lemin,
I don't know your unique situation, but chances are (see exceptions below),
你上当了!
Your honest comments tell me you missed the point of all the IUL discussion
- you cannot just look at IUL's performance itself and say, this is a good
or bad product.
You need to have a benchmark to judge IUL, and a fair one is Term+Index ETF
(let's call this option 2).
1) You already pointed out IUL's fee, do you know how low the fee in option
2 is? You might think the difference in each year is small, but do you know
how much the difference between the two options' fees will grow in 30 years
? (You will be amazed by the number, I always say this - the most important
factor in one's success in investment is long term compounding, with IUL,
you already lost that edge).
2) Ditto for the missed dividend yield, year after year, with IUL. You
already realized it now (but I am willing to bet you didn't know this when
you opened your IUL account, because if you did, you wouldn't tolerate this
big disadvantage in IUL!). Just Google to see how significant dividend
yield is to one's long term success in investing.
3)You do have tax savings, but you know you paid for it with the missed
opportunities! Furthermore, when you enter into retirement time and want to
use the money, you have two options, unfortunately both are bad:
a) you can close IUL to take money out, in this case, your will be subject
to income tax which is a very big number, so I assume most people will do as
agents tell them -
b) take loan out of IUL, that is "free money".
Do you really believe it's free money?
First of all, it's YOUR money, not something insurance company gives to you.
Second, if you die during the period, insurance companies will deduct it
from your payout, so it isn't free!
Third, I bet most people don't know this - when you take money out of IUL
for retirement use, thinking you got a good tax-free deal, your cost of
insurance will be up, guess how expensive insurance will be at your
retirement time? What agent showed you at the time of opening the policy
that small insurance premium you have to pay as you getting older (thanks to
your increasing cash value in the policy) now all of a sudden becomes a
monster!
Because of the above reasons, IUL is really for super wealthy families to
leave money for children, not for policy owners' own use.
You might say, OK, I will leave IUL to my kids, and I won't touch them in my
own retirement time. Fine, but you still paid a hefty price for this
option, and because you can do the same with option 2, with more money for
your kids. Wealthy families need IUL to avoid estate tax, but for most
middle class families, that's not a concern (the $5M limit will be inflation
adjusted, so you can imagine in 30 years, it will be more than $10M, if
that's your concern, IUL is OK for you, although for super wealthy families,
there will be better products than IUL).
4) Yes, IUL prevented loss in a down market, but you also got capped on the
upside. In the long term, since the market will be up, you actually will
like the down markets because with dollar cost averaging, you will
accumulate more shares in ETF, and you will end up being a big winner in the
end!
I'm an insurance agent, I can sell IUL to anyone, but my conscience tells me
, for most working families, just help them get the lowest cost Term, and
point out the way to invest in low cost indext ETF's, I will have a very
good night's sleep, every day, so will my clients!
Maybe someday I should write an ebook to show the good, bad, and ugly of IUL!
