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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Hi gang... wow!!! Date: 9/17/2013 1:26 AM
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Actually, the latest figures I've been posting have no increase. Just the straight constant $150/mo. The way the sheet is set up, all the alternatives (B&H, Timed, IUL) get the exact same monthly deposit & withdrawal (if any).
That doesn't standardize against the downside risks then. The IUL can invest 100% of the reserves that the S&P B&H strategy has to set aside to prevent catastrophic events from forcing underwater liquidation.

That over-funds the S&P account by 53% (call it 45% if you want to play the aggressive side.)

With your own S&P account you can increase the deposits for inflation. And increase withdrawals, too, without having to pay extra for an inflation rider.
Same for an IUL, no rider required... its just cumbersome to build out an every-period increasing premium the way the software is set up, so if we're comparing basic performance I'd just request we stay flat on the contributions (unless you see how it might make a comparative difference one way or the other... I'm open to the manual work if that's fairer to the S&P side.)

Jan'73 to Jan'13, 40 years, initial $15K, monthly deposit of $150, no increase ever.
Again, that's not apples-to-apples, since the risk of collapse remains on the S&P side unless 1/3 of the principal is put in reserves on that account.

IUL: $586,000
The IUL is much more than that. Go look at my illustration.
https://dl.dropboxusercontent.com/u/8644020/2013-09-13%20TMF...

EOY 40 = $769,585 at 100% of the S&P account's principal and reserves.
What's the S&P account do on principal without its requisite reserves?

Cool. Hungry shark that I am, I immediately thought about ways to game the system. Like fund an IUL with $1M and immediately borrow out $900K at 5.5%. Just sit tight and let the gains run to the long-term average of 8%, and collect (average) $80K gain less $50K interest, for $30K annual gain on $100K equity. That's, like, 30% CAGR. No possibility of margin call or policy lapse because of the OLP rider.
Sign me up!!

You're not the first shark to bite on that, and the insurance companies aren't the losers.... it was the IRS. That's why Congress passed TAMRA, TEFRA & DEFRA.

Ahhhhh, dang. Some gotchas that showed up (not all same source):
<SNIP>
* The entire cost basis must be taken as partial surrenders. (I have NO idea what this means.)
That means you'd have to draw down the original principal prior to any further loans being allowed. Whenever you withdraw principal on an IUL (or any UL design) you are automatically reducing that amount of the previously approved death benefit.

Dave Donhoff
Leverage Planner
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