The Recession Hedge
Clients are understandably concerned about the impact of a recession on their portfolios, particularly if they are starting to see their retirement date on the horizon. Unfortunately, staying on the sidelines versus in the market is the last thing they should do. Reconciling this contradiction is critical to a successful retirement plan, and buffered strategies recently introduced into the life insurance vertical can help clients stay invested and sleep well at night.
But which buffered strategy is the right one? Rather than focus on trying to “time the market” by selecting the “best” buffered strategy, our approach focuses on the strategy that is going to do the best job accomplishing the objective we set out above: Keeping the client invested without causing them too much anxiety. When viewed through that lens one strategy stands out, particularly in times like these: The “Dual Direction” Buffer.
Simply put, if the index is positive, the client participates up to the Growth Cap. More important is what happens when the index is negative. This strategy not only absorbs the first -10%, it will credit the client a return equal to the actual index, but in a positive direction, when returns fall between 0% and -10%. Index results in a -5% return? The client is credited +5%. What if the return is -10%? Client receives +10. Use this in concert with the other available buffered strategies to fine tune the downside protection and upside potential to match the client’s overall risk tolerance. End result? A strategy perfectly suited to today’s uncertain market, all wrapped in a tax-efficient life insurance wrapper. Please see Figure 1 for examples of how this could play out in various market conditions.
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The contents of this document should not be considered as tax or legal advice. Any information or guidance provided is solely for educational or informational purposes and should not be relied upon as a substitute for professional advice. It is always recommended to consult with a licensed financial or legal advisor for specific guidance related to your individual situation.