CHAPTER NINE
Eliminating Market Risk
“I don’t know anything about the stock market. And I stay away from things I don’t know anything about.” ~ Wayne Gretzky
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he biggest problem with 401(k)s and IRAs is that growth is often dependent on the stock market. As we’ve seen, the market can rise and fall, creating an unsteady environment in which to grow your funds. In most savings vehicles, when the market is up you make money and when the market crashes you The “indexed” in 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. lose money. It’s a boom and bust cycle. IUL overcomes this through indexing. In indexing, you capture a portion of the stock market’s growth, up to a cap—for example, 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. Here’s the special magic: your account has a floor of zero. This means the least amount of interest you can be credited in a year is zero percent. If the market drops 15 percent this year, your
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