Frequently Asked Questions
What is an MPI™ Financial Plan?
MPI™, or Maximum Premium Indexing, is a patent-pending cash value life insurance plan specifically designed inside of a max funded Indexed Universal Life Insurance Policy (IUL). MPI™ has special features and benefits providing enhanced results. MPI™ has 5 major features that set it apart from other financial plans including 401(k), IRA, Real Estate, and Insurance products. These 5 features are 1) Tax/ Legal Advantages 2) Low Expenses 3) 0% Floor Security 4) Secure Leverage and 5) Increased Retirement Income.
What is a max funded IUL?
IUL stands for Indexed Universal Life and is a permanent life insurance policy, which means that it accumulates cash value while also providing a death benefit with no expiration date. “Max-funded” means that the most amount of your money is going to your cash accumulation, and the least amount required by the IRS is going to buy life insurance. This type of IUL ensures the lowest cost possible.
What are the fees?
There are three main fees associated with the MPI™ financial plan. They are, premium charges, expense charges and cost of insurance (COI). The premium charge is around 3.5% of your premium payment. You pay on what you contribute, not the entire account value. The expense charges cover the cost of the plan being designed, approved, and put in force, like the medical examination and the compensation paid to the agent, as well as all other administrative needs. The total cost of these expenses is amortized over 10 years in the plan, so the expenses decrease over the first 10 years and settle at a flat fee of around $60 annually. The COI depends on your age and health rating and increases each year as it is a one-year renewable term insurance.
What does “front loaded fees” mean?
Front loaded fees mean that your costs are higher in the earlier years of your plan and diminish as your plan matures. You end up paying most of your costs earlier, allowing your cash to compound more later when your costs are lower. Front loading fees provide for maximum long-term retirement income goals.
Is there a restriction on when I can retire or use the money?
Unlike traditional retirement plans, with an MPI™ financial plan, there is no restriction on when you can retire or access your money. Surrender charges may limit the cash available to you, but there is no tax or early withdrawal penalty for accessing the cash in your plan before age 59 ½. When you are ready to retire or to use the money in your plan, you can do so. We have MPI™ Specialists who are available to discuss your plans and help you maximize the income available to you when you choose to begin drawing income from your plan.
What is the loan feature inside of MPI™?
Inside the MPI™ system, the insurance company offers a unique feature called the “loan feature” or “leverage feature.” This feature allows for the owner of the plan to borrow money from the insurance company using the cash value as collateral. This is a dollar for dollar loan so it requires no credit checks, underwriting, loan officer, or expenses and can be executed quickly and easily. This loan also does not get reported to the credit agencies. The insurance company typically charges between 4-6% interest on the loan to the client.
Can I take a loan and use the money for other purposes like buying a car or college tuition for kids?
Yes! The cash value in your plan is always available to you for any purpose. When you borrow against your cash value in the form of a loan, the loaned amount stays in your plan and continues to earn you the full interest credit of the S&P 500 Index. You’ll only be required to pay the loan interest rate, which will be covered by the cash value in your plan, not billed to you directly. You can also pay back the loan with a lump sum or periodic payments, reducing the amount of loan interest due each year. With historical information, the MPI™ system will produce around 7% interest gains and the loan rate will cost around 4% so using the loan feature provides a path to additional interest earned even on money being spent. (See FAQ “What is arbitrage?”)
Can I defer my taxes?
The contributions you make to your MPI™ financial plan are not tax deductible. They act like Roth IRA contributions in that you pay the taxes now (post-tax dollars), but the cash you pull from the plan can be tax-free.
What sets MPI™ apart from a traditional max funded IUL?
MPI™ has a unique advantage over a traditional IUL and other cash value life insurance products through the patent-pending process of maximizing the leverage/loan feature. Inside of MPI™, the cash value is used as collateral to take out a secure loan at around 4%, then contribute into the MPI™ system making around 7% on average, or achieving arbitrage on leveraged money of around 3%. MPI™ allows for an optimal scenario of “interest earned vs interest paid” with OPM (Other People’s Money).
Should my spouse and I both have an MPI™ plan?
