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Subject:  Re: 7702 Private Plans (indexed universal life) Date:  3/28/2013  9:11 AM
Author:  PSUEngineer Number:  71529 of 88497

Thanks for the responses so far.. interesting reading the different opinions. I'd say I'm reading better arguments from the pro than the con side at the moment. Has anyone heard of these things going sour? The people that are against this aren't really making specific arguments why this is bad, more just overall statements like; if they are getting commission they are screwing you and if the contract is really long it must be a scam. I am actually hearing more logical arguments why this may not be all that bad of a way to go.

I avoid the various flavors of UL because it is a lifetime commitment. If you decide that it isn't right for you in first several years, you are hit with heavy surrender charges. If for reason you want or need to cancel the policy later, those tax-free distributions (loans) become taxable. If you start at age 30 for example, you may be making a 50-60 decision. What will happen during those years? Will the tax code change to make other products more compelling or the IUL less compelling?

Ray and Dave have been arguing over the product for years. The part I don't like is that I get a fibe from Dave that this product is good for a larger portion of the population that it really is. This is for the higher income earner who has already funded his/her Roth IRA (if eligible) and at least their 401k for the matching. It isn't for the average family earning the mean US income. The policy requires funding it in excess of the mortality charges. If something were to disrupt your income, you would need the policy to be self-funding or it will lapse and you have a date with the IRS for your "tax-free" earnings. Dave will tell you that you can overfund it enough in 4 years to make the policy lapse-proof. He may or may not be right - I wouldn't know since he has not put up an illustration for how much would be needed for a certain sized IUL. Dave is more than capable of putting an illustration together, picking an average sized IUL, person in average health, and posting the numbers. The illustration would show how much of the premium is going to the death benefit portion of the premium, how much is going to fees and how much is going into your asset account. Until I see an illustration, I treat his posts much like the financial planner that sold me a VUL years ago - a slick salesman.

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