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iknowmorethanyou
LSU Fan
Paydirt
Member since Jul 2007
6131 posts

re: Life Insurance
You can still get preferred rates with admitted cigar usage. So long as it's less than 24 per year. Definitely go through a broker who will analyze your exact situation.


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TheBoo
New Orleans Saints Fan
The Bay Area
Member since Aug 2012
1894 posts

re: Life Insurance
quote:

Buy as much permanent coverage as you can

quote:

Leverage your death benefit and spend your tax free dividends in retirement

Unless you are extraordinarily wealthy this is a terrible idea. This is one of the reasons you can't trust insurance salesmen and how a lot of average working Americans get/have gotten the shaft.


bstew3006
LSU Fan
318
Member since Dec 2007
2033 posts

re: Life Insurance
You don't do that unless you can truly fund it!! Pick a custom policy and fund the hell out of it for 5/10/15/20 years and let it cook. If you do it right, every $1 you put in, you'll get $4/$5 back tax free. Now this is contingent on you funding it, time horizon and strong dividend.
This post was edited on 1/3 at 8:21 am


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32
BestBanker
LSU Fan
Around here.
Member since Nov 2011
8721 posts

re: Life Insurance
quote:


Unless you are extraordinarily wealthy this is a terrible idea.

This is an incorrect assumption. Wealth is relative and financial decisions should be weighted appropriately. A fast food employee with minimum wage income shouldn't purchase a million dollar yacht, but maybe a bass boat. Both float, but offer different value.

quote:

This is one of the reasons you can't trust insurance salesmen

I agree that salesmen of any kind (auto, knives, real estate, insurance, group plans, investment bank, etc.) only look to sell their wares. Trust the information if true.

Btw, riddle me this: Of all insurance agreements available that offer coverage for any reason, which insurable event has a 100% probability of occurrence? If you know the answer, then do you decide to insure it? It's about choice.


baldona
Auburn Fan
Florida
Member since Feb 2016
7008 posts
 Online 

re: Life Insurance
quote:


Btw, riddle me this: Of all insurance agreements available that offer coverage for any reason, which insurable event has a 100% probability of occurrence? If you know the answer, then do you decide to insure it? It's about choice.



Yes, but at what cost?

How much are you recommending? Let's say the avg Money board guy makes $100k, so he gets a term policy of $1 mil at age 35 for 20 years for $75/ month. I feel those are fairly accurate enough numbers.

You are recommending insurance that is $300+ month right? that's $3600/ year.

Honestly, I don't understand the "need" for life insurance once I'm past 60. If you are thinking about life insurance in your 30s, your net worth at 50+ should be great enough with very very low debt for your wife and kids to be well off without you.

If you "need" life insurance past 55 after obtaining term at 35 then you made some serious financial mistakes.


bstew3006
LSU Fan
318
Member since Dec 2007
2033 posts

re: Life Insurance
quote:

Yes, but at what cost? How much are you recommending? Let's say the avg Money board guy makes $100k, so he gets a term policy of $1 mil at age 35 for 20 years for $75/ month. I feel those are fairly accurate enough numbers. You are recommending insurance that is $300+ month right? that's $3600/ year. Honestly, I don't understand the "need" for life insurance once I'm past 60. If you are thinking about life insurance in your 30s, your net worth at 50+ should be great enough with very very low debt for your wife and kids to be well off without you. If you "need" life insurance past 55 after obtaining term at 35 then you made some serious financial mistakes.



You're looking at it from just the Death Benefit stand point. However, some still want to leave a legacy after age 55, you might not want to but others do. I work with plenty of clients that are worth 5mil, 7 mill and have huge WL policies. They've done pretty well for themselves financially. Point is, just bc you don't or do see value doesn't mean the next person does or doesn't. He is speaking about supplementing your retirement this way. I'm 36 and put $1,000 per month / 12,000 a year into a policy or 10 years. I'm doing this bc I want to maximize tax free accumulation and supplement my other retirement accounts. You have to stop thinking about the Death benefit when doing this. The death benefit is just he vessel that's keeping me tax free.
This post was edited on 1/3 at 4:12 pm


BestBanker
LSU Fan
Around here.
Member since Nov 2011
8721 posts

re: Life Insurance
quote:

Honestly, I don't understand the "need" for life insurance once I'm past 60. If you are thinking about life insurance in your 30s, your net worth at 50+ should be great enough with very very low debt for your wife and kids to be well off without you.

