br>Life insurance should be a bedrock of any serious financial retirement. 5, 2016, Ed Slott goes beyond listing great uses for life insurance and ...
Ed Slott, CPA, cited as "America's IRA Expert", feels that life insurance is the best inheritance you can leave behind, even more valuable than ...
I had forgotten how strongly Ed Slott feels about Life Insurance as a. the insurance chapter in his 2012 updated edition of "The Retirement ...
Ed Slott - Life Insurance - May 2013br>David McKnight (Author), Ed Slott (Foreword). 4.6 out of 5.. Look Before You LIRP: Why All Life Insurance Retirement Plans Are Not Created Equal,. +. Money.
Jump to Life-Insurance Policy Can Provide Tax-Free Income for Your. - Ed Slott: Well, I would pull down. get you $5 million of life insurance.
A provision in a broad retirement bill could pull the plug on a tax-savings. Life insurance: “With life insurance, you could get more money tax-free. and just bypass the whole system,'” said Ed Slott, CPA and founder of Ed.
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Tax-Free Retirement - A Video From IRA Expert Ed Slott | Income for Life Ed slott retirement life insurance
The author of many books including "Ed Slott's Retirement Decisions Guide. buying permanent life insurance or looking at other tax-planning ...
Retirement Planning news article published by Brian Anderson titled. For a guy that doesn't sell life insurance, Ed Slott is one heck of a life ...
A provision in a broad retirement bill could pull the plug on a tax-savings. Life insurance: “With life insurance, you could get more money tax-free. and just bypass the whole system,'” said Ed Slott, CPA and founder of Ed.
Leaving a Legacy: 3 Differences Between Life Insurance and Roth IRAs – Grace Advisory Group Ed slott retirement life insurance
Tax-Free Retirement - A Video From IRA Expert Ed Slott | Income for Life Ed slott retirement life insuranceOne vehicle well suited to achieving these goals is cash value life insurance. Ed Slott, a CPA, author and expert on individual retirement ...
Richard C. Cella, III is a member of Ed Slott's Elite IRA Advisor Group℠. Acknowledges Milestone by Offering Insight to Gloucester's Retirement Savers. Richard began his financial services career in 1983 as a life insurance agent for John.
Ed Slott, an expert on IRAs, has pointed out that life insurance is not only. cost-effective than withdrawing funds from taxable retirement funds.
Ed slott retirement life insuranceMonths or even years after Best hands poker pre flop write a post the comments continue to grow into the hundreds.
In a recent comment, one agent stated that whole life insurance was a lot like a.
This post goes in to more detail about the reasons why whole life insurance is not like a Roth IRA.
Just like when you borrow from a bank, when you borrow from an insurance policy you have to pay interest.
You have to pay interest to borrow your own money.
When you withdraw from your Roth IRA, you owe neither taxes nor interest.
There is no fee at all to open one at Vanguard.
They also have no closing fees.
The expense ratio for investments can be as low as 0.
Try comparing that to the typical whole life policy.
The more you pay in fees, the less that goes toward the investment, and the lower your returns.
All the money continue reading goes toward the cost of that insurance by definition cannot go toward your cash value, so your investment will grow slower, producing lower returns.
You put in after-tax click at this page, it grows tax-free and it comes out tax-free in retirement.
You can put any reasonable investment inside it- stocks, bonds, mutual funds etc.
Fees are clearly disclosed and, if you go to the commonly used mutual fund houses, quite reasonable.
Insurance policy prospectuses, however, are hundreds of pages thick.
Even the illustrations run dozens of pages.
The fees are usually buried somewhere deep inside.
In general, complex financial instruments favor the issuer over the purchaser.
Their dividends are limited by the investments that they use.
These investments tend to be very conservative, often composed of 80-85% bonds.
A Roth IRA, of course, can be invested in all kinds of investments with higher expected rates of return, such as US stocks, International stocks, REITs, small value stocks, emerging market stocks or even commodities.
Not so with a life insurance policy.
Proponents will argue that after a certain number of years, the dividends from the policy will be sufficient to pay the premiums.
That may be true, but that period of time always seems to come much later than the initial projections.
It may be 2 or even 3 decades before the policy can pay its own premiums, dramatically reducing your financial flexibility.
Depending on the state, some or all of your Roth IRA may be protected from creditors.
The same goes for the cash value in a whole life insurance policy.
In some states one is protected more than the other, and vice versa in other states.
In some states neither receives much protection, and in other states both are completely protected.
The same goes with estate planning issues.
A Roth IRA passes to heirs income tax-free but subject to any possible estate taxes.
The cash value of a whole life insurance policy disappears when you die, and your heirs are paid the death benefit minus any money you borrowed out of the policy without having to pay income or estate taxes on it.
Any additional earnings on that money, of course, would be fully taxable to the heirs.
The money in both a Roth IRA and whole life insurance passes to heirs check this out of probate.
Both have their positive aspects, but they are very different.
