid MEC status. Actual policy design, premium funding, applicable tax rules, underwriting approval, procedures, and contract provisions control.

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.

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 maximum loan provisions should be verified against current approved policy information and the actual insurance contract.

The strategy is modeled with applicable loan charges carried forward rather than requiring the client to pay those charges out of pocket each year during the accumulation design. This statement should not be interpreted as meaning loan charges disappear, are waived, or never affect policy economics. The actual contract and current approved illustration govern the treatment of policy indebtedness and loan charges.

Positive arbitrage is not guaranteed. Periods in which applicable indexed crediting is below the applicable policy-loan cost can create unfavorable loan economics. Prolonged unfavorable loan economics combined with policy charges, distributions, and growing indebtedness can place additional pressure on policy values and increase lapse risk.

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. Negative annual price changes were replaced by 0% and positive annual price changes above 10% were capped at 10% for purposes of that historical analysis. The resulting annual capped-and-floored figures averaged approximately 6.87%. Historical results do not predict future policy performance and should not be interpreted as a guaranteed future indexed-crediting rate, compound annual growth rate, net policy return, or historical total return of the S&P 500.

The simplified 1.87-percentage-point modeled positive spread represents the mathematical difference between the 6.87% historical indexed-crediting result used in the referenced model and the current 5% applicable policy-loan rate. It is not a representation of net policy return after cost of insurance, administrative expenses, other policy charges, withdrawals, distributions, or other factors and is not guaranteed to occur.

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, compound annual growth rates, sustainable withdrawal rates, net returns after policy charges, participation rates, cap rates, or guaranteed policy returns. They are modeled effective results under assumptions used in the referenced JUMP analysis, before accounting for applicable policy charges and other factors.

References to approximately 12% annual retirement distributions describe modeled distribution levels under specific assumptions. They should not be interpreted as universal safe withdrawal rates, guaranteed distribution rates, guaranteed lifetime income, or assurances that an indexed universal life policy can sustain those distribution levels.

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.

Death-benefit increases associated with planned JUMPs are designed to create additional funding capacity under the intended policy design while managing applicable MEC limits. Increasing death benefit does not by itself guarantee non-MEC status. Actual policy design, premium funding, tax rules, underwriting approval, applicable procedures, and contract provisions control.

Under the strategy mechanics described, failure to qualify for a future JUMP does not necessarily mean prior successful JUMPs or the previously achieved matching-loan level automatically disappear. Actual policy rules govern each case, and projections should be updated when future JUMP assumptions change.

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 under specific assumptions. It is not a universal, expected, or guaranteed result and should not be interpreted as 300% more investment return, indexed interest, policy-loan arbitrage, net policy return, sustainable withdrawal rate, guaranteed lifetime income, death benefit, cash value, or S&P 500 performance.

Contributions, contribution periods, taxes, retirement timing, retirement-account returns, indexed-crediting results, policy-loan mechanics, loan rates, policy charges, future underwriting outcomes, future JUMPs, retirement distributions, longevity, and other assumptions can materially alter the up-to-approximately-300% modeled comparison. Actual results may be substantially lower than modeled results.

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 and does not represent approximately 40% more investment return, indexed interest, cash value, death benefit, or policy return. Funding, policy charges, crediting assumptions, loan provisions, distributions, future JUMPs, and longevity can materially alter the comparison.

Comparisons between life insurance and 401(k)s, IRAs, brokerage accounts, annuities, or other retirement strategies involve materially different products, tax structures, contribution rules, liquidity characteristics, insurance benefits, costs, risks, and legal features. Comparisons should use clearly disclosed assumptions and should not imply that an IUL is legally, economically, or functionally identical to a qualified retirement plan, IRA, investment account, or other financial product.

Stress testing and financial modeling cannot predict future policy performance or eliminate risk. They are analytical processes used to examine how changes in assumptions may affect projected results. Actual outcomes are governed by the insurance contract, actual policy performance, applicable rates and charges, underwriting outcomes, client actions, tax law, and other circumstances.

FPP Financial does not provide tax, legal, accounting, investment, securities, or estate-planning advice. Individuals should consult qualified tax, legal, accounting, insurance, financial, estate-planning, and other appropriate professionals regarding their individual circumstances before purchasing or modifying life insurance, taking policy loans, accessing policy values, changing retirement-plan contributions, or implementing any retirement-income or insurance strategy discussed here.