Having dual MPI™ financial plans in both spouses’ names is the best solution for everyone. As an example, rather than contributing $800/month into a single MPI™ plan, it is more reasonable, for dual financial security, to build two MPI™ plans. We typically suggest about a 60%-40% split with more life insurance on the breadwinner. However, the goal is to max-fund as many plans as possible, so if your circumstance would create two under-funded plans if you do one for each spouse, we would recommend max-funding one policy until circumstances permit an additional max-funded policy for the other spouse.
What happens if the policy lapses?
The policy lapses if all the cash value is depleted. This can happen if you stop making the premium payments and costs of insurance are paid with the cash value until it is gone. It may also happen if the S&P 500 Index does not perform above the interest rate of the loans and the cash value erodes while paying off the interest.
The MPI™ financial plan has been stress-tested to withstand several consecutive years of 0% interest crediting, especially as you continue to pay yourself first and contribute to your financial plan.
What if I get sick during the contract period? Can they cancel my policy?
No. Once you have been approved for the policy, it cannot be canceled due to any illness that develops after the approval. The MPI™ plan is a permanent life insurance policy, unlike a term policy that will expire.
What happens if we get divorced?
No two divorce settlements are the same. Life insurance policies may be part of a qualified domestic relations order (QDRO). This may mean that one spouse is required to continue to make payments on behalf of the other spouse, or that the cash value of the policy be divided amongst the spouses. After a divorce, we recommend reviewing your beneficiary designations to ensure that the death benefit passes to the individual(s) you wish.
Is MPI™ hyper-funding?
No, MPI™ is not hyper-funding.
Hyper-funding is a practice in which you front load your contributions into your life insurance plan for a short period of time (typically 2-5 years) and stop payments completely. Then using the cash value in your plan, you pay the premiums through the life insurance loan feature to keep it alive. Although MPI™ uses the loan feature as leverage, the first Rule of Wealth is to Pay Yourself First and contribute as much as possible, as long as possible, to achieve your financial freedom. The loan feature has the possibility to achieve positive interest, so using the loan feature in addition to your contributions can produce the best financial outcome.
Is MPI™ safe? What are the risks?
There are risks inherent in any type of cash growth projections. In a typical stock market account, you share all the growth potential, as well as all the loss potential. In the MPI™ system, you can never receive a negative credit on your cash value. On average you participate in about 90% of the upside with 0% of the downside. The risk of stock market down turns is eliminated. The only other risks within the MPI™ system are related to costs of insurance and expenses, both of which the insurance company controls according to various factors including inflation, profitability needs, and life expectancy of the population. Their incentive is to keep costs as low as possible to ensure client success and loyalty.
What is the 0% Floor?
The 0% floor is a guarantee from the insurance company that your cash value will never receive a negative credit, even if the S&P 500 Index is negative that year. If you did not have that guarantee and your investment S&P 500 Index had a rate of return of -20%, your account value would decrease by 20%. With the 0% floor, the credit to your account value is 0%, as guaranteed by the insurance company.
The 0% floor is the ultimate feature! Because the risk of market downturns is eliminated, you don’t have to follow the traditional risk pyramid, and reduce your rates of return as you get older. You can continue to earn stock market type rates of return throughout your entire life. This enables your compound growth to continue to accelerate throughout your life instead of slowing to a crawl in your later years. What does this mean for you? It means that your retirement income is maximized because of the continued higher growth, compared to the slower growth in a traditional retirement plan.
I am currently contributing to my company 401k. Or if I have an old 401k or money in an IRA, can I transfer that money into an MPI™ financial plan?
Typically, you cannot withdraw money from a 401k that you are currently enrolled in, meaning you are still working for that company. Once you separate from employment, you have the option to move that money wherever you choose.
401k and IRA money are all considered qualified money. If you withdraw qualified money before age 59 ½, there will be a 10% penalty on the amount that you take out. In addition, if the money was pre-tax (traditional, not Roth) you will also owe ordinary income taxes on the amount you withdraw. The MPI™ financial plan is not a qualified plan, so it does not qualify as a pre-tax rollover. MPI™ plans are more like Roth IRAs/401ks because after-tax money goes into the plan and the money can be tax-free when you use it for income in retirement.
Is there an age limit?
