So even though withdrawals are available sooner, you must illustrate policy loans until year 15. If, however, for some crazy reason all you had was that guarantee, you could at least spend other retirement assets more aggressively while you’re alive knowing that the contractual death benefit would fill up the bucket for your surviving spouse. That is why we placed the PDX to the right of IUL but left of VUL on the “risk axis” below. There is also a two percent guaranteed interest rate to protect the investment, but can accumulate at a higher rate with index fluctuations. However, I was told by multiple sources that the crux of the mysterious black box works like this: “It was my understanding there would be no math.” – Chevy Chase impersonating Gerald Ford on SNL. Right next to the raw returns of the S&P is a column titled “Limited Return %.” What’s being represented there is the hypothetical back-tested crediting of Pacific Life’s 1-year uncapped S&P 500 strategy where you earn 0% when the S&P 500 earns 5% or less in any given year. Let’s see if my “chicken-scratch” can help your comprehension. Now that you understand the bones of how Pacific Life’s proprietary Performance Factor formula works, let’s strategize on how to maximize its overall effect on cash value growth and future retirement distributions. Frankly, this piece alone didn’t get me to a place of full understanding with the product. It is almost the same as buying term while building an emergency fund or saving to buy a house. Pacific Discovery Xelerator IUL 2 December 6, 2016 by Jamie Johnson . However, one of my unique gifts that God has given me is to make complex concepts simple to understand. As of March 2018, their participating loan rate was 4.65% giving you plenty of room to achieve positive arbitrage even in today’s low cap environment. 1ST QUARTER TOP SELLING PRODUCTS BY CHANNEL: Overall- Pacific Life Pacific Discovery Xelerator IUL 2 Bank- Pacific Life Pacific Discovery Xelerator IUL 2 Career- Farm Bureau Life Foundations Indexed UL If you purchased the Pacific Discovery Xelerator (PDX) Universal Life policy from PacLife or the Eclipse IUL from Minnesota Life in the last 5 years, you may qualify to join this universal life insurance lawsuit or … “Pacific Discovery Xelerator [Indexed Universal Life] provides life insurance protection with the ability to accumulate cash value at index-based interest crediting rates,” PacLife states. Pacific Discovery Xelerator IUL (PDX IUL) Pacific Discovery XeleratorIUL 2 (PDX2 IUL) Pacific Indexed Accumulator III (PIA3) Pacific Indexed Accumulator IV (PIA4) Pacific Indexed Accumulator 5 (PIA 5) Pacific Indexed Accumulator 6 (PIA 6) Pacific Indexed Performer LT (PIP LT) This credit is just too darn favorable if Pacific Life’s desire was to extract all your premiums and leave you without a policy someday. This policyholder could surrender the policy for over 92% of your premiums paid in 15 years when run at 0%. 4. 3118 0 obj <>stream Pacific Discovery Xelerator IUL – designed for protection and supplemental income; Pacific Discovery Protector IUL – great solution for insurance protection and wealth transfer. pages 3–4 for transition guidelines): • PDX IUL 2 will replace PDX IUL3 • PIA 6 will replace PIA 54 Indexed Universal Life Insurance does not directly participate in any stock or equity investments. The fact that they are one of the largest companies offering Indexed Universal Life and also very highly rated makes it even easier. Notice what often happens after bad spells in the S&P 500 index. That means they will charge you 2.25% to borrow against your cash value, and simultaneously credit your cash value with…you guessed it – 2.25%. The latest addition to Pacific Life's line of IUL products is designed for death benefit protection with competitive long-term cash value accumulation potential after year 15. Pacific Life offers something called an Overloan Protection RIder. The No-Lapse Guarantee rider allows you to “get off the mat” if for some reason the S&P 500 got pounded for several consecutive years early on in the life of the policy.” Needless to say, if the S&P 500 experiences an unprecedented string of five or more years of annual losses, we all will probably have much bigger problems than our paper assets. That means, whatever growth the S&P 500 index gets over the course of 5 years will be multiplied by 1.1 and applied to your cash value allocated to this strategy. Variable life is a kind of permanent life insurance. The extra silos depicted in blue represent additional indexed crediting potential from the Performance Factor. At the other extreme, we have Variable Universal Life (VUL), in which the client bears all the market risk needed to grow their policy’s cash value. People intuitively understand that there is no free lunch or easy money available when it comes to growing your wealth for retirement. Rather than get caught up in opinions and rhetoric, this review of the new Pac Life’s new Indexed Universal Life product will explore the facts. Take a gander at these actual raw indexed returns that can no longer be run through Pacific Life’s illustration software. Although the Performance Factor’s exact details remain confidential for the time being, hopefully this simplified explanation removes some of the mystery and makes it more of a “light gray box.”