I found a Monte Carlo investment calculator and decided to see how the risk of stock investing compares with a guaranteed no loss investment. I set up a scenario to match Dave's Allianz sheet : a premium of $15,000 to start plus $1800 a year. https://dl.dropboxusercontent.com/u/8644020/2013-09-13%20TMF...I used the last column in Dave's sheet, labeled "Total Deductions" as the total fees. Then I imagined that the guarantee meant that at any time you could take out all the premiums you paid with no costs. I considered two cases: the case where there were no fees charged and you got all your premiums back, and the case where you got your premiums back minus the total fees.I then used the Monte Carlo calculator at http://www.flexibleretirementplanner.com/wp/ to calculate the success rate of investing the premiums in their "moderate risk” portfolio, which has an allocation between stocks/bonds/international of 41/45/14. I set tax rates and inflation rates to zero. Below is the probability of having a portfolio large enough to withdraw all the premiums, both with and without fees:Year no-fee success rate success rate with fees2 79% 99.6%3 87% 99.8% 4 91% 99.9%5 94% 99.9%6 96% > 99.9%7 97%8 98%9 98%10 99%Over any reasonable timeframe, this portfolio almost never has less money than the premiums minus the fees. My conclusion is that either I made a mistake, the Monte Carlo calculator is wrong, or the IUL guarantee is virtually worthless.
Year no-fee success rate success rate with fees2 79% 99.6%3 87% 99.8% 4 91% 99.9%5 94% 99.9%6 96% > 99.9%7 97%8 98%9 98%10 99%
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