Before I share with you my experience with this particular financial vehicle, Indexed Universal Life.

Let's listen to, what Ed Slott, a pronouned CPA and IRA Expert, has to say about this particular vehicle?

Like the name suggested, "Yes", it is a life insurance product; but the unlike most of the other life insurance product, this particular one has a lot of built-in benefits, including investment features, tax-free returns; it also cover life and long-term care protection.

Sot it does look like a Swiss-arm Knife, doesn't it?

Speaking of Investment, do know what's the most important rule about investment?

"Rule No. 1: Never lose money.

Rule No. 2: Never forget rule No. 1."  

-Warran Buffet

​​Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. ​

​​But under the current market, everybody is losing money, how can we avoid "losing money"?

​Well, a lot of companies are offering ​many financial vehicles that can prevent you from losing money in the market downturns.

Although ​I cannot cover all of them ​in one blog, because I cannot, there are too many.

I just want to focus on one product, IUL, mentioned earlier...

​Many companies are offering IUL, ​details ​may be slight different​, but the features are about the same..

In particular, ​I just want to show you ​one example using Transamerica's IUL​, ​...

However, when the market is up, it will give you the actual return of ​the investment ​based on the market, up to a ​CAP.

Yes, it does have a CAP, ​Transamerica's IUL has a CAP of 15%.

When the actual return is no more than 15%, it will give you the actual return of the investment; if the actual return is above 15%, it will give a return of 15%. 

On the anniversary of the vehicle, the value of the index (we’ll use the S&P500® as an example, since it’s the most commonly chosen index) is compared again the value of the index from the previous anniversary date.

​The difference between the two values, as a percentage of the beginning value, is calculated.

If the index showed a loss (the ending value was less than the beginning value), the contract is credited with ​0.75% interest.

If the index showed a ​gain ​but no more than 15%, the contract is credited with ​actual market return;​ 

If the index showed a gain of greathern 15%, the contract is credited with 15% of interest.

The beginning value of ​calculation will be reset on the anniversary date annually.

Let's compare the vehicle against the actual return of S&P500 index fund.

The blue line is the return of the IUL vs the orange line of S&P500.

See the difference?

In addition, other features of this vehicle include

​This vehicle does not have age or income requirement, but it does require ​the insured to be healthy; so we'd better get it when we are still healthy.

The funding process is flexible, it can be funded as little as a few hundred dollars per months, or a couple of thousand dollars per months, based on ​individual's financial situation.

Well, for some of you, 15% return may not be very attractive? 

But combining both the downside protection, it is very powerful.

Out of many investment vehicles, this particular one will have tax benefit; it is regulated under the Section 7702 of the United States Internal Revenue for federal tax purposes.

Do you think the Tax rate is high already? 

Let’s look at the historical tax rate over the last 100 years. During the second world war, the tax rate for the highest tax bracket is about 90%, scary right?

Although the current tax rate is not all time low, but it is still pretty low comparing to the historical rates. 

So the answer to the question is “No”, the current tax rate is still pretty low.