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Hi Ray,

60/40 MaxDD is -30%
OK, so if your "safe blend" still has a risk of a 30% drawdown, then there *STILL* has to be non-participating reserves equal to 30% of teh full funding the IUL can employ. That effectively drops the 60/40 returns, on a risk-weighted basis, below the IUL (again.)

It occurs to me that we are talking about two different things.
Yeah... we drifted... ajnd I saw it happening early on, but didn't bother to make a big deal about it.

*ORIGINALLY* I was pointing out that the *STRATEGY* of a hedged fixed-reset indexing account was superior on a risk-weighted basis (and I suspect it still is.) This can be done, theoretically, on a DIY basis (though it has to use new money yields for the safe leg, which has it underperform relative to insurance accounts.)

*HOWEVER* you & everyone else kept pulling it back into a comparison of Indexed Universal Life, specifically. So I didn't fight it... I just went with the flow.

If you want to model the IUL, you'll have to build out the index blend as I explained it, and apply a flat annual fee ratio to match the 40 year IUL average, since we can't apply the specific fees, as the mortality tables for each carrier is considered trade secrets. (Heck, even if we leave it on a 0/12 spread on the S&P alone, but properly adjusted for the drawdown risks... I think it will still be pretty close.)

Alternatively, you could easily get the annual gross return of the 60/40 blend for the 40 year period (or apply a rolling 25 year return at the 95th percentile, if you want to stay apples to apples) on 70% of the available at-risk principal, with the IUL taking 100% of the principal.

I've described this over & over & over & over.... and wonder why the apples-to-apples comparison is never actually done?

I really don't understand what your complaint it.
I don't really have any complaints. On a risk-weighted basis, nothing has been shown to passively perform better than the IUL.. at least not here.

If someone can accept a degree of likelihood of a delayed or denied retirement in trade off for the potential of earlier retirement, higher levels of risk can be taken.

Dave Donhoff
Leverage Planner
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