This article will present you with one unique plan combining insurance and a retirement plan, called maximum premium indexing (MPI). It has pretty impressive marketing campaigns, so our task is to decipher what it is and is it too good to be true? We will cover:
- Basics of Indexed universal life insurance
- What is MPI (Maximum Premium Indexing)?
- Advertised Benefits Of MPI
- Top selling points of MPI from a retirement perspective
- MPI compound interest
- What is RELOC?
- How can I access my cash value?
- What are the surrender charges?
- What are the insurance costs and fees?
- Are MPIs Retirement savings accounts?
- When could MPI Make Sense?
- How much do you need to invest?
- 9 MPI Financial Plans
- MPI account pros and cons
- Is MPI safe, and what are the risks?
- Infinite Baking #1 Income Feature
Why Is Investing Important at Every Age?
We can compare what investment would do for your money to what a regular workout would do to your body; both ensure discipline, and endurance in the long run. Investment involves setting a sum of money aside and diverting it into a financial instrument so that after a specific time, your money starts earning interest and growing.
If you are still young, investing is not your primary plan; more so, it may be the last thing on your mind. On the other hand, you might fear it’s too late to start now if you are over a certain age.
It is safe to say investing is essential at every age. If you invest wisely, you may earn enough money to provide your retirement income. However, it’s necessary to focus on making long-term gains and save a portion of that money for a secure future.
But what if you want ultimate protection of both your assets and your family’s future? Is there a safe option? Well, in that case, you may consider some type of life insurance, as they offer living benefits allowing you to access these funds even while you’re alive.
If you want to learn how to grow your money with life insurance and how much life insurance coverage you need, we suggest you learn the basics of permanent life insurance and how to choose the right insurance for your financial goals.
Keep in mind there are two main types of policies: permanent and term life insurance. Permanent insurance offers many different options: whole life, universal life, indexed universal, and variable life.
Many people choose term life insurance to provide financial stability when they die, but it is not without risks. In the first few years, costs for insurance are very high, and if the policy owner dies unexpectedly, the money that the family gets will be less than the owner put it.
Further, term life insurance is not an option if you’re going to invest and score gains and save for your retirement income. If these reasons were as well your intentions, keep reading this article to see what will be a better option for you!
Top 5 Reasons to Invest in Life Insurance Now
The Younger You Purchase, the Cheaper Your Insurance Plan Will Be
Generally, plans tend to be much more affordable if you start investing at a young age. Take time to plan out what coverage you need and what the future may hold. Also, you may have older parents or siblings to provide for, and they may be your beneficiaries. Nonetheless, the healthier and younger you are, the more insurable you will be, meaning you can get the best possible rates.
Higher Tax Savings
You can always count on tax savings regardless of your policy type. The monthly premiums paid on these policies are eligible for the maximum tax deduction.
Supplement Your Retirement Goals
Everyone hopes for stable, healthy, long-lasting retirement savings, and it is easily achievable if you purchase the right plan. Investing money now in your insurance helps provide you with a comfortable living when you retire.
You May Not Qualify for Insurance Later
We can’t predict what will happen tomorrow. Life is full of uncertainties; that’s why it’s wise always to be prepared. You may be fit and healthy now, but you might not be able to get the coverage you need if your health deteriorates and you fall ill.
Peace of Mind
If you have loved ones depending on you, you may ask yourself what happens to them when you are no longer there? Once you are covered, you know your loved ones are taken care of if the inevitable occurs early.
Your insurance investment will help your family financially cover funeral expenses, debts, or education costs.
Thus, investing is not a burden yet a necessity.
Basics of Indexed Universal Life Insurance
Universal life offers different options, from fixed-rate to variable models, allowing you to invest in various equity accounts you selected.
Indexed universal life (IUL) insurance allows the policyholders to allocate cash value to either a fixed or an equity index account. Policies offer various indexes, such as S&P 500 or the Nasdaq-100.
If the indexed account makes gains, usually over a month, a percentage of the earned interest goes directly to your policy’s cash account. This interest is called the participation rate.
Indexed Universal insurance policies are more volatile than fixed ones. Still, they tend to be safer than variable Universal life insurance policies because your money is not necessarily invested in equity positions. These policies offer tax-deferred cash accumulation along with the death benefit.
Who Should Buy IUL?
We need to warn you if you plan to have a permanent life policy and take advantage of interest-earning potential by using an equity index to promote cash accumulation. Although it is possible, there are many examples where people lost all of their money due to not having enough knowledge about this program or agents putting themselfs’ interest in the first place and not yours.
