New and improved safe money alternative

You may not have heard of modified endowment contracts, but they were created in 1988 when congress passed a law called the Technical and Miscellaneous Revenue

Act (TAMRA). Modified endowment contracts grow tax deferred like deferred annuities yet they have an income tax free death benefit like life insurance.

Historically, these vehicles were used to maximize inheritance for one’s heirs. However, a couple of years ago, insurance companies started offering modified endowment contracts that have no upfront load and no back end surrender charges. This means that deposits are not only guaranteed by highly rated insurance companies, but they are fully liquid. Even more exciting are the potential for earning attractive rates of interest. Traditional contracts offered fixed interest rates that were tied to prevailing interest rates.

However, companies are now offering customers interest based on the returns of the stock market without downside risk. The most competitive modified endowment contracts are expected to earn significantly more interest than comparable index annuities. Modified endowment contracts can offer double-digit returns in some years and can never lose principal. These contracts not only offer an attractive expected return without stock market risk or interest rate risk, but they also offer a tax-free death benefit and an additional long-term care benefit if one is unable to perform two of the six daily living activities or suffers from permanent cognitive impairment.

If you are looking to make more interest on your safe money or want to reduce the risk of your portfolio, yet still have the opportunity for competitive returns, newer versions of modified endowment contracts could be what you are looking for. If you have questions or would like to receive a free report on modified endowment contracts, please contact my office. *Modified endowment contracts may not be appropriate or suitable for all individuals. You should consult with a financial professional regarding your individual situation.