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re: Whole Life Policy: Good Investment?
Posted on 6/21/22 at 10:39 pm to Lutcher Lad
Posted on 6/21/22 at 10:39 pm to Lutcher Lad
0
Posted on 6/21/22 at 10:39 pm to joshnorris14
quote:
Mass Mutual has paid out a 6+% dividend longer than anyone on this site has been alive
Sure but you still gotta pay whole life rates to be able to get that. You can invest in a mutual fund instead, get way more coverage on a term policy, and earn an average of 8%-12% AND still save money.
Posted on 6/22/22 at 3:23 am to GoldenBoy
Yep. I don’t plan on collecting on my life insurance.
Posted on 6/22/22 at 5:49 am to TDsngumbo
quote:
You can invest in a mutual fund instead, get way more coverage on a term policy, and earn an average of 8%-12% AND still save money.
8-12% on average.
A properly constructed whole life policy (as little whole life insurance as possible, as much paid up additions as possible) will give you a 6% MINIMUM annual return, that you can borrow against when the market is down.
My original point wasn't that a whole life policy should be seen as an investment, but it can be utilized in a way that allows for smart investments
Posted on 6/22/22 at 7:22 am to joshnorris14
quote:
My original point wasn't that a whole life policy should be seen as an investment, but it can be utilized in a way that allows for smart investments
And my point is that that is complete nonsense.
quote:
A properly constructed whole life policy (as little whole life insurance as possible, as much paid up additions as possible) will give you a 6% MINIMUM annual return, that you can borrow against when the market is down.
Exactly. It’s a shitty thing to do with your money and you’re proving it without even realizing it with that statement.
Posted on 6/22/22 at 8:01 am to TDsngumbo
quote:
And my point is that that is complete nonsense.
How?
quote:
Exactly. It’s a shitty thing to do with your money and you’re proving it without even realizing it with that statement
How?
Posted on 6/22/22 at 8:09 am to Lutcher Lad
I had 3 separate acquaintances try to sell me whole life as soon as I started making a fair salary. I declined at the time mainly bc I was hoarding cash for a separate venture. They lost all of my future business though, because I later learned that for someone to try and sell me that BS I know I can't trust them with a nickel of my money, better yet hundreds of thousands.
Every NW Mutual type "advisor" has to sell that crap for the first few years and they'll harass(sell) every friend, family member, and even foe about it until they quit picking up the phone.
Every NW Mutual type "advisor" has to sell that crap for the first few years and they'll harass(sell) every friend, family member, and even foe about it until they quit picking up the phone.
Posted on 6/22/22 at 8:15 am to Joshjrn
quote:
Whole Life is an investment vehicle of last resort for those who are rich enough to have run out of other options and want to continue diversifying for tax reasons.
Well, the policies do have a place in some estate planning structures, too.
But, otherwise, you're spot on. If you want death protection, buy death protection (term). With the money you save on not buying whole life, you can probably afford long-term disability insurance and have money left over.
Posted on 6/22/22 at 8:32 am to Lutcher Lad
I've been in these conversations and it was a hard no for me after looking at the numbers. They try really hard to sell you on converting term life into full life over time, but I just don't get it. For me, I've got term life basically until I retire. I won't need it beyond retirement because I'll have several large investments including a pension and a paid off house. The amount I chose was to cover our house note and then a good bit more for kids school. My wife and I both did that. For the price, it let's us sleep at night a little better if something does happen. While it's not a traditional investment, I still view it as an investment on protecting our future.
As a 25 year old, term life may be an option to consider.
As a 25 year old, term life may be an option to consider.
Posted on 6/22/22 at 9:18 am to joshnorris14
quote:Josh, the reason I asked the question is because a 6% ROI on $100K obviously equates to 6K/yr or, if compounded and not withdrawn over 20yrs, a $330,000 principal which then would deliver nearly $20K/yr at a 6% annual rate.
Mass Mutual has paid out a 6+% dividend longer than anyone on this site has been alive
If you factor ALL premium contributions, in total, to those MassMutual policies, I suspect ROI is nowhere near 6%. That's why I asked "6% of what?"
Posted on 6/22/22 at 9:33 am to TDsngumbo
quote:
quote:
Mass Mutual has paid out a 6+% dividend longer than anyone on this site has been alive
Sure but you still gotta pay whole life rates to be able to get that. You can invest in a mutual fund instead, get way more coverage on a term policy, and earn an average of 8%-12% AND still save money.
Or, you can do both. When you have real cash, you have to find places to put it.
Posted on 6/22/22 at 9:50 am to DotBling
But there is no cap on MF investing. So "real cash" doesn't keep you from investing in index/mutual funds. You can always find a place to invest "real cash". Now, you might would like a different exposure, but the ability to invest is not an issues.
I understand you are saying you are rich, but you have yet to put forth a valid argument of why to invest in this vs term + market.
If you think it is a better diversification offer for you, say it. It is just likley not giving you the maximal ROI over a 30 year time span.
I understand you are saying you are rich, but you have yet to put forth a valid argument of why to invest in this vs term + market.
If you think it is a better diversification offer for you, say it. It is just likley not giving you the maximal ROI over a 30 year time span.
Posted on 6/22/22 at 10:15 am to joshnorris14
quote:Right, and borrowing against it saves CGTax exposure.
will give you a 6% MINIMUM annual return, that you can borrow against when the market is down
Translatable ROI equals rate return on principal, less fees and borrow costs, with the advantage of tax avoidance.
