MPI stands for Maximum Premium Indexing, which is a financial strategy that “could generate lots of money for you”. But more specifically, it’s a combination approach that provides life insurance and acts as a retirement planning vehicle at the same time.
MPI accounts can (theoretically): provide you with a relatively safe way to achieve consistent returns protected from market downturns, deliver ample tax-free retirement income, and then finally pass on a nice tax-free inheritance to your heirs…(theoretically).
An MPI secure compound interest account grows in line with the S&P500 index. However, the MPI account (via the terms of the IUL) has a floor of 0%, which means that even if the S&P500 crashes -30% in one year, you won’t lose anything!
The growth of your cash account grows in line with the S&P. It’s limited on the downside to 0%, but is capped on the upside at 10%. This means that if the S&P500 returns 8%, your account value will go up by 8%. If the S&P goes up 20% you only get…10%.
Historically, the S&P500 has returned around 10% per year for its investors (with reinvested dividends). But when factoring in the 0% floor and 10% cap, MPI has averaged about 7% over the last 25 years.