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URL:  http://boards.fool.com/hi-psu-if-you-started-with-100000-and-the-30706707.aspx

Subject:  Re: IUL vs. S&P500 spreadsheet Date:  5/29/2013  1:44 PM
Author:  Dwdonhoff Number:  72315 of 76082

Hi PSU,

If you started with $100,000, and the market drops it to $50,000... the homerun opportunities are available at *THIS* point in time... but your ammunition is gone.
Unless your ammunition in your IUL is gone because you've taken loans for Jr. in college and a $30K car.

Sure, but now you're talking about spend-downs, not market risks. There is no way to insure against your own consumption.

Those items seem to be big selling points when I see discussions about the benefits of IUL - paying yourself interest instead of a bank.
Interesting... I haven't observed this to be the case. The old "pay yourself the interest instead of the bank" has always been (in my observation) the circular logic argument of whole life pitchers. Every time I run into these folks I chop it right at the knees... (I'm not popular with the WL'ers...)

BTW, what does the insurance pay interest on when you take a loan - the original balance or the lower one to account for the loan? For example, if you have $100K available in your IUL and you take a policy loan for $30K for a car, are you earning interest on $100K or $70K?
You're not borrowing *out* your own money, you're borrowing against your principal which serves as the collateral. So, if you have $100,000 principal, and you borrow $30,000, you gain market growth calculated on the $100,00 principal, and accrue your interest costs on the $30,000 loan.

Dave Donhoff
Leverage Planner
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