You also have to go through blood and urine tests and give out detailed private information about your health and habits.
All you need to open a Roth IRA is income and a social security number.
The bottom line is that whole life insurance IS NOT like a Roth IRA, and anyone who tries to equate the two is likely trying to earn a commission by selling you whole life insurance.
What do you think?
Have you heard agents using this line?
What other differences or similarities do you see between a Roth IRA and whole life insurance?
The compensation filter that is created by the way Whole Life is sold is so large, it clouds the judgement of those who sell it so voraciously.
Great post, just one correction: Life insurance death benefits are NOT necessarily excluded from estate tax.
It has to go into something like an irrevocable trust in order to pass those benefits estate tax free.
My understanding of the current use of a SLAT is to avoid state estate taxes.
Since my state, and any state I would possibly considering relocating to, has no state estate taxes, I have chosen not to spend the money on a SLAT.
Nobody is holding a gun to your head and forcing you to read post after post while leaving mean comments on each one.
Anyway, what are your thoughts about buying a whole life policy for your children?
When I bought my WL, I also bought a policy for my 2 year-old son.
There are a few reasons why this seemed like a really good deal to me.
No matter what, he will at least have this for his family.
Admittedly, I have some doubts about how wise it was to buy WL for myself, but I feel like it was the right choice for my kid.
What do you think?
As a general rule, you should buy life insurance on someone when their death will financially affect you adversely.
The death of my child, while tragic, would not be a significant FINANCIAL setback.
In fact, it would probably save me money.
It happens, but not that often.
Certainly not often enough that we ought to invite our insurance agent to the delivery to issue the policy as soon as the cord is cut.
There are far worse play roulette way best than not being able to buy a decent life insurance policy on yourself.
When we need life insurance, we need a ton of it, although we probably only need it for 2 or 3 decades of our lives.
Lastly, which does your son need more?
I would argue assets.
He needs money to pay for school, pay for a wedding, buy a first car, put a down payment on a home etc.
Which asset is likely to provide more money at age 25-30 when it is most needed, traditional investments or life insurance?
Look up what insurance costs for a 20 year old.
Many of our chief economists and even the congressional budget office state we, as a county, are going to be broke by 2023.
There are two alternatives, raises taxes, or cut spending by over half.
WL is guaranteed on a good policy at 4-5% per year.
One other thought, maybe you have already posted on this topic.
I feel that Getting large death benefits into a trust seems to be a way to accomplish this type of financial goal?
Would love to hear your thoughts!
Whole life is guaranteed at 2%, projected at 4-5% IF you hold a well-designed policy for 3+ decades.
If you feel it is too high, run your own numbers using a lower number.
Future returns are, of course, unknowable.
You makes your bets and you takes your chances.
By the time they need it, a whole life policy will be about breaking even.
Just remember those illustrations are heavily dependent on the assumptions inputted into the illustration.
Start changing those and the outputs in 60 years may be dramatically different.
I get guaranteed 4-5-5% plus dividends on my policies bit higher on ten pay policy which has come out to be a real return of 5-6%.
Not as good as yours but not bad compared to other people that I have talked to about their real returns.
This is guaranteed money unless of course the company goes belly up which is much less likely given they are 200+ yo.
I want to make sure my kids kids kids kids and their kids all have something that I can help them in their lives.
Would love to hear your thoughts on generational wealth development and possibly other ways to ensure that this is a financial goal I meet.
U should send wci a copy of an inforce illustration with name and stuff blocked out.
You are not guaranteed the return you are quoting when one actually peels away the illusions.
You are talking about your child dying as saving you money!??
A person I worked with and his wife had a daughter born with EB… They lived at the hospital in the NICU for a month before being relocated to a special hospital in MN.
They were there for another 4 months until there child died.
He was unable to work during that time, and after the death had a few months until they decided to continue to live in MN get a new job and work part time for a non-profit help with EB research and funding.
This changed his life and without life insurance and the help of a wealthy father His life would have been not only emotionally ruined, but financially, because of the death of his child.
You INSURE the things that are most valuable to you in life… CASE CLOSED.
However, I disagree with your last comment.
You buy insurance against financial catastrophe that you cannot afford to selfinsure…CASE CLOSED.
You misunderstand taking loans when you retire.
On top of this, if you are making 5% on your money, then yes, maybe the insurance company is making 6.
If that bother you then ok.
You actually can stop investing at pretty much anytime.
It can be a good thing.
Fund your Roth IRA.
Now you hit that ceiling pretty quick, now what?
Can you elaborate on that?
I had to get a full physical when I purchased mine.
Many are cleverly disguised.
What you fail to mention is that once you do so the policy starts eating itself to pay the insurance and fees.
Yes, you can buy a policy on someone else.
Of course, that person has to be insurable.
My spouse is about it.
Then 529s for the kids.
Then the taxable account.
Then paying down my mortgage.
Then some investment real estate.