. For international exposure, there is also a capped 1-year strategy that blends the performance from the Euro Stoxx, Hang-Sang, and Emerging Markets indexes. Elijah said it best. That said, I find that once clients understand how costs and risk can be quantified and managed, they are much more comfortable moving forward with a particular strategy. The pure uncapped participation offered by VUL offered seemed to be a much more attractive insurance choice than IUL. Also, Pacific Life’s fixed-interest loan is the lowest in the industry locked at 2.25% for the life of the policy. Click here to thoroughly understand all the pros and cons of Indexed Universal Life insurance. You also have the ability to rebalance and reallocate at the completion of each indexed segment. What are the positives of Pacific Life’s PDX product? Pacific Life’s indexed universal (IUL) products have a cash value that grows based on an established index (typically the S&P 500, but you may be able to choose another with some products). Pacific Life Pacific Discovery Xelerator IUL 2 was the #1 selling product for non-variable universal life sales, for all channels combined, for the 3 rd consecutive quarter. Once the Tech-Bubble started popping in 2000 followed by the terrorist attacks on September 11, 2001, we saw every major market index lose somewhere around half of its value or more. The fact that the combination of features necessary to produce the outsized illustrated income is not guaranteed in the contract language. Below is an example of the PDX earning 0% with its normal charges on an age 48 male with a standard non-tobacco rating (which is the fourth from the top). Pacific Discovery Xelerator IUL 2 Policy Form #P15IUL and S18PDX2 or ICC15 P15IUL and ICC18 S18PDX2, based on state of policy issue. Unfortunately, as agents we can’t even illustrate the true power of this performance factor due to the constraints of Actuarial Guideline XLIX (aka AG-49). Pacific Life has a patent pending on their Performance Factor (P.F. That means you could apply these types of historical return sequences against the projected charges based on the exact PDX policy illustration you were considering. Thankfully, Pacific Life is one of the top IUL carriers that allows you to essentially refinance your policy loan between the fixed and participating loans each year on the loan anniversary. However, safeguards are good, especially when they’re contractual. Even if a guaranteed death benefit is not the reason you’re getting the policy, you will see that it’s a very small price to pay for an additional contractual safeguard.Below, is the same illustration side by side with and without the No-Lapse Guarantee Rider (NLG): Notice how little the difference is in cash value and income between the exact same policy on a male age 48 with a standard rating when adding the Pacific Discovery Xelerator’s No-Lapse Guarantee rider. Are you an entrepreneur or professional age 25-60 decent health? 1. videos. Once you have withdrawn your basis, policy loans again should be used if you want your retirement distribution to be tax-exempt. Click here to learn the mechanics behind how IUL carriers offer this unique growth strategy. Although it may not be suited for every type of consumer, the Pacific Life’s PDX (Pacific Discovery Xelerator) product may be ideal for clients wanting maximum tax-exempt retirement income by channeling market volatility using the traditional 0% floor of an Indexed Universal Life policy along with their new mechanism for growth. They understand that the S&P 500 index has gone up much more often than it has gone down, and after deep market crashes, there have historically been very steep rebound rallies. That way, if you do choose to be tactical and try to capitalize off of an impending bull run using the PDX’s participating loan, you can easily switch it back to the more prudent fixed loan if the rally slows or the participating loan rate becomes too unattractive. 3. With other IUL products, especially those with high caps and low participating loan rates locked in the 5%-6% range, it may be a worth attempting to achieve long-term positive arbitrage using participating loans for retirement income. The combination of a market crash resulting in increased policy charges will further erode your cash value, which can lead to a vicious downward spiral inside a VUL product. Unlike many carriers, Pacific Life staunchly maintains a “what’s good for the goose is good for the gander” philosophy when it comes to offering the exact same caps and indexed crediting strategies for both old and new products. Pacific Life’s PDX product may not be for ideal for every consumer. This rider is meant to protect policyholders from their IUL policies imploding if their retirement loans (that they don’t intend to pay back) overtake the policy equity later in life. The PDX’s special sauce (and source of all the criticism) is its mysterious multiplier effect known as the “Performance Factor.” It can multiply any of the Pacific Discover Xelerator’s index crediting strategies well beyond their stated caps. 2. Take a look at the most volatile periods we can find in that 81-year period tracking the S&P 500 in the column titled “Annual Return %.”