Ok, so IUL's have gotten my attention ...

[Golfnut2112]

My question is he security licensed? They reason I ask is because I know two people that sell life insurance for retirement income and both did not renew their security license once they started to do that. I honestly do not know the reason why, I suspect it is to protect them if they do get sued because they could only offer life insurance or an annuity. I am not saying it is unethical to sell life insurance for retirement income I am just saying people need to know all the facts.

 

[DHK]

Gave them up 2 months ago after 40 years. And yes, he has a clean record.

 

[DHK]

I honestly do not know the reason why, I suspect it is to protect them if they do get sued because they could only offer life insurance or an annuity.

If they have a clean record, and they're primarily doing fixed life and annuities... why have that additional unnecessary compliance burden?

I am not saying it is unethical to sell life insurance for retirement income I am just saying people need to know all the facts.

That's actually a big step for you to say!

 

[Golfnut2112]

If they have a clean record, and they're primarily doing fixed life and annuities... why have that additional unnecessary compliance burden?



That's actually a big step for you to say!

Yeah it hurt like hell.

 

[Allen Trent]

A couple of items i noticed in the video that likely skew the overall results of what he is showing

1. He calls the largest IUL expense column a "fee for managing your money". That is just absolutely not correct. yes, it is a fee, but they are not managing your money. You pay a premium & they dont charge you to manage your money. If they did, 1500 in year 1 for managing your 10k CV would be an astronomical AUM fee.

2. I dont believe his comparison of Qualified money shows the client actually getting $16k or more deposited in the Qualified account. I can put $16K into something that gets a tax deduction if I am in 25% tax bracket to net to $12k out of my pocket to match the other 3 comparisons. It also likely doesnt show how much of a match the person gets from an employer

3. All the comparisons show the exact same 6.5% the IUL is 'making in interest". That is a bit disingenuous. If the person is investing in the S&P 500, they will average about 2% more in those other 3 items because of the dividends credited to the S&P500 index funds that IUL & EIA dont receive

4. His comparison spreadsheet shows 1.5% in annual management fees of the qualified, the equity & Roth 401k. Those #s are a pretty high if you are merely buying indexes like SP500. Those can be bought for .1-.2% in expenses. At his 6.5% shown with a 1.5% expense, he is really showing a net return on these other 3 comparisons of about 5%. A conservative comparison with full SP500 with accurate expense ratios would have an average of closer to 8.5%. The actual 100 year average is 10%

5. He mentioned someone owing taxes on the equities account. I would be curious to know if that after tax equities account showed 25% deducted each year on the 6.5% return as if the person is taxed like that. That isnt how equity after tax accounts work. if I own an ETF offering of the S&P500, i will owe zero each year in gains unless a company leaves the SP500. The gains wont occur until I sell shares & those tax rates on capital gains are much lower than ordinary income tax rates (thus the cries that Buffet pays a lower tax rate than his secretary. The owner of an after tax equities account will have dividends reported as taxable each year during accumulation. Those dividends will never be taxed again & if I invest them, it increases my cost basis when i use the dividends to buy more shares. When i start drawing out the money in retirement, I may or may not owe taxes. Some years I may be cashing in from my cash piled up from dividends, other years I may sell shares that I have capital losses on & other shares I will pay capital gains. When I die, the entire account balance is paid out income tax free as after tax capital assets get a stepped up basis

Listen. I love using WL with PUAR & even IUL for supplemental retirement saving, but I am very sick of these videos & sales pitches by many mutual WL reps & most IUL reps that the life product is magic that beats all other items like 401k, IRA, roth, etc. the magic is the direct comparisons are never direct comparisons. They either use wrong interest crediting, wrong expense items or wrong taxation, or all 3.

Our products have a great place in the portfolio of most, but it doesnt have to be getting them to stop making 1k per month contributions into their work plans or Fidelity account, etc.

 

[Golfnut2112]

A couple of items i noticed in the video that likely skew the overall results of what he is showing

1. He calls the largest IUL expense column a "fee for managing your money". That is just absolutely not correct. yes, it is a fee, but they are not managing your money. You pay a premium & they dont charge you to manage your money. If they did, 1500 in year 1 for managing your 10k CV would be an astronomical AUM fee.

2. I dont believe his comparison of Qualified money shows the client actually getting $16k or more deposited in the Qualified account. I can put $16K into something that gets a tax deduction if I am in 25% tax bracket to net to $12k out of my pocket to match the other 3 comparisons. It also likely doesnt show how much of a match the person gets from an employer

3. All the comparisons show the exact same 6.5% the IUL is 'making in interest". That is a bit disingenuous. If the person is investing in the S&P 500, they will average about 2% more in those other 3 items because of the dividends credited to the S&P500 index funds that IUL & EIA dont receive

4. His comparison spreadsheet shows 1.5% in annual management fees of the qualified, the equity & Roth 401k. Those #s are a pretty high if you are merely buying indexes like SP500. Those can be bought for .1-.2% in expenses. At his 6.5% shown with a 1.5% expense, he is really showing a net return on these other 3 comparisons of about 5%. A conservative comparison with full SP500 with accurate expense ratios would have an average of closer to 8.5%. The actual 100 year average is 10%

5. He mentioned someone owing taxes on the equities account. I would be curious to know if that after tax equities account showed 25% deducted each year on the 6.5% return as if the person is taxed like that. That isnt how equity after tax accounts work. if I own an ETF offering of the S&P500, i will owe zero each year in gains unless a company leaves the SP500. The gains wont occur until I sell shares & those tax rates on capital gains are much lower than ordinary income tax rates (thus the cries that Buffet pays a lower tax rate than his secretary. The owner of an after tax equities account will have dividends reported as taxable each year during accumulation. Those dividends will never be taxed again & if I invest them, it increases my cost basis when i use the dividends to buy more shares. When i start drawing out the money in retirement, I may or may not owe taxes. Some years I may be cashing in from my cash piled up from dividends, other years I may sell shares that I have capital losses on & other shares I will pay capital gains. When I die, the entire account balance is paid out income tax free as after tax capital assets get a stepped up basis

Listen. I love using WL with PUAR & even IUL for supplemental retirement saving, but I am very sick of these videos & sales pitches by many mutual WL reps & most IUL reps that the life product is magic that beats all other items like 401k, IRA, roth, etc. the magic is the direct comparisons are never direct comparisons. They either use wrong interest crediting, wrong expense items or wrong taxation, or all 3.