Then a bigger boat.
At no point am I left with nothing but whole life insurance to invest in.
It happens all the time.
If you are using these policies for high cash value, and after the first year you cannot contribute anymore or you want to reduce contributions, you can—in most companies—reduce or eliminate premiums at any time after year 1.
But simply converting your policy to a reduced paid up will eliminate all future premiums.
I will really hate to be around to see your portfolio when the next crash hits, and that is a when not an if.
Because a crash is coming and it will hit my portfolio.
Actually, probably 5 or 6 crashes.
Despite the fact that crashes are coming, my portfolio is still highly likely to outperform whole life insurance over my investing horizon.
Good luck with your career selling it.
Not everyone wants their retirement to be on a roller coaster ride that they cannot get off of.
I understand why, they want to sleep at night.
Of course any CPA worth his salt will tell you that slow and steady will beat the roller coaster in the long run.
Turtle and the Hare and all.
What happened to you and your life insurance policy is what typically happens, but does not need to happen.
This directly translates into little to no cash value in the first years.
This does not have to be the case.
The way I structure policies my clients see cash value in the very first month.
However it creates people like you who get burned and now are on a crusade.
An account that loses on a regular basis will never outpace a guaranteed account that never loses, especially after you figure in the broker fees on the underlying investments which are based on the value of the account instead of merely the premiums paid in.
My clients never walk out of my office upset that they are in a whole, never.
Oh and by the way the whole trying to discredit someone simply because they sell something is a two edged sword.
Or should we not pay any attention to you on stocks and government accounts because you have them or sell them?
Really the whole bias argument is silly.
There is no such thing as objectivity, everyone has a bias.
The important thing is not to act as if your objective, but to simply be honest about where your coming from.
Yes I sell it, but in my case at least I got my license because I believed in it, not the other way around.
I got into this because I discovered how great it can be, but also how underserved many people are by agents who do not structure their policies correctly.
I often structure 10 paid up policies that have a cost of insurance that is almost exactly the same as a term policy by the 10th year, sometimes better.
But after the 10th year, the client still has life insurance, and they have a growing tax free cash account for the same cost as the term policy which has now run out.
In fact WL, in the long run, is the cheapest life insurance you can buy.
I have seen the projections as well as the client statements.
Open your mind to possibilities you had not considered and do yourself and your clients a favor.
Geez, a completely civil comment from a whole life salesman!
You have no idea how rare that is.
I just write a blog and sell ads.
If people find it useful, they read it.
But honestly I have no dog in this fight.
I agree with you that many people choose stability over higher returns.
I also agree with you that while whole life policies CAN be designed to provide a better return such as 5% projected over the years most are designed exactly as mine was-to maximize commission.
Yet every agent who comes to post on this blog claims that he only designs his policies the right way and his clients never drop the policies etc.
Selling something induces a serious bias that makes it very difficult to trust advice.
But would you expect those who purchase ads from me to come to me for advice on where they should advertise?
It would be a rare insurance agent who actually had a fiduciary duty to their client.
WL is only the cheapest insurance if you need a permanent policy.
If you only have a temporary insurance need, like most people, term is far cheaper.
Fill up the 401K and then open a taxable account with tax efficient stock index funds.
Worlds better than the Whole Life policies that dirtbag salesmen attempt to peddle.
I have never understood why people try to compare Whole life, Universal Life, etc.
With extremely few exceptions, the only people who should even consider such policies are those who much chose between that and a straight taxable account.
When I read this post I thought it was self-evident.
But I guess there are people out there who need it.
It blows my mind that there are people out there who forgo contributing to a Roth so that they can fund this type of policy.
I recently broke down my continue reading year of my 401K with an attorney who is also a tax accountant.
So, he might be the second smartest guy alive next to me when it comes to investing.
Over the last 23 years my 401K has grown about 478%.
This is really exciting until I broke it apart with the 2nd smartest Investor Alive.
I am still not very upset as I have earned about 155,000.
This is pretty exciting still as I have made quite a tidy sum.
However, the 2nd smartest guy alive points out that I have earned a growth of about 39% over 23 years.
I am still not too upset or frustrated because I still made 39%.
I am now asked how much does that equal each year?
I am the Smartest Investor Alive so I do the math and discover I made an astonishing 1.
I thought I was making 8%?
I am kind of frustrated until I start to really uncover the harsh dark reality of those conniving scum buckets brokers who lie about their fees and commissions.
I have a no-load account and no commission becasue my guy is fee based….
I have seperated from service and my money is in an IRA.
Anyway, this is getting uglier by the minute for me.
I am so angry I am getting black outs….
His over all fee was 1.
This SOB made more money than I have.
I am an extremely talented EE from U of M Go Bluebut this is BS.
I am so pissed.
So, to all you buying into Brokers being better than life insurance agents beware.
I have term, but if WL is guaranteed and I can stop these lying brokers from getting my money I am all for it.
