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I believe I understand what Dave is trying to do; I'm just not sure that the way he's doing it is correct. He's trying to mathematically quantify the risk of the stock market; more specifically, the S&P 500 B&H strategy. He's handicapping the S&P B&H by 50% (rounded) because historically the worst decline in the S&P 500 has been 53%. There are many scholarly works on the subject of quantifying risk; just google for "mathematically quantifying market risk."

It's true that with an IUL, one's principal is guaranteed through the strict reserves requirement by which the insurance industry is regulated. In other words, all gains will be scraped, added to the account balance (for lack of a better term) and protected. Losses in the S&P don't impact the IUL balance. For very risk averse people, such as myself, this is a good thing.

However, if two people start at (say) age 20 and invest the same monthly amount on through to age 60, the S&P B&H account will have more money in it at retirement. Taking into account the caps on the IUL, this is a mathematical fact.

The reason I took out an IUL policy is that I don't trust my government. Every day I see less and less reason to trust my government. Considering the voting constituency of the U.S., I think the Republican party is pretty much doomed (you can't win against Santa Claus). The dollar is being devalued and the national debt is untenable. When desperado Dems get their backs completely against the wall, I doubt that government sanctioned 401(k) and IRAs will remain beyond their reach.

But to quantify the risk of the volatile S&P 500 and handicap the S&P B&H strategy by 50% just doesn't strike me as certifiably accurate.
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