how often can I change indexing strategies on an ilul that is the question I will be answering in this episode uh when people ask this question uh it usually tells me that they've been watching other educational videos on this channel and they understand that you don't just select a strategy and sit there forever with that strategy yes you could do that and uh people who did that uh from uh you know the year 2000 to 2010 the worst decade since the Great Depression the Great Recession we call it uh you would have averaged 7.23% if you had a million in your IL it would have doubled to 2 million by not doing anything you just fell asleep like rip vanwinkle and woke up 10 years later and you doubled your money but if you change your indexing strategies which we did with our clients instead of earning 7.23 they were credited 11.17% during the worst decade since the Great Depression and they netted over 10% taxfree cash on cash so get ready I'm going to explain this in detail in this episode I think you're going to be blown away so I'm Doug Andrew I've been a financial strategist and a retirement planning specialist now for five decades helping thousands of Americans optimize their assets and minimize taxes Empower their authentic well if you've watched very many of my videos uh my favorite Financial vehicle without question question is a property structured maxf funded indexed universal life if it is property structured and maximum funded it is deemed what I call a laser fund which is the title of my most recent best-selling book 300 pages jam-packed with information and and 62 stories and I'll gift you a copy of this book it it retails for anywhere from 20 bucks up to 70 bucks on Amazon I'll gift you a copy free at the end of this episode so stay with me so uh usually they're watching these videos and they begin to understand index universal life that the beauty is you're taking the cash values inside of this insurance policy which will grow tax-free and you can take out the money taxfree and you don't have to wait until you're 59 and a half it's not like an IRA or 401K it is far superior to that and uh if you watch very many videos or read the book you're going to see that uh our clients um who select ilul if they did not change the indexing strategies generally speaking based on actual historical performance they will probably uh average in that 8 to 9% rate of return uh range uh gross okay uh at the end of the day retroactive back to the first day they open it up they should uh net within 1% uh of the gross rate of return if they average nine they they should net 8% cash on cash only 1% went out in in actual the costs uh that have to to be inside of an insurance contract in order for it to qualify to be taxfree uh in the Internal Revenue code okay now um again you can earn eight and net seven you can earn seven and net six uh if you know what you're doing but if you actually rebalance and diversify this is the secret uh behind uh ilul is knowing how on an annual basis uh in annual reviews you can take your average return uh from that eight or n % range up to uh more like 10 11 or higher okay uh we've actually averaged 11.17% uh and netted over 10% for our clients which means every million bucks uh that they accumulate it can generate a 100,000 a year of taxfree income without depleting principal uh it also means that uh if you're earning 10% your money is going to double about every 7.2 years based on the rule of 72 and so we've had many clients who started out their ilul with you know 500,000 and it doubled to a million and then a million double to 2 million 2 million double to 4 million and 4 million double to 8 million if if they didn't need the money yet yes we have clients with $8 million taxfree that can generate 600,000 to 800,000 a year of taxfree income without depleting principal and they started out with 500,000 you know 30 years before or what whatever okay and so this is achieved by understanding iul structuring it correctly irly and then rebalancing and diversifying okay so let me give you a few examples most of um uh my son's clients and they have uh several thousand clients they diversify within their actual IL portfolio inside of the same company sometimes uh a a client that's repositioning uh not only hundreds of thousands of dollars but even millions of dollars uh they will request that their money is divers I ified over you maybe two three five or six carriers okay because they want to diversify uh because they're talking about repositioning 10 million 100 million or even uh 400 million we have people that do that in ilul the affluent uh they understand this and so they want it to be tax-free so whatever it is they're they're diversifying among companies but let's just keep it simple and say that you have an IL with one single insurance company uh one particular carrier now most insurance carriers will have um somewhere between 10 to 15 different indexing strategies to choose from okay uh you have maybe uh one year pointto Point okay that's where you pick a particular point in time like the 15th of March and you link and one year later in March of the next year you're going to be credited uh if the S&P let's say if you chose the S&P 500 uh that you linked it to if the S&P was up you'll be credited with whatever that increase was over that onee point-to-point strategy okay and then you can choose another one or you can just stay and and continue with that one for the next oneyear pointto Point uh and so you could use a a one-year pointto point but there's other options