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Message
re: Whole Life Policy: Good Investment?
Posted on 6/22/22 at 3:58 pm to GoCrazyAuburn
Posted on 6/22/22 at 3:58 pm to GoCrazyAuburn
quote:
Whole Life Policy: Good Investment?
quote:Can you make the case for WL as an investment? There may be a case to be made. I've just not seen it for disciplined investors.
Except whole life policies can objectively be good options for people.
1
Posted on 6/22/22 at 4:07 pm to NC_Tigah
quote:
Can you make the case for WL as an investment? There may be a case to be made. I've just not seen it for disciplined investors.
I mean, in my previous post I flat out said it shouldn't be treated as purely an investment. That doesn't mean it isn't a good option in some cases for people.
As purely an investment vehicle though, it has the benefit of guaranteed continual positive compounding, zero market exposure or retraction risk, is a tax advantaged vehicle. As part of an entire portfolio, it can be a very nice stable base to allow you to stay or be a little riskier in your other investments. What % return difference is worth having a continuously appreciating asset with now downturn risk? Some its worth more, some less. Plenty of disciplined investors absolutely can do better by the term vs invest difference route, but as I said previously, those two strategies are vastly different in goals and aren't worth comparing. I wouldn't compare someone who invested solely in stocks vs someone who was solely in bonds. Different profiles mean different strategies.
If the discussion is whether or not there is an argument that it is a better option than an IRA or reducing 401k contributions to purchase one, absolutely not. Anyone that would recommend such a thing should have their license stripped. If it is a discussion around it vs taxable investments, yes there are valid reasons to do either option, but it completely depends on the person's situation.
This post was edited on 6/22/22 at 4:09 pm
Posted on 6/22/22 at 4:21 pm to GoCrazyAuburn
quote:To be clear, I'm not debating or arguing.
I mean, in my previous post I flat out said it shouldn't be treated as purely an investment. That doesn't mean it isn't a good option in some cases for people.
I'm interested in your opinion, and (more specifically) in the basis for it.
When you say WL is "a good option in some cases for people," can you layout examples?
Posted on 6/22/22 at 4:39 pm to NC_Tigah
quote:
When you say WL is "a good option in some cases for people," can you layout examples?
Its been a while, but off the top of my head, business owners looking at a buy-sell agreement, estate planning, those interested in trusts. From the pure investment side of things if you're a fairly moderate or conservative investor, it can absolutely be a good option for you over a taxable avenue, or at least in some mixture of the two. Someone who may have a lifelong dependent. Just a few from memory that had great benefit from them. Obviously you have to be able to afford the stuff and if going the WL route would basically eliminate any actual true retirement investing, its not a great option for you. Banks buy the stuff by the truckload because it does have value worth investing in.
The question is kind of a loaded question though. I'll ask it another way. Who wouldn't an asset that is guaranteed to grow, can never retract, and will be tax advantaged when tapped into not be a good option for? Well obviously anyone that can't afford it or have different goals. It is by no means a "retirement investment vehicle" and shouldn't be treated as such nor really compared to ones. If I had a house to sell to you that was guaranteed to always grow at 3% but averaged around 6%, its value could never go down at all regardless of market fluctuations, and you didn't have to pay taxes on any of it when you sold the house, would that be worth investing in? You absolutely lose out on the upside risk of market fluctuations, but gain the guaranteed protections. A continual positive compounding asset can easily out performs a fluctuating asset that averages an overall higher return (obviously to a certain point).
This post was edited on 6/22/22 at 4:40 pm
Posted on 6/22/22 at 4:53 pm to Lutcher Lad
No...
Posted on 6/22/22 at 4:59 pm to GoCrazyAuburn
quote:Who would that not be a good option for?
Who wouldn't an asset that is guaranteed to grow, can never retract, and will be tax advantaged when tapped into not be a good option for?
Perhaps someone who is dubious about others' solvency or growth guarantees, .... or government promises regarding tax policy?
Posted on 6/22/22 at 5:02 pm to NC_Tigah
quote:
Who would that not be a good option for?
