Ml ilipp+stock market_popularretirementchoice2

Copyright 2013, 2015 - All Rights Reserved
Stock Market is a Popular
Choice for Retirement Savings
But the Outcome
is Never Certain!
Sponsored by MarketLinking.com
Published by Capital Strategies Press

But the Stock Market
Goes Down as Well as Up
The graph shows the annual price changes of the S&P 500 Common Stock Index, which is often
said to mimic the performance of the entire stock market. Annual price changes are measured
month-end to month-end one year later and includes every month-end from Jan 1970 to Dec 2012
(504 one year periods). Historically, the market has yielded substantial gains, but it has also
generated significant losses.

Stock Market Math
Stock % Return
Market Needed to
Loss Break-even
10% 11%
20% 33%
35% 55%
50% 100%
75% 300%
The problem with losses is that it reduces your working assets. Whatever
capital remains has to work even harder, just to get you back to even.
Large losses are not uncommon for the stock market as a whole, and even
more frequent for individual stocks.

Selected Stock Market Declines
There have been other substantial declines not listed above. These are
some of the most recent. No stock market drop has ever been predicted
with any degree of accuracy. Stock market declines occur suddenly and
without warning! (Data above reflects S&P 500 Stock Index)
% of Stock
Market
Period Market
Decline
1968-1970 33%
1972-1974 48%
1987-1987 34%
2000-2003 47%
2007-2009 56%

Riding Out the Market
In addition, just breaking even does not solve your problem. Retirement planning
requires your money to grow continuously. No growth years, must be followed by
years that do double duty. When a market plunge takes a huge chunk of your net-
worth, the rebound not only needs to get your money back, it also needs to make
up for the growth you would have earned in those down years.
The longer a market takes to rebound, the more lost growth it needs to make up.
Riding the market out is a strategy open to people in their 20's and 30's, but if you
are in your 40's its a risky proposition, and if you are in your 50's in could be
financial suicide!
Some people say “ignore market declines and just ride them
out, the market always comes back!” They are correct the
market always rebounds. However, sometimes it takes many
years and those years might include a number of years during
which you planned to be retired.

Using Time to Manage Market Risk
One of the most important lesson from the historical study of markets was
that time can be a reliable method of diversification. 'The longer the
period, the more predictable the return.' The chart below compares
the range of historical annual changes in the S&P 500 Stock Index for
different holding periods. The longer the holding period, the narrower the
range. Averages for the holding periods were: 16.25%, 8.2% and 9%,
-44.46%53.37% 1 Year Hold
5 Year Hold
10 Year Hold
26.18%
16.75%
-8.48%
-5.08%
Above percentages represent annual compounded return, based on buy and hold.
Market price only was considered, dividends were completely ignored.
Time lowers risk, it does not eliminate risk!

Time is an imperfect approach to risk management
because the portfolio is always exposed to market risk. If a market downturn
strikes, the portfolio will shrink and you will need more time while the market
sorts itself out and eventually rebounds. History teaches that this wait could
last several years.
It is therefore essential when using the stock market as an accumulation source
for retirement funds, to leave a low risk buffer zone between the accumulation
period and your retirement years. That is why financial experts recommend
that individuals in their 50's switch to a much higher percentage of bonds in
their portfolios.
Age 45 Age 55
Retirement Payout –
Portfolio Managed to
Maximize Income
$
Age 65 Age 100
$
Stock Market Growth –
Portfolio Managed
for Maximum
Accumulation Managed to
Protect Principal
& Some Growth
Low Risk
Buffer Zone

An Indexed Insurance Policy
Provides a Perfect Buffer Zone
• Cash Growth tied to Increases in a Specified Stock Index
• Absolute Protection from All Market Losses
• Guarantee of Principal by a High Quality Carrier
• Minimum Interest Rate Guarantees
• Tax Free Accumulation of All Earnings
• Tax Free Distribution Provisions at Retirement
• Tax Free Distributions at Death
• Critical Illness Protection Built-in
• Retirement Plan Completion Build-in
• Magnifies Assets Passed to Next Generation

Indexing is a portfolio management technique that protects the
principal from market downturns, while simultaneously offering the
opportunity to profit from market upswings.
In the indexing approach, the principal is invested in high grade bonds and the
interest there from is used to purchase stock market hedges. If the market moves
up and the stock index increases, the profit (market value of the index less the cost of
the hedge) is credited to the portfolio and becomes new principal. If the market is flat
or plunges, the hedge expires and the interest used for its purchase is lost. A one or
two percent interest rate is normally retained in order to guarantee minimal portfolio
growth regardless of market performance.
The indexing method protects the principal at all times and only risks interest
earnings. The portfolio is never exposed to stock market risk and is always safe
from market declines. In some years the annual interest is lost, but in others the
stock index gains can be substantial. Indexing essentially trades some market
gains for total protection from all market losses.
When indexing is combined with the tax favored structure of a life
insurance policy, it makes a perfect retirement accumulation resource.

