Ask any golfer if he or she would rather have Tiger Wood’s golf clubs or his swing. Without a doubt, we would all want Tiger’s swing.

We all realize that if we could golf like Tiger, it wouldn't matter what clubs we used; we would consistently play better on any given day.

The same analogy holds true when it comes to saving money for retirement. However, its easy to get confused by the menagerie of commercials, advertisements, and articles that promise that their fund or diversification model is better in some way. When in reality they are all just clubs in the same bag. Mutual funds and most security type products have the same thing in common: systematic risk.

For some the risk is low, and for others that offer a chance at higher yields, the risk can be limitless. You could lose everything you invested.

Every week I meet with families that share with me essentially the same personal experience. Their retirement savings today is equal to what it was ten or more years ago. They admit that they have tried several brokerages and varying degrees of risk in an attempt catch up and stay on “target,” all to no avail.

I recently met with a 45-year-old client who fell into the aforementioned category. He was mad that he’s been maxing out his IRA contributions over the past ten years and had made very little progress. He handed me his brokerage statement and asked me if I would “fix it”. He was shocked when I handed it right back to him. I explained that I am not licensed to give advice on brokerage accounts and had no desire to do so.

This client has since learned a “new swing” and is implementing an often-underutilized asset class to meet his goals.

This ability is known as indexing (not to be confused with mutual funds and ETFs that sometimes use the same wording). The indexing that I am referring to is only found in two different asset classes: Fixed Indexed Annuities contracts (FIA) & Indexed Universal Life (IUL) policies. These products are only offered by life insurance companies.

The Swing

This “swing” brings with it two wholly unique abilities that cannot be found elsewhere. First of which is the ability to lock in any gains, usually on an annual basis.

The second ability is notable in that it enables an indexed annuity or life policy to automatically reset its basis, typically every twelve months. So what does this mean? We all know that it’s best to buy low and sell high. Much harder said than done. When we invest in shares of stock or units within a mutual fund, the initial price or basis we paid never changes and is always relative to our account’s future value.

How Indexing Works

For instance, if you purchase a mutual fund at $10,000, and it grows 5% in the first year, your account would reach approximately $10,500. However, if the following year nets you a 40% loss, your account would only be at $6,300. If your third year produced a 5% rate of return, you’d still be below your original investment at $6,615.

However, in an Indexed annuity the “reset” every year, means you never earn less than zero. So, if you invest $10,000 in a Indexed Annuity and receive 5% growth your first year, your end result is $10,500. Continuing the hypothetical scenario, say the markets drop 40% in the second year. You’ll lose nothing. After your second year, your account will still be at $10,500. In the third year, your account grows 5%, which means you’ll have $11,025.

That’s an additional $4,410 for you to build on next year.

At this point you are probably asking yourself why haven't I heard about this before? Why hasn't my broker taught me this swing? Is it new? No. This swing has existed since February of 1995, and every year it has gotten better, having innovated countless new benefits.

So if you are interested in improving YOUR swing, email us to learn how Nathan@SeascapeWealth.com