Re: TERM VS PERMANENT LIFE INSURANCE:

Subject: Re: Re: TERM VS PERMANENT LIFE INSURANCE:

Comments:
: --Great post! Some questions for you. What interest rate did you use and how were the monies contributed ($10,000 lump sum at start or end of year or is it divided in to 12 months)? : : : I bet you didn't know this. : : If you took $10,000 a year and invested it into a Life Insurance policy, after twenty years the cash value would be greater than that of an annuity/mutual fund. The comparson uses the same interest rate, over the same time period. Here's an example, : : Annuity/Fund would accumulate : : $ 478,094 : : Life Insurance would accumulate : : $ 483,276 : : : : But it is even better during the income/withdrawal phase. : : Annuity/Fund Total Withdrawals : : $ 481,455 : : Life Insurance Total Withdrawals : : $ 923,740 : : : : This is because in Section 72 (c)(e) of the IRC, Life Insurance allows for tax-free withdrawals up to your basis and then tax-free policy loans. Such withdrawals, of course, will reduce the Death Benefit. : : The important point is that Variable Life Inusrance OVER LONG TERM accumulates greater cash value than purchasing a Term policy and investing the difference. : : So use Number One: Use Life Insurance for SUPPLEMENTAL RETIREMENT INCOME. Please keep in mind that I do not advocate using Life Insurance as the sole tool for Retirement funds. Certainly Life Insurance should be viewed as a new way of providing income to ones retirement fund. The tax-deferred accumulation AND tax-free withdrawals offer compelling reasons to use Life Insurance to spplement Social Security, your own personal savings either in the form of a company-sponsored Pension Plan or a personal IRA/taxabale savings account. The ideal time frame to begin funding a Life Insurance policy as part of a supplemental retirement plan is fifteen to twenty until retirement. : : Additional Uses Of Life Insurance: : : Besides providing a Death Benefit for your family, Life Insurance has a great number of other uses. : : First, it can be used to pay Estate Taxes as part of one's Estate Plan. If properly structured within an Irrevocale Life Insurance Trust or owned by a family member, all proceeds are received TAX-FREE outside of one's estate. These tax-free proceeds are used to pay Federal and State Estate Taxes due at the second family members Death. Thus, instead of liquidating assets and/or selling property, the Life Insurance is used. In effect you are paying the estate taxes at a discount. : : Another significant use of Life Insurance is to fund a Buy-Sell Agreement among business owners. One of three things will happen to every business owner; you will either die, become disabled, or retire. It is important to have a written and funded Buy-Sell Plan to handle all these contingencies. Life Insurance within the Buy-Sell is the most affordable way. : : The business owner could create a SINKING FUND with which a business could make deposits to a fund specifically earmarked to pay cash for the deceased owner's business interest. However, the agreement may call for cash payment to the family and the sinking Fund may not have accumulated enough capital; especially if death occurs prematurely. : : Secondly, as the Sinking Fund ties up accumulated capital, the business owner may want to pay-out/buy-out the deceased's owners interest on an After-Tax Installment Basis, after the business owner's death. To buy-out let's say $100,000 business interest, as an example, would take a total of $166,000 spread out over ten years. I don't know of to many surviving spouses that would be willing to wait ten years for the existing full fair market value of $100,000. : : Lastly, there is Life Insurance. It would cost approximately $1,440 a year (assuming a standard non smoker Male of Age 45) to purchase the interst of $100,000. This is a Universal Life policy that accumlates tax-free cash values. You can see the first year to create the tax-free fund of $100,000, it would only cost approximately TWO PENNIES on the dollar. And even over ten years, it would cost only $14,000 as comapred to the Sinking Fund of $166,000. Consequently, one can easily see that Life Insurance is the quickest, most affordable way to buy-out the deceased owner's business interest.

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