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So, a family member was explaining to me about equity index life ins. tonight at a party....and it sounded too good to be true......(the way that it was explained to me)....so i thought i'd check with you guys while i simultanously research it myself on google....
so he said that the way it works is that you buy a half mill (or whatever) life insurance policy at let's say 300 a month.......200 of that money goes into a fund....the other 100 is for the fees/etc. the 200 keeps collecting, and growing based on S&P or any other fund you may choose to invest in.....and it grows tax free....and after 10 years, you can take all/some of the money out tax free as you please.
He also said that there's an option to invest in 'capped' funds or something like that....and the way that would work is that if the market goes down, your stash doesn't go down (at all), and if it goes UP, there's a 10% cap for the amount you can go up. (ie. if the market goes up 15%, your money goes up only 10% and the company takes the other 5%)
this to me sounded like a ZERO risk investment since it sounds like a 'no-lose' investment on your part.....which again, sounds 'too good to be true'.
This is the way it was explained to me and i told him that i have my doubts about if this is truly how it works. he said that all the rich people are doing this type of 'tax sheltering'.....he used OJ Simpson and Donald trump as examples.
the truth is you get very little of the market moves. its more a sales tool.
you get no dividends and since 1/3 of the markets gains has been dividends you give that up. your capped at certain levels so if he markets soar you are capped at a certain level max.then the fees eat you up.
i used to do these on my own with cd's. you can set any level you want to participate in the market at with stock options.
when all is said and done even doing it on your own it was more like a cd on steriods in a bull market than any kind of proxy for a market investment. if you got an extra point or 2 that was great.
thanks for the reply mathjak,
how do the fees work? is he accurate in saying that out of a 300 dollar monthly payment, 200 of it will go into the cash pile and only a 100 towards maintaining the account? (i read that the amount that goes into the cash pile is much less)
many times early on the cost of insurance is low but goes up every year so less and less makes it into the cash pile and more and more into the cost pile.
many times early on the cost of insurance is low but goes up every year so less and less makes it into the cash pile and more and more into the cost pile.
interesting.....i thought it would be the other way around!
let me ask you this though.....given the information i gave you in my originate post, would you be skeptical too or does that sound like a pretty reasonable/normal type of thing?
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