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Author: sykesix Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Strategy comparison S&P500 vs. IUL [rev 1] Date: 4/4/2013 4:04 PM
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That's one-time. How much is that 5% spread out over 20, 30, 40 years?

It is one time charge--each time the premium is paid. Let's fire up Excel and see how much that turns out to be over say, 20 years. This will just be super quick and dirty for illustration purposes. We'll assume the initial premium and each annual premium is $1000. Interest rate is 10% compounded annually. And for comparison, we do the same thing with values of $950 to reflect the 5% commission.

At the end of 20 years, the no-commission value is $69,730
The 5% commission value is $66,244. That's a difference of $3,486 over the period. Expressed as a percent that turns out to be...5%. So when we are talking about costs, I think it is reasonable to include commissions along with the management fees.

Just so we're not talking past each other, I was responding to Catherine's comment that mutual fund fees are higher than IUL fees. While that is possible in some cases, it is bad advice to make investment decisions upon because only an unsophisticated mutual fund investor would make the mistake of buying a high-fee fund. I'm sure you and I both agree that if you're not savvy enough to evaluate mutual funds, you shouldn't be buying IULs. So let's take the comment that IUL have lower fees than mutual funds right off the table.
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