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Message
Whole Life As Part Of Retirement Strategy
Posted on 6/2/15 at 10:36 am
Posted on 6/2/15 at 10:36 am
Every time a Whole Life insurance topic comes up on this board, I try to explain my approach with using Whole Life as PART of my overall retirement strategy. The link below is a nice article about a paper published by a retirement "expert" who is recommending my exact strategy. I'm not trying to convince anyone, I just wanted to show that there are benefits to Whole Life, if you have the cash.
LINK
Enjoy ripping me a new one for this preposterous way of thinking!
LINK
Enjoy ripping me a new one for this preposterous way of thinking!
Posted on 6/2/15 at 11:08 am to Douboy
I think the issue is not that whole life is inherently evil in all cases, but that 90% of the people it is sold to are being screwed with a product that is not appropriate for them and VERY expensive.
I'm one of those that thinks it's generally terrible, but agree that it can, in rare situations, be an important part of a portfolio. The key word is 'rare'. Very few people understand the variables enough to make the decision, even fewer actually need it.
I'm one of those that thinks it's generally terrible, but agree that it can, in rare situations, be an important part of a portfolio. The key word is 'rare'. Very few people understand the variables enough to make the decision, even fewer actually need it.
Posted on 6/2/15 at 11:24 am to Douboy
There are a few whole life policies out there that are good for a few people. It's a tool in the toolbox, although not one I would recommend often. But there are times when I do, and there will be times in the future when I do.
Posted on 6/2/15 at 11:34 am to Douboy
Instead of whole life, why not buy a long-term care policy? You are likely to actually use the insurance benefits and lower your retirement income requirements, and you can invest the premium savings to achieve a better rate of return for retirement savings.
Posted on 6/2/15 at 11:35 am to Douboy
I opened this with high hopes that it would enlighten me, but all I got was the typical snake oil salesman schtick. I was 2/3 of the way through it without seeing a single hard statistic. Then, I saw what looked like a good one. Unfortunately it was "there is only a 35% chance an investment only approach would outperform (enter snake oil plan) assuming a person lives to be 100.
That was their one statistic. Seriously.
The whole point of the article is that you can spend more wth annuities than investments (they are clearly assuming significant equity allocations in retirement throughout this article, which is the only way that most of their claims make sense) because they are a more reliable income stream.
His rebranding of annuities and insurance as "bonds" is a laughable attempt at rebranding an industry that has been tarnished by insanely high fees and relatively poor returns. With that said, I think the explanation is a good one, just with poor intentions because of his failure to disclose all of the implications.
That was their one statistic. Seriously.
The whole point of the article is that you can spend more wth annuities than investments (they are clearly assuming significant equity allocations in retirement throughout this article, which is the only way that most of their claims make sense) because they are a more reliable income stream.
His rebranding of annuities and insurance as "bonds" is a laughable attempt at rebranding an industry that has been tarnished by insanely high fees and relatively poor returns. With that said, I think the explanation is a good one, just with poor intentions because of his failure to disclose all of the implications.
Posted on 6/2/15 at 11:42 am to Douboy
I have a variable life insurance policy that provides a death benefit of $150,000 and also holds a cash value that steadily increases. Per my understanding of the policy's benefits, when I hit retirement age I can make withdrawals from the policy as supplemental retirement income. Obviously the VLP won't serve as my primary death benefit policy, but rather a supplement retirement vehicle.
If I'm stupid for having this (which is very possible), I'm all ears.
If I'm stupid for having this (which is very possible), I'm all ears.
Posted on 6/2/15 at 11:56 am to TheHiddenFlask
quote:
I was 2/3 of the way through it without seeing a single hard statistic.
Apparently you only read the article and not the actual paper that is linked in the article. It is a PDF file:
LINK
Posted on 6/2/15 at 12:09 pm to Poodlebrain
quote:
Instead of whole life, why not buy a long-term care policy? You are likely to actually use the insurance benefits and lower your retirement income requirements, and you can invest the premium savings to achieve a better rate of return for retirement savings.
This is the type of insurance that I feel I should learn a LOT more about.
Posted on 6/2/15 at 12:17 pm to Jag_Warrior
quote:
This is the type of insurance that I feel I should learn a LOT more about.
its generally a rip off. Great idea that no longer works. Its better to buy something specific like alzheimers or cancer insurance.
whole life insurance is generally sold to suckers. Not saying its always bad, but usually is. better to have term life plus investments on the side. Or forgo life insurance all together. I don't really see the need unless you have kids.
Posted on 6/2/15 at 12:42 pm to TheHiddenFlask
quote:
His rebranding of annuities and insurance as "bonds" is a laughable attempt at rebranding an industry that has been tarnished by insanely high fees and relatively poor returns.
