No. of Recommendations: 1

I avoid the various flavors of UL because it is a lifetime commitment. If you decide that it isn't right for you in first several years, you are hit with heavy surrender charges.
Nope, that's not true at all. It performs *better* if treated as a financial cornerstone to your balance sheet, but it can be unwound & exited over a reasonable time period at far less bloodshed than if you're sitting on a drawn down "buy and hold" position, from which there is no escape but wait & pray.

Further, you have from 80-90% liquidity of principal and gains from day #2, if desired.

If for reason you want or need to cancel the policy later, those tax-free distributions (loans) become taxable.
Only on the gains you borrowed, and only if you don't pay them back prior to unwinding.

In contrast, you can't get tax-free loans against your securities greater than 50% max, and getting anywhere near that level puts you at risk of margin calls that can force you to book permanent position losses when you can least afford it. If you sell & withdraw your cash instead of collateralizing a loan on your securities, you book the loss, and lose all the forward gain potential from the position you abandoned.

Don't forget, anyone in the securities market (even after sitting on buy & hold positions for over 30 years) took an up to 50% "surrender charge" when they were forced to sell in order to take income when the markets had collapsed.

With IULs the maximum "surrender charge" is defined from day 1, and declining daily through a prescheduled period... and entirely avoidable via loan liquidity.

If you start at age 30 for example, you may be making a 50-60 decision. What will happen during those years? Will the tax code change to make other products more compelling or the IUL less compelling?
Again, in comparison the IUL is *exponentially* better suited for making future changes than a buy & hold naked securities position, simply because there *ARE* unwinding options. When you're holding naked securities that have dropped 20%, 30%, 50% or more from your entry, you have no options.

Ray and Dave have been arguing over the product for years.
Ray is *AWESOME* and some day I'll get the chance to buy him a beer in person. We agree on 99.65% of our opinions, and on that 0.35% he does me the honor of loyal opposition with easy-to-crush arguments... and does so while remaining a gentleman (if a sharp toothed gentleman.) What more could I ask for!?!

The part I don't like is that I get a fibe from Dave that this product is good for a larger portion of the population that it really is.
Can't help you on that vibe (nor fibe) thing... I really have no idea what "portion of the population" wants what this offers.

I *DO* know what the features *ARE* that it offers.
We can define & declare those, and let those who want those results take them.

This is for the higher income earner who has already funded his/her Roth IRA (if eligible) and at least their 401k for the matching. It isn't for the average family earning the mean US income.
IULs outperform 401ks structured for similar safety and performance, handily (even considering typical freebie matching contributions.) It does so regardless of the owner's income.

IULs outperform traditional ROTH IRAs handily. Those savvy enough to actively structure alternative investments inside self-directed ROTHs may indeed have an advantage... but then we're talking about passive versus active management, so the IUL is still a good foundational cornerstone for the 'family banking system.'

The policy requires funding it in excess of the mortality charges.
That's misleading. Its easier to understand that any given amount of working capital requires a minimum amount of death benefit (as defined by the IRS codes of TEFRA, DEFRA & TAMRA) to keep the special treatment available inside the IUL design.

Your not "adding cash on top of a life insurance policy"...
You are "wrapping the very least amount of life policy possible around the capital you want to have perform."

If something were to disrupt your income, you would need the policy to be self-funding or it will lapse and you have a date with the IRS for your "tax-free" earnings. Dave will tell you that you can overfund it enough in 4 years to make the policy lapse-proof. He may or may not be right - I wouldn't know since he has not put up an illustration for how much would be needed for a certain sized IUL. Dave is more than capable of putting an illustration together, picking an average sized IUL, person in average health, and posting the numbers. The illustration would show how much of the premium is going to the death benefit portion of the premium, how much is going to fees and how much is going into your asset account. Until I see an illustration, I treat his posts much like the financial planner that sold me a VUL years ago - a slick salesman.
I'll do exactly this for you (to my knowledge, you've never asked before... though I do recall offering before unaccepted.) Give me through the day... real work awaits me ;~)


Hi Sykesix,
Dave, your example is for a 17 cap. Those arent available anymore.
Who were you listening to that told you that?
17% caps are available, and higher actually!


This is exponentially easier than you are making it out to be.

There is no argument to be had about the features... you either want to take risks of loss, or you do not. If you don't mind risks of loss, there are lots of ways that you can get higher performance sometimes, as long as you can stomach and wait out the drawdowns.

IULs are for people who want the best growth and distribution performance with zero risk of market loss.

That can be done without using the insurance industry... it just can't be done as cheaply as available in the insurance industry. This is because the IRS code allows the insurance industry to do things the naked securities industry cannot.

The biggest "secret sauce" in the mix is the safe returns on new money in the general account. The insurance world is currently providing about 5.5% tax free safe returns, principal guaranteed. The same money outside the insurance world is fighting hard to earn 1%, taxable, at the same level of safety.

That 4-5% advantage the IRS code grants the insurance world allows them to buy option spreads that provide all the "magical no-market risk upside returns." You can buy the exact same spreads yourself at but you won't have the 4-5% "free yield" to spend doing so from safe yields outside the insurance world.

The costs of entry to get the "special sauce" returns in the insurance world is about 1% annual average of your working capital, all martality (death benefit) costs, commissions, loads, charges and 'junk fees,' included.

You just can't do it for that outside the IRS competition-sheltered regulatorily-protected environment of the life insurance industry. When that changes, I'll do it however it can be best done at that time.

As of now, its game over... there is no competition.

Dave Donhoff
Leverage Planner
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