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Does anybody who is pushing these do anything as simple as looking at the historical prices?
Stupid quesiton, of course!

'cause they'd see that from Mar 1987 to today, $100 in the S&P price-only grew to $436. But including dividends it grew to $813.

A) what was the liquidity/volatility risks?
B) what was the after tax returns?
C) what were the costs to neutralize #A & #B in order to make it apples to apples?

1987 - 2002 = 0.42 advantage to the IUL

2001 - 2012 = 6.47% advantage to the IUL

So, yeah, over the long haul the IUL company keeps a lot of your money. They keep so much that they can easily give you a meaningless guarantee.
The IUL company doesn't "keep any money" from the trades. Again, you could cook it yourself, you just can't get returns to compete with their existing long-term yield portfolios to anchor the safe leg of the hedged trade.

"Indexed universal life uses the S&P 500 index. (excluding dividends) as the benchmark for crediting their cash value."
Actually, a single S&P500 account allotment is almost always available, but not the best more most stable performing choice. Usually an index blend is better.

All it takes is for a quick look to see the effect over a long term.
Indeed... talk is cheap... above are examples of actual results.

Over the last 25 years, the return without-dividends was HALF the return with-dividends. Actually, worse than that. $100 grows to $436, for a profit of $336. $100 grows to $813 is a profit of $713.
Not after taxes, fees, and costs of hedging to nullify volatility. Not anywhere near close.

In addition to the fees & caps -- which in themselves cover all the company's expenses --
Fees cover the companies' expenses, but caps are simply relfective of the hedged trades put in place. The companies don't take any margin out of the hedge trades.

they keep 53% of the profit and give the customer the remaining 47%. That's a hell of a racket. No wonder they can provide a "guarantee".
Math isn't a long suit of this argument, unfortunately. There are simply no outperforming alternatives available to the retail investor with the same features... not even on a DIY basis.

If there were, they'd be trotted out here... but the silence tells it all.
Dave Donhoff
Leverage Planner
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