Re: Re: Re: Re: Re: Re: whole life

Subject: Re: Re: Re: Re: Re: Re: Re: whole life

Comments:
: : : Wow. Thanks for all of the information. I'm planning on going out and buying some books on this, so I'm coming from a more educated stance. : : Unfortunately, much of what I've posted isn't available from books. It's stuff I've learned over the last 30+ years in the life insurance business. No product is "perfect". There's no "one size fits all" solution using life insurance. The best advice I can give you is -- there's no free lunch! : : : : Life insurance is not an investment. It has a "floor" that you can't earn less than. A true "investment", on the other hand, has potential downside risk up to 100% of the money invested. Life insurance is a good supplement to real investments, especially tax-qualified plan investments like 401(k)/IRA/TSA/SEPP etc. : : : :: Especially if the funds are earning much higher rates than a whole life plan. : : My view of whole life is different than what you'll get from either Primerica or their opposites in the "traditional" companies. It is an inflexible product with a fixed payment plan...you are forced to overpay...it's built around a "worst scenario" of maximum coi (ART rates), maximum expense loading, and minimum discounted interest, usually 4%. Now, if the company does better, they will give you part of the forced overpayment back later in the form of a non-taxable non-guaranteed dividend. There is a large element of "forced savings" with whole life. Over time, the inflexible overpayment accumulates tax-deferred as inside buildup (cash value). The company owns the cash value, not the customer. Now, how efficiently can you get all the inside buildup back? : : 1. I'm going to take the money and run when I'm 65! Sorry, you're going to pay ordinary income tax rates on all the gain since day one...and then run with what the IRS doesn't want. : : 2. I'll annuitize for a lifetime income! All the gain is taxable at ordinary rates. Plus, most policies use non-competitive conversion factors, compared to the top annuity companies. : : 3. I can borrow the money! Yes, at 8% interest which is not efficient...and has to be paid back to prevent the policy from "imploding" making all the gain taxable that year. : : So, there you go, Clint. My abbreviated take on Whole Life -- a permanent insurance product where everything is controlled by the company and not by the customer. Personally, I like flexible payment plans...the ability to voluntarily overfund rather than forced overfunding...and tax-free income. That's why I like a quality UL rather than WL, but I'm sure many will argue the other way. : : : : Now you're comparing a 100% guaranteed financial product with a 100% risk product. There are too many distinct differences for any kind of honest comparison short of a 300 page book. : : : Well, here's how I've been educated. If you BTID, then there is a risk factor. : : Of course. If your ID is in the stock market, the money is always at risk, even in bonds. However, the market's long-term average return is 11%...minus fees of maybe 2%...which means you should net 9% over the long haul. Obviously, the higher the risk, the greater the potential return all else being equal. A lot depends on if the difference is going into a qualified plan or you are investing non-qualified with after-tax $$$. : : On the BT side, just be sure you buy a quality, appropriate term policy...and not : : something "stripped-out" like Primerica and most of the rest. Then, you can leverage your insurance to increase your spendable income from the ID money at retirement anywhere from 40% to 100%. : : please explain what you mean by "stripped out"? how many companys offer renewable term? no medical checks. was in someones house that has a 15 year block. when that block runs out his premium goes from $500 a year to $2500 a year and he has to get medically check at that time. primerica's cost is alot lower at renewal age.in fact almost more then 1/2 the cost less. just thought i'd give you this bit of info. : : : However, this varies with people's ages. There are some people that are better off keeping a whole life plan. : : Dividends generally increase the longer you hold a whole life policy. So, you reach a point about 20 years out where it makes sense to keep the policy. : : However, if you're young enough, you're better off buying an inexpensive term life and investing the savings in something with higher rates of return. : : Again, a lot depends on if your are investing inside a tax-qualified retirement plan...or using the money after-tax to pay capital gains rather than ordinary income rates. Voluntarily overfunding a good UL, however, can give you all your gains back as tax-free income. It's an interesting alternative most people don't understand. : : Sure, there's risk, but that goes without saying if you want high growth. Rather than having a hefty life insurance plan, you will have some heftier assets, given that the record of the market keeps up through the next 30 or so years. : : Hopefully! But, no guarantees, of course. : : : As people get older, their need for life insurance decreases, as their kids are on their own, houses are paid off, and they have enough assets generating income to live on. : : Not true! This is "conventional wisdom"...like group term life is cheaper, or Blue Cross/Blue Shield is better because Ozzie & Harriet had it. Your life insurance can be most valuable as a tool in retirement to give you 40% to 100% more spendable income...plus give you other benefits at that time too. : : : That is, of course, if they have invested wisely and have good assets. : : You bet! But, I ask again -- how are "they" going to get the money back? : : : : Hope this has helped, Clint! hindi 2X : : : It has helped. I greatly appreciate the information and your advice.

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