Indexing Avoids All Market Losses
The graph shows the effect of applying indexing to the S&P 500 Common Stock Index. Annual price
changes are measured month-end to month-end one year later and includes every month-end from
Jan 1970 to Dec 2012 (504 one year periods). Indexing avoided all market losses and yielded gains
up to the market cap. Gains above the market cap were forgone.

S&P 500 Compared to Indexing
2010 2011 2012 2013 2014 Net
S&P 500 11.64% 0.00% 13.41% 29.6% 11.4% 83.1%
12% Cap 11.64% 0.00% 12.00% 12.0% 11.4% 56.3%
2009 2010 2011 2012 2013 Net
S&P 500 24.71% 11.64% 0.00% 13.41% 29.6% 104.6%
12% Cap 12.00% 11.64% 0.00% 12.00% 12.0% 56.9%
The table above show the results from buying and holding the S&P 500 Stock Index for each of the
last fourteen calendar years and their cumulative five year results. Dividends were completely
ignored. It also shows the results of indexing the S&P with a 12% cap (gains limited to 12%
annually).
Notice that the indexing account avoided all market downturns and despite the cap, registered
consistent and impressive gains. Additional years are compared on the following pages. In only
three of the ten the five year periods, did the stock market outperform the indexing account.
Total growth from Jan 1, 2001 to Dec 31, 2014 was 56% for the S&P500 (with out dividends
included), but 154% if the S&P500 was indexed with a 12% cap. The safer account made more
money during this specific period.

S&P 500 & Indexing Compared
2005 2006 2007 2008 2009 Net
S&P 500 3.00% 13.62% 3.53% -38.49% 24.71% -7.06%
12% Cap 3.00% 12.00% 3.53% 0.00% 12.00% 33.76%
2006 2007 2008 2009 2010 Net
S&P 500 13.62% 3.53% -38.49% 24.71% 11.64% 0.74%
12% Cap 12.00% 3.53% 0.00% 12.00% 11.64% 44.98%
2008 2009 2010 2011 2012 Net
S&P 500 -38.49% 24.71% 11.64% 0.00% 13.41% -2.88%
12% Cap 0.00% 12.00% 11.64% 0.00% 12.00% 40.04%
2007 2008 2009 2010 2011 Net
S&P 500 3.53% -38.49% 24.71% 11.64% 0.00% -11.34%
12% Cap 3.53% 0.00% 12.00% 11.64% 0.00% 29.45%

S&P 500 & Indexing Compared
2001 2002 2003 2004 2005 Net
S&P 500 -13.04% -23.37% 26.38% 8.99% 3.00% -5.46%
12% Cap 0.00% 0.00% 12.00% 8.99% 3.00% 25.73%
2002 2003 2004 2005 2006 Net
S&P 500 -23.37% 26.38% 8.99% 3.00% 13.62% 23.53%
12% Cap 0.00% 12.00% 8.99% 3.00% 12.00% 40.82%
2003 2004 2005 2006 2007 Net
S&P 500 26.38% 8.99% 3.00% 13.62% 3.53% 66.89%
12% Cap 12.00% 8.99% 3.00% 12.00% 3.53% 45.79%
2004 2005 2006 2007 2008 Net
S&P 500 8.99% 3.00% 13.62% 3.53% -38.49% -18.77%
12% Cap 8.99% 3.00% 12.00% 3.53% 12.00% 30.17%

An ILIPP (Indexed Life Insurance Private Pension) is a personal
retirement plan that merges the best features of an indexed portfolio and the
tax favored provisions of life insurance policy. These policies intentionally over
funded to maximize cash growth and minimize mortality expenses. Property
designed they offer a compelling and risk free alternative to traditional stock
market based retirement plans.
**Life insurance policies are purchased through licensed insurance
agents. The purchaser must receive a NAIC compliant illustration on
any and all policies considered. Not all agents are familiar with this
concept. For best results choose your insurance agent wisely. - See
the important notices on the following pages.
For additional information on this
financial concept please visit
MarketLinking.com