where you maybe have a two-year point to point that means you wait two years and measure how much the the the market went up uh to see what your credit is uh sometimes there's fiveyear pointto points and so if it's a long-term strategy many times a fiveyear point too is very beneficial if you're beginning to link uh at the beginning of a downturn in the market such as 2008 or March of uh of 2020 uh because of the covid-19 pandemic the market dropped 30% uh why do you do that okay if if you are coming on an annual basis to review your ilul and uh you can link to a different strategy and the market uh just uh crashed you know 20 30% or more like 2008 40% uh it may behoove you um to uh at least allocate maybe 50% of your uh indexing cash value to be linked to a five-year uh point-to-point strategy why if if you if you after a downturn to the market allocated 50% of your cash value to a 5-year point to point and 50% to a 2-year point to point uh because you're starting out at at a a low uh historically uh you will average over 14% when you do that okay so that's pretty good uh if you're going through just normal ups and downs in the market uh my sons will oftentimes have their clients link uh 40% to a one-year pointto point another 40% to a two-year point to point and maybe the last 20% to a five-year point to point and uh that's because the average is uh over 11% uh for any historical period clear back to the Great Depression if you do that one okay now what you really want to do is be watching for opportunity so for example during the Great Recession uh 2000 to 2010 will'll extend it even to 2012 because it took until 2012 for most Americans to come back to break even uh after having their money suffering up to a 40% loss twice during that 12-year period in other words many Americans uh may be saved a million dollars uh and their yet to be taxed IR of 401k is invested in the market by the year 2000 let's say well if without adding a dime if they had their money in the market and let's say it was in the you know S&P 500 uh they saw that million dollar NES dwindled down in value from 2001 after the 911 terrorist attacks from a million dollars uh from 2001 2002 to 2003 they saw it drop down 40% down to 600 Grand okay now our clients um didn't lose a dime during that downturn they may not have made much of anything if they just sat there with the same indexing strategy linked to the S&P uh zero was their hero because indexing your money's not at risk in the market if you don't understand this you need to watch uh several other episodes on this channel now our clients we came in you know they came in for annual reviews and we came in and said hey uh it looks like people are not going back to work they're not going out and eating they're not flying uh on on airplanes after 911 terrorist attacks so uh maybe just just uh link over here and get the general account portfolio rate instead of linking to an index here for a year or two so they only got zero uh in 2001 in 2002 and 2003 they got 5% instead of zero same thing happened in 2007 they got zero but 2008 they didn't get zero again because there were five years that the market was down that you would have earned zero had you not rebalanced or chose different indexing strategies our clients only had two years of zero the other three years they got 5% and then the other five years uh they they got what the market did up to a cap and only two of those those years did the market cap out okay what was the difference if you would have had a a million dollars in there in in ilul in the year 2000 and uh during the next 10 years you had five years you didn't make anything but you didn't lose uh zero was your hero and the other five years you made money in only two of those years did you cap out and the Caps back then were 16 and 177% you would have averaged 7.23% okay Rule of 72 you divide 7.23 into 72 your money will double in that 10year period what I'm saying is uh people had IL and they didn't even change the indexing strategy okay they just kept it in the S&P 500 if they had it properly structured their million double to 2 million in that 10-year period where most Americans uh by 2010 they still didn't recoup their million they they lost uh it took four years until 2007 to make back what they lost in in the market that 40 % dip in 2001 to 2003 it took four years from 2003 to 2007 to come back and and and get back to a million okay our clients were way above that on their IL but then what happened in 2008 as Warren Buffett put it he said when the tide went out in 2008 it revealed who was swimming naked is the way he put it people lost 40% again in one single year for the second time in a decade it took four years from 2008 until 2012 to come back back to where they finally had a mil4 46,800 to show for the million they started with many of our clients had uh two and half to three million to show for their million in iul now uh our clients didn't sit there and earn just 7.23 because when they came in for annual reviews uh three of those five years they didn't get zero they got five so they went up to 11.17% uh but then we rebalanced and so many of our clients they ended up averaging 11.17% during that period and so if you go clear to 2012 many of them had two and a half million or more in their IL where most Americans who had their money in the market barely were had their million dollars back does that make sense okay now there's other times besides linking or just going back to the general account portfolio rate uh that you may want to link to