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Why Equity Index Universal Life???? September 15, 2011

Posted by shaferfinancial in Uncategorized.

I post much on the subject, but I thought I would make the case simply as possible.

1. Taxes; Once set up right you won’t have to pay taxes or penalties no matter when you want to take out distributions. You no longer have to worry about the future tax rates of the government.

2. Sequence of Returns; This is the killer of mutual fund strategies. Since they go negative often [at least 2 out of 10 years historically] this will effect your retirement investments. The only question is how much. It ranges from devastatingly to mildly and it all depends upon how lucky you are. Recent retirees often had defined benefit pensions to draw from, but increasingly that is not something retirees will have to lean on. Since EIULs don’t go negative that is the second major risk avoided.

3. Dying too early. Odds are good you live to retirement age, but close to 20% don’t make it and that can be devastating to your dependents. EIULs are self completing financial plans with the insurance component protecting against an early death.

Why assume these risks, when you don’t have too?



1. Steven - September 21, 2011

What happened if the Insurance company goes under?

Are they protected by something like the FDIC?

What happen with the Cash Value if the company is bankrupt?

Who assures that my money will be there when I retire in 40 years?

shaferfinancial - September 24, 2011

There is a state agency in each state that adds a layer of protection.
There has not been an insurance contract that failed to pay out in at least 80 years that I am aware of. In the past when insurance companies get into trouble, the life insurance book of business is quickly swept up and bought by another company. AIG, as many issues as it had, kept their life insurance business and never failed to pay out. Remember that the LI business is heavily regulated, has to have reserved invested conservatively, and is hundreds of years old, so they know what they are doing.

2. The LIES We Are Told « Uncommon Financial Wisdom - May 17, 2012

[…] talked at length about the damage of sequence of return risk for retirement funding. [here & here]. By decreasing expected variance and eliminating negative years it dramatically reduces sequence […]

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