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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 75890  
Subject: Re: Retirement, college, and Obamanomics Date: 1/4/2013 2:45 AM
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Why is 100% safety of one's principal getting such short shrift in this discussion?

Why is no one mentioning the huge tax-free payoff--much more than I put in--to heirs when (not if) I die?

I would much rather have my $100,000 (upfront policy premium) guaranteed against market risk with a 17% cap and a $400,000 tax free payoff to my heirs than collecting dividends that may or may not cause that taxable strategy to be better than the IUL.


Your heirs inherit $5 million tax free. The $400K tax free insurance payoff is only beneficial if it on top of $5 million previous tax free dollars.

You can get safety by stuffing the money under your mattress. If that doesn't appeal, you can do the bull spread call option strategy yourself that caps the downside.

Bottom line is these things are *crazy* expensive. I would have to run the numbers to be sure, but I'm willing to wager a steak dinner that after any reasonable period of time the insurance company winds up with more money of your money than you do. Hell, I'll go out on a limb and say the insurance company makes more money than you do without running the numbers. The fees as quoted by KB are enormous. You might as well attach a vacuum cleaner to your wallet.

It is certainly possible that if you really drill down in some limited circumstances these things make sense. My rule of thumb is that if it isn't obvious that something makes sense, it probably doesn't make sense.

I'm simple like that.
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