If you "need" life insurance past 55 after obtaining term at 35 then you made some serious financial mistakes


Nobody needs life insurance. Hope that answers your question. It's purchased/sold because people "want" it. Example: let's say young couple with children, and the husband earns the income, and he died suddenly without life insurance. The wife and children will survive; they just won't have the standard of living that they were used to because there was no life insurance.

Somebody might want to own life insurance contracts because of the tax-free status, cost recovery, dividend payments, liquidity, etc.

Again another assumptive statement in this thread about making mistakes if you own life insurance when you're older. I think we all are going to die when we're older so why would you want to lose the millions of dollars of tax-free asset that either A. you could pass on to someone else B. give away to anybody else C. sell it D. spend it E. Leverage it's value? It's. An. Asset.



baldona
Auburn Fan
Florida
Member since Feb 2016
7008 posts
 Online 

re: Life Insurance
quote:

A. you could pass on to someone else B. give away to anybody else C. sell it D. spend it E. Leverage it's value? It's. An. Ass


Lol. So is cash and so is a 401k that you can pass on tax free, and if you put the same amount into a 401k as you do insurance you'll be better off. That's the sales part you are leaving out.

I disagree about needing it. I want to pay for my kids college and for them to have a good life if I'm not around. Sure I definitely agree they can survive without me, but as a father I want to help them whether I'm alive or dead. If you take the 'insurance' part of it out, paying for what I can't afford, then literally all you are doing is selling me a crappy investment.

Again, this whole 'investment' vehicle is a load of BS.

Before you explain why someone should get anything but term, please also explain your commission rates on those policies. Explain how a company can make that policy a 'great' investment while making huge commissions on it? You simply can't.

There's literally no tax benefit for anyone worth under $11 mil to have a whole life or similar policy. They wouldn't be taxed at death on anything they owned as it is. Again a sales pitch.


AUtigerNOLA
Auburn Fan
New Orleans, LA
Member since Apr 2011
16257 posts

re: Life Insurance
quote:

I think we all are going to die when we're older so why would you want to lose the millions of dollars of tax-free asset that either A. you could pass on to someone else B. give away to anybody else C. sell it D. spend it E. Leverage it's value? It's. An. Asset.



I think most people fail to understand the tax free return part of this. They think its better off to invest all those funds you would put in the whole life policy into the market. Which generally is not a bad move because historically the market performs better. But the thing people fail to miss is the the market could be performing on a downturn when you retire.

I would rather pull from this than my investment accts to let the market recover and recoup back any gains you might have had. Not to mention you have to pay taxes when you withdrawal from your 401k and investment accts. It is not for everyone obviously, but its a way to improve your retirement assets.

I just hate when people shite on the whole thing like its the worst financial decision anyone can make which is just not true. It could be for a person who isn't willing to continue to fund the policy to its completion. That's the risk, just like with everything else, there is a risk involved.
This post was edited on 1/3 at 1:54 pm


bstew3006
LSU Fan
318
Member since Dec 2007
2033 posts

re: Life Insurance
quote:

I just hate when people shite on the whole thing like its the worst financial decision anyone can make which is just not true. It could be for a person who isn't willing to continue to fund the policy to its completion. That's the risk, just like with everything else, there is a risk involved.



To many people take the Dave Ramsey course and think they are experts or the have a buddy working for a company like Primerica that shits on it. But you are absolutely right in the points you made. Its about supplementing your retirement. WHY? bc to many people Kill their retirement accts in down markets. That's the leverage part people are missing


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22
BestBanker
LSU Fan
Around here.
Member since Nov 2011
8721 posts

re: Life Insurance
quote:

so is a 401k that you can pass on tax free

You're the winner, champ.
quote:

literally all you are doing is selling me a crappy investment.

