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re: Whole Life Investments. Pro's and Cons?
Posted on 9/3/09 at 1:51 am to kfizzle85
Posted on 9/3/09 at 1:51 am to kfizzle85
Most of the whole life policies out there are bad moves. However, there are some strong whole life policies that are very lucrative.
Someone asked a question about cash value and the death benefit. I can show you policies that grow in cash value and in death benefit. And, a portion of that cash value is ACTUAL cash you can withdraw with zero penalty. (Example: $750,000 death benefit plus $250,000 accumulation equaling $1,000,000 to the beneficiary upon death. Or, you could realize a gain and withdraw all or part of the $250,000 and still have your original $750,000 death benefit. If you needed to cancel the policy, the $250,000 accumulation would be sent to you PLUS the cash surrender value.)
If you have any life insurance questions (term, whole, etc.) or if you would like to see a few proposals from one of the best companies in the industry, feel free to email me at lsu_golf@live.com and I would be glad to answer any questions you have.
Someone asked a question about cash value and the death benefit. I can show you policies that grow in cash value and in death benefit. And, a portion of that cash value is ACTUAL cash you can withdraw with zero penalty. (Example: $750,000 death benefit plus $250,000 accumulation equaling $1,000,000 to the beneficiary upon death. Or, you could realize a gain and withdraw all or part of the $250,000 and still have your original $750,000 death benefit. If you needed to cancel the policy, the $250,000 accumulation would be sent to you PLUS the cash surrender value.)
If you have any life insurance questions (term, whole, etc.) or if you would like to see a few proposals from one of the best companies in the industry, feel free to email me at lsu_golf@live.com and I would be glad to answer any questions you have.
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Posted on 9/3/09 at 7:15 am to kfizzle85
quote:
Right. So if you have a lot of money, and you put it in whole, it doesn't really do you any good if it gets swept into your estate.
"Put it in Whole"?
THE CASH VALUE DISAPPEARS/GOES BACK TO THE INSURANCE COMPANY WHEN YOU DIE!
You gotta loook at whole life as 2 products in one.
1)An "investment"
Think of it like Social Security. It's a really shitty rate of return and if you don't use it before you die, you lose it. Can't pass on the cash value to heirs.
2)Life Insurance
At a jacked up rate compared to what you could get for simple term life insurance.
Sounds great, right?
Posted on 9/3/09 at 8:28 am to JWS3
quote:
Try to find a single investment professional not profiting from the sale of whole life that thinks it is a good idea. It is overpriced crap, buy term, and invest the substantial savings in premiums.
Well, at least we found out who the insurance agents are on this board.
quote:
Anyone that is overly anti-wholel life is a glaring signal to me that the individual is obviously not well educated on the subject of life insurance and is merely repeating what they have heard from others.
Translation: I'm an insurance agent and I make more money off of you with whole life.
As to the 99% figure, something tells me that that figure is a complete joke. The implication is that everyone who buys it pays for 30 years and then just outlives the policies. I'm guessing that the vast majority of that 99% involves people who take it out because their friend's kid comes around from a scam outfit like Primerica, and then drop it less than a year later when the kid quits. Also, all the people who buy it through work and switch jobs (where they get another policy) also accounts for a large portion of the 99% figure. I'd love to know exactly what percentage of people pay for the entire term of the contract and just outlives the contract. I'm guessing that's below 10%.
Posted on 9/3/09 at 10:49 am to dawgorama
will give you a real life con. Purchased a $250K whole life about 7 years ago at 26. Premium is $2350 per year. The current cash value of the policy is around $10,500 Purchased a $750K term life policy 3 years ago and the premium is $780 per year.
So I know I can buy term at about $100 per year per 100K in coverage. Assuming I made the choice to purchase a term policy rather than the whole life policy and "invested" the difference at 0% interest I would have $14,000 cash versus the $10,500 in cash value I have accumulated with the term policy. Bad move on my part obviously.
So I know I can buy term at about $100 per year per 100K in coverage. Assuming I made the choice to purchase a term policy rather than the whole life policy and "invested" the difference at 0% interest I would have $14,000 cash versus the $10,500 in cash value I have accumulated with the term policy. Bad move on my part obviously.
Posted on 9/3/09 at 11:02 am to kfizzle85
quote:
What about my estate tax question?
if the policy is truly for estate tax purposes, then a trust is going to be the owner of it.
Posted on 9/3/09 at 11:15 am to BigErn
quote:
if the policy is truly for estate tax purposes, then a trust is going to be the owner of it.
I was hoping the life insurance people would be able to point out something as basic and crucial as that. It still doesn't necessarily exempt the policy from any income tax though.
Posted on 9/3/09 at 11:17 am to kfizzle85
quote:I thought life insurance was non-taxable for income tax purposes?
It still doesn't necessarily exempt the policy from any income tax though.
Posted on 9/3/09 at 11:54 am to dawgorama
quote:
Think of it like Social Security. It's a really shitty rate of return and if you don't use it before you die, you lose it. Can't pass on the cash value to heirs.
