
Subject: Re: Hi gang... wow!!! Date: 9/14/2013 12:34 PM
Recommendations: 3
Dave, thanks for the Policy sheet data. I'll have to read your long post carefully before commenting on that.

I'm not familiar reading a sheet like you posted, but trying to puzzle it out. Check me out.


Cross-checking .... the insurance premium is $280 at age 50. That seems in the ballpark for a pure term policy.

Therefore the investment is not actually $1800 ($150/mo). It's $1520 ($127/mo) for the investment part and $280 for the life insurance.


This brings up the question of why a 67 year old would want to have life insurance at all. The purpose of life insurance is to replace the paycheck income in case somebody dies early, but once you've retired there is no paycheck and hence no income that needs to be replaced. But that's not really pertinent here.


Now, that's the fee as a percentage of the deposit, but we need to figure the fee as a percentage of the account value -- that's the definition of Expense Ratio.

Age 50, (NG)CV is $207,769. $180 is 9 BPS. Including the insurance, $460 is 22 BPS. True, life insurance is a separate issue and shouldn't really be included -- but it's an inextricable part of the IUL policy so you can't really exclude it. So logically, in order to compare like to like, you should add an insurance premium to the non-IUL S&P500 alternative -- even though nobody rational would keep life insurance after they retire.

So, anyway.... for IUL, age 50, E/R is 22bps. Or should we do the percentage of $460 to the death benefit amount of $457,769? I think not. The death benefit goes to the heirs not the insured, so the amount that belongs to the insured is the cash value.

Age 65. Retirement age. Fees $1595, CV $769,585. E/R = 21 bps.
Age 75. Fees $3796, CV $1,785,422. E/R = 21 bps.
Age 45. Fees $344, CV $130,325. E/R = 26 bps.

After paying $280 for life insurance and $180 for fees, the actual investment deposit is $1340 ($112/mo). To be fair, you have to account for the life insurance premium for the (non-IUL) S&P500 alternative, so the amount invested in the S&P500 wouldn't be $150/mo either -- it would be $127.

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