Links to Impartial Providers of
Historical Asset Class
Performance
Copyright 2013, 2015 - All Rights
Reserved
Federal Reserve Board posts returns from a variety of fixed income asset classes, some of which extend as far
back as the early 1900’s. Please visit: http://www.federalreserve.gov/releases/h15/data.htm
Ibbotson, owned by Morningstar, compiles an extensive list of asset returns and focuses on stock market
based asset returns. http://corporate.morningstar.com/ib/asp/subject.aspx?xmlfile=1414.xml
Capital Strategies Press publishes an annual summary of indexed performance. Their numbers are
independent of the projections made by the insurance carriers. http://CapitalStrategiesPress.com
Yahoo financial database: http://finance.yahoo.com/market-overview/
MarketLinking.com offers a public access database on a variety of market linked and indexed returns.
Visit http://MarketLinking.com

Important Notes and Disclaimers (Please Read)
The performance comparisons used in this presentation make assumptions about future rates of
return. These assumptions may or may not be valid. No one knows the future. Our only guide is the
past and the future returns from various asset classes may not reflect their historical averages or
ranges. The comparisons used herein are solely for the illustrative purposed.
Knowledge is power and when making financial decision knowledge is essential. Every consumer,
whether making investment, savings or insurance decisions should carefully study the past
performance of every asset class under consideration in order to make an informed decision about
their expectations of the future performance of that asset class. There are a number of independent
third party sources of asset returns. All consumers should consult one or more of these sources or
other impartial third parties that maintain similar databases and/or analysis.
Meaningful financial planning requires unbiased information. Financial decisions about retirement
funding, future retirement income, building a family nest egg, and purchasing insurance to provide
financial protection for life’s unexpected events all require making assumptions about future
performance. Unless these assumptions are based on expectations that have a reasonable probability
of being close to future results, you are not planning, you are guessing.
Please discuss asset class returns with a competent financial professional before making a final
decision about how to allocate your financial resources. This should be more than a cursory
discussion. If the financial professional you have chosen to trust seems uniformed in any way on the
subject of asset class performances, you should seriously consider replacing them and finding a more
knowledgeable professional.
Please, please, please take the time to build your personal knowledge of the various financial products
and the performance and liquidity characteristics of the asset classes available to you.

Important Notes and Disclaimers (continued)
The National Association of Insurance Commissioners (NAIC) has formulated guidelines for illustrations that
must be presented to each potential purchaser of cash value life insurance. These multi-page illustrations are
carrier, product and insured specific and contain substantial disclaimers, warnings and clarifications. The
summary presented herein is taken from one set of annual yield assumptions and premium inputs. Alternate
assumptions can produce radically different policy performance, including early lapse of the policy. The age
and health status of the insured is likewise a key assumption that when changed, can lead to policy
performance much less favorable to the policy owner.
These types of life insurance policies can only be purchased through the services of a life insurance
agent licensed in your state of residence. If you are interested in learning more about the retirement cash flow
features of cash value life insurance, please confer with a licensed agent and have her/him prepare NAIC
compliant illustrations using reasonable assumptions. We strongly advise that consumers never rely on the
carrier’s highest historical return. A lower return assumption will make the outcome more likely.
We also strongly advise that the interest rate spread assumed on any variable loan be reasonable in light of
historical performance data. The spread is the difference between the assumed policy crediting rate and the
rate charged on policy loans. Example: the policy yields an annual return of 8.3% and a loan charge of 5.5%,
then the spread is 2.8%.
A 2.8% spread is unreasonable and will create an internal compounding during the loan period that will inflate
the available retirement funds substantially. Since a 2.8% spread has never been sustained during any past
economic period, the results illustrated will be an illusion and will never occur. The variable loan rate of an
indexed policy is tied to the commercial bond rate. Universal life insurance carriers invest policy cash values
funds in the commercial bond market. If the insurance carrier charges the policy holder less than its bond
earnings, the carrier will lose money. A history of commercial bond rates are published by the Federal
Reserve and can be found on the Internet
The spread is a critical element of all indexed universal life illustrations that employ the universal loan. If your
agent glosses over the importance of the spread or seems fuzzy on its criticality, get a new agent, because you
are not working with a true professional.

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