. Click here to read more details from Pacific Life about these 125 different pricing improvements and the savings they passed on to consumers. Pacific Life Pacific Discovery Xelerator IUL 2 $24,160 17% $200,967 $412,392 John Hancock Accumulation IUL 19 $21,787 5% $199,135 $422,199 American General QoL Max Accumulator+ IUL w/MLSB and SIR $21,714 5% $199,911 $433,494 American General QoL Max Accumulator+ IUL w/MLSB $20,707 0% $199,911 $429,248 Global Atlantic Global Accumulator IUL The client also bears the additional expense risk if the insurance company happened to misprice their product, or if a market crash erases a big chunk of cash value needed to support the policy. However, with the added variable of PDX’s Performance Factor, it appears that withdrawals may juice-up the Performance Factor more than the illustrated long-term positive arbitrage from the participating loan. Click here to see a telling 81-year study of the S&P Index movements from a third party financial company. For some though, the Pacific Discovery Xelerator’s unique structure offering the possibility for outsized indexed crediting and retirement income may be worth the additional costs. “Why cap your upside in the teens when markets increase by 20%-30% every year?”, “Who needs a 0% floor? In this low-yield environment, Pacific Life had a real dilemma on their hands. how safe are life insurance companies? It is not a recommendation of any specific insurance or financial product. (Note: This hypothetical 20-year backtest below represents the different crediting percentages that would have been applied given Pacific Life’s current 1-year caps, floors, and participation rates with no Performance Factor applied.). Be sure to have extensive consultations with a licensed professional about the implications pertaining to your specific situation before implementing any strategy discussed herein. 1. To be honest, Pacific Life’s Indexed Universal Life product fell out of favor for a couple of years until…. 1 year: regular and high Cap, high participation or no cap; 2 year: higher cap (to allow for longer term) 5 year: high participation rate Pacific Discovery Protector IUL: This is an ideal option for individuals looking to preserve their wealth and have access to their retirement assets. We reveal the formula behind the Pacific Discovery Xelerator’s controversial “Performance Factor" and discuss 5 viable exit strategies if Pac's new IUL's cash value can't outrun PDX's higher charges. Keep in mind that with the Pacific Discovery Xelerator you can mix and match any combination of these strategies together. So, if you didn’t want to try to shoot the moon with any of Pacific Life’s domestic or international indexed strategies in some years, you could park all or part of your cash value into their fixed-interest account. Pacific Discovery Xelerator IUL 2. Substantially higher charges supporting this unique opportunity for additional indexed crediting, A mysterious formula as to how these credits will be applied. There may be an argument for having some portion of your cash value allocated to one of Pacific Life’s 1-year uncapped option in all years. Indexed UL Sales – its PDX is the #1 Selling IUL plan. Every single one of these 5 indexed crediting strategies described below have the traditional guaranteed 0% floor like most indexed universal life policies on the market today. We have found in many situations that illustrations using the Pacific Discovery Xelerator’s wash loan still produces substantially more ongoing retirement income than other top performing IUL policies. Throughout the mid-2000s IUL sales started steadily increasing. That way, your cash value can cover the ongoing cost of insurance lasting a lifetime. Annual indexed universal life insurance premiums hit $1.56 billion at the end of 2014, reflecting a 14% increase from $1.356 billion in 2013, according to Wink’s Sales and Market Report, 2013-2014. Rather than offer one singular silo of indexed crediting, Pacific Life decided to multiply the number of silos that a client could earn indexed crediting with. Best of all there is a 1-year uncapped S&P 500 strategy where you can track the S&P 500’s growth above the first 5%. Pacific Life Insurance Company’s Pacific Discovery Xelerator IUL 2 (policy form #P15IUL and S18PDX2 or ICC15 P15IUL and ICC18 S18PDX2, based on state of policy issue) and Pacific … IUL PLANS. Imagine if you could get those returns multiplied…on a 6-figure cash value account. I sure liked the sound of the sizzle, but I needed to know more about the steak. Hopefully, this piece helped to clarify a lot of the mystery shrouding the new Pacific Discovery Xelerator product and its mysterious Performance Factor. This policy includes similar features to a regular universal life policy, including the short-term no-lapse guarantee. So before we head into the weeds with algebraic formulas, this schematic below is how I was able to mentally simplify the Pacific Discovery Xelerator’s Performance Factor and wrap my head around it. Pacific Life Discovery Xelerator 2 (40%) $23,912 $27,589 $40,911 $4,506 Penn Mutual Accumulation Builder Flex $22,038 $31,734 $37,131 $4,828 Principal IUL Accumulation II … Anything over 5% growth in the S&P 500 index gets credited to your cash value at the end of the year. !H-,�+�\?y�1Lh�g �*�W�W�^1���-Vu��d �2B�UC�?¢^pX§V�1$�G�Ī�\ kkU da�m� Choose Uncapped Options after Bad Years. So when cash value goes down, then a smaller number on the bottom of that formula should produce a greater multiplier effect that year. So if you choose the 2-year S&P 500 indexed crediting strategy capped at 30%, you have the opportunity to earn multiple silos of crediting up to 30% over the 2-years. S&P 500. Therefore, you will find a direct relationship between prevailing bond yields and IUL caps. Indexed Universal Life insurance can be one of the best things you ever own! Subject to state availability, the following will occur(see .