I didn't read the article in the OP, but I want to expound on this tidbit. Perhaps this is a topic for its own thread, but I'll post it here to begin.
It is my opinion that annuities get such a bad wrap publicly that they are now "underrated" so to speak. There are certain annuities, namely fixed and index annuities, that are unfairly compared to an equity or balanced asset approach. Obviously annuities are not for everyone, but you have to account for the risk profile of the individual. Annuities shouldn't be compared to a Vanguard target retirement fund, for example. If the mutual fund is suitable, then the annuity isn't, and vice versa. A more logical comparison with regards to risk tolerance is an annuity vs. a CD or an individual bond.
/hijack.
Posted on 6/2/15 at 1:09 pm to Hawkeye95
Wait just to clarify you're stating WL or LTC insurance is a rip off?
Posted on 6/2/15 at 2:07 pm to Shepherd88
quote:
Wait just to clarify you're stating WL or LTC insurance is a rip off?
Both.
We looked into LTC for my father and step mother. It was quite expensive and didn't cover much. It used to be great, but the people who are going to need LTC often know it ahead of time and are more likely to buy it.
Posted on 6/2/15 at 2:07 pm to Hawkeye95
Term and invest is a helluva plan if you actually do it. I'm sure you do, but most don't. Therefore, forced savings make sense for a large majority of the bozos out there.
Posted on 6/2/15 at 2:12 pm to Hawkeye95
Meh, while I see what you're saying in the sense of "use it or lose it" the chances of you actually using the policy is extremely high and that's why the cost of a policy is so high....
Now to address your specific issue, I also have that concern as most do my clients and that's why I like the hybrid policies a lot better. (GUL w/ chronic illness rider) so if the LTC benefit isn't used then it's at least used as a life insurance policy. But should you qualify for the LTC benefit and need it, most of those hybrid policies are indemnity contracts meaning the insurance company will send you a check and you can use it for whatever you want. Rather than a reimbursement contract as a traditional policy.
Now to address your specific issue, I also have that concern as most do my clients and that's why I like the hybrid policies a lot better. (GUL w/ chronic illness rider) so if the LTC benefit isn't used then it's at least used as a life insurance policy. But should you qualify for the LTC benefit and need it, most of those hybrid policies are indemnity contracts meaning the insurance company will send you a check and you can use it for whatever you want. Rather than a reimbursement contract as a traditional policy.
Posted on 6/2/15 at 7:15 pm to Shepherd88
To me, whole life is for the wealthy.
Posted on 6/2/15 at 9:03 pm to Hawkeye95
quote:
It was quite expensive and didn't cover much. It used to be great, but the people who are going to need LTC often know it ahead of time and are more likely to buy it.
As someone who knows, the issue with LTC was incorrect pricing based on a number of incorrect assumptions. It is expensive now because no insurance company is willing to touch the thing based on how bad they got beaten up over it
ETA: People's ability to extend life longer was just wrecking companies
This post was edited on 6/2/15 at 9:04 pm
Posted on 6/2/15 at 10:01 pm to Hawkeye95
Whole life is actually a great place to park cash and to use it to enhance your overall wealth picture. However, it has to be high cash value life ins, not traditional whole life. I will use it to help invest in real estate. Once I use the cash value to buy a rental property or use it for a down Payment I don't interrupt the growth of the cash. Also-the money I take is similar to a flexible line of credit( all depends on the carrier of course) and I pay it back over time and use it as a vehicle of leverage for rental properties or other investments that create a higher rate of return .
Call me crazy, but I could argue that this may be a really efficient way to enhance your wealth w/ more cash flow and passive income than the typical 401k....
Just my candid thoughts..
Call me crazy, but I could argue that this may be a really efficient way to enhance your wealth w/ more cash flow and passive income than the typical 401k....
Just my candid thoughts..
Posted on 6/2/15 at 10:04 pm to iknowmorethanyou
Term and invest the rest in what?
True wealth is created from more cash flow and passive income not stockpiling eggs in a qualified plan incentivized by congress.
True wealth is created from more cash flow and passive income not stockpiling eggs in a qualified plan incentivized by congress.
Posted on 6/2/15 at 10:41 pm to Hawkeye95
quote:
We looked into LTC for my father and step mother. It was quite expensive and didn't cover much. It used to be great, but the people who are going to need LTC often know it ahead of time and are more likely to buy it.
Is there any chance that we could break LTC out into its own thread? I don't want to take this thread off topic, but I'd like to hear more about your opinion, and the opinion of others, on this topic.
Thanks for addressing that.
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