So, if you are an agent an can show me how a WL policy beats the market….
I agree that there are plenty of sleazy brokers and sleazy insurance agents out there.
Your story is far from unusual.
Nobody is doubting that a Roth is a million times better than a WL policy.
But I think the real issue is to compare something like a VUL policy to a taxable account.
That comparison will be coming up in the coming months.
WCI, I eagerly await this comparison.
I think the TIAA-CREF VUL is also considered one of the better ones.
The idea that a Roth is better then WL is simply false.
WL has none of these problems.
For that reason alone it is better.
For tax purposes they are similar.
However a properly structured WL policy can provide a retirement income as well as an inheritance to your heirs.
WL is like a super Roth, without the government strings.
A 401 kyes, but not an IRA.
Similar for tax purposes?
The only way you can get your gains out of a whole life policy tax-free is to borrow them and pay interest for the privilege of accessing your own money.
The insurance company strings are far worse than the government strings in this case.
Equating WL to a Roth IRA or worse, a super Roth IRA is just another WL sales technique.
It must be really tough yet rewarding to convince people to buy this stuff given just how hard so many salesmen work at selling it.
Why should you have to work around withdrawal rules?
There should be no need for workarounds.
Compared to a whole life policy where you ask the company for a check and get it, the difference is night and day on the side of WL.
Second they are similar for tax purposes only the WL is better since there are fewer strings.
Why would you cash out your whole life policy?
This would be a bonehead move.
You WANT to borrow the funds out of your policy.
The idea that you should steal from yourself is what is wrong.
By taking out of your account without paying back with interest you are harming your own growth.
Your should borrow from yourself and pay yourself back with interest, that is the financially prudent thing to do for yourself, and the insurance company knows it.
That is how money works.
Of course if you borrow, and then repay with interest this will never happen.
You can grow the thing until the day you die borrowing up to basis and paying back with interest and never pay a cent in taxes.
As it grows your basis grows, and your ability to self finance grows.
The other thing is this.
There is no legal limit on how many WL policies one can own.
There is only one Roth per customer, and that comes with contributions limits.
I can do so much more with a WL policy then you even can with a Roth.
Not saying no one should ever have a Roth, but the flexibility of WL far outperforms it.
A WL policy is compared to a Roth since they are both funded with after-tax dollars and earn returns tax-free.
You can buy a 10-pay policy—I believe all mutuals offer them—and your policy is paid-up in 10 years.
The 10-pays have the highest IRRs because of their design, but not much higher that the WL99 and if you die while funding these vehicles, your IRR based on death benefit is much higher, obviously.
If you were to become disabled, there is no automatic completion of funding, which is available with Waiver of Premium.
When you distribute from a WL policy, you go to basis then borrow to not incur taxation.
Once you withdraw from a Roth, you no longer earn interest on that portion, correct?
But I also think that owning a WL policy that is quietly returning over 4% in its cash value and providing a death benefit while doing so is equally valuable.
However, can casinos with best video poker odds matchless NOT go down the path of VUL!
Let me add the caveats you failed to add- you continue to earn dividends only on a non-direct recognition ed slott retirement life insurance />When interest rates were high, direct recognition policies also paid much higher dividend rates.
The VUL guys say the VULs are great and online casino asia uk best life should never be used without caveat.
The universal life guys say universal is the only one to consider.
The equity-indexed guys are the same.
Take a look at Northwestern.
Direct recognition policies have fixed interest rates according to contract.
With direct recognition and the corresponding higher dividend rate you receive the actual rate is about 7%.
If you needed to take money out of your policy, then you could either withdraw cash values with no taxable consequence, or you could borrow from the insurance company AND continue to earn dividends.
Most people would choose to borrow, I believe.
They end up getting repaid, either by you or your heirs, and you do get charged interest on them.
And, if you take too many out, your policy lapses, and you can get hit with capital gains.
But those points never make the brochure.
The reason they tout the return of basis—which also happens when you annuitize—is that it preserves the tax-free aspect of distributing income from a policy.
If you were to go from basis to paid-up additions, then it would become a MEC and be taxable.
Inhererent in any discussion of life insurance should be the admission that, yep, you can die prematurely.
My friend Erik died this spring at age 53, stroking out after a heart valve replacement.
He had 5 million in WL insurance that was paid to read more family within a week.
The 5 million was supposed to grow and he was going to use it to supplement retirement and use it for legacy purposes.
Of course loans are repaid, by the way.
They are collateralized by the cash values of the policy and either the policy values will support the loan if the policy was sufficiently funded OR if the premium is ed slott retirement life insurance to be paid.
Your policy will never lapse with loans as long as you pay premiums.
Buying perm when there is an unmet need in term insurance is an absolute NO-NO, in my opinion.
Not overly impressed with WCI here.
Baackground about me — 38, healthy, male So ed slott retirement life insurance addition to contributing to my 401k, I have a custom whole life policy with NYL.