Our products have a great place in the portfolio of most, but it doesnt have to be getting them to stop making 1k per month contributions into their work plans or Fidelity account, etc.

Allen I just skipped over the video but what you caught the guy saying is crazy. He sounds like a down right liar, you have to wonder about North American’s credibility.

 

[Allen Trent]

Allen I just skipped over the video but what you caught the guy doing is crazy. He sounds like a down right liar you have to wonder about North Americans credibility. This business has no place for people like him

Not sure I would say he is a liar, as I dont know him. It could be that he doesnt understand in intricate details how each of the 4 types of products mentioned actually function in terms of fees, taxes, returns. I would error on the side that there may be less intentional lying & more inaccuracy. It is what I have seen on a ton of YouTube videos of the magic of putting all your money in life insurance instead of retirement funds.

A real 3rd party comparison of all 3 would use all the detail of each product to compare. The IUL may still look pretty good, but not anywhere near how awesome it looks showing $1.9M of lifetime income compared to only $400-$500k of the others. especially if the IUL showed the actual returns credited including some years getting 0% credited for the index, -1to2% after IUL load/COI/admin/policy fees. 6.5% every year is a lot different than actual historical--for better & worse

NOTE-- because of quality on my screen & the speed of the video, I couldn't see all the values of the spreadsheet to get an idea of how they may be off, etc

 

[Golfnut2112]

Not sure I would say he is a liar, as I dont know him. It could be that he doesnt understand in intricate details how each of the 4 types of products mentioned actually function in terms of fees, taxes, returns. I would error on the side that there may be less intentional lying & more inaccuracy. It is what I have seen on a ton of YouTube videos of the magic of putting all your money in life insurance instead of retirement funds.

A real 3rd party comparison of all 3 would use all the detail of each product to compare. The IUL may still look pretty good, but not anywhere near how awesome it looks showing $1.9M of lifetime income compared to only $400-$500k of the others. especially if the IUL showed the actual returns credited including some years getting 0% credited for the index, -1to2% after IUL load/COI/admin/policy fees. 6.5% every year is a lot different than actual historical--for better & worse

NOTE-- because of quality on my screen & the speed of the video, I couldn't see all the values of the spreadsheet to get an idea of how they may be off, etc

Liar may have been harsh. But I am also sick of these one sided videos and in this case by someone that maybe doesn’t know enough and should not be doing them. Based on a quick glance of the ledger I believe the life insurance had around $30,000 more than the Roth 401k in 20 years. You know the old saying garbage in garbage out.

 

[Allen Trent]

Liar may have been harsh. But I am also sick of these one sided videos and in this case by someone that maybe doesn’t know enough and should not be doing them. Based on a quick glance of the ledger I believe the life insurance had around $30,000 more than the Roth 401k in 20 years. You know the old saying garbage in garbage out.

Yup, the Roth would have more, not less than the IUL in 20 years. 6.5% in the Roth illustration & 6.5% in IUL would be identical in a pure investment to investment comparison. However, the IUL will have the 6.5% credit, minus the premium load fee, the annual policy fee, the annual COI charges, the "additional Expenses. Those were $2k-$3k each year in most years if I recall. So, how does something with $40-$60k in expenses end up having more in it in 20 years if it is also making 6.5% (likely would have had made more than 6.5%). Actually, his spreadsheet shows in year 22 that the IUL would have almost 65k more than the Roth before the magic of the IUL distributions have even begun.

Ironically, his year 22 values have the Qualified plan & the ROTH having the exact same values. That confirms for me that nothing was put into the spreadsheet regarding taxation. In addition to no employer match being shown for either trad qualified or roth 401k, a qualfied plan would grow much faster equivalently because you would be putting in pre-tax money. The roth would make up for it later by being tax free.

The equity portion in year 22 shows as the worst. i assume because he is assuming the person would owe the full 25% each year on the 6.5%, thus between the 1.5% management fees shown & 25% taxes, the after tax equity account is likely netting only 4.0%. Actually just confirmed that 12k per year for 22 years making 4.06% is $431k after 22 years. So, not only is 6.5% average low, 1.5% expense rate of SP500 EFT-index high, but it appears the spreadsheet has programmed in that the person owes 25% every year on an Equity account. The only way that would be true is if the person was able to buy a 6.5% CD type investement, not an equity based investment or S&P 500 EFT, etc. with those items corrected, the equity account would likely have close to $900k in it based on historical averages

I guess the Magic in this presentation involves either some slight of hand maneuvers or audience ignorance about what they are seeing and paying for. Abra cadabra

 

[DayTimer]

S&P 500 EFT, etc. with those items corrected, the equity account would likely have close to $900k in it based on historical averages

So you are saying that based on historic market averages that $1000/ purchases of SPY would be worth approx. $900K after 22 years?

I’m not disputing anything, as I am here to learn. In other words, I am asking a sincere question.

Thank you

EDIT: I assume that this would include a DRIP program to reinvest the dividends in additional shares?