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My end impression: continous dollar cost averaging over a long period of time into an S&P500 index, and then using a SWR of say 4% easily outperforms an IUL.

It depends on what you're going to do with your contributions to the account.

If all you're going to do is stick the money in an IUL or stick the money in an S&P500 fund and don't disturb it for 30-35 years, then, yes, the naked S&P500 will do better; that is, it will accumulate more money--but not much more money--in a narrow way. But you'd better not have a need for cash, in all that time, for either catastrophic life events or just opportunities that only cash can fulfill.

An IUL is capable of more sophisticated leveraging strategies and lifestyle opportunities than a plain 'ol S&P500 retirement acccount. No one has ever claimed that an IUL alone, without exploiting those opportunities, or using the cash to avoid ruinous catastrophic costs, would outperform straight investing in the S&P500.

For example, let's say your granddaughter needs life-saving experimental treatment that isn't covered by insurance. Are you going to liquidate your S&P500 retirement fund to help her? Of course you are, but you'll suffer mightily after she recovers. With an IUL, you would take out a loan while your principal continues to grow. (Dave, correct me if I'm wrong.)

(At this point, I should mention Rayvt, the same guy who does serial 30 FRMs at full LTV in order to stay liquid. It’s either one belief or the other--not both selectively as his need to be right directs.)

Another quick example: a couple years ago (during the last 50% S&P500 drawdown) I know someone who bought a $230,000 condo for $140,000 because he could write a check on his IUL. That’s a 65% return on his cash--before you even consider the cashflow yield from rents, which was over 8% before the rent markets began increasing! Does this get added to the yield of an IUL? It should--that's where the money came from!

No...the naked S&P500 as a foundational buy and hold (relying on it for your full balance sheet) is playing Russian roulette, all for the potential long term upside of just 10-13%. None too smart, I'd say.

To invest in a naked S&P500 fund, you must have the willingness to forego huge upside opportunities during the S&P down cycles. When the majority have decimated accounts, huge opportunities arise for those who are still whole. If you're not at all interested in that, then plugging away with an S&P500 account--pay no attention to that shrinking account behind the curtain--is a no brainer. Comparing the S&P500 side-by-side with an IUL, without taking into account the myriad opportunities to exploit the insured nature of an IUL--is simply not accurate.
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