Would this make sense for me if I was unhealthy and the insurance cost was eating away at my premium?
It needs to be the right fit.
Readers may find it interesting to see what your current cash value is after 5 years and what your premiums have been each year.
You talk about having a legacy to pass on to your family, and then in the same sentence you talk about diversifying your retirement portfolio.
You either get the death benefit, or the cash value, not both.
If it is a legacy you wish to leave, and you die at your expected age, you will likely leave more money i.
That means your money doubles once every 72 years.
Sufficient for my needs?
Again a reasonable description.
Way off the mark IMHO.
Especially for someone passing up a 401K or a Roth IRA to do it.
I am not sure where that info came from.
You DO get your cash value AND the death benefit.
Plus, it is paid TAX FREE, both the cash value to you or, if you die, the cash value PLUS the death benefit.
Again too, your growth statement is simply not true with a good mutual company.
This information is simply not true for all policies.
Also, it depends greatly on how you fund it.
You should over fund your policy greatly.
One other thing, in over funding your whole life policy, you want a policy that not only pays you a yearly dividend but one where the death benefit increases each year through your paid up additions or through over funding.
If your death benefit does not increase, the model does not work in getting the death benefit and the insurance amount.
Just keep an open mind and talk to people you trust.
This is a great tool if used properly and you get good guidance.
The only people I know who recommend investing in whole life insurance are those who benefit from its sale.
Those are not the people I trust for unbiased advice on this subject.
Those are not the people I trust for unbiased advice on this subject.
Do you distrust anyone who makes a profit on anything they sell you?
Remember, I said talk to people YOU trust and shop around.
One adviser would not even meet with me or sell me anything till I read that Nelson Nash book on infinite banking.
He even wants you to give him a report on the book.
If you want unbiased advice on a car, you go to Consumer reports, not to the best slot machines at tropicana dealership.
Nor does Pamela Yellen.
Am I to assume you are admitting you are a whole life salesman?
You do NOT get your cash value and your death benefit.
Send me an illustration that shows my return projections are wrong.
This is what got me looking at these policies.
I believe your heart is in the right place and that you are trying to help folks but the information in https://veronsmeatmarket.com/best/best-casino-management-system.html post is flat wrong.
You get BOTH if your death benefit grows.
My policy gives out the cash value AND the death benefit.
Why would I pay an insurance company for cash value and let them keep my money?
Now after 30 years, my policy death benefit has also grown, because the cash value has grown.
BE CAREFUL—Some illustrations could separate the two into a death benefit and cash value column and you do NOT get to add these together, that is not what I am talking about.
I used to think this too.
I know mine will, its guaranteed.
You do not get to take out a loan AND not pay it back at death.
But you do keep the death benefit and the remaining cash value.
Thank you for admitting you were wrong when you said you get both.
Readers need to be aware that the death benefit is not guaranteed to grow, but it probably will at some rate below the rate of inflation.
Does it make any kind of logical sense that an insurance company can compound your money at 13.
So that cannot be the return.
You, or your friend, are leaving something out, most likely a premium payment that is ed slott retirement life insurance due but which will not increase cash value or the premium payment from last year.
By the way, this is an Adjustable Complife policy I am using as the example.
Sold by Northwestern Mutual.
Happy to provide emails etc.
There is no free lunch.
If they dont charge you as much for the loan by crediting you the same regardless of having one then they give you less in dividends then companies that do the opposite.
There is no magic.
Its a matter of choice but both being inferior to other investments.
Also there is no diversification with WL.
You are just buying the same types of things mostly bonds and treasuries through an insurance company but with higher costs.
Costs are irrelevant in the absence of value.
I care about what is most strategically beneficial.
WL may not offer much diversification from bonds, but it is a better way to get a safe RoR than bonds are, IMO.
When value is guaranteed, sure.
After reading this post people will be aware about the difference between a Roth IRA and whole life insurance.
One, when someone says Hey look the index fund only charges a half of a percent, and the whole life policy charges 50% first year, and 6% every year after.
Wow what a rip-off that whole life stuff is.
You gotta ask one question.
When can a half a percent be more then 6%?
In any mutual fund, you are paying a percentage of your account value, which if you have any hope of retiring should be north of one million dollars.
The whole life percentage is of the premiums paid, not the total and growing value of the account.
This is a classic example of short term thinking, which is especially inappropriate when thinking about long term savings such as for retirement or large purchases.
Sure the commission in the first year outstrips the fees of the fund and in the first few or so, but if your mutual fund grows as it should, those fees will soon out strip the commission on a whole life policy by orders of magnitude since a whole life premium never goes up.
First, half a percent is a ridiculous fee on an index fund.
You can buy Admiral TSM at Vanguard for 5 basis points a year.
Second, how many years of expense ratios does it take to equal the commission on a whole life policy?
According to my calculations, if that index fund makes 8% a year after expensesit will take a grand total of 35 years before the ER adds up to more than just the original commission.
