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good point. i have seen kids have to spend quite a bit for funerals from parents who had nothing.my son has a wife but no kids. since he is a lawyer and my daughter inlaw a cpa they make a nice living but my advice was carry enough insurance to cover their student loans.
Whole life policies are not a smart move at ANY age.
If you don't have dependents (spouse, kids) to provide for then you don't need life insurance at all.
not totally true. their are situations where they perform a certain function that cant be dublicated.
they are fabulous for turning taxable ira money into never taxed money for your spouse.
while spl policies are better a whole life policy will work too.
its great for 2nd marriages where each is leaving everything to each other. a small whole life policy that goes on until death is a good way of giving your own kids something without having to wait until the other spouse dies until they see something from their parent.
there are quite a few outside the box uses for cash value policies but none act as a proxy for real investments..
Ask your "friend" how much more commission he makes off of whole life vs. term and report back to us....
1. Don't EVER buy life insurance if you don't have a family....no one cares or will need to benefit if you die.
2. Buy term and invest the difference when you start a family...get at least 500K - 1MM in benefits so that when you die your kids college will be paid for and your wife can pay off the mortgage...works for us..
The ONLY time I would look at whole life was if I was much older and I know in very RARE cases it helps as a tax shelter...but Im nowhere near that point yet...
Ask your "friend" how much more commission he makes off of whole life vs. term and report back to us....
1. Don't EVER buy life insurance if you don't have a family....no one cares or will need to benefit if you die.
2. Buy term and invest the difference when you start a family...get at least 500K - 1MM in benefits so that when you die your kids college will be paid for and your wife can pay off the mortgage...works for us..
The ONLY time I would look at whole life was if I was much older and I know in very RARE cases it helps as a tax shelter...but Im nowhere near that point yet...
Bold is HORRIBLE advice. Think forward 5 years. Might you have a family then? 5 years seems to be the magic number at which a life insurance agency will begin covering you again after serious illness or injury (for a price). I got cancer at 23. When I'm 28, I will likely either be married or hopefully along the path toward marriage. If married, it's likely that I will be considering children at that time. However, because I have had cancer, I would NOT be able to get insurance after the fact until that point. If I died - be it from cancer or getting hit by lightning - my family would not even have the money to bury me, much less the financial ramifications of hospital care, etc.
Because I already have life insurance, however, I am all set. Note that a life insurance company cannot drop you due to serious illness unless you lied when applying. If you have had the insurance for 2 years or more, then there is no way to drop you as long as you continue to pay. I'm kicking myself now for only choosing the 2nd lowest coverage (my employer pays for 1x my salary, I pay $12 a year for twice my salary). Because of my age, I didn't even need an eligibility check up before being granted insurance (that policy varies). At this point, I cannot up my coverage due to my history.
Plan for the future. Getting term life insurance while young can save you a whole lot of heartache later. Too many of my other young adult cancer friends have left their spouses in hundreds of thousands of dollars in debt after passing away because they weren't proactive about getting life insurance before they became ill.
Bold is HORRIBLE advice. Think forward 5 years. Might you have a family then? 5 years seems to be the magic number at which a life insurance agency will begin covering you again after serious illness or injury (for a price). I got cancer at 23. When I'm 28, I will likely either be married or hopefully along the path toward marriage. If married, it's likely that I will be considering children at that time. However, because I have had cancer, I would NOT be able to get insurance after the fact until that point. If I died - be it from cancer or getting hit by lightning - my family would not even have the money to bury me, much less the financial ramifications of hospital care, etc.
Because I already have life insurance, however, I am all set. Note that a life insurance company cannot drop you due to serious illness unless you lied when applying. If you have had the insurance for 2 years or more, then there is no way to drop you as long as you continue to pay. I'm kicking myself now for only choosing the 2nd lowest coverage (my employer pays for 1x my salary, I pay $12 a year for twice my salary). Because of my age, I didn't even need an eligibility check up before being granted insurance (that policy varies). At this point, I cannot up my coverage due to my history.
Plan for the future. Getting term life insurance while young can save you a whole lot of heartache later. Too many of my other young adult cancer friends have left their spouses in hundreds of thousands of dollars in debt after passing away because they weren't proactive about getting life insurance before they became ill.
I do understand your point and I'm sympathetic to your situation.
The only difference in my answer I would change would be thinking about gettting a policy if one is in a serious relationship and kids are around the corner.