Perhaps someone who is dubious about others' solvency or growth guarantees, .... or government promises regarding tax policy?
Absolutely. So there are people that it can be good for and people that it isn't good for. So, back to my statement that having an ethical obligation to work in the best interest of one's client while simultaneously telling every client they should never do this option or even look at it, is a conflicting statement.
This post was edited on 6/22/22 at 5:04 pm
Posted on 6/22/22 at 5:07 pm to ThatsAFactJack
quote:
Where do you stand on small whole life for children when they are born (25k-50k)? Still 100% against?
Thanks
I'm not 100% against it at all, actually. For a child, a whole life policy is often the only type of individual policy you can obtain. There are child riders you can add to your own term coverage if you'd like but that coverage disappears when the kid turns 25.
As sad as it is, kids die every day and most parents of young children are still getting their own finances in order so most don't have the funds laying around to pay for an unexpected funeral for a child. If you want to buy a smaller whole life policy for a child, that would be the only time I'd advise one to get a whole life policy because it'll never be cheaper and it's a good way to ensure that kid will always have some type of coverage regardless of what health situation pops up later that may make them ineligible. For example, when I found out I have a serious heart condition that could have potentially been hereditary, I purchased some whole life coverage for my two kids in case they have it and it's found later in life. That way they have coverage when they're uninsurable.
For an adult, though, whole life is a bad choice and it's certainly never to be viewed as an investment of any kind.
Posted on 6/22/22 at 5:15 pm to GoCrazyAuburn
quote:
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.
I know where you're coming from there. Of course, if someone without any coverage at all comes to me and is ineligible for term coverage (assuming they are old enough to purchase a final expense whole life policy) then I'd offer them that FE option. That's the only time I'd recommend it, though. If my client qualifies for term, I'm talking them out of a whole life policy because it's just not right for them 99.99% of the time and don't even get me started on Universal Life policies. Those are even worse.
Posted on 6/22/22 at 5:21 pm to TDsngumbo
quote:
I know where you're coming from there. Of course, if someone without any coverage at all comes to me and is ineligible for term coverage (assuming they are old enough to purchase a final expense whole life policy) then I'd offer them that FE option. That's the only time I'd recommend it, though.
I'll just categorically disagree, but i'll respect your opinion.
quote:
don't even get me started on Universal Life policies. Those are even worse.
Agreed. These have way too many contractual issues that go way beyond one's general opinion on performance of a product vs an alternative.
This post was edited on 6/22/22 at 5:22 pm
Posted on 6/22/22 at 5:28 pm to GoCrazyAuburn
UL's get people in a lot of financial trouble all the time. State Farm agents were pushed like hell to start selling the crap out of them in the 90s (maybe 80s, can't quite remember now). To be fair, it wasn't just State Farm, though. Anyway, they're always sold as permanent products when in fact they are so far from it. The average consumer doesn't understand how they work because most agents just gloss over the details and focus the sales presentation on the idea of it being a "permanent" policy when in fact it's not. If anyone reading this is being sold a UL product by their agent, make sure you ask the agent what happens to the policy as you get older. Hint: those premiums are NOT locked in.
Posted on 6/22/22 at 6:52 pm to TDsngumbo
Yep. Their entire calculation is flawed and was based on returns and interest rates of the 80’s. What is never explained to people is that not on is the policy returns tied to those market rates, but so is the premium. If the market has a run of bad years, the policy premiums won’t be enough to sustain the policy unless the insured pays in more. The policy won’t let them know that until it has almost completely eroded away until they get those lovely letters that tell them their policy will become void unless they start paying in some absurd premiums. I’m sure you e come across plenty that got those letters. Back when I was in this world, I saw many UL policies from the 80’s that became complete inversions. It was awful.
Hell, even Dave Ramsey early on had no idea what he was really talking about with this stuff. He even used UL policies as his baseline for his opinion on WL insurance. It was laughable. They are just very poorly structured policies that had no real long term understanding of market dynamics.
Hell, even Dave Ramsey early on had no idea what he was really talking about with this stuff. He even used UL policies as his baseline for his opinion on WL insurance. It was laughable. They are just very poorly structured policies that had no real long term understanding of market dynamics.