There are all kinds of ongoing expenses, which are actually quite a bit higher than the 5 basis points in an index fund.
There are legitimate arguments to buy a whole life policy.
This is not one of them.
I agree that half a percent is a ridiculous fee for an index fund, but that does not mean it is unheard of.
In fact the average is only.
The fund you cited has only returned a meager 5.
You can easily match those kinds source returns and have the guarantees of WL.
The point I was making however was not to quibble over numbers but to point out a principle that does not go away no matter what the numbers are.
That point being you have to look at the long term not just the short term.
Now as far as that issue here, your question about how many years of expense ratios does it take to equal the commission on a whole life policy of course depends on three factors.
The expense ratio proposed, the commission involved, and how long the policy will be held for.
The last part most people forget about.
But if you average commission over the life of product which you should and compare the annualized expenses then how long it is held makes a big difference.
Whole life has a high up front cost, no doubt, but if you run the numbers in the long run, AND you compare a properly structured whole life policy which reduces the commission by as much as 80%to any index fund, it compares favorably and in my opinion preferably.
One of the big reasons is because even a.
This is Wall Streets dirty little secret, and why they lobbied so hard for the Roth IRA and other tax qualified plans to begin with.
To enduce the common man to invest in the market.
Whole life insurance was not developed because of Wall Street lobbying Washington, it was developed because term insurance clients complained that they never collected on their premiums.
So the insurance companies responded to the market place demand and developed Whole Life.
None of this even takes into consideration the market risk involved in index funds or any market based asset whatsoever.
Whole Life insurance comes with guarantees that funds never do.
A lot of people are attracted to the idea of not waking up one morning and being worth less then when they went to sleep the night before.
As we all know this happens a lot.
Oh, but just wait they say.
The timing of these market drops are pretty dam inconvenient for many.
If the roller coaster ride is a problem for you, then Whole Life, especially participating Whole Life is a solution.
If you love whole life insurance, invest all your money in it.
Or you can cruise around the internet, find 18 month old blog posts, and then post comments half as long as the original post on it.
Those who would give up their freedom for security, deserve neither.
Those who would give up their high returns for low volatility, have the unenviable problem of not being able to meet their goals.
None are particularly strong.
First, the cherry picked time period beginning in 2000.
Why not start in 2002?
Because it makes your argument look terrible.
Instead, pick the best casino near albany ny worst period you can find, and use that in your example.
The best part about this argument is it is becoming less and less effective the further out we get from 2000.
The guaranteed returns on a typical whole life insurance policy bought today and held 30-50 years are around 2%.
Projected returns are in the 4-5% range.
However, over a relatively short 14 year time period, the returns are quite a bit lower, with many policies barely breaking even around that time period.
But if you can meet your financial goals with 2%-5% returns, then be my guest.
Invest all your money in whole life.
Third, nice little sleight of hand using the investor shares of the Vanguard 500 Index fund.
Sure, the ER is 0.
But hey, if you think 0.
Fourth, Wall Street might have a lot of dirty little secrets.
So does the insurance industry.
But hey, set up a Boogie man and then provide the solution.
Sixth, stocks might be volatile.
But what do you call an investment where all or most of your entire principal disappears the second you invest it?
That seems an awful lot like volatility, no?
Sure, it only goes up from there.
But if you think whole life compares favorably to investing in stocks, then invest in whole life.
No skin off my nose.
You have run those numbers, right?
If not, you might want to rethink your investing strategy.
I do not have all of my money in WL, I have gold, real estate, and WL.
Not that it is any of your business but your ad hominem approach is silly.
I never once advocated everyone should put all of their money in bay 101 craps one vehicle.
That said, it does nothing to show that my argument is not valid that I have other assets.
And by the way, WL is not investing, it is savings.
Investing involves risk of loss, savings does not.
Since WL comes with guarantees it does not involve investment risks.
It is specifically designed to accumulate and preserve wealth not invest.
This is a common misconception.
Anything that makes guarantees against losses is savings, not investing.
It provides a benchmark from which to judge wether an investment is worth taking money out for as well which is insanely helpful.
Your freedom for security reference is quite tortured.
What Franklin was referring to there was people entrusting the state with their security by giving it too much power.
This is precisely what is happening of course, but on the tax qualified plan side which are essentially government solutions to government created problems.
Life insurance is a free market product and predates the Republic itself.
Oh and before you go accusing people of cherry picking, you should check up on things first.
I got the 2000 date from Vanguards own website.
They claim a return of 5.
Might want to look into that.
It is slight of hand however to talk about the guarantees of WL only without ed slott retirement life insurance about dividends as well.
Mass Mutual declared a dividend of around 7% last year.
That compares very well when you consider the lack of volatility.
Why it goes up and why it goes down.
It has a great deal to do with fractional reserve banking systems and the availability of capital to invest on margin.
This margin investing results from very low interest rates due to Federal Reserve money printing.