Congrats. You've got it figured out.
quote:

Before you explain why someone should get anything but term, please also explain your commission rates on those policies

I cannot explain anything to you, but since you brought it up here, what's the commission rate on the term policy? Curious.
quote:

Explain how a company can make that policy a 'great' investment while making huge commissions on it?

(See previous reply.) To add, insurance is NOT an investment. It's insurance.
quote:

There's literally no tax benefit for anyone worth under $11 mil to have a whole life or similar policy

Thanks! It's been nice.




EA6B
Navy Fan
TX
Member since Dec 2012
7708 posts

re: Life Insurance
quote:

To add, insurance is NOT an investment. It's insurance.


This gets really old, I have had a dozen insurance salesmen spend hours telling me the benefits of putting my money in their product as opposed to other investments, even showing me ROI projections which they pulled from thin air, but when I start asking questions that I would ask any person offering me some type of investment opportunity instead of answers I get the "Its not a investment, its insurance." You guys should get together and write a new play book.


LSUFanHouston
LSU Fan
NOLA
Member since Jul 2009
12096 posts

re: Life Insurance
quote:

I think most people fail to understand the tax free return part of this.


Yeah, let's talk about this.

If you die, in the vast majority of cases, death proceeds are income tax free. Easy enough.

Dividends during the life of the policy are tax free, because they are returns of premium. You are literarly getting some of your own money back. It's not really an investment, then, is it? And if you take them out in cash, it reduces your basis in the policy.

Take a loan against cash value? You will owe interest, which will keep running up the loan. If you are lucky, you die and the loan (including interest) reduces death benefit. If you cancel the policy, the loan gets paid off against the cash value.

So let's put it all together.

If you take money out of the policy during life, yeah, it's tax deferred, I guess, but you are going to have to pay the piper at some point. That price comes in the form of interest as well as crappy investment rates.

If you don't take the money out, and you die... then you wasted a ton of money on whole life that should have been used for term and investments.

As I've said before... whole life only makes sense in a few spots:

1) You will have an estate tax issue and you want to use the proceeds to pay the estate tax, AND, you die after the point that term insurance will work (term becomes crazy expensive as you get real old, and unavailable at some point).

2) You are using it to fund a business buyout. Same rules as far as age/term insurance apply as he first point.

And in both points above... convertible term might make more sense.

3) You are very wealthy, have truly run out of all other tax-deferral buckets, and this is the only option you have left.


BestBanker
LSU Fan
Around here.
Member since Nov 2011
8721 posts

re: Life Insurance
quote:

"Its not a investment, its insurance." You guys should get together and write a new play book.
quote:

This gets really old, I have had a dozen insurance salesmen spend hours telling me



I always hesitate to join this type of post for what I consider to be stubborn indignation from those who have it all solved, and yet, from time to time (every few years) someone asks a fair question to which I like to offer some of my 3 decades of experience. What truly amazes me is the abounding ignorance when so much information is truly available with the advent of the internet search engines. Opinion and emotion don't offer excellence in decision-making, but be that as it is, you're a winner too. Thank you for your input.


hungryone
LSU Fan
river parishes
Member since Sep 2010
7262 posts

re: Life Insurance
If your spouse has decent earning potential, why buy insurance? I'd rather see him/her direct the $$ into a retirement account that he/she hopefully will live to see & enjoy, rather than shovel premiums into a fat death benefit for me. If I'm the beneficiary, I'll get those retirement funds anyway should he/she die before me. If my better half pre-deceases me, I'm not going to stop working. (I can understand buying a term policy if you have young children.) The typical "wife left behind" scenarios used to illustrate the typical policy are stuck in 1950...and I think the insurance industry forgets how many women are solid earners and aren't going to drop out of the workforce if widowed.

I'm reminded of a family I know; dad died of lung cancer (a horrible death, with much suffering). He left a fat pile of cash to wife/young adult son....who have proceeded to wallow in grief to the point of mental illness. I keep thinking that if either of them had been forced back into the workplace, their prolonged, complicated grief might have been helped a bit by continuing to feel useful and productive. Instead, every penny they spend comes with a truckload of survivor's guilt. It's a very sad circumstance. A big pile of money to the survivors isn't necesssarily in their best interest.


