I understand that a whole life policy can be used as a volatility buffer.
But just about any account can be moved into that status when the time is right.

To imply a unique status to whole life is a little disingenuous. It can't help but to be a volatility buffer because the lack of options that come with such a policy.

I can admit that a whole life policy (and other permanent cash value products) can have competitive returns at 30 years.
But the lack of variability and extremely expensive opportunity cost if the policy is cancelled early (or death benefit used) gives me a long, long pause before anyone should consider this.

It really is as serious as a marriage. Because if another better opportunity comes along 5, 10, 15, and 20 years in... it is a super-expensive divorce.

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Posted by JL

Member since Aug 2006

3052 posts

Posted on 4/18/24 at 1:42 pm to meansonny

I mean you cash it out and you lose money, just like a divorce up to a point. I would have to look, but my guaranteed money without any dividend influence breaks even with my investment at like 17 yrs. At 10 yrs I would get back like 75% of my investment. My policy has never missed a dividend payment and puts a multiplier on the dividend payment tied to that years S&P 500 performance up to 2x so I would imagine my break even will be closer to 12 yrs. I'm sure if I closed my policy early I would be pissed for not investing in something else, but I knew what I was getting and how I planned to use it when I signed up. I doubt I will ever touch it, probably just use it for my kids wedding, first house downpayments, etc. then they get a pretty generous gift tax free when we pass.

This post was edited on 4/18/24 at 2:02 pm

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