Also, IUL is an example of key person insurance that companies, business owners, and co-owners use. It is usually because they don’t mind paying a financial advisor to help and organize this plan, while it is a considerable expense for individuals.
What is MPI (Maximum Premium Indexing)?
A Maximum Premium Indexing secure compound interest account is a type of Indexed Universal Life insurance policy promoted by Suncor Financial. In reality, these policies are so similar that even Curtis Ray, owner of Suncor, calls his financial strategy Indexed Universal Life 2.0. MPI plans are sometimes complex insurance products that combine life insurance and investment products.
MPI accounts are providing cash value growth with the help of the S&P 500 index, building your retirement income. During retirement, the policy owner can access the cash value when needed to cover living or health expenses.
MPI provides the security component of life insurance, the growth potential of the S&P 500, and compounding leverage acceleration.
Advertised Benefits Of MPI
Suncor financial is advertising their MPI accounts as vehicles allowing you to compound your wealth at an impressive, higher-than-average rate meanwhile protecting your principal. MPI plans seem promising, providing remarkable stock market growth with life insurance coverage protection. Thus, MPIs provide long-term tax-free retirement income and the ability to pass that wealth tax-free to your heirs.
MPI marketing material claims unique features and benefits that are slightly different from other life insurance or annuity products available on the market. Suncor financial claims saving your money with an MPI plan is superior to putting it in a Roth IRA, Traditional IRA, or 401 k account. Let’s consider it!
Triple Advantage of MPI
Protection
Maximum premium indexing account promises to protect your money with their Security lever. Security lever guarantees you cannot earn less than 0% interest per year, also known as the 0% Floor feature.
In other words, this feature freezes your account value in case of stock market turmoil, so you don’t ever lose principal value due to market risk. Suncor financial claims that combined with Life Insurance policy, the 0% Floor is a significant cornerstone ensuring your hard-earned money will be protected.
Money Growth
MPI account provides another important lever, called the Growth lever, to achieve good compound interest in your account at a rate of the S&P 500 Index.
The growth of your cash account is limited both on the downside ( 0% Floor ) and on the upside, capped at 10%. To illustrate, with a cap of 10%, if the S&P 500 index goes up 20%, the most you’ll get is 10%, and if the index is ever negative, you won’t lose money; you stay at 0%.
According to Curtis Ray, when factoring in the 0% floor and 10% cap, MPI has averaged about 7% over the last 25 years, which is not a bad deal considering the capital preservation security. He also says that this compounding method is secure and may produce significantly more money over time than traditional accounts.
Leverage
A third feature, called Leverage lever, sets MPI apart from traditional accounts and financial products. With Leverage lever, you get the opportunity to accelerate your compound interest potential using the insurance company’s resources.
If you want these additional resources, you can qualify for the MPI Match Line of Credit after the second year of your MPI financial plan. Combined with your own money and contributions, these resources contribute to your wealth-building potential.
Top Selling Points of MPI From a Retirement Perspective
Increased Retirement Income
According to Curtis, compared to the traditional 4% Rule of retirement found in traditional retirement vehicles, like the 401k and IRA, MPI can produce up to 15% income with time.
No Early Withdrawal Penalties
Some people point out that the most significant advantage of MPI is that you don’t have to reach a certain age before withdrawing funds, and there are no withdrawal penalties. Consequently, they suggest that MPI is for people who want to retire early.
Even though it is all true, there is the other side of the coin. To access your cash, you have to make a loan. So, instead of retirement age restrictions, you get a loan involved. You have to make a loan because you can’t withdraw more cash than your basis. Another way is to face taxes, but we want to run away from high fees and borrowed money, not jump to it.
Tax-Free Growth Inside the Savings Account
Like some traditional retirement vehicles, like 401 k plans, your cash value account growth is tax-free per IRS tax code.
Legal Protection of Assets
MPI offers legislative protection of assets. This protection is mostly protection against lawsuits, liens, creditors, or judgments that can devastate both individuals and business owners and individuals alike. Protecting your future self from legal and financial threats should be the main focus of all MPI Plans.
Tax-Free Death Benefit for Your Beneficiaries
Suppose you keep your MPI account throughout all your living years, and it doesn’t lapse for any reason. In that case, the insurance company will pay out your initial life insurance amount and remaining cash balance tax-free to your beneficiaries.