There is no age limit on starting an MPI™ financial plan. For best results, the plan should have about 15-25 years to fully mature. This allows for the majority of the front-loaded costs to be eliminated and the compounding effects to be working at maximum impact.
Is there a limit on how much I can contribute to my plan each year?
Unlike traditional retirement plans, there is no stated limit for the amount that you can contribute to your plan each year. The only consideration is related to the amount of life insurance coverage that you can qualify for. In order for the plan to retain all the tax benefits, a minimum amount of life insurance must be purchased relative to the total contribution, with the rest going toward your cash accumulation (also called your nest egg). This is called a max-funded, minimum-face plan when the maximum amount of your money is going to your retirement plan and the minimum amount is going to the insurance premium. We always create max-funded, minimum-face financial plans focused on maximum retirement income for the clients.
What is arbitrage?
The word “arbitrage” is used frequently inside of cash value life insurance. In simple meaning, arbitrage is the possibility of earning a higher interest on an asset than what it costs. For example, in the loan feature of MPI™, a policy holder has the potential of earning arbitrage. Because the historical gains of MPI™ are around 7% and the loan rate inside of MPI™ is around 4%, a 3% arbitrage opportunity is possible while using the insurance company’s loan feature. This is an essential concept in the MPI™ system. Interest earned vs Interest paid provides for accelerated compounding interest.
What is the rate of return?
The rate of return is the amount of net growth that you earn, divided by your own contributions. For example, if your net growth in a year is $1,000 and you’ve contributed $10,000, your rate of return is 10%. This is usually stated on an annual basis as a percentage. The MPI™ system uses the S&P 500 Index, which has averaged a secure rate of return of around 7-8% historically.
Do I have to manage anything in the MPI™ system?
No! The only thing you need to do is to make sure to Pay Yourself First! The goal should be at least 10% of your income. Although 10% is the goal, Pay Yourself First can be any amount and Starting Today is the first and only decision you make. If you continue to Pay Yourself First and put the money into the compounding growth available in the MPI™ system, the rest of the process will be taken care of for you. We will meet with your periodically to review your account and discuss your income potential when it comes time to draw money from your retirement plan, as well as answer any questions you have along the way.
Is retirement income tax-free?
Yes! When it comes time to draw income from the plan in retirement, the income you receive is 100% tax-free! This is because of the IRS tax code that allows for loans from cash value life insurance policies to be accessed tax-free.
Who handles the leverage/loan process?
Our team includes MPI™ Specialists who are licensed life insurance agents and understand how to maximize the leveraging process for you. When it comes time to begin or continue the leveraging process, you will meet with an MPI™ Specialist and review the loan amount that is appropriate for your situation. Once this is confirmed, the rest of the process is automated and you do not have to do anything else.
What if I lose my job or can’t max fund the policy?
The contributions are not fixed in an MPI™ financial plan. If you start your plan, then lose your job, the plan will continue to pay your premiums while there is still cash value available to do so. If you are unable to max fund the policy, we will still ensure that for the amount you can contribute, the least
amount is going to life insurance and the maximum amount is going toward your cash accumulation. When it comes time to begin the MPI™ leveraging process, we can borrow enough cash from your plan to ensure we are at least reaching the max-funded amount.
Can I do this for my kids?
Yes! An MPI™ financial plan for your children can be a great benefit to them throughout their life. It can accumulate cash that can be used for college expenses, ordinary life expenses and retirement savings, all while providing a death benefit in the unfortunate scenario of them passing away unexpectedly. It also allows you to teach your children the importance of security, paying yourself first, and the power of compound interest.
What if I’m not healthy enough to qualify for life insurance?
The MPI™ system is not just about becoming wealthy and maximizing retirement income in the future. It is about achieving happiness in your life. If you have unhealthy habits that prevent you from qualifying for life insurance, we recommend you apply the theory of paying yourself first to your health and getting yourself to a place where you could qualify for insurance. This will increase your overall wellness and happiness.
If you have a health issue that is out of your control to eliminate that is disqualifying you for health insurance, we may be able to identify other individuals who could be insured and still allow you to fund the plan for your income benefit. These are case by case scenarios that we can review with you