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Hi AJ,

You keep bringing up non-retirement issues, to try to make me think that IULs are great places for retirement money.
No, so far I have *ONLY* referred to retirement accumulation issues. Catastrophic events prior to retirement that force liquidation of working capital at below acquisition price *IS* relevant since it forces a delay or elimination of the chance to reach financial retirement.

If they are retirement funds, why would I liquidate them before retirement?
Due to insufficient reserves. If you carry sufficient reserves (or alternative safe account allocations) so that you have no danger of forced liquidation while underwater... an IUL user would have been able to put all those underperforming reserves into the IUL to compound from day #1

In my (so far) 28 year working career
Congratulations (seriously!) You've been one of the lucky ones... even the lucky majority... who have dodged the under-funded catastrophic event expense. Maybe only 1 in 20 incurs such an event, maybe only 1 in 30, maybe only 1 in 100... but a retirement plan is like a home (not a 2nd house or investment house.) You have to be able to count on its existence to survive... you can't survive the same lifestyle on only half of it.

But it doesn't have to be 53% of the total retirement fund amount. That's where you are mixing up short term volatility with long term planning and goals.
No, there's no mixing anything up. If you incur a catastrophic expense that forces you to liquidate your retirement assets while underwater (and that can happen in a day, let alone over the relatively immense span of 5 years,) your retirement plan will be worse off.

I'm saying that at most, one should need 5 years of expenses in reserve to recover from downside volatility.
That won't be enough if you're forced to liquidate your retirement assets to cover catastrophic event expenses.

Besides... while you're building up 5 years of reserves for your buy & hold position, the IUL can fully invest and compound *ALL* of them from day one.

And depending on what other reserves or income can be generated from funds not earmarked for retirement, not even a full 5 years may be needed
Prior to reaching the point of financial retirement, *ALL* funds not consumed for lifestyle are purposed for reaching retirement. If you gamble for fun under the label of "daytrading" or "discretionary investing" or "Vegas Fun Money" whatever, that's an entertainment expense, not accumulation toward financial independence. If you win, you are lucky and you get to accelerate your point of retirement... if you lose, you delay or deny your retirement... for real... in real dollars and cents, and years on the calendar.

If one already has a 1 or 2 year emergency fund outside of the retirement funds, then only 3 or 4 years of expenses would be required to be held as reserves.
Even if that were sufficient because your choice of buy & hold market had much lower drawdowns, *ALL* of those 3-4 years of reserves could be fully invested & compounding in an IUL from day #1.

If one has non-retirement income generating investments
We're not talking about investments *AFTER* retirement has been achieved. We're talking about *PRIOR* to achieving financial retirement. Every dollar lost prior to financial retirement delays retirement.

You can't say a system works simply because one, or some, users have been lucky enough to dodge the Russian Roulette bullet of risk. If *anyone* is at risk of random catastrophic expenses that would delay or deny their retirement, then the entire system must be factored to account for that risk.

Again, retirement investing is *EVERYTHING* that is done prior to achieving retirement. Segregating out "non-retirement investments" in order to emotionally justify risk-taking prior to achieving retirement is just mental masturbation, and entertainment/gambling.

Dave Donhoff
Leverage Planner
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