Minnesota Life’s EIUL

Many of my clients are curious about the historic returns inside the EIULs I sell.
So I thought the readers would appreciate this historical analysis and history.

The first analysis looked at 30 years of historic data.  That ran 20 year and 1 year rolling month analysis. This means they looked at all the possible 20 year and 1 year returns starting every month for the last 30 years.  

This assumed the current 15% cap.

Percentage of 20 year period that exceeds 7.5%= 100%.  Percentage of 1 year periods that exceed 7.5%= 60%
Percentage of 20 year period that exceed 8%= 97%.  Percentage of 1 year periods that exceeds 8%= 59%
Percentage of 20 year periods that exceed 8.5%= 81%.  Percentage of 1 year periods that exceeds 8.5%= 57%
Percentage of 20 year periods that exceed 9%= 51%.  Percentage of 1 year periods that exceeds 9%= 56%
Percentage of 20 year periods that exceed 9.5%= 29%.  Percentage of 1 year periods that exceeds 9.5%= 54%
Percentage of 20 year periods that exceed 10%= 7%.  Percentage of 1 year periods that exceeds 10%= 52%

We all know that statistics are just numbers that can be manipulated, but historically you had about a 50/50 chance of getting a 9% average credit for 20 years and a 97% chance of getting an 8% return!

Good odds if you ask me!

Now about the cap rate.

Here is where I learned a little something [memories sometimes fail!]

The original cap rate when this product was introduced in 2005 was 17%.
It stayed there until 2009 when it went down to 16%. In August of 2010 it went down to 15% where it now stands. As I have noted before the cap rates move with the overall interest rate environment. For example, the prime rate when the product was established was 7.25%. The prime went all the way down to 3.25% until there was a drop in the cap rate. As the prime stayed that low [it was last that low in 1954] another cap rate decrease occurred when the Moody’s AAA bond yield dropped below 5% [first time that low since early in the 1960s] to its current 15%.

So if you bought this product early on in Jan. of 2006 your interest rate credit would look like this:

2006 12.16%
2007 2.43%
2008 0%
2009 17%
2010 13.39%

So for every $1,000 you would now have $1,524 or an average return of 10.48% per year.

Now future returns are not guaranteed to do as well as historic returns. But, I am pretty happy to have my money earning an average of 10% over the last 5+ years considering how bad the overall economy has been in that time period.

BawldGuy Here: And that’s why I’ve been including EIULs in so many clients’ Purposeful Plans. It’s a strong and separate ‘basket’ of retirement income.

Related posts:

1. Real Estate Investors: How EIUL’s May Fit Your Purposeful Plan For Retirement
2. 401K or EIUL?
3. EIUL vs Mutual Funds – Mano-A-Mano
4. EIUL As a Savings Vehicle – This Time For Young Women
5. Structuring An EIUL Correctly