Posted on 6/22/22 at 9:02 pm to GoCrazyAuburn
quote:
I’m sure you e come across plenty that got those letters.
At least once a week! I feel so bad for the thousands (maybe millions) of people who’ve been fricked by an agent selling them a UL policy. May those agents rot in hell, they either knew exactly what they were doing or they had no idea what they were doing. Either way they were wrong for it.
Posted on 6/23/22 at 6:51 am to GoCrazyAuburn
quote:
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.
You pretty much ignore every life insurance product/conservative investment product developed the past 60 years to make a case that whole life has a puzzle piece to fit inside of one's needs.
Sure. In the 1950s, it was the option available. But that is no longer the case.
Posted on 6/23/22 at 9:32 am to meansonny
I don't in the slightest, but okay.
Posted on 6/23/22 at 10:38 am to GoCrazyAuburn
quote:
business owners looking at a buy-sell agreement, estate planning, those interested in trusts. From the pure investment side of things if you're a fairly moderate or conservative investor, it can absolutely be a good option for you over a taxable avenue, or at least in some mixture of the two. Someone who may have a lifelong dependent. Just a few from memory that had great benefit from them.
You are recommending whole life insurance for the above scenarios?
If you are, then you are ignoring a ton of alternatives better than what developed in the 1930s for the life insurance industry.
Posted on 6/23/22 at 11:15 am to meansonny
quote:
You are recommending whole life insurance for the above scenarios?
If you are, then you are ignoring a ton of alternatives better than what developed in the 1930s for the life insurance industry.
I have done none of this.
Posted on 6/28/22 at 9:16 am to joshnorris14
6% on what? Cause mass mutual takes about 20 years to even show a gain! So 6% on what exactly?
Posted on 6/28/22 at 9:20 am to L S Usetheforce
Ugh. Use a variable annuity. There’s even stripped down ones that have no fees and are invested in S&P 500 indexes. But have the tax protection your universal life has. A universal life cost of insurance is annual renewable term. Look in to the cost of insurance page of your policy. It increases every year. Raising above the premium and eating away the cash. So you have an investment with a rising fee structure every year!
Posted on 6/28/22 at 6:24 pm to LSUtiger89
Just spoke to a potential client who insisted on whole life because "it's a better investment" 
.
Tried explaining to her that it's not an investment at all and her response was "well if I pay $250 a month for a $250k policy and have the policy for 50 years then that's $150,000 I paid into it but my kids get $250k.
I said "ok, that's true. However, if you were to buy a $250k term policy that costs $30/month, then invest the rest of the $220 each month for 50 years, you come out wayyyyy ahead of $250k. Her response: "but investments suck right now". I said, "right now they suck but over time they will go up" she goes, "you don't know that, I'd rather buy the whole life and know it's going to go up".
I said, "look, if you invest $220 a month for 50 years and ONLY make an average of 2.5% return on your money, which will be way less than what you actually will make, you're looking at over $257k dollars".
This stupid bitch still insisted on buying the more expensive whole life policy.
Whole life insurance keeps the middle class middle class and it keeps the poor poor. You can't reason with someone who already thinks whole life is a "good investment". They're stupid.
. Tried explaining to her that it's not an investment at all and her response was "well if I pay $250 a month for a $250k policy and have the policy for 50 years then that's $150,000 I paid into it but my kids get $250k.
I said "ok, that's true. However, if you were to buy a $250k term policy that costs $30/month, then invest the rest of the $220 each month for 50 years, you come out wayyyyy ahead of $250k. Her response: "but investments suck right now". I said, "right now they suck but over time they will go up" she goes, "you don't know that, I'd rather buy the whole life and know it's going to go up".
I said, "look, if you invest $220 a month for 50 years and ONLY make an average of 2.5% return on your money, which will be way less than what you actually will make, you're looking at over $257k dollars".
This stupid bitch still insisted on buying the more expensive whole life policy.
Whole life insurance keeps the middle class middle class and it keeps the poor poor. You can't reason with someone who already thinks whole life is a "good investment". They're stupid.
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