You do need to stay ahead of inflation, but unless there is a hyperinflation a properly designed WL policy does keep ahead of 2-3% inflation handily.
Gold should be held in case of a Weimar Republic type scenario.
The question of market risk is vital.
You may be comfortable sticking your retirement funds in volatile funds, but are most people?
Should you be investing, risking, retirement money?
Or money for college?
Or money for the family car?
Generally no, you should be investing with money you can afford to lose.
This is why they have qualified investor status.
Those people have money they can afford to lose.
If your trying to save so you can live in your old age, that is NOT money you want to risk.
It never was normal just a few generations ago.
I have seen it happen.
Are we really going to compare a mutual insurance company like State Farm to Lehman Brothers?
No, that would be silly.
State Farm is more stable then the US government.
No, and you never will because they will never need a bailout from the taxpayers.
If you want to focus on returns, that is your prerogative, but when polled most Americans when given a choice prefer safety over a larger return.
The difference has to be substantial to justify taking risks, and they just are not that much better if better at all.
You are an insurance salesman, no?
Gold is down 38% from its peak.
One of my favorites.
You invest for it.
You certainly can lose money with whole life.
Still under water by a third.
How is that not losing money?
Around 80% of whole life insurance policy purchasers surrender their policies before death.
Looks to me like about half of those who put money into whole life lose money.
I just point them out.
Most Americans live on Social Security in retirement.
Polling Americans about their financial knowledge seems a lousy way to determine what the best course of action is.
You must not think much of the readers here or of me if you expect me to buy that.
It says here that the date of inception for admiral shares is 2000.
And the return since then is 5.
Far more data than just going back a lousy 14 years.
What is the return there?
Life insurance, product of champions and Ben Franklin.
The stock market also precedes the Republic.
So does real estate.
Lots of insurance companies failed in the Great Depression.
Time for me to go to bed.
Seriously, if you love whole life.
I sincerely hope your investing strategy allows you to meet your financial goals.
Vanguard reports their numbers before taxes and after fees.
I dont know alot about investing which is my next step but im looking at the vanguard site and it shows since inception 31Aug1976 11.
But the heading says Average Annual Returns.
The reason I say that is because I was shown an example of how I could average 25% return on my money and not earn a single penny.
Any investment promising 25% returns long-term qualifies as too good to be true.
We had this discussion on Bogleheads recently.
You can double check it here: where the difference between the two is clearly emphasized.
By the way, you the same fred who used to work for State Farm and now works for The Simmons Group?
Property and Casualty agent…that is correct.
Homeowners, Auto, Commercial some term sprinkled in there.
Had term until I met with an Agent from Ohio National who changed my way of thinking but was interested to see what other sides of the argument were.
I am very interested in learning the investment side of things which I clearly stated but obviously some of the points that I made pushed you to a level of discomfort that you felt the need to investigate thus putting potentially personal information out there.
If you must know like i referenced to many times I am not completely sold on the WL concept that was sold to me by my WL AGENT and was curious to know the pros and cons from a different point of view.
However up until this moment I have not been able to see a response from you on what would be a better alternative.
I can use my own brain to determine what I believe is best.
If I decide I need to form my own RIA then I have the ability to do that.
If I truly believe that I can better help individuals by selling them properly structured WL then I can do that too.
For now I am doing what I know best which is insuring houses and businesses.
You a fan of the Marines or something?
However I have yet sell 1 WL policy in 2015.
In fact I have sold a total of 13 term policies in 2015.
I did sell a few WL last year but that was more for people who wanted the insurance their entire life.
When I say learn more about the investment side of things I am not referring to IRAs or anything like that.
My latest interest is in Ed slott retirement life insurance tax free Muni bonds.
I would love to get your insight on those.
Not much insight to offer.
If the after-tax rate for a muni bond or bond fund is higher than the after-tax rate for a taxable bond or bond fund of similar risk, you should buy it instead if you wish to hold bonds in your portfolio.
Triple tax free in this case refers to income taxes- federal, state, and local.
Here are the numbers from NYU, look at the geometric average.
If you donate shares to charity from an IRA, then no tax due.
If you have enough carry over losses from tax loss harvesting, then no tax due.
If you get the step up in basis at death, then no tax due etc etc.
I just know that my CPA was anti WL at the beginning.
During my first meeting with what would become my life agent, he asked if there was someone who participated in my decision making process my cpa and invited him to our follow up meetings.
At some point in the process he was able to show us how rate of return was not the answer to my long term problems I was going to have to earn something like 12% every year not avg.
The fact that my CPA walked away with a probably, best strategy for betting craps something mindset made me a believer.
I would point out that the longer history is a better indication of long term expectations, and the link I provided gives those numbers.
The link I gave is from NYU and the bond rates there comes directly from the Federal Reserve, those are the correct numbers, and going back to the 20s that number sits currently at 9.
Here is the link again.
Your article is very interesting.