another one based upon is the market down or whatever so there is another strategy that we generally don't use during normal times and that's called a threshold strategy what is that that means there is no cap you choose an A No Cap strategy so instead of having a cap that if the S&P is up you know uh 10 or 12 or 15 or 17% if the cap is is 10 or 12 and the S&P is up 15 you don't get 15 you only get 12 that's called a cap now the tradeoff is uh if if the market crashes you don't lose but they cap it and that's because of the price of options and what have you now if you remove the cap okay then there are other costs and the insurance company has to buy options in a different way so if you remove the cap then there is a cost to that and generally that is going to be subtracted off of the return that you're credited if they take the lid off uh there is no cap and so they may deduct 5% or 7% off of whatever your return ends up being okay now in a normal period of time we don't do that because uh normally our clients uh might average 11% okay so if you Ed that threshold strategy uh during just normal up and down times and you got credited 11 and they subtracted even 5% uh then you're only going to net what six and so normally don't choose that except During certain times so one of those times happened in March of 2020 during covid-19 so the market dropped 30% in one single month now uh my two sons they contacted over 800 of their clients who had money in their UL policies uh that were ready to be linked and they said link to a oneyear pointto point with no cap with a 5% threshold fee okay and they did that with one stroke of their computer and and contacting their clients so what happened um the market of course rebounded they knew it had a very good chance of doing that so from March of 2020 to March of 2021 the market the S&P was up 66.3 3% from the low in March of 2020 during covid-19 so they had 66.3 three minus 5 percentage points they netted 61.3 three% yeah we had we had over 800 clients that got 61.3 3% one client uh had $852,000 uh in his ilul policy that he allocated to that strategy that was only about 20% of his money in that ilul by the way uh a year later in March of 20 21 that 8 152,000 was now worth a, 382,000 he made 535 Grand taxfree in one single year now if the next year the market would have crashed he wouldn't have lost one dime of that 535,000 he made the year before because you lock in your gains and reset uh if you don't understand that check out another episode where I talk about lock in and reset but the point is this you can change indexing strategies uh every time you get to the end of an indexing linking period or if you're just riding along at the general account portfolio rate of the insurance company you can link it anytime you want but if you link to an index you've got to wait till the end of that indexing period if it's a one-ear point to point you have to wait till the end of that one year uh to see what you're going to be credited for that year and then you link to a new one okay and so you can change the strategy at the end of each indexing period And so when you understand this and you have an ilul professional who knows what they're doing you will be able to tweak your rate of returns so that your average uh gets to be like our clients uh in excess of 11% and we have many clients that have done way more than that but you want to earn 11 and at the end of the day you a net within 1% of the gross rate of return uh our clients's net about 10.07 cash on cash after all the costs of the policy 10% divided into 72 your money is going to be doubling every you know 7.2 years it's that simple so hopefully that uh helps you understand that you can change indexing strategies as often as every single uh linking period every year and that's why we strongly encourage that you have an IL profession that understands this and reallocates rebalances and diversifies uh every time they meet with you uh for an annual review now if you want to learn more I would strongly recommend that you study my book the laser fund authored co-author with my two sons this retails for anywhere from 20 bucks to 70 bucks on Amazon I'll gift you a copy free simply click on the link below or you uh go to laser fund.com and you cont tribute a nom nominal amount towards the shipping and handling I'll cover the rest of that but I'll pay for the book I'll fire out a hard copy of this to you via priority mail now uh when you're uh in there claiming your free copy if you'd like to listen and learn or watch and learn there's there's audio and video formats available uh you can even register for a free educational webinar we do 90 minute webinars on a regular basis and about once a month we do 6h hour retire by Design webinars you can even schedule an appointment to talk to an IL certified professional that will show you how an ilul laser fund can work in your particular set of circumstances with no cost or obligation because if you don't have if you don't get it structured correctly you're not going to be able to take advantage of what I've been talking about in this episode now this is not about me this is about you and so this book has uh 14 chapters on this left brain side with charts and graphs and explanations if you're more of a right brain learner you flip it over to this one and this has 12 chapters with 62 actual client stories so uh study learn claim your free copy uh and uh engage because you're going to kick yourself you're going to miss out if you don't seize this opportunity [Music]