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Message
re: Anyone using a whole life insurance policy for income?
Posted on 6/13/23 at 9:37 am to TDsngumbo
Posted on 6/13/23 at 9:37 am to TDsngumbo
quote:
Even if he would owe taxes at this point, it’s best to cut losses now instead of letting the problem fester.
You don't know if there is a problem and you don't know anything about the guy and what tax implications could arise.
0
Posted on 6/13/23 at 9:45 am to La Place Mike
quote:
quote:
Aren't 6 month treasuries paying 5.3% right now?
Yes. I notice you did not bring up 30 year treasuries which are currently at 3.84%. That would be a better comparison.
The point is opportunity cost.
Life insurance and annuities have so much front loaded expenses that you either lose so much flexibility (moreso than even a 30 year treasury) or you have locked in losses if you do decide to change your needs in the future.
I'm not a Clark Howard fan. But I like his premise that keeps as much of your money flexible so you can pivot as life throws change ups and fast balls at you (i.e. some of the worst financial opportunities grab and lock up your money up front).
Posted on 6/13/23 at 10:37 am to meansonny
I guess to give some more context, I'm 40, my wife is 35. I have an old life policy before we had kids, but now I'm uninsurable and that policy won't cover what I would want it to if I died. She is tip top health so I'm putting a lot of money in a whole life policy for her/kids down the road. We both max out 401K's and have separate investment accounts and rental properties. This was sort of just another investment vehicle where I could produce some long term income for the family if I die. I've pumped in a bunch of money to front load the whole life policy.
This post was edited on 6/13/23 at 10:41 am
Posted on 6/13/23 at 10:45 am to meansonny
quote:
I'm not a Clark Howard fan
I haven’t caught his radio show in years. But I always thought that he was pretty reasonable when I did listen. What about him don’t you like? Just curious.
Posted on 6/13/23 at 11:10 am to JL
quote:
JL
I appreciate you providing more information but it really isn't enough for people to give legimate advice.
Sorry to hear that you are uninsurable. Since you are uninsurable, did you happen to purchase a LTC policy before you became uninsurable? If not consider that the cash value can be used, tax free, for LTC expenses. LTC expenses can wipe out the average american's retirement leaving the spouse with few options.
Posted on 6/13/23 at 11:22 am to La Place Mike
It’s just for another year or so then I can purchase but it’s gonna be expensive as shite.
Posted on 6/13/23 at 11:32 am to JL
quote:
I guess to give some more context, I'm 40, my wife is 35. I have an old life policy before we had kids, but now I'm uninsurable and that policy won't cover what I would want it to if I died. She is tip top health so I'm putting a lot of money in a whole life policy for her/kids down the road. We both max out 401K's and have separate investment accounts and rental properties. This was sort of just another investment vehicle where I could produce some long term income for the family if I die. I've pumped in a bunch of money to front load the whole life policy
We are talking different languages.
I don't consider a death benefit to my spouse/family as "income" although I do recognize it as income replacement.
Posted on 6/13/23 at 11:34 am to Jag_Warrior
quote:
quote:
I'm not a Clark Howard fan
I haven’t caught his radio show in years. But I always thought that he was pretty reasonable when I did listen. What about him don’t you like? Just curious.
He is more than reasonable.
But he is a travel agent who gives all kinds of financial advice.
He seems like good people. When his advice backfires, he retracts and changes his preaching. It is the difference between wisdom and knowledge (knowing what you don't know).
Posted on 6/13/23 at 11:51 am to JL
quote:
It’s just for another year or so then I can purchase but it’s gonna be expensive as shite.
I am in the same boat.
Posted on 6/13/23 at 4:28 pm to meansonny
quote:
He seems like good people. When his advice backfires, he retracts and changes his preaching.
OK, I see what you mean. I guess I just noticed that when he was wrong about something, he would admit it. I think it’s important to learn from one’s mistakes or errors. I mean, no one is right all of the time. Anyway, I haven’t listened to his show in years. Didn’t know he was still on the air.
Posted on 6/14/23 at 8:30 am to meansonny
quote:
Life insurance and annuities have so much front loaded expenses
I had a whole life insurance policy for a few years and that ended up being my issue. I was paying a whole life insurance company $120 a month. $30 a month went to a small policy and $90 was invested in bonds. Eventually cashed it out to just focus on maxing my 401K and IRA.
This post was edited on 6/14/23 at 8:40 am
Posted on 6/14/23 at 1:19 pm to PetroBabich
quote:
I was paying a whole life insurance company $120 a month. $30 a month went to a small policy and $90 was invested in bonds.
That doesn't sound like a Whole Life policy.
Posted on 6/14/23 at 5:04 pm to La Place Mike
Then what is a whole life policy and what does what I had sound like to you?
Posted on 6/14/23 at 7:22 pm to PetroBabich
quote:
Then what is a whole life policy and what does what I had sound like to you?
You can't allocate funds in a Whole Life policy so you would not be able to choose a bond fund. You can choose different funds in Variable Universal Life and Index Universal Life policies.
Posted on 6/14/23 at 9:18 pm to La Place Mike
A good rule of thumb:
If you’re buying life insurance for something other than, you know, life insurance (death benefit), you should be acutely aware of what you’re doing and explore all other options too.
At the end of the day, a life insurance policy takes the actuarial risk and tacks on a profit margin for the insurance company. The agents, customer service staff, etc, aren’t free. You need to take that into consideration in the decision making process.
Lastly, if you’re talking to someone about creating a life insurance income stream and that person isn’t licensed for other securities (series 6, 7, 63, 66, etc), be very careful. To a hammer, everything is a nail. When the agent can ONLY sell life insurance/annuities, don’t be surprised when that’s their answer for everything.
If you’re buying life insurance for something other than, you know, life insurance (death benefit), you should be acutely aware of what you’re doing and explore all other options too.
At the end of the day, a life insurance policy takes the actuarial risk and tacks on a profit margin for the insurance company. The agents, customer service staff, etc, aren’t free. You need to take that into consideration in the decision making process.
Lastly, if you’re talking to someone about creating a life insurance income stream and that person isn’t licensed for other securities (series 6, 7, 63, 66, etc), be very careful. To a hammer, everything is a nail. When the agent can ONLY sell life insurance/annuities, don’t be surprised when that’s their answer for everything.
Posted on 6/15/23 at 5:29 am to La Place Mike
quote:
You can't allocate funds in a Whole Life policy so you would not be able to choose a bond fund.
I did not choose the bond fund. It was the only fund the insurance company had associated with their life insurance. I'm pretty sure what I had was a whole life policy. If not then what's a whole life policy?
Posted on 6/15/23 at 7:57 am to PetroBabich
quote:
I did not choose the bond fund. It was the only fund the insurance company had associated with their life insurance.
How would you know this?
Posted on 6/15/23 at 8:33 am to La Place Mike
By reading my policy documents and talking with the agent.
Posted on 6/15/23 at 9:13 am to PetroBabich
quote:
did not choose the bond fund. It was the only fund the insurance company had associated with their life insurance. I'm pretty sure what I had was a whole life policy. If not then what's a whole life policy?
My suspicion is that this is a generic explanation of how whole life works. Some part of the premium covers the mortality risk, and the rest goes into the general investments (mostly bonds) of the insurer, from which they collect income and pay out dividends to policyholders.
I doubt you had a direct investment in a bond fund, but the general idea is accurate.
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