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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Re: 7702 Private Plans (indexed universal life) Date: 3/29/2013 8:24 PM
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Recommendations: 21
:: sigh ::
CC you are much too emotional about this.

Letting your emotions control your investing is well-known to be detrimental to your investment success. Someone who is driven by their emotions is far better off in some fire-and-forget strategy. So for them perhaps a IUL is the least-bad method.

From my quotes file: "Following the path of least emotional discomfort is a road to failure."

the person who attacked IULs got a mess o' recs. I ask myself, "Why the disparity of recs?"
1) Nobody "attacked" IULs. Laying out mathmatical and statistical facts is not an attack. Making a rational argument about a thing being sub-optimal is not an attack.
2) The disparity of rec's might be telling you something. If umpteen people are saying that strategy X is not good, but you are thinking it is good, maybe you should try to understand *why* they think it's not. In particular, if people in the top 2%-3% of net worth ( plug yours in here to see where you are: http://politicalcalculations.blogspot.com/2013/01/the-distri... ) are generally saying strategy X is not good, then their opinion probably has a bit of weight.

If you google "problems with index universal life" you'll get a variety of information -- some is garbage, but most are not.

As a general rule, whenever you are considering ANY investment strategy, the first thing to do is to google "problems with [strategy]", so you don't get suckered in by just hearing from the proponents.

Dave's posts nailed both the math and the logic of IULs. He hit the advantages of IULs front and center,
But he didn't discuss any DISadvantages of IULs. Every story looks good if you leave off the part about "and then you die."

Anyway, I have to chuckle at your comment. I got a private email from someone who has been around TMF for 10+ years, who wanted to stay private .... who said in part "Just wanted to say THANK YOU for your efforts to shoot down Dave and Cath Coy on their promotion of Indexed UL. Their comments run from disingenuous (Dave) to ignorant (CathCoy)."

Notice that Dave and I completely disagree on IULs, but he doesn't get all emotional about it. As for CC, on the other hand, I don't think is ignorant (that's a bit too strong, IMHO), but is mostly way too emotionally committed and is more deluded than ignorant.

yet those who would rather venture forth in the market, for possibly a few more yield points, without any protection, fully risking their retirement in some cases, are hailed greatly.
:: sigh :: You have NO IDEA. You prize safety and stability above all else. Got it.
There are a lot lot lot of people who are regulars on TMF boards who have retired in their 50's --well before 65-- by venturing forth in the market. I'd say that darned few of them have any money at all in an IUL or other similar vehicle -- and that if they do, it's only a very small amount of their net worth.

Elsewhere, I have relayed that I have had a 50% loss twice in my career. Yup. Two different times our accounts lost half their value. That would have you spitting up blood.
OTOH, we're currently slightly above our all-time high in net portfolio value.

All Rayvt's posts proved is that if you duke it out by yourself in the stock market, commit to do so for many years and hope your timing is consistently impeccable, you may (not will) earn a bit more than an IUL.
Um, my timing has been horribly off. See above, re: the 2 times we lost half our money.
Have you looked at the equity curve charts I uploaded? The actual historical data since 1987?
$75,000 is more than "a bit" more than $50,000. And that's not even deducting the various fees and mortality charges that a real IUL would face.

Or, well, 1987 to 2000. At the peak of the dot-com boom, $66,000 for S&P vs. $25,000.
'course, there was the subsequent dom-com bust. $40,000 for S&p vs. $27,000. You were "protected" from that loss at the cost of $13,000. Some protection.

I will grant that it looks different for somebody who started in Jan 2000 at the peak just before the bust. $14,000 for the S&P vs. $24,000 for IUL. Better not wait until 13 years before retirement to start investing for retirement. ;-)

Oh, you're wrong about "when you die, ... your heirs WILL pay taxes". They won't. The basis gets reset upon death, so no capgain tax. Or did you mean estate taxes? I am ignorant about that, the exclusion is pretty high, so I don't worry about it. [Ah, the 2013 exclusion is $5,250,000. I don't think many IULs are going to have a value of $5 million, so no worry.]

obviously Rayvt cannot STAND the thought that someone may earn a commission from the sale of a life insurance policy wrapped around a mutual fund,
I could care less about commissions. Everybody's got to eat. If a person provides a beneficial service, they earn their commission. If not, not.


I don't understand the hostility toward IULs
This much is clear. ;-)

--which hostility, by the way, exists in the general population, if discussion boards like this are any indication.
There is also a general hostility to spit sandwiches. Maybe, just maybe there's a good reason for the hostility?

All I can conclude is there's religion in financial matters just as there's religion in other matters, and if your religion is that you're a stock picking warrior, impervious to risk, your ego won't let you consider any other course of action.
By jove, I think she's got it!

Although, the "religion" and emotionalism and ego is on your part, not on the anti side.

Look, this isn't hard. Math doesn't lie. The historical data is readily available.
I put up the equity curve charts. I was as fair as I could be. I used the actual S&P500 data, and used the exact floor & cap rules and figures that you and Dave said. 0% floor, 12% annual point-to-point cap.
What I *didn't* do was subtract the fees & mortality fees that a real IUL would have -- which means that the equity curve I showed for IUL is HIGHER than it would actually be in real life.

I challenge the IUL proponents to do the same. Run the data and post the equity curves. If you really want to go wild, post the stats like they do for real investment strategies: CAGR, standard deviation, maxdrawdown, sharpe ratio, etc.

So far, all I've seen is handwaving. You don't prove or demonstrate that IULs are better than the S&P500 by handwaving, you do it by shwoing the data. SHOW ME THE MONEY.

Yes, I get that IULs have a guaranteed floor and you never ever lose money. For some people, that's the #1 most important thing. I get that. You don't mind that you'll only have half the money when you retire -- just that you never see your account value ever go down. I get that.
See you at Walmart -- I'll be the guy that you hand the cart to.
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