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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75888  
Subject: Re: 7702 Private Plans (indexed universal life) Date: 3/27/2013 6:35 PM
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just to add to this: How many years was the S&P up over 12%? IUL's would not have participated in that.

Conveniently, it was simple to add that to my spreadsheet and see.

This is for all rolling 12-month periods 1993 to present, not merely calendar years. AFAIK, IULs go by an anniversary date, not calendar year, so rolling periods give a more accurate picture of the statistics.

For S&P500 including dividends: 10.4% CAGR, $10K grows to $72,937. Maximum 12-month return +51%. Worst 12-month loss: -45%.

With 0% floor and 12% cap, CAGR 8.0%, final value $42,232.

The stats don't change all that much. Some, but not a lot. You're still some $30K behind.

Distribution of returns:

*** Distribution of returns, excluding dividends***
** Counts at the max & min endpoints may not be right.
Gain Cnt Pct Cum pct
-45% 36 16.0% 16.0%
-11% 3 1.3% 17.3%
-10% 0 0.0% 17.3%
-9% 2 0.9% 18.2%
-8% 3 1.3% 19.6%
-7% 2 0.9% 20.4%
-6% 0 0.0% 20.4%
-5% 2 0.9% 21.3%
-4% 1 0.4% 21.8%
-3% 2 0.9% 22.7%
-2% 4 1.8% 24.4%
-1% 1 0.4% 24.9%
0% 4 1.8% 26.7%
1% 5 2.2% 28.9%
2% 4 1.8% 30.7%
3% 4 1.8% 32.4%
4% 7 3.1% 35.6%
5% 6 2.7% 38.2%
6% 11 4.9% 43.1%
7% 2 0.9% 44.0%
8% 4 1.8% 45.8%
9% 9 4.0% 49.8%
10% 7 3.1% 52.9%
11% 4 1.8% 54.7%
12% 19 8.4% 63.1%
15% 19 8.4% 71.6%
20% 32 14.2% 85.8%
25% 14 6.2% 92.0%
30% 10 4.4% 96.4%
35% 4 1.8% 98.2%
40% 4 1.8% 100.0%
51%
Tot: 225 100.0%

You got capped 37% of the periods, and protected by the floor 27% of the periods.
You sure wouldn't be doing a happydance on those years where the S&P gained 30% or 40% or 50%(!!!) and you just got a measly 3%. Well, maybe you wouldn't even notice -- if you're the type of person who doesn't want to do anything more than give an insurance company a slug of your money and depends on them to give you a good retirement income. We have a few people like that here (a semi-retirement community). We call them "the 70 year-old part-time Walmart greeters and Dollar General checkout clerks." 'course, they do get to see all the deer & cougars & foxes on the roads as they drive to work just before sunrise.

(Sorry, I shouldn't snark. Bad habit of mine.)

Looking at this closer, it seems worse than I first thought. So many of the loss rows have low single-digit counts, and a lot of the high gain rows are in double-digits. (Although that many just be an artifact of the bucket sizes I picked.) This sure shows the fat tail at the high loss end.
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