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Hi Ray,

The problem you guys have is that you are thinking that short-term volatility is risk. It isn't. (CC's recent posts show this, and I'm working on a response to that.)
Not as long as you keep sufficient current, and or future reserves its not, I agree.

The IUL can employ and compound those reserves from day one, 100% of them, where the S&P B&H has to account against a potential drop of 53%.

Just eyeballing the 40 year balance on the IUL I ran, versus the 40 year balance on the spreadsheet... looks to me like the IUL finishes with more money... and that's before we distribute with a 2% positive arbitrage in the IUL.

And yet the B&H portfolio ends up at $1,500,000 while the IUL ends up at $586,000 -- when started just before the 1974-75 bear market.
Not quite... the IUL ended year 40 at $769,585, and your spreadsheet shows a final balance on Dec. 3, 2012 of $781,080, and that's with 3% inflating contributions (which the IUL didn't assume.) Drop the assumed contribution inflation and the S&P return will fall to the IUL.

Further, if you back up your start date for a full 40 year run, you're going to take a 46% drawdown at the beginning that you won't recover from for your 1st 5 years, until 1979.

Dave Donhoff
Leverage Planner
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