MPI Maximum Premium Indexing Compound Interest
As a saver or investor, you have to understand compound interest. By definition, compound interest is interest earned on the initial principal that includes all accumulated interest on a deposit or loan from previous periods. It’s the interest you earn on both your original money and on the interest you’re accumulating. A secure compound interest account allows you to imitate stock market growth and build wealth faster.
Maximum Premium Indexing secure compound interest account allows you to grow your savings using an index similar to the S&P 500 up to a top cap of about 10-15% historically.
Maximum premium indexing focuses on maximizing singles and doubles, guaranteeing the security of the 0% Floor, and constantly moving forward will outperform home runs and strikeouts over a long time. With a 0% Floor, you’re safe from market risk.
What is RELOC?
Retirement Equity Line of Credit or RELOC is an essential feature of an MPI plan. RELOC allows you to make loans against the cash value kept in your account. This loan lets you borrow against your policy with a modest interest rate. Interest rates vary within MPI plan variations, but it’s usually 4% and is capped at 6% per year.
MPI advertisers suggest you use the Retirement Equity Line of credit for two purposes: to supercharge your returns and for retirement income.
RELOC for Reinvesting in Your Savings Account
MPI plan allows you to borrow against your cash value account and send that money back into the chasing side of your plan. Thus, you will create leverage because you are now investing the insurance company’s money.
To illustrate the case, suppose you are paying 4% interest on the loan while earning 6-7% compounded returns on the money in the savings part of the plan.
This way, you’ll be creating an interest spread of 2-3% on average. On the downside, in 0% years, you can be losing money with your leverage. Although 2-3% interest doesn’t sound like much, it can add up to a significant amount of extra compounded returns over the years.
RELOC as a Source of Retirement Income
When you decide to retire, you will eventually start borrowing money with RELOC to cover your living expenses and needs during retirement. The main idea is that you have accumulated enough existing cash value through the compounded returns so that you can borrow even more.
How Can I Access My Cash Value?
Unlike traditional retirement vehicles, the MPI account has no age restrictions, penalties for early withdrawal, or any other conditions to access your account’s cash value. Typically, you should access cash-value tax-free through the RELOC.
However, your cash availability may be limited by surrender charges in the early years. Also, make sure to check our note above. It’s advised to discuss the best strategy with your financial advisor to maximize your income.
What Are the Surrender Charges?
If you decide to cancel your life insurance early, expect to pay fees. When you cancel your contract, the insurance company imposes a surrender charge on your cash-value account.
Fourteen years after purchasing your life insurance, the surrender charges expire. These charges don’t affect your compound interest growth or retirement income; they will only be charged in case of early cancellation.
What Are the Insurance Costs and Fees?
MPI maximum premium indexing imposes three main fees:
- Premium charges
- Expense charges
- Insurance cost (COI)
The premium charge cost is associated with your money growth. The fees are calculated based on contributions only. The expense charges cover administrative expenses, including plan design, agent compensation, and medical examination.
Typically, these insurance costs are amortized over ten years, settling at a flat fee of roughly around $60 in annual fees per year. The insurance cost (COI) is based on your age and health status and is charged annually as one-year renewable term insurance.
Are MPIs Retirement Savings Accounts?
An MPI account is an advantaged financial planning tool, yet it’s not a retirement account but a life insurance contract. While it’s not literally a retirement plan, it offers many similar benefits, including tax-related benefits, identical to conventional retirement plans.
Typically, it’s very costly to have multiple retirement plans, so people usually have to choose between purchasing a traditional retirement account or an MPI Maximum Premium Indexing account.
The cost of MPI maximum premium indexing is so high that if you want it to work out in the long run, most people have little money left to invest in another retirement account.
The Suncor financial claims such costs are justifiable if we consider the MPI accounts a form of a retirement account.
As with other insurance contracts, retirees access their retirement income through borrowing against the account’s cash balance to fund their needs. However, cash value withdrawals tend to be tax-free. Also, a great perk of MPI accounts is you can access your cash value even before retirement with a loan.
MPI Account vs. Roth IRA
The owner of Suncor financials claims MPIs are superior to other available traditional retirement accounts, such as a Roth IRA. The main advantage of the MPI account is it’s guaranteed not to lose value.
Another vital benefit is early access to your funds, unlike an IRA or 401 k retirement plan, which both require a person to be older than 59 to be able to withdraw funds (or else pay penalties).
A Roth IRA is a widely accepted form of a retirement plan that offers tax advantages, such as tax-deferred growth on your contributions and reduced tax burden for those contributing.
Differences Between MPI and 401 k
A 401 k retirement savings account, similarly to a Roth IRA, potentially may decrease in value and lose money if the stock market hits severe downturns. Suncor claims that its MPI accounts won’t lose money when the stock market tumbles.
