Whole Life Policy: Good Investment?

Easy answer: HELL NO

Do you consider -100% return over the first 3 - 5 years years a good investment?
How about 1.3 - 3% average over his life?
How about breaking even and showing a return at finally 20 years average?
How about when he wants to use that money he has to take it out as a loan at 5 - 8%?

quote:

---

investment

---

quote:

---

whole life policy

---

Those two should not be in the same sentence. 99% chance the only thing a whole life policy is good for is making the salesperson money

The soundest investment advice is a hard NOPE

Your whole life policy is a great investment for your insurance agent.

Absolutely not. You NEVER think of a whole life policy as an investment.

First of all, you’ll rarely get more cash value than you paid into it nowadays.

Secondly, if you ever use your cash value and don’t pay it back, interest accrues every year on top of the balance. When that balance becomes more than the cash value, the policy cancels. IF the total loan balance is more than the cost basis of the policy when it cancels, you’ve lost your policy and created a taxable event for yourself.

The only agent pushing a whole life policy is a commissioned agent. Don’t let them fool you. In a couple cases a universal life policy may potentially be a good fit BUT you HAVE to keep up with it every year - by that I mean pay more and more and more each year - because if you don’t, that too will eventually end. UL policies are NOT permanent policies.

Buy term and invest the rest. You’ll always come out ahead by doing that.


Edit to add: a smaller whole life policy may be a good fit for some who want to ensure that just burial costs are covered so I do recommend to lots of my customers a small $25,000 whole life policy if they insist on having whole life, but they should always use that as a compliment to a larger term life strategy to cover their working years when they have a much larger need for coverage. Let the term expire later in life if they outlive it and keep the small whole life for burial. It’s also not a terrible strategy to just do lots of term (around 1-3M each) until retirement and put away $50-75 a month that entire time so that there are enough funds for burial if they outlive the term.

quote:

---

Dave Ramsey says no

---

It's the payday lender of the middle class. Or is that time shares? I get confused.

I do like how Ramsey is very against things that are solved by his sponsors.

You don’t need a credit score! Just use Churchill mortgage ( a sponsor).

You don’t need a credit card. Just use dollar car rental ( a sponsor).

Time shares are evil. Use “Time Share Exit” (a sponsor).

Insurance is indemnity, and not an investment.

Whole life insurance has benefits that some will never accept. Make your own decisions and press forward.

I'll take the bullet here and say some positive things.
First, I would not consider WL if one was not maxing out qualified plans. At 25, I might suggest all in on stocks, so maybe not WL. For someone a little older, who is maxing out every IRA, 401K, etc. and has a desire for some bond alternative, and has liquidity and staying power, yes. That eliminates most people.

I have a lot of money (relative to net worth) in later generation WL policies that are funded near the modified endowment limits. My current year over year cash value returns are around 5.5%. It took a decade to break even, so my long term cash value average will look more like 4.5% tax advantaged, and that includes the cost of coverage, which I needed.
When the market is up 20%, it's disheartening, and in years such as this, it's comforting. I would compare it to bonds, as there is no resemblance to the stock market, and it I don't consider it an alternative to stocks.
Fire away.