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Subject: Re: Strategy comparison S&P500 vs. IUL [rev 1]  Date: 4/7/2013 11:43 AM  
Author: Rayvt  Number: 71768 of 82314  
see how an IUL performs  both during accumulation, and distribution assuming the tax free loan status and continual crediting of the loan amount Um .... forgot about this. Plain vanilla simple method is final value $29,800. Need to figure accumulation of running balance minus outstanding loan minus 6% interest. Let's assume we don't reduce the value by the draws, but keep track of the draw amount and the interest owed in a side account. We'll let it grow, then at the end offset by subtracting the balance of this side account. So play a game with the spreadsheet. Accumulation phase as before, to 1/1/2003, but then set withdrawal of $0 (this stops the deposits). See what final value is reported, and then subtract out the total amount of the side account. SWAG on the loan interest. Avg balance of $100,850 (half of the total draw) at 6% per year = $6051/yr. Over 10 years that's $60,510. Final SWAG'ed value: $286,500  $201,700  $60,510 = $24,300. (Final value  total withdrawal  accumulated interest). Oh, duh!! No need to SWAG  excel is good at this kind of thing. Ending balance of loan side account at 6% interest, computed monthly is $272,000. ($270,600 if computed annually.) Final net value: $286,500  $272,000 = $14,500. Same ballpark as the plain Jane method, so all the fancy footwork with loans, etc. is just fancydancing with minimal realworld effect.  CC: Also, we're not using a "single investment" of $1,000 but an agreed ongoing investment of X. CC, what he did was a quick & dirty backofenvelope smell test. Engineers & physicists do this all the time. All you are trying to do is to see what ballpark the numbers are in. "Smell test" is like sniffing that lunchmeat in the refigerator  you're not trying to get an exact freshness level  you are just trying to see if it smells bad. The value of this technique is that it is simple  so simple that any methodology errors will be clearly obvious  but that it will still give you a decent approximation to the results that have all the complexity. If the backofenvelope number is way off from what you need it to be  it smells and you know your idea is garbage, yo don't need to waste any more time & effort to be more exact. Like he said, you can do this in 5 minutes. It's so simple that it would take as much time find it again after you've saved it as it would to just redo it from scratch. 

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