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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 76078  
Subject: Re: How to make your own annuity on the cheap Date: 1/24/2012 9:14 PM
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Again, go read the blog post I linked to. The capped upside version of the strategy would cost, what, $50 a year in commissions?

I read it from the outset, and the best it offers is 27% participation to the upside, and no way to shelter from taxes in any large account. Further, if it *DID* begin to perform nicely and you wanted liquid access to some of it, you'd have to collapse it all and surrender the CD yield. Do you have a better way to make it work?

How much mone would you leave on the table in the first 5 years if you cashed out of an EIUL policy? Ten grand? 15?

You have 80-90% liquid access on an annually increasing balance, guaranteed against market downside... why would you cash it out rather than borrow it? Policy loans run from a net cost of 1%, to a wash, to a positive credit (arbitrage) of up to 3% on average (and a positive potential arbitrage of up to 9% on maximum-gain years.) That is to say that, counter-intuitively, you can usually actually MAKE money on the funds borrowed AGAINST the cash value, rather than paying interest costs in.

Even at the bare annual minimum credits assuming worst-case years, borrowing against the IUL would yield you more capital at less costs than cashing out the DIY annuity.

Again... I'm nothing but a market opportunist. Bring me something that actually competes, and I'm all over it!

Nothing serious showing up yet....

Cheers,
Dave Donhoff
Leverage Planner
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