Every cashout is taken out of the portfolio: while saving, only the leftover (earning − cashout need) is invested; afterwards the yearly cashout is withdrawn directly from assets.
Cash needs are borrowed, so assets are never touched except for the premium. The loan compounds and is never repaid; "out of money" means the loan catches up with the assets (net worth ≤ 0).
A — spend the cash
Every dollar spent leaves the pie. Next year's need comes out of a smaller one, and the year after that out of one smaller still.
B — borrow the cash
You take the same $20,000, but the pie is never cut. The whole $100,000 goes on compounding while the loan compounds more slowly beside it.
Water levels are the calculator's own numbers — each bucket is that year's end-of-year balance from the table below. All three share one fixed scale that never changes as the years run, so a level moves only when the balance does. The scale has to hold the largest balance reached, so a longer Simulation horizon flattens the early years — compounding runs away with the top of the scale. Shorten it to zoom back in. Scenario A drains because every dollar spent leaves the bucket for good and stops compounding. Scenario B never drains bucket 1, so it keeps compounding at the asset growth rate while the loan compounds at the lower loan rate — that gap is the whole mechanism.
| Year | Deposit | Income | A net worth | B assets | B loan | B net worth |
|---|
Simplified model: all cash flows (savings, premium, cashout, borrowing) happen at the beginning of each year and then grow/accrue for that year; constant rates, loan always available with no loan-to-value cap, and the insurance death benefit is collateral only (not counted in net worth). Real policy loans have borrowing limits and variable rates.