I am debt free, unmarried, work full time and have no dependents.
How do I figure out if I should purchase any life or even disability insurance?
Are you financially independent?
If not, you need disability insurance.
Do you have enough money in your investments to be buried?
Given your age, which is a huge advantage, I would figure out how much savings you would like to put away each month and buy a properly designed whole life policy as your savings instrument.
Being young when you start saving is a huge advantage.
WL is not investing, it is saving.
Did you seriously just recommend the purchase of a permanent life insurance policy to someone with no dependents?
You are plagued by short term thinking.
It is a Whole Life policy that means it is good his whole life.
Will he have dependents someday, most very likely.
Your focused on the here and now, not the long term with a comment like that.
Second of all I did recommend it as a savings vehicle primarily.
It is possible, with the right agent, to design a policy that maximizes the savings aspect of a policy over the death benefit.
You use it for what you want to for best casino in san jose costa rica that it for, not what someone else tells you it is for.
IULs are a big sham.
They are ART policies in which your cost of insurance grows every year.
That premium you send every month will get eaten up by cost of insurance plus administration costs.
Your cash value will get depleted.
If my WL policy is completely off the grid of the IRS and when I retire I have 1 million in cash that I can withdraw tax free via policy loans, how does rate of return have anything to do with anything?
To someone like me when I was presented with this idea it made sense.
Can the Gov put an excise tax on a Roth if they want?
They just tried to do it to our 529 plans.
Also to know that if during my working years I am ever disabled the insurance company will pay the premiums for me of if I die unexpectedly my loved ones will at least have some of my economic life potential to help them??
I think what some of the agents on your blog are saying is that sometimes to some people, like me for instance, rate of return is not the most important thing.
If WL is such a bad thing then why would the Government care how much people put into them?
Why would they create qualified plans shortly after establishing the MEC?
I quickly learned that 25% of banks portfolios consisted of BOLI bank owned life insurance and that the top 1% pump millions upon millions into WL each year Michael Dell puts 1.
When you consider the fact that the top 1% are also the top contributors to political campaigns I strongly doubt there will be a long line of politicians waiting to jack around with WL.
I also learned that when the Gov did touch WL policies with the MEC that it grandfathered in all the previous policies.
With all that said I believe my Agent said it best.
It all boils down to each individual and what they like or feel comfortable with.
My agent told me his goal is not to do business with everybody who needs what he does, it was to do business with the people who believe what he believes.
Its not for everyone and that is perfectly fine.
I forgot to mention that I was told I also can have access to funds from my Death Benefit if I were to need Long term care which will eliminate the need to pay thousands of dollars in Premium for something I may or may not ever use.
To me and the way it was explained, i just cant see how rate of return can even be calculated on something like this.
Maybe I am naive and just the victim of a heck of a salesman?
I do like hearing your point of views as it gets me thinking!
A LTC rider on a whole life policy can allow you access to cash in that event or it can spread the death benefit over a period of time to pay for LTC or something else similar like Hospice care.
If your going to go slowly rather then fast that could be a useful feature and of course no one knows how that is going to go down.
LTC riders do add to the premium however, but they best craps betting not as expensive as a separate LTC policy because it merely extends the death benefit already there.
Every financial advisor I talked to in the past told me how they can get me a better rate of return.
But not one told me about the impact opportunity cost throughout my lifetime can have on my overall wealth.
Every financial advisor I have been around has been telling me to fill my leaking bucket with more water instead of plugging the holes.
If Best poker chip shuffle never have to finance anything ever again and pay finance charges, or lose the cash that I was going to pay for that same item am I not coming out ahead in the long run?
Accuse me of being sold on the build your own bank concept but it just makes sense to me.
I am all ears.
What else is out there for someone like me that can provide all the benefits of WL along with the opportunity to avoid lost opportunity costs throughout my lifetime?
But I find it odd that almost all of the true believers just happen to sell the stuff.
Is the non direct recognition the only way that WL will work with the bank on yourself concept, when the dividends and interest outweigh the interest on the loan?
I realize that my questions might come off more as answers but honestly I am looking for answers that I dont have.
I would think that if you had significant equity in your house then you could use that to bank on yourself.
The house will appreciate regardless if you have equity in it or not and there is 0 rate of return on equity.
With continue reading as low as they are on 30 year mortgages I feel like it makes sense.
Sorry not trying to turn this post into a bank on yourself topic so I will leave it alone after this!
You own the whole house.
So if you borrow against the house to buy a boat or another investment, the house still appreciates at the same rate.
If the house is rented out, the rent is exactly the same no matter how much of the house is financed.
I suppose you could do it with real estate or even stocks.
Not sure I would though.
It would have to be a taxable account you were borrowing against.
Im not looking to prove you right or wrong.
Like I said, I am not trying to prove a point just simply trying to see things from a different set of shoes.
I think whole life is a pretty lousy retirement investment- the returns are just too low for what most people need their retirement money to do.
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