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Ouch, Bobblehead Sucker Punches Brett Anderson October 14, 2009

Posted by shaferfinancial in Finance.

Last week I pointed out a financial planner who was seemingly taking a non-biased look at EIULs on the request of my friend Brett Anderson.  Well this week we got his answer and he set Brett up for a sucker punch.  You can see his post here.

Make sure you read through Brett’s and others comments.

Now that you have looked at the post here are my comments:

His response kept moving the target at best and for the most part discussed things that had nothing to do with the original challenge;

Like most financial planners he likes to talks about hypotheticals, putting his ideas in the best possible light and others ideas in the worse, but never directing himself to the actual performance of the various products.

He likes to do “Monday morning quarterbacking” by telling folks if they had done X, then you would have gotten Y% return but always is changing the time period.  And then has the gall to complain about the time period chosen by Brett as being the result of the 18 year bull market?????  But that is the same period of time that makes his indexing ideas look good.  [For the record, indexing will out perform EIULs in extended bull markets because of lack of down years, but bear markets will favor the EIUL because it doesn’t go negative.]

His worse case example of the EIUL is not matched with a similar worst case example of indexing [asset allocation].  This is called setting up a straw man and is a well known rhetorical strategy.

Finally, he says you can do the same thing the insurance company does with your money and not end up paying those commissions and insurance fees.  True, but how many folks are sophisticated enough to enter into option contracts and brave enough to do it with large sums of money?

And of course he ignores the tax benefits, which is my #1 reason for considering an EIUL!

All in all a nice sucker punch from the initial post the week before.  Very well done Mr. Roth!  I applaud you.

And now back to reality…………………………..



1. BawldGuy - October 14, 2009

Thanks for the best laugh of the day so far. Financial Planners are some of the most talented users of smoke ‘n mirrors on the planet.

2. Rafael Teran - October 15, 2009

So? How do you avoid to be classified as a Modified Endowment Contract to avoid Tax penalties?

Whats the Limit for Premiums paid in the First 7 years? Do the premium limitations apply after 7 seven years or you can make bigger payments to the EULI after that time without being clasified as a MEC?

shaferfinancial - October 16, 2009

Great questions. I will post the answers on a new post today on the blog! Thanks for asking these important questions.

3. Allan Roth - October 20, 2009

I very much appreciate your kind words. I’ve posted another column today that Mr. Anderson alerted me to – regarding a Wall Street Journal article last week.


shaferfinancial - October 20, 2009


4. gregturn - May 26, 2012
mary - February 24, 2014

your link does not work to view comments :/
why did the value go to 0 in year 26? Was he referring to cash value? Also couldn’t you have used an annuity to fund the policy? also what are the differences in taxes by doing it Roth’s way (you mentioned doing the same thing the insurance company does) vs EIUL admin fees etc? seeing something that shows a side by side comparison would help a lot.

shaferfinancial - February 24, 2014

Yes, you can use an annuity to fund policy, but some of the insurance company will just take the total amount you want to put in up front and make the appropriate premium payments while paying interest on the amount not in the policy. Taxes are less using an EIUL because you are paying taxes on the initial income instead of deferring and paying taxes on the growth too. I believe I have several past posts that demonstrate the two side by side. Finally, Roth doesn’t account for sequence of return risk. Thanks for commenting.

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