CHAPTER SIX
Eliminating the Conflict of Growth vs. Security
O
ne of the biggest conflicts in your IRA is between growth and security. Just look at your asset allocation. You are constantly giving up growth for security, and security for growth. In many savings vehicles, when the market is up you make money and when it crashes you lose money. Otherwise, you just slog along at a growth rate far below what you need to accomplish. It’s a terrible choice, but one we’re so used to making that most of us never stop to question it. Of COURSE we can’t have growth and security. By definition, in today’s market, gaining one requires giving up the other. IUL overcomes this through indexing. The indexed part of indexed universal life explains how interest is credited to a policy. This technique lets you grow your money when the market is up but protects your money when the market drops. It’s a “best of both worlds” approach. What’s even better? It’s pretty simple to understand. In indexing, you capture a portion of the stock market’s growth, up to a cap. Let’s use, for example, a cap of 11.5 percent. If the market goes up 10 percent next year, you would get 10 percent growth in your policy. If the market goes up 15 percent, you would get the cap of 11.5 percent.
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