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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75890  
Subject: Re: 7702 Private Plans (indexed universal life) Date: 3/27/2013 9:10 AM
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I'm sure our local product hawker, Dwdonhoff, will be by shortly to tell you they're the best thing invented since sliced peanut butter.

HAHH!!! Apparently since I'm one of the only people not blindered by some kind of religion *I* am the odd one ;~)

IULs are a specifically structured tool, and they do what they are designed to do better than virtually any other financial tool available in the market at present. As with every other financial option, there are things they do not do well, everything has its trade-offs.

Strong Pros;
Zero market loss risks (Ray doesn't understand how option spreading works...)
Market linked gains, tracking from 100% to 140% of the nominated index market(s,)
Lower costs & fees than comparative performance alternatives,
Superior penalty-free liquidity (90% of principal and gains) compared to all alternatives,
Tax free accumulation & growth,
Tax free distribution,
Tax free procession (family financial continuation,)
No mandatory distribution minimums nor maximums,
Annual gains re-set annually, so after a down year where you lost nothing, you actually gain while others attempt to recover from their drawdowns.

Moderate, 'gray area' Pros;
Higher hurdle of asset protection from creditors
Higher hurdle of asset protection from politicians/government
'Some' life insurance death benefits
Safety & market growth at a passive position... little to no attention required.

Downsides/cons;
Not sexy... tax-free returns average 'only' in the mid-8%s
Not sexy... best individual annual return is limited by the cap,
Costs are lower, but they are front-loaded, so there's the emotional hurdle,
Very sacriligious among those who don't/won't/can't weigh out the financial facts calm-minded & cold-heartedly.
Not well designed for liquidity earlier than the 3-4th years,
Average returns for shorter periods can be much lower than the mid-8's, since the zero-loss-zero-gains years can weigh more heavily.
Best performance still requires annual reviews, & potentially strategic adjustments among crediting methods offered, liquidity methods offered, and how the linked death benefits are structured. "Set it & forget it" work OK, but not as well as once-per-year tune ups.

Whenever you hear the fanatics rail about "running away"... just ask them "run to where?" What alternative financial strategy or product performs like this, or better, for cheaper?

I haven't found any yet. When I do, I'll use those when appropriate, just as I use IULs when appropriate.

Dave Donhoff
Leverage Planner

PS. Pac Life is a great company.... sucky IUL design though. If you're going to use the IUL as a tool at all, look for a product with contractually fixed rate distribution loan terms that are still collateralized by your indexed account (not only the fixed interest account.)
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