Episode #146: How You Can Lock in Tax-Free Gains (ANYTIME) Using Indexed Universal Life

Millions of people start their day in the driver’s seat of their cars. They are in control of the route they take, but their safety is often in the hands of the other drivers on the road.

In relationship to retirement planning, Indexed Universal Life is your smart vehicle. Like all long trips, the strength of the external index ultimately determines how secure you feel in retirement. While IUL is not the fastest vehicle on the road, it provides reassurance that you and your family will arrive safely at your destination.

In this episode of Money Script Monday, Kyle explains a new IUL feature that allows the policyholder to lock in gains and avert losses during times of stock market uncertainty.


Click on the whiteboard image above to open a high-resolution version of it!

Video transcription

Hi, this is Kyle, and welcome back to another episode of Money Script Monday.

Today, we're going to be talking about how to lock in tax-free gains any time, using indexed universal life.

But before we begin, for you viewers watching today, how many of you guys ever plan for a family vacation, for it to only rain the entire time?

Or for you golfers who practice hours at the driving range, only to miss the fairway on the first tee?

While it might be impossible to ever lock in good weather, or that perfect golf swing, wouldn't it be ideal to have the ability and control to lock it in?

You're probably nodding your head in agreement.

That leads me to introduce the newest feature inside indexed universal life, where it gives the policyholder the ability and control to lock in those gains, help limit their losses, during that crediting period.

It's called the index lock feature, and we're going to talk more about that today, and talk about the benefits, some of the mechanics, and address some of the most frequently asked questions.


Let's move over here to the benefits. Transparency is key with indexed universal life. It's not a black box.


You can actually look and track and view where your money's allocated on a daily basis, and it'll give you the real rate of return on what that will be.

So, when you have that leisure of tracking and having that transparency, you have the ability to lock in gains, not having to wait until the end of the crediting period.

If you're seeing deterioration in the stock market and you're not so optimistic, you can lock in those gains, as long as they're positive.

With this feature, that's also going to help minimize losses, because again, if you have the foresight, and you're not so optimistic, you can lock it in, and this will help prevent any 0% returns.

How it Works

Let's move over to an actual, hypothetical example, and show you first hand how this index lock features from year to year.

How it Works

As you can see here, the ebbs and flows of that index value over the course of the first year, the client decided to actually lock it in at 108, the index value, which is then an 8% return throughout the year.

But, that index value ended at 102. But no worries. Because you locked it in at a higher index value, you're going to get credited that percentage, which of course is 8%.

The second year, where does it leave off? Does it leave off where you locked it in ?

Or does it leave off where that first-year policy end, and what that index value was? And it's that second option. It starts at the 102.

As you can see here, they lock it in, and when it hits 108 again, they have the ability to do so, and they were able to, again, generate a positive return, but what happened?

They somewhat limited their upside, because the second year anniversary, index value actually ended at a higher amount, at 112.

It’s a bit of a game you have to play with yourself and be comfortable with those rates that you're locking in, as it can potentially limit your upside.

Frequently Asked Questions

Let's move over here to the third section, frequently asked questions.

frequently asked questions

The number one is, "Who is doing this? What insurance carrier?" And it's Allianz Life.

They're based out of Minneapolis, in Minnesota, and in fact, they're the largest insurance carrier in the world, globally.

With that size comes pretty deep pockets, and the financial backing, which leads to the next question, "How are they able to do this?"

And I'm going to use a term called dynamic hedging. Hedging is a risk mitigation tool, using different financial instruments.

With that size, they're able to do a lot of things most insurance carriers can't. Instead of having to outsource their hedging to an investment bank, they can do it internally themselves.

By doing it themselves, they're able to save money, and it's a more cost-effective approach.

With that cost-effective approach, more money is put back into the product, to give you higher rates, to give you higher-graded purchased bonds in their portfolios, and gives you the ability and the innovation of adding some of these features to these contracts.

The third question is, "Can I elect multiple index allocations?"

Currently, right now, the PIMCO and the Bloomberg strategy are the only allocation, or the only indices, that have this index lock feature, and you can put this index lock feature and lock them at the same time, or one or the other.

It's up to you.

Fourth question, "When is the index interest credit applied?" Great question.

As we saw earlier, if you locked it in in the ninth month, it'll still be applied at the end of the first policy year, or at the end of that year that you lock it in at.

"Can I lock in the higher value?" Great question, but unfortunately, when you do that, again, you are placing that permanent lock for that year inside your policy.

So, even though it ended up at a higher value, you have to be able to stomach that amount that you locked it in at.

Lastly, "When will the index value be locked?"

If you lock it in in the morning, they will take the index value at 4 p.m. Eastern Standard Time, when the market closes, and calculate what your interest was.

If you decided to lock it in after hours, they'll take the next day's close at 4 p.m. as well, so, not much movement there of a course of 24 hours.

I get some questions, "Hey, if I canceled my index lock, am I able to remove that cancellation?" And it depends on your speed.

If you were to request that cancel to take place, or request that lock to take place, the same day, you would also have to cancel.

If not, you have to be able to, again, deal with locking in your gains.

We talked about the benefits, we showed you a quick example, we covered some of the questions, and I want to just leave you with this.

This index lock puts you in the driver's seat, gives you control of the car, but most importantly, the reassurance that you won't participate in any crashes for the remainder of that year.

It's the first of its kind, from one insurance carrier, the largest in the world, and is only available on certain index allocations.

If you're like most people who want certainty, hands on, flexibility, transparency, consider indexed universal life with an index lock as a wealth-building financial vehicle.

Reach out to the financial professional that shared this video, to see if it makes sense for you.

Again, my name is Kyle, thanks for tuning in, and we'll see you next week.

About Kyle Tomko

Kyle Tomko is a Field Support Representative at LifePro. He coaches hundreds of financial professionals on how to build effective financial strategies that achieve their clients' long term goals and helps them stay educated on the latest industry trends.


This information is meant for educational purposes only.

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