Pacific Life Policy Performed 22%

[marindependent]

I went through the trouble of getting licensed and originating these contracts because I think they are better than any alternative investment vehicle. I can't directly invest in an index nor do I have the accredited investor status to buy the institutional index options they are buying and dynamically hedging.

You got licensed in insurance, in California - just to sell yourself this policy?
-talk about adding fees to your investment.
License Costs + Cont Ed + E&O + who knows what else...

 

[ejbarraza]

Exactly

I went through the trouble of getting licensed and originating these contracts because I think they are better than any alternative investment vehicle. I can't directly invest in an index nor do I have the accredited investor status to buy the institutional index options they are buying and dynamically hedging. Why would I want to if they are only charging me a few basis points after a decade. Much cheaper than a private wealth manager and comparable to an ETF with way more upside. Where else can a CD yield 10% tax-free with zero downside risk if you invest in the stock market? I'll gladly pay the fees for the value they are providing me. And don't forget that if I put any money into a solo 401k I cannot spend that money while I am under 60 or else...This credit product is an all-in-one loan that builds tax-free cash reserves, insurance coverage, business credit, cash back rewards, lifelong growing line of credit, uncapped tax deductions, and tax-free retirement income at the same time. It might not be for the elderly, but it's definitely for some groups of people.

 

[ejbarraza]

You got licensed in insurance, in California - just to sell yourself this policy?
-talk about adding fees to your investment.
License Costs + Cont Ed + E&O + who knows what else...

Yup, I find the multipliers for the remaining 5 decades of my life to be highly accretive. Not something I can manage on my own in a tax-free passive income vehicle. Also, I like the 5-year index option a lot. I guess I'm nuts like that.

Irrefutable evidence of a Pacific Life policy in-force from November 2008 - May 2022 is averaging over 10% and this is with most cash value allocated to the 1-year index option. Also, he did not max fund it to $350k according to the original design, he fell short by $60k. So you can imagine what $350k of cash value could have done had it been allocated on a monthly compounding basis to the 5-year index option.

 

[ejbarraza]

Remember, max borrowing is great for young people skilled to manage their own policies, but some of us will struggle to maintain our skill needed in our 70s/80s & 90s. The consequences of a policy imploding at that time will have massive tax consequences when all the promised "tax free" become really tax deferred. Overloan protection is not contractually guaranteed nor even ruled on by the IRS to date.

How would a 7.5% fee in flat years of the 1964-1982 time frame look, especially if the client was age 75+ at the time getting charged ART rates when CV dropped. years

You can set the dollar cost averaging and put half the money in the 2-year and the other half on the 5-year options and leave it alone for the rest of your life. Just make your premium payments and use the line of credit like a savings account. All the income you earn you pay into the QUARTERLY interest-only line of credit and that prevents future interest from accruing. Increasing your yield spread even more. You could use this line of credit to own a home without a mortgage. All the rental income is then warehoused in the line of credit which satisfies the minimum payment since you are paying way more than the minimum.

Since the cash surrender value is only being pledged as collateral and not being withdrawn ever, it can only stay flat or go up. If you are bold enough to time the market bottom, then you can massively improve your CAGR. This point is made by Nassim Taleb's hedge fund partner Mark Spitznagel. By managing the downside risk, the profit takes care of itself.

"The volatility tax is the hidden tax on an investment portfolio caused by the negative compounding of large investment losses. Much in the same way most tax changes take the form of a political sleight of hand (typically shifting taxes between one group and another), the volatility tax also comes down to stealth, mathematical trickery. Put simply, the geometric average return of an asset is a function of the difference between its arithmetic average return and a measure of its volatility. As that volatility is reduced, the geometric average return is increased, as we are subtracting a lower volatility number. The greater the spread between the geometric and arithmetic average returns, the greater the volatility tax being levied. (It is 25% in the previous example.) To put this in a historical context, in the past 20 years if you had owned only the SPX and had managed to avoid every annual loss worse than -15% (there were just two of them), your geometric average return would have gone from 7.2% to 11.08%, and your arithmetic average return would have gone from 8.81% to 11.77%. (The spread between the geometric and arithmetic averages thus closed by almost 1%—the volatility tax savings). Your cumulative 20-year return would have gone from 302% to 377% on volatility tax savings alone (keeping the arithmetic average return at 8.81%); you can see just how steep that 1% volatility tax was!?"