So you don't diversify? any intelligent investor, no matter how aggressive, should have 5-10% in bond type investments, minimum. Whole life is essentially that. Any reputable whole life company returns 5-6% after 25 or so years. so younger folks can essentially use whole life as the conservative part of their retirement investment portfolio. I average 10-12% return, including the last few years, but that doesn't mean i don't have some investments in my portfolio whose goal is 4-5% return.
If you live to retirement, you've made a good investment for retirement, AS LONG AS your whole life input is calculated as the conservative part of your portfolio. think of it as buying a 30 year bond...that's it really. If you croak, you get the death benefit. your rate of return is bitchin anyway. sure you lost some premium, but in the long run not that relevant.
basically, if whole life is crap, then so are bonds, bond funds, cash funds, and any other investment that returns 5% or less.
disclaimer: chemical engineer turned stay at home dad
This post was edited on 9/3/09 at 12:03 pm
Posted on 9/3/09 at 12:00 pm to DandyPimp
quote:
So I know I can buy term at about $100 per year per 100K in coverage. Assuming I made the choice to purchase a term policy rather than the whole life policy and "invested" the difference at 0% interest I would have $14,000 cash versus the $10,500 in cash value I have accumulated with the term policy. Bad move on my part obviously.
not necessarily. you don't cash in whole life at age 33, so your calculation, while correct, is not valid.
look at your whole life tables you should have gotten. it will show your rate of return for each year in the future. When your are 70, your return should be (for a reputable company) 5-6%. that's a very good nearly guaranteed investment.
if you're investing 15k per year, then the 2300 is 15% of your portfolio. So ALL of you other investments should be aggressive, i.e. you've basically taken care of the conservative portion of you allocation. If you're investing much less than $15k, then you're putting too much into the conservative vehicle that is whole life, unless of course you're an ultra conservative investor.
Posted on 9/3/09 at 12:11 pm to LSURussian
You're right it is. I guess it would just pass through the trust as non-taxable.
Posted on 9/3/09 at 12:11 pm to spanky
Bond funds are definitely crap.
Posted on 9/3/09 at 12:12 pm to spanky
forgot to add that all that stuff i wrote is crap if you still have tax-free investment vehicles you haven't used.
never buy whole life if you have room in your 401k/ira vehicles. if those are maxed out, then whole can be the next vehicle. if not, don't buy it.
never buy whole life if you have room in your 401k/ira vehicles. if those are maxed out, then whole can be the next vehicle. if not, don't buy it.
Posted on 9/3/09 at 12:55 pm to spanky
I love the guy who is talking about outliving your term life insurance policy as if that's a bad thing. 
Posted on 9/3/09 at 2:04 pm to Cold Cous Cous
Boy lots to think about. I'm not sure we really need to have whole life, but I think the wife and I definitely need some term life---purely as life insurance in case one of us dies---especially since we are planning a family now.
I appreciate the discussion and welcome more experts on both sides of the coin to chime in. I'm really out of my element here.
I appreciate the discussion and welcome more experts on both sides of the coin to chime in. I'm really out of my element here.
Posted on 9/3/09 at 2:25 pm to spanky
quote:
So you don't diversify?
Uh, where did I say that?
quote:
basically, if whole life is crap, then so are bonds, bond funds, cash funds, and any other investment that returns 5% or less.
I can buy term. Invest the difference in premiums between it and Whole life in bonds/bond funds/cash funds/etc and if I die before retirement my heirs get the death benefit from the term insurance AND the money in the bonds/bond funds/cash funds/etc.
If I'd used that money instead to buy whole life, they'd only get the face value, not the "cash value" or "investment" part of whole life.
That's the scam...and the difference in "investing" in whole life and the other things you described.
Posted on 9/3/09 at 2:36 pm to Tiger Ryno
quote:
but I think the wife and I definitely need some term life---
What you are poor and have to rent?
Posted on 9/3/09 at 3:13 pm to Cash
we po folk.
Posted on 9/3/09 at 5:34 pm to Tiger Ryno
quote:
The death benefit of $100k. The cash value would be the living benefit for you, and would not be paid to heirs in death.
Great, and investment that goes to zero if you die. If you would have bought term at a fraction of the cost, and invested the difference then die, your heirs would get the death benefit and the value of your investments. Who cares about tax benefits, paying taxes on something beats getting nothing every time. An insurance salesman subjected me to an hour of double talk trying to hide this one small detail. Amother sales trick is to imply that people with real wealth are into Whole life, " but if all you can afford is term".
Posted on 9/4/09 at 8:07 pm to Tiger Ryno
I love the people who know nothing about Life Insurance bashing whole life. Dave Ramsey figs. The ONLY con to whole life is it's expensive. I am a Agent and I'm here to tell you that I make NO more commission on WL. I actually will make more off of term because 95% of the clients will roll it into a WL policy or cancel and get another term. Close thread good night!
Posted on 9/4/09 at 8:09 pm to bengalbrother
quote:That's not the only con against whole life. You just lost credibility by stating that.
The ONLY con to whole life is it's expensive.
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