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lsujro
LSU Fan
BR
Member since Jul 2007
2995 posts

re: Life Insurance
A big thing for term was my cholesterol and BMI. Having moderatlely high cholesterol (despite a good ratio) and being muscular really dinged me with many providers. Shop around is my recommendation. I was rated with several and ultimately cut premium in half vs my first offers (i went with Prudential fwiw). Many financial advisors can run you through multiple providers to find you the best rate.

eta i pay about $500/year for $1mil 20 yr term at second or third highest rating, purchased at 28yo. wife has highest rating and it's about $200/year for $500k with different co.
This post was edited on 1/3 at 4:05 pm


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AUtigerNOLA
Auburn Fan
New Orleans, LA
Member since Apr 2011
16257 posts

re: Life Insurance
quote:

Take a loan against cash value? You will owe interest, which will keep running up the loan


This would be a bad decision. Why do you assume everyone would take this route?


TheBoo
New Orleans Saints Fan
The Bay Area
Member since Aug 2012
1894 posts

re: Life Insurance
quote:

Which generally is not a bad move because historically the market performs better.


So we are admitting that it's an under-performing investment option, which only tax shelters up to the amount of the premiums paid...

Y'all are recommending that people take out a huge whole life insurance policy to pour their hard earned money into as an under-performing investment for retirement which they will forfeit to the insurance company if they die before using it? You want to talk about risk? That's a huge gamble.

Explain to me how that's a better option than purchasing a term policy and investing for retirement in traditional, higher performing vehicles, so that if you die before you are self-insured your family will get both the death benefit AND your investments?


This post was edited on 1/3 at 4:20 pm


LSUFanHouston
LSU Fan
NOLA
Member since Jul 2009
12096 posts

re: Life Insurance
quote:

This would be a bad decision. Why do you assume everyone would take this route


Because 100 percent of life insurance agents I have met with, have mentioned this as one of the top "features" of whole life insurance. It is a heavily pushed "feature" of the product.

Also, about 98 percent of life insurance agents I have met, when faced with a client that can't afford the premium a few years down the road, tell the client "just take a loan to pay the premium" which is absolutely asinine.


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bstew3006
LSU Fan
318
Member since Dec 2007
2033 posts

re: Life Insurance
quote:

So we are admitting that it's an under-performing investment option, which only tax shelters up to the amount of the premiums paid...


Its not for everyone, as stated before, you have to really fund them. But also distinguish between policies designed for a Death Benefit and ones designed for Cash Accumulation, Big Difference. If you can only afford $100 month, it's not for you. Not once was it mentioned to do this as a stand alone retirement acct. It's to tax diversify your portfolio and supplement retirement.

I'm paying $1,000 month / $12,000 per year for 18 years for a total contribution of $216,000, done when I'm 52. Now as I'm doing this, I'm funding other retirement accts in the market. During retirement I can elect to supplement my retirement to annual payments of $67,000 per year tax free for 10 years which is $670,000. My cash account will be over $200,000 still earning a Dividend! The dividend is based off my total cash account before receiving payments, so the dividend offsets my interest and will continue to grow, just at a slowed rate. Now if I don't access anymore cash, my family will receive a Death Benefit of over $450,000. That's a 1:5 ration on money contributed.

I did this bc I know the market will fluctuate nearing my retirement and after I retire. Majority of retirees don't plan for market corrections. So I wanted a tax free source of money that would allow me to leave my invested assets alone during market corrections or reduce my distribution. No one talks about the market when its Flat, 2%-5% and you're taking a 2%-4% distribution.

Is this for everybody, no! Not everyone can truly fund this product. If you are a buy term invest the difference, then DO IT! I however want to eliminate some of my risk by Tax Diversification. I buy term, invest the difference and also have a Tax Free plan. No one is stupid for doing either.
This post was edited on 1/3 at 4:45 pm


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