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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75534  
Subject: Re: Hi gang... wow!!! Date: 9/17/2013 11:48 AM
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The IUL can invest 100% of the reserves that the S&P B&H strategy has to set aside to prevent catastrophic events from forcing underwater liquidation.

That over-funds the S&P account by 53%


I think you are getting bogged down in the thinking here, and confusing things. The comaprison is funding each account the exact same way with the exact same amount of money.
The asset allocation decision is a separate issue. It's simply incorrect to call this "overfunding the S&P account".

But anyway, it's a valid point, and that's why I enhanced the spreadsheet to allow for different asset allocations.

A 50/50 asset allocation has 50% in the S&P500 and 50% in US Treasuries. That's your "reserves" right there, that 50% in treasuries. Half the initial deposit and have of each month deposit goes into T-bills.

50/50 is generally considered quite conservative, and it in line with your thinking. If you haven't already taken a look, here's the figures for 50/50:
1973 start, 2013 end, $15K initial, $150/mo deposit, expenses 9 bps & 22 bps
Final:
IUL account: $586,000
S&P account: $1,023,000 (vs. $1.5M for 100/0)
# of months IUL was ahead: 41 (9% of the months.)
Max amount ahead: $3,500

If we go crazy-wild low-risk: 25/75. 25% S&P500 and 75% in 10-yr T-bills
Final:
IUL account: $586,000
S&P 25/75 account: $785,000 (still higher than IUL)
With 15% dividend tax, final value: $757,000.
IUL ahead 18 months (4%)
Max ahead: $955.

For comparison, for 100/0 the IUL was ahead 84 months (18%) nad the max amount ahead was $7,600.

===============
BTW, no reason do do any extra work to allow for increasing the deposit. It doesn't change the outcomes, only the dollar amounts.
Just make sure to properly set ALL the parameter cells in the spreadsheet. For example, deposits cease at the withdraw start date, so that needs to be set far in the future, like 1/1/2999.
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