MPI (maximum premium indexing) is an investment strategy promoted by SunCor Financial. It provides life insurance coverage, stock market growth, and compounding acceleration. However, excessive fees and complex contracts are downsides of such accounts.
Key differences between MPI and 401(k)
A 401(k), like a Roth IRA, can potentially decrease in value if the stock market experiences severe downturns. SunCor Financial claims that MPI accounts won’t lose money.
Article continues below advertisement
Investopedia discusses indexed universal life insurance, or MPI, as insurance accounts tied to a stock index like the S&P 500. Indexed universal life is supposed to enable you to get into the stock market while minimizing losses.
However, while a 401(k) can grow alongside the stock market, MPI or IUL accounts are usually capped as far as gains. MPI salespersons may promote their accounts by saying that conversely, their accounts can’t lose value, but the high fees on MPI investments may also be a deterrent.
Article continues below advertisement
Sales representatives receive commissions on any MPI investments or indexed universal life policies sold, which increases the fees paid by investors. These commissions may influence the salesperson to push MPI even if it is an inferior product. The fees often negate any growth of the account for the first year or longer.
Investopedia says that unless you have a very high net worth, it’s better to invest in a 401(k) and choose term life insurance instead of investing in MPI or IUL accounts.