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Message
re: Permanent Life Insurance - Keep it or scrap it?
Posted on 1/29/19 at 12:53 pm to GoCrazyAuburn
Posted on 1/29/19 at 12:53 pm to GoCrazyAuburn
GoCrazyAuburn brings up a good point..
My response was assuming you purchased whole life insurance. Universal life insurance is a whole different vehicle and is a big reason permanent insurance gets a bad name. If you’re friend sold you universal life insurance at your age, please go kick his arse now.
And just so you know, my dad purchased permanent life insurance for me when I was younger. He signed it over to me a few years back. I put around $1200 a year in it and it spits off approximately $1400-1500. I plan to never use that cash value; strictly death benefit. Premiums will never change and death benefit will only increase as long as I pay in it. I hated it as a Christmas gift when I was younger but greatly appreciate my dad looking out for my future family or having the option to access the cash should I need it.
My response was assuming you purchased whole life insurance. Universal life insurance is a whole different vehicle and is a big reason permanent insurance gets a bad name. If you’re friend sold you universal life insurance at your age, please go kick his arse now.
And just so you know, my dad purchased permanent life insurance for me when I was younger. He signed it over to me a few years back. I put around $1200 a year in it and it spits off approximately $1400-1500. I plan to never use that cash value; strictly death benefit. Premiums will never change and death benefit will only increase as long as I pay in it. I hated it as a Christmas gift when I was younger but greatly appreciate my dad looking out for my future family or having the option to access the cash should I need it.
1
Posted on 1/29/19 at 12:57 pm to itsbigmikey
GoCrazy provides very sound wisdom in this arena. Don't believe all the negativity. Everyone is entitled to their opinions on the subject. However, just do the research on determining if its the right choice for you.
Posted on 1/29/19 at 12:58 pm to itsbigmikey
Has anyone asked you yet how much the death benefit total is currently?
This is what is considered to be the tax-free value of your asset. Do an internet search on leveraging death benefit for tax-free income during retirement.
I'd consider keeping it. Learn how to use the cash value for investments while maintaining the policy.
This is what is considered to be the tax-free value of your asset. Do an internet search on leveraging death benefit for tax-free income during retirement.
I'd consider keeping it. Learn how to use the cash value for investments while maintaining the policy.
Posted on 1/29/19 at 1:00 pm to itsbigmikey
Scrap it. Get term life insurance if you have a spouse or children who depend on your income (otherwise you do not need term life). Insure for your anticipated lifetime earnings. Buy the term life insurance from an independent agent who can shop around.
Ditch NW Mutual. They are giving you bad advice and taking your money. That "advisor" made a nice commission to sell you that policy. He is taking money out of your pocket and putting it in his. It may hurt in the short term but you will recoup the losses in a few years after investing in tax advantaged accounts first (401k then roth) then using the left over for a taxable account.
In general it is a bad idea to mix insurance and investing.
Ditch NW Mutual. They are giving you bad advice and taking your money. That "advisor" made a nice commission to sell you that policy. He is taking money out of your pocket and putting it in his. It may hurt in the short term but you will recoup the losses in a few years after investing in tax advantaged accounts first (401k then roth) then using the left over for a taxable account.
In general it is a bad idea to mix insurance and investing.
Posted on 1/29/19 at 1:11 pm to EhSeeJay
He doesn’t have to look at his permanent life insurance as an investment. Lets say he does have a family. I agree buying term for the unexpected is definitely smart. But I would also say mixing it with a permanent policy isn’t a bad idea (depending on how much he can afford). If he buys a 10, 20, or even 30 year policy, chances are he will outlive it (30 year puts him at 56 years of age). What does he do then? Start all over? Majority of the rime there are no clauses to get return of premium and if so, you pay substantially for that rider. Slim chance his health is as good as it was when he first took his policy. Who knows when he will have his last child and life insurance is still needed. BigMikey seems like a top notch dude, but will his kids grow up to be the same and self sufficient when he passes? A good chunk of permanent insurance (let’s say $250K) purchased at a young age guarantees these questions are answered and he has the option to cease payments on the policy before this term plan ends
This post was edited on 1/29/19 at 1:13 pm
Posted on 1/29/19 at 1:52 pm to itsbigmikey
quote:
scrap it
Definitely this, but get a term policy in place before you scrap it.
Posted on 1/29/19 at 2:53 pm to itsbigmikey
Good points are brought up on the side of keeping it. A couple on the scrap it side. I have had a permanent policy in place for the last 8 years. I have put just under $200 in per month. Consider this advice from someone a little bit down the road from your situation.
Dipped into it once when times were tight. I don't have kids, but this is my two cents. Use it as an emergency savings vehicle that will (down the road) get you a better return then putting money in a savings account, money market, CD, etc... with tax advantages. At times, I hated to see the money being drawn from my account, but I knew this isn't the end all be all of planning. I contribute heavily to my 401k/Roth 401k and figured this is my "bond portfolio" and allows me to be more aggressive in the market.
I am another year or two away from having my cash value equal the amount of money I have put into the policy, but my annual return has exceeded my annual contributions for the last few years. If the $200 isn't hurting your budget and you can put other money to fund the Roth, just consider it a bigger part of your tax free retirement planning once you get to the distribution phase. Also, you can take withdrawals at anytime from the account if you get into a pinch as I did a few years ago. You went with a highly rated company as well, so just check the policy and see how much cash you would have in your later years if you stay the course.