However, there are other vehicles one can also borrow against. Cost of borrow in those instances can be written off for tax purposes as well.
Aside (perhaps) from multigenerational tax management for a select few of us, I just don't see the costs of WLP's as justifiable in investment terms.
Certainly not for the OP as a loaded 25y/o, or for the average Joe.
Posted on 6/22/22 at 10:22 am to joshnorris14
quote:
And my point is that that is complete nonsense.
How?
I've already laid out how/why but I'll say it again. You're already paying 10-12 times more than you would pay for a term policy. When you're referencing the dividend rates and interest rates, you're failing to consider the fact that you're already paying way more for a whole life policy than you would pay for a term policy. Sure, if your dividend rate is higher than the interest rate on borrowing from the cash value, of course you're "coming out ahead" - but only if you ignore the fact that if you had invested the difference between term and whole life, took out a loan for the same interest rate (which is still possible, for the most part) and paid it back, you're still coming out ahead because you're saving so much money on the premiums.
quote:
quote:
Exactly. It’s a shitty thing to do with your money and you’re proving it without even realizing it with that statement
How?
You're proving my point by continuing to talk about borrowing from the whole life policy. I'm a life insurance agent and I tell every single one of my customers to never buy a whole life policy from me because I have an ethical duty and responsibility to do what's right for the customer. If they want that junk, they can go to another agent. I'm in the business of doing what's right for customers, not turning middle class people into lower class retirees.
Life insurance companies WANT you to use the living benefits of a whole life policy because they know that 99.99% of the time, they will come out ahead - whether it's by you paying interest back to them or by you not paying it all back and they then pay out less death benefit when you die (loan minus death benefit) while still being paid 100% of the premiums for the original death benefit -- or by collecting all your premiums and then cancelling the policy if/when you don't pay it back and the cash value is eaten up by the interest. Life insurance cash value is the apple dangling in front of poor people's faces. Don't fall for it.
Posted on 6/22/22 at 12:31 pm to joshnorris14
quote:
Mass Mutual has paid out a 6+% dividend longer than anyone on this site has been alive
6% dividend?
Minus cost of insurance?
Minus cost of policy maintenance?
Minus cost of accessing funds?
It is a simple sales hook. Be smarter than simple marketing tag lines.
Ive seen 6% dividends in policies grow money worse than 3% returns. All. The. Time.
Or the guy bragging about his 4% mortgage rate (that he paid 2% buydown fees to get).
Posted on 6/22/22 at 2:10 pm to TDsngumbo
quote:
TDsngumbo
quote:
I'm a life insurance agent and I tell every single one of my customers to never buy a whole life policy from me because I have an ethical duty and responsibility to do what's right for the customer
Where do you stand on small whole life for children when they are born (25k-50k)? Still 100% against?
Thanks
Posted on 6/22/22 at 2:45 pm to ThatsAFactJack
Oof, haven't been in one of these threads in a while. Lots of bad responses in here 
Highly recommend the sticky thread of topics that has some good discussions on this.
Shortest answer is yes it can be a good investment, but it is not an investment. Meaning, it can be a very good asset to invest in for your overall portfolio, but it should never be used to replace other tax advantaged investment options.
It is first and foremost life insurance and should be viewed as such. If anyone is selling it to you as an investment, run away. If you have already exhausted your other tax advantaged vehicles, and have money left over then it is absolutely something worth looking into (only at a very few companies though. Most of the products out there suck). It is life insurance though, so the most important thing first is getting the death benefit number right. Then you can decide what mix or term and whole life you can afford and/or want to do.
The term/invest difference vs whole life is not really a discussion worth getting into greatly as they involve such vastly different strategies and priorities you just aren't comparing anything worth comparing. You can end up better off using either route, but it all depends on your goals, risk profile, etc.
Highly recommend the sticky thread of topics that has some good discussions on this.
Shortest answer is yes it can be a good investment, but it is not an investment. Meaning, it can be a very good asset to invest in for your overall portfolio, but it should never be used to replace other tax advantaged investment options.
It is first and foremost life insurance and should be viewed as such. If anyone is selling it to you as an investment, run away. If you have already exhausted your other tax advantaged vehicles, and have money left over then it is absolutely something worth looking into (only at a very few companies though. Most of the products out there suck). It is life insurance though, so the most important thing first is getting the death benefit number right. Then you can decide what mix or term and whole life you can afford and/or want to do.
The term/invest difference vs whole life is not really a discussion worth getting into greatly as they involve such vastly different strategies and priorities you just aren't comparing anything worth comparing. You can end up better off using either route, but it all depends on your goals, risk profile, etc.
Posted on 6/22/22 at 2:47 pm to TDsngumbo
quote:
I'm a life insurance agent and I tell every single one of my customers to never buy a whole life policy from me because I have an ethical duty and responsibility to do what's right for the customer
Well, these are conflicting statements.
Posted on 6/22/22 at 3:41 pm to GoCrazyAuburn
quote:I’ve read his post multiple times, and I don’t see anything conflicting. In fact, if I was looking for a life insurance agent, someone like him would be what I was looking for.
Well, these are conflicting statements.
It’s kinda like Kris Kringle/Santa recommending deals at other stores in Miracle on 34th Street and this causes customers to want to shop more at the store he was working at.
Posted on 6/22/22 at 3:44 pm to buckeye_vol
Except whole life policies can objectively be good options for people. So, saying you would never recommend one to a client because you have an ethical obligation to act in the interest of the client is at conflict with itself.
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