 

[Tahoe Ray]

Irrefutable evidence of a Pacific Life policy in-force from November 2008 - May 2022 is averaging over 10% and this is with most cash value allocated to the 1-year index option.

Is this a joke?

The Nasdaq is up almost 500% over that time frame, including the current sell off.

Alphabet is up 10x. I'm sure the other FAANGs look similar. Tesla is probably up 10000% but I'd have to look all of that up.

Nothing will beat equities for pure performance. Maybe real estate for leverage but if you use options, you can get similar or better leverage.

I am not arguing against IUL.

I am just stating that your performance hypothesis is incorrect over the long term.

 

[ejbarraza]

Is this a joke?

The Nasdaq is up almost 500% over that time frame, including the current sell off.

Alphabet is up 10x. I'm sure the other FAANGs look similar. Tesla is probably up 10000% but I'd have to look all of that up.

Nothing will beat equities for pure performance. Maybe real estate for leverage but if you use options, you can get similar or better leverage.

I am not arguing against IUL.

I am just stating that your performance hypothesis is incorrect over the long term.

You are cherry-picking the highest return stocks. Obviously, it's not a fair contest my point is that without downside risk 10% is an absolutely insane return! Let us compare IULs to the SPY and compare it to the 5-year index options returns times 2.7. Which one wins out? And which one gives you more peace of mind? I rather take my chances with Pacific Life over Elon Musk rug pulling my retirement.

 

[Tahoe Ray]

You are cherry-picking the highest return stocks.

My first example was one of the largest indices in the world.

Guess what, I can cherry pick because I'm not limited by what PacLife or PennMutual tells me I can do.

Again, I believe in IUL. I just don't believe it is a magic Swiss army knife of investing.

 

[marindependent]

I can cherry pick

I think I'll cherry pick my way out of this "discussion". I remain unconvinced.

Perhaps we can all agree to reconnoiter here in 29 years and reassess the situation.

 

[ejbarraza]

I think I'll cherry pick my way out of this "discussion". I remain unconvinced.

Perhaps we can all agree to reconnoiter here in 29 years and reassess the situation.

An elegant solution to your skepticism would be to tokenize a digital receipt of the insurance-backed lines of credit and upload redacted in-force illustrations as JPEGs on the Ethereum blockchain. This way the cream of the crop will rise to the top and the best policies, agents, carriers, and index options will get the notoriety they deserve. Imagine being able to pull up since inception charts 24/7 for almost any IUL. Consumers would have maximum clarity on who is the best of the best. It would also make this "discussion" moot since I would have an insurmountable preponderance of evidence showing double-digit tax-free returns. By the way, it does not have to be either/or it can be yes/and. Yes IUL, and FANG, crypto, commodities, options, preferred stocks, etc. The point of IUL is to use it as insurance float and make money on the investment plus the leverage.

 

[Tahoe Ray]

It would also make this "discussion" moot since I would have an insurmountable preponderance of evidence showing double-digit tax-free returns.

No it wouldn't. It would show who was best in the past.

If Pac decides they want to max charges in a few years, how do you think your policy would look?

What if they end up like Executive Life?

I would hate that because I have several Pac policyowners. I also know not to put all of my eggs in one basket.

By the way, it does not have to be either/or it can be yes/and. Yes IUL, and FANG, crypto, commodities, options, preferred stocks, etc. The point of IUL is to use it as insurance float and make money on the investment plus the leverage.

As I have said a thousand times.

You seem like you're trying to educate people about these products.

Good on you, people should know about them.

But this is an IUL forum of insurance agents.

Several people on here are also financial professionals. We know how this stuff works.