As Indexed universal life insurance policies and MPIs are tied to a stock index like the S&P 500, you get the benefits of accessing the market but minimize market risk and negative returns.
However, MPI or Indexed universal life accounts are usually capped as far as gains are concerned, while a 401 k grows alongside the stock market. On the upside, MPIs can’t lose value, but we can’t ignore the high fees on investment gains.
When Could MPI Make Sense?
According to the Suncor founder, MPI plans are suitable for anyone wanting to build their retirement income and achieve their financial goals. They offer permanent life insurance, alongside living benefits, the lowest legal expenses, tax-free distributions with no penalties, enhanced money growth potential, and legal protections against liens, lawsuits, and creditors.
We think MPIs can fulfill their potential for ultra-high net worth individuals who either maxed out their other traditional tax-deferred money growing plans or are looking for stock market protection. However, it may not be the best option for an average earner.
How Much Money Do You Need to Invest?
It’s entirely up to you to decide how much you want to invest. However, it would be best to determine how much retirement income you want. You can check out the MPI Calculator here to get an idea of how to combine this financial strategy with your current budget.
To simplify, this type of permanent life insurance is designed to accumulate more money through maximized compound interest. Nonetheless, the earlier you start to compound, the less money you’ll need to invest.
We cannot stress enough the importance of designing your plan around an amount of money you are truly committed to putting in regularly. The main reason is that your permanent life insurance plan can implode if you don’t put enough money into the insurance contract as initially designed. However, It’s best to stick with the max funded option.
While your plan doesn’t have to be max-funded every year, it’s more likely to fulfill its promise and financial benefits and be less likely to fail.
9 MPI Financial Plans
There are nine different versions of the MPI Maximum Premium Indexing plan. The exclusive MPI Match Program can customize your contract and help you achieve your desired financial goals. These are the plans:
- MPI traditional
- MPI accelerated
- MPI children
- MPI family legacy
- MPI conservative risk-taker
- MPI Whole Life upgrade
- MPI mortgage retirement
- MPI business protection
- MPI premium acceleration plan
MPI Traditional
The traditional plan is designed for individuals seeking a copious retirement in about 15-30 years. If you want to achieve an estimated retirement income, the program requires a commitment of 5-20% of your monthly earnings.
MPI Accelerated
The accelerated plan is suitable for those individuals looking to build a great retirement quickly, in about 3-14 years. With a lump sum contribution plus the percentage of your earnings, you can achieve the retirement you dream of in a shorter period.
MPI Children
The children’s plan is one of the options for those looking to provide their children with financial security and abundance. Typically, the plan requires a commitment of roughly $100 per month to provide for your long-term retirement planning and your children’s future expenses, such as college and wedding expenses, all without strict restrictions or penalties.
MPI Family Legacy
The legacy plan is designed for individuals wanting to maximize their retirement income now while building a wealth legacy transfer to their family at the same time. The legacy plan is ideal for those who cannot qualify for their own insurance due to health or age limitations.
This plan works best with a lump sum from your existing assets, with additional future contributions on top of that to maximize the retiree’s retirement income for the retiree and promote legacy inheritance.
MPI Conservative Risk-Taker
The conservative risk-taker is made for all individuals interested in good security. On the other hand, they are also willing to take additional risks to maximize potential wealth growth.
This plan helps fund your real estate ventures and other investment opportunities.
Furthermore, it will add additional risks using the RELOC feature to fund more risk-based investments.
With the RELOC feature, your returns can increase up to an additional 2-4% on average, using your plan as your own bank. However, this requires an MPI accelerated plan, where you have to pay a lump sum for the first two years on top of your contributions.
Then, two years later, up to 75% of your ongoing contributions and accumulated additional growth can be accessed through the RELOC feature. Thus, you can undertake other investment opportunities while creating a 2-4% compound interest spread on invested money.
MPI Whole Life Upgrade
The Whole Life upgrade plan is for clients looking to upgrade their current cash-value life insurance contracts. This plan lets you take the outdated contracts and use additional features for enhanced end goal results.
With MPI, you can upgrade all existing insurance plans, such as:
- Whole Life (Infinite Banking/ Bank on Yourself),
- Indexed Universal Life
- Variable Universal Life
- Annuities
MPI Mortgage Retirement
Mortgage retirement plans are made to help homeowners maximize their compound interest potential. This unique insurance contract focuses on converting 15-year mortgages to 30+ year mortgages.
