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Buy term is the way to go for most. But for millions this strategy has not worked. For many that failed using this strategy will have an insurance need that will never go away.
Oooops! Learn to read an insurance policy.
Because you do not or have never read a insurance policy.
The death benefit is used to “cover final expenses” not the cash value.
Ok, don’t like Dave Ramsey? Try Suzie Ormon, Jim Cramer, Smart Money or Consumer Reports and many others. They ALL state the same concept: Buy term and invest the difference through a 401k or IRA. They have MILLIONS of listeners. Don’t yuo think if they were misleading people the truth would come out? Buying a WL policy is stupid. It’s monthly payments are sky high (which you never get back)and the roi at best is 4%.
Has anyone noticed that his main endorser is a term life insurance brokerage? How about the folks that followed his advice, had all their money tied up in the stock market and “were” planning on retiring but now can’t. I’ve also never heard of anyone using term insurance for estate planning purposes. Makes absolutely no sense unless you knew when you were going to die.
Why not “cover final expenses” buy SAVING MONEY? Ever heard of that concept? Buying cash/variable/whole life policies as investments is dumb. It’s roi at best is 4%. That’s less than the rate of inflation.
While it’s great to buy term and invest the difference, many buy term and spend the difference. It’s most important to have the right amount of term insurance coverage first and if you want someting to cover final expenses, like burial or taxes then a little of the permanent coverage is ok
So why even invest in the stock market in the first place? According to your “analogy” the stock market will never make money. I guess since the history of the stock market, no company has ever made any money? Please tell me you are joking.
Wtf are you talking about? “You get the growth out a cost of .1%?” What does that mean?
Please give your source. My sources are Dave Ramsey, Suzie Ormon, Jim Cramer, Wikipedia Smart Money and Consumer Reports. They all say stay away from wl policies. If you say they are wrong, I will laugh at you. They have MILLIONS of listeners.
the market suffers a down year about once every three years. you have a high probability of having to withdraw money from the market at a depressed value during your retirement, whenever that may be. it’s a very real possibility that you’ll get to face when you do want to retire. if all of your money is in the market, you have no choice but to realize some potentially devasting losses.
whole life contracts act like the Roth IRA regarding how it’s taxed. after tax money in, tax free growth, tax free withdrawals on the basis, and you get the growth out at a cost of .1%. unlike the Roth, there are no contribution limits and people with high incomes are not excluded from participating.
actually the dividend for a solid mutual has a 50 year avg of 7%. and that’s tax free. so a comparable mutual fund would have to get like 9% to 10% EVERY YEAR to compete.
thatpsychostud… And again you are talking about tax free…since we both know that there is no such thing…except on Roth IRA. Plus isn’t it that in Whole life policy you need to borrow your own money? Do you like to borrow your own money from your savings account in the bank? I don’t think so…
thatpsychostud…isn’t it nice that the market is down right now since I am not ready to retire yet? I still have about 20 more years to go. I don’t think the market will keep on going down because the market IS THE ECONOMY…I don’t think we will stop driving, using our cell phones, eating, watching TV anytime soon, are we?
Hardly. Do you know that the CFP exam materials repeatedly highlight the many uses of cash value insurance? It’s a legit financial instrument that many people own because of it’s many uses. Bad products like UL and VUL have given cash value a bad name. Also companies who aren’t mutual companies can’t have competitive whole life products because they have stock holders they must pay dividends to instead of policy holders.
As a simple guy, I’m sure you can appreciate the simpleness of my answer. Your Roth IRA is in the market, WL is not. If your account value is down (like most everyone’s is…many 30% or more) when you want to retire, you might have to work longer or live off less. With WL policies getting a current dividend of 7%+ tax free, you know what you’re getting and where you’ll stand at retirement. The avg investor in the market gets much less than 7%.
Its not that simple. I know a guy whose term insurance policy lapsed 2 months before he took his own life (depression), because he failed to pay premium, and there was no cash value fund to pay mortality costs. So, its not so simple. This why most policies are not term.
Why would I invest in something that has an roi of 4%? That’s less than the rate of inflation. Never use insurance as means of investments. It’s a rip-off. True the economy is down, but that means it’s a great time to buy, because the stock market will go back up.
Know anybody who has lost much of their net worth, by investing in high-yielding, tax-deferred, cash value Universal Life … recently? Those “buy term and invest the rest in stocks” folk are suffering right now.
Because he sells those god-awful cash value policies. A snake oil salesman.
pyscostud…Hehehe….This sounds complicated to me. I’m a simple guy and I like simple things. So, if it is .1% tax. Why not just put it in a ROTH IRA? It’s completely tax free at 60 isn’t it? Why go through all this policy loans?
You don’t use life insurance for the same reasons in retirement that you used it for earlier in life. Having a contact with a strong mutual life company allows for guaranteed tax advantaged returns every year, regardless of what the market does. It allows you to build up savings inside the policy with the cash value. The IRR on the CV is usually around 5% tax free and after expenses. You’d have to get 8-10% EVERY YEAR in a mutual fund to equal this.
Your misunderstanding is an education issue. It’s not your fault that you’ve been misled and never properly taught how it works. When you borrow the cash value out at 8%, the cash value continues to grow at the dividend credit rating, around 7%. So you access your money for around 1% cost. This is lower than a bank or financing company. Make sense?