Discuss the pros and cons of retirement funding using savings invested in an insurance Indexed type of product. |
Now that we've seen the different results with money invested in the market, a compounding account, and a combination of accounts, let's take a look at the results if you purchase an insurance product to provide the fixed portion of your nest egg. Fixed Indexed Annuity – With a Fixed Index Annuity, your contract can have interest credited based in part on the movement of a major market index with certain period cap, floor, and participation limits. In addition to the growth protections, an annuity may provide for a lifetime income that continues even if the account balance declines to zero. Guarantees are dependent upon the claims-paying ability of the issuing company. Indexed annuities have surrender charges that are assessed during the early years of the contract if the annuity is surrendered. Indexed annuities do not directly participate in any stock or equity investments. Indexed Universal Life Insurance Policy - If you have the need for additional death benefit protection for your family or business, there may also be an opportunity to use the policy's cash value to supplement retirement income using policy loans and withdrawals. Like the indexed annuity, interest is credited to the cash value allocated to the index strategy in part based on changes in a market index. Interest is also subject to limits called floors, caps and participation rates. Note that policy loans and withdrawals reduce the policy's cash value and death benefit and may result in a taxable event. Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender. Surrender charges may reduce the policy's cash value in early years. |
Total Withdrawal = Initial Total Assets Assumption * Withdrawal % * (1 + Inflate @ Rate) ^ n where n=year number Values Subjected to Market ReturnsForward Market Balance = ([previous year] Forward Market Balance - Total Withdrawal) * (1 + Forward Market ROR) Forward Market ROR = Market return for selected year, ascending. Inverted Market Balance = ([previous year] Inverted Market Balance - Total Withdrawal) * (1 + Inverted Market ROR) Inverted Market ROR = Market return for selected year, descending. Average Market Balance = ([previous year] Average Market Balance - Total Withdrawal) * (1 + Average Market ROR) Average Market ROR = Sum of selected market return values / number of market returns selected. Values Protected via a Compounding AccountForward Risk Withdrawal ( >= Threshold %) Total Withdrawal * (1 - % Safe Assets) or ( < Threshold %) Total Withdrawal * (1 - % Safe Assets) * (1 - Market Reduction %) Forward Risk Balance = ([previous year] Forward Risk Balance - Forward Risk Withdrawal) * (1 + Forward Market ROR) Forward Safe Withdrawal ( >= Threshold %) Total Withdrawal * (% Safe Assets) or ( < Threshold %) Total Withdrawal * (% Safe Assets) * (Market Reduction %) Forward Safe Balance = ([previous year] Forward Safe Balance - Forward Safe Withdrawal) * (1 + Safe Return %) Forward Total Balance = Forward Risk Balance + Forward Safe Balance. Inverted Risk Withdrawal ( >= Threshold %) Total Withdrawal * (1 - % Safe Assets) or ( < Threshold %) Total Withdrawal * (1 - % Safe Assets) * (1 - Market Reduction %) Inverted Risk Balance = ([previous year] Inverted Risk Balance - Inverted Risk Withdrawal) * (1 + Inverted Market ROR) Inverted Safe Withdrawal ( >= Threshold %) Total Withdrawal * (% Safe Assets) or ( < Threshold %) Total Withdrawal * (% Safe Assets) * (Market Reduction %) Inverted Safe Balance = ([previous year] Inverted Safe Balance - Inverted Safe Withdrawal) * (1 + Safe Return %) Inverted Total Balance = Inverted Risk Balance + Inverted Safe Balance. Average Risk Withdrawal ( >= Threshold %) Total Withdrawal * (1 - % Safe Assets) or ( < Threshold %) Total Withdrawal * (1 - % Safe Assets) * (1 - Market Reduction %) Average Risk Balance = ([previous year] Average Risk Balance - Average Risk Withdrawal) * (1 + Average Market ROR) Average Safe Withdrawal ( >= Threshold %) Total Withdrawal * (% Safe Assets) or ( < Threshold %) Total Withdrawal * (% Safe Assets) * (Market Reduction %) Average Safe Balance = ([previous year] Average Safe Balance - Average Safe Withdrawal) * (1 + Safe Return %) Average Total Balance = Average Risk Balance + Average Safe Balance. Principal Protected via an Indexed AccountConstrained Forward Risk Withdrawal ( >= Threshold %) Total Withdrawal * (1 - % Safe Assets) or ( < Threshold %) Total Withdrawal * (1 - % Safe Assets) * (1 - Market Reduction %) Constrained Forward Risk Balance = ([previous year] Constrained Forward Risk Balance - Constrained Forward Risk Withdrawal) * (1 + Forward Market ROR) Constrained Forward Safe Withdrawal ( >= Threshold %) Total Withdrawal * (% Safe Assets) or ( < Threshold %) Total Withdrawal * (% Safe Assets) * (Market Reduction %) Constrained Forward Safe Balance = ([previous year] Constrained Forward Safe Balance - Forward Safe Withdrawal) * (1 + Constrained Forward Market ROR) Constrained Forward Total Balance = Constrained Forward Risk Balance + Constrained Forward Safe Balance. Constrained Inverted Risk Withdrawal ( >= Threshold %) Total Withdrawal * (1 - % Safe Assets) or ( < Threshold %) Total Withdrawal * (1 - % Safe Assets) * (1 - Market Reduction %) Constrained Inverted Risk Balance = ([previous year] Constrained Inverted Risk Balance - Constrained Inverted Risk Withdrawal) * (1 + Inverted Market ROR) Constrained Inverted Safe Withdrawal ( >= Threshold %) Total Withdrawal * (% Safe Assets) or ( < Threshold %) Total Withdrawal * (% Safe Assets) * (Market Reduction %) Constrained Inverted Safe Balance = ([previous year] Constrained Inverted Safe Balance - Inverted Safe Withdrawal) * (1 + Constrained Inverted Market ROR) Constrained Inverted Total Balance = Constrained Inverted Risk Balance + Constrained Inverted Safe Balance. Constrained Average Risk Withdrawal ( >= Threshold %) Total Withdrawal * (1 - % Safe Assets) or ( < Threshold %) Total Withdrawal * (1 - % Safe Assets) * (1 - Market Reduction %) Constrained Average Risk Balance = ([previous year] Constrained Average Risk Balance - Constrained Average Risk Withdrawal) * (1 + Average Market ROR) Constrained Average Safe Withdrawal ( >= Threshold %) Total Withdrawal * (% Safe Assets) or ( < Threshold %) Total Withdrawal * (% Safe Assets) * (Market Reduction %) Constrained Average Safe Balance = ([previous year] Constrained Average Safe Balance - Constrained Average Safe Withdrawal) * (1 + Constrained Average Market ROR) Constrained Average Total Balance = Constrained Average Risk Balance + Constrained Average Safe Balance. Cumulative WithdrawalsMarket Total (average/forward/inverted) = Sum of withdraws plus remaining balance. Indexed Total (average/forward/inverted) = Sum of withdraws (using indexed protection) plus remaining balance. |