How is that possible? Well, Suncor financial’s owner claims that by taking the difference in payment from a 15 to a 30-year mortgage, one can build a 7-figure nest-egg account value as well as an abundant retirement income.
For real estate owners over the age of 62 with a current mortgage, the Reverse mortgage retirement financial strategy can be a solution to optimize their future.
MPI Business Protection
The Business Protection Plan makes sense for business owners and entrepreneurs hoping to build a security net for the possible need for liquidity and emergency funds. This insurance contract makes it possible through secure compound interest growth. It’s advised to divert about 25-50% of all company net profits to your MPI.
MPI Premium Acceleration Plan
The MPI accelerated finance plan involves third-party financing (from a bank), providing up to 90% of contributions to the compound interest. Individuals with a net worth of $5,000,000 or higher are those who should consider this highly advanced plan.
MPI Account Pros and Cons
When trying to achieve financial freedom, you have to make an informed decision. Firstly, you need to consider both pros and cons and weigh them against your unique goals. Take a look at some of the pros and cons of the MPI insurance contract:
Pros
- It has all the benefits of Roth IRA, but fewer negatives
- It helps you take advantage of stock market returns and leverage
- It provides a dose of security
- Due to a 0% floor, your money is protected from the stock market crashes
- You can potentially receive retirement income 3-4 times higher than with a traditional or Roth IRA account
Cons
- The plan is quite complicated to understand
- It requires a long term commitment
- If you decide to cancel it out of the blue, you may lose all the money you saved
- Your health condition is an essential part of the application process
- If you don’t have the best health rating, your insurance will be more expensive
Is MPI Safe, and What Are the Risks?
Even though risks usually are a part of a financial plan that relies on the future projections of the stock market, we believe that investing CAN be risk-free. MPIs promise that with a 0% floor, you won’t receive a negative credit on your accumulated value. On the other side, their surrender charge doesn’t go away before 14 years of this plan, which is a long period with no positive returns. Why wait that long when there is another option?
Other remaining risks are the costs of insurance and expenses. They claim to offer the lowest cost to their clients to promote the succession rate and loyalty. But, there are policy lapse risks due to insufficient funding premiums during the first few years or if your insurance premiums get high, which usually happens when the owners get older.
Is It Wise to Mix Insurance and Investing?
We think it depends on the insurance you want to use; it’s different with different insurance options.
With MPIs, your earning potential on the stock market can be lower because of caps, and it is known that investments usually underperform under these accounts.
A floor cap protects you from future risks, but if the stock market is stable, you may have more profit-building investment options. Just a quick reminder that term life insurance doesn’t offer investment opportunities.
If you don’t understand how IULs work, as these terms may be confusing, these plans may not work in your best interest.
Now let’s look at the option that is much more effective for combining insurance and investing!
Infinite Baking #1 Income Feature
What if we told you there are ways to make better use of your cash value savings account? With Infinite Banking, you can forget about complicated money earning schemes you can’t wrap your mind around and start saving now!
The Infinite Banking Concept is a unique strategic method utilizing your Whole Life Insurance policy to help finance everything you would typically finance through a bank and secure your and your family’s financial future. Thus, you can safely engage in multigenerational wealth building.
Achieve Financial Freedom With the Infinite Banking Concept
With Infinite Banking, you can imitate how a traditional bank operates and build your wealth while borrowing and repaying the money held in the cash value of your permanent life insurance policy.
Learn how to become both a creditor and a lender, so you won’t need to depend on a third party anymore.
Instead of borrowing from a bank, borrow money against yourself and single-handedly dictate money flow. At the same time, your whole life insurance policy earns dividends, even though you are using that money elsewhere.
Using this borrowing setup strategy, you would never have to borrow money from a bank again and deal with hefty banking fees or interest rates on loans. Instead, borrow from your whole life insurance policy and pay yourself back over time.
Key Steps to Building Your Own Bank
Infinite Banking involves:
- Overfunding (with after-tax funds) a high cash value whole life policy from a life insurance company.
- Accumulation of Cash Value(tax-free) throughout the years you are a policyholder of your Whole Life policy.
- Tax-Free Loans taken out against your Whole Life Insurance policy’s cash value to use for your financial expenses.
Final Thoughts
To summarize, we think that potentially MPI Plan can deliver on advertised promises with reasonable market conditions.
However, like other indexed universal life insurance plans, these plans are complex if your goal is to grow money and save for retirement. Sometimes simpler is better, so you should take time and evaluate if this plan is right for you with our short quiz.