Dipped into it once when times were tight. I don't have kids, but this is my two cents. Use it as an emergency savings vehicle that will (down the road) get you a better return then putting money in a savings account, money market, CD, etc... with tax advantages. At times, I hated to see the money being drawn from my account, but I knew this isn't the end all be all of planning. I contribute heavily to my 401k/Roth 401k and figured this is my "bond portfolio" and allows me to be more aggressive in the market.
I am another year or two away from having my cash value equal the amount of money I have put into the policy, but my annual return has exceeded my annual contributions for the last few years. If the $200 isn't hurting your budget and you can put other money to fund the Roth, just consider it a bigger part of your tax free retirement planning once you get to the distribution phase. Also, you can take withdrawals at anytime from the account if you get into a pinch as I did a few years ago. You went with a highly rated company as well, so just check the policy and see how much cash you would have in your later years if you stay the course.
Posted on 1/29/19 at 2:59 pm to boosiebadazz
quote:
If the ashes were to come back as $500,000 or more for his future family when he dies it may be
He can do that for $20.00 a month.
Posted on 1/29/19 at 3:03 pm to EA6B
assuming you die within the term.
Posted on 1/29/19 at 4:08 pm to GoCrazyAuburn
Ideally term life insurance is in place until you are financially independent and can insure yourself (20-30 years). Once you hit the term, you are nearing or in retirement and should have a nest egg to support your loved ones. You should be self insured (from death in a sense) at this point.
Posted on 1/29/19 at 4:30 pm to EhSeeJay
Sure, in theory, but absolutely not always the case. Term is insurance against premature death. Permanent insurance is not. Comparing the two as if they are truly designed for the same purpose is not worth anyone's time.
My point was more to the argument is you can spend less on term and be better off. Well, no, you spend the same amount of money, just in different places.
If you buy term & invest the difference or buy permanent insurance, you're still spending the same amount of money. At that point, there are benefits and drawbacks to both options. One is not guaranteed to out perform the other or be the right one for a certain situation. Anyone that says one is always better than the other should not be trusted.
My point was more to the argument is you can spend less on term and be better off. Well, no, you spend the same amount of money, just in different places.
If you buy term & invest the difference or buy permanent insurance, you're still spending the same amount of money. At that point, there are benefits and drawbacks to both options. One is not guaranteed to out perform the other or be the right one for a certain situation. Anyone that says one is always better than the other should not be trusted.
Posted on 1/29/19 at 4:32 pm to GoCrazyAuburn
I think I agree with you.
Posted on 1/29/19 at 4:46 pm to Chuckiee
quote:
I plan to never use that cash value; strictly death benefit.
Who is going to get the cash value if you never use it?
Posted on 1/29/19 at 7:14 pm to EhSeeJay
quote:
Scrap it. Get term life insurance if you have a spouse or children who depend on your income (otherwise you do not need term life). Insure for your anticipated lifetime earnings. Buy the term life insurance from an independent agent who can shop around.
Ditch NW Mutual. They are giving you bad advice and taking your money. That "advisor" made a nice commission to sell you that policy. He is taking money out of your pocket and putting it in his. It may hurt in the short term but you will recoup the losses in a few years after investing in tax advantaged accounts first (401k then roth) then using the left over for a taxable account.
In general it is a bad idea to mix insurance and investing.
I agree with all of this, pretty much what I would have posted.
You currently have no reason to have life insurance since you do not have any dependents. At your age the 200 dollars self insuring yourself by investing into your 401k or IRAs can make it to where you don't need life insurance later in life.
Posted on 1/29/19 at 9:51 pm to EA6B
My beneficiaries will get the death benefit that has continually grown and is much higher than the cash value
Posted on 1/29/19 at 11:52 pm to itsbigmikey
If you are a catholic, look into joining the Knights of Columbus. They have very good insurance with good rates. They might be able to convert this existing policy.
You are doing the right thing by getting insurance while you are young. If you wait until you have a family, you will be older and your rates will be higher.
Look around at other life insurance companies. Compare their rates. Get KC insurance if you are catholic. It's a no brainer.
You are doing the right thing by getting insurance while you are young. If you wait until you have a family, you will be older and your rates will be higher.
Look around at other life insurance companies. Compare their rates. Get KC insurance if you are catholic. It's a no brainer.
Posted on 1/30/19 at 7:14 am to djmicrobe
I have a million dollar permanent life policy that is roughly 11K a year. I’ve got 8 years left on it and then it’s paid for and I know that’s it’s there if something happens to me. I also invest heavily so this is just a safe way to diversify in my mind and still have the ability to pull cash out of it if I ever need to, but likely will not. In short, it serve its purpose if you can pay for it.
Posted on 1/30/19 at 8:18 am to itsbigmikey
quote:
permanent life insurance policy through Northwestern Mutual which I contribute $200/month.
You aren't "contributing" to a life insurance policy...
Posted on 1/30/19 at 5:06 pm to itsbigmikey
I have never seen a permanent product that produces a better long term cash value than investing the same amount in a vanguard mutual fund. I'd scrap it yesterday.
Posted on 1/30/19 at 5:08 pm to djmicrobe
KOC rates are very high. You can get better insurance for much cheaper. Plus they try to push you into whole life.
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