Other than that, insurance is all about the risks and having a fatal disease happening is an extreme rarity....Its like anything else. I would forego a few years of premiums taking the chance I'm not going to get a disease that would be extrmely rare...
Sorry if it sounds cold, but it comes down to risk and dollars and cents...
Just graduated college at 23 years old and I have an extra 500-1000 a month to invest (after contributing to roth) long term. One of my friends just started at Northwestern Mutual and has been telling me about whole life insurance, which apparently is basically a life insurance policy + an investment vehicle. He touts the cash value and dividends. Using his 'projections' at age 60 I would be able to take out 83k a year in cash from the policy until I was 90.
Is whole life insurance at 23 a smart move, or should I invest it elsewhere?
I'm going to be a bit contrarian and say it is worth considering. And I say that as someone who for years bought into the idea that you purchase term and invest the rest. I ended up buying some whole life 10 years ago because my brother in law became an insurance agent and my wife wanted to help out her little brother. I needed life insurance because I'm married and have a lot of kids and my wife stays home with the kids.
After seeing wild gyrations in my stock market based investments, including my 401(k) the last decade, I for one am happy to have the slow and steady growth I'm seeing in my cash values. And the policies are to the point were the increases in cash value are much greater than the annual premium. They are going to play a big part in financing my kids' college education through policy loans and then help with retirement. Of course, if I kick it in the meantime my wife will get the death benefit tax free, or if she goes before me, the kids will get it when I go.
I say maximize your 401(k) if you have one, max out an IRA or Roth IRA, but if you still have funds left over to invest, it's worth considering.
It is definately a long term investment. And the brother in law? He quit after about a year.
a decade is way to short of time frame for good results from equities. its like looking at the premiums you paid in to your whole life plan over only a decade.
there were no long term gyrations in the stock market if you went out to what i consider the minimum time frames for good results.
as sure as day followed night for the past 100 years if you were diversified in the markets you saw a 100% chance of being up 15 years or longer if you needed to sell..
no telling what the future will be but since your talking about what transpired nothing was more consistant in the past..
figure in your premiums and every penny of interest and dividends over the life of your policy and report back as to the deal you got. its an incredible amount that gets paid in over the typical 30 year time span to pay off a policy. some never get paid off and you just keep paying and all that interest just self insures you at death.
they actually take the cash value you accumulated and give it back to you as your death benefit . if you are a little short they only make up the difference with their dime.
if your not short then basically your self insuring and still paying them yearly fees until death.
thats the part everyone misses who raves about how good of a deal their plan is. the interest /dividends going back in and the fees for management go on forever.
its a lose/lose for you and a win/win for them.
if you take the cash value out of the plan then you way over paid for the cost of insurance because they are charging you internal rates based on you having coverage when your no longer insurable into old age..
if you keep it until you die and dont take the cash value then you in effect forfeit that cash value at death and only get the death benefit.
im not so sure you understand the inner workings of your policy.
there are some older policies out there that do have decent rates of return but not many and even less are still in effect long term as over 97%% of the policies are cashed out way early in the game making them horrible choices.
you dont buy life insurance as a product to fund you living via its cash value . its a product designed to cover you dying...... at least if you want a product thats based on covering you if you live buy the right product and look at some low cost annuities . even then unless you have a use you can do better on your own.
im not anti life insurance either as there are genuine uses for these cash value policies but as an investment isnt one of them.
once i retire i intend to sell insurance and annuity products as a part time hobby but i will market them in a manner that they should be to my clients.
Last edited by mathjak107; 07-19-2012 at 04:00 AM..
a decade is way to short of time frame for good results from equities. its like looking at the premiums you paid in to your whole life plan over only a decade.
there were no long term gyrations in the stock market if you went out to what i consider the minimum time frames for good results.
as sure as day followed night for the past 100 years if you were diversified in the markets you saw a 100% chance of being up 15 years or longer if you needed to sell..
no telling what the future will be but since your talking about what transpired nothing was more consistant in the past..
figure in your premiums and every penny of interest and dividends over the life of your policy and report back as to the deal you got. its an incredible amount that gets paid in over the typical 30 year time span to pay off a policy. some never get paid off and you just keep paying and all that interest just self insures you at death.
they actually take the cash value you accumulated and give it back to you as your death benefit . if you are a little short they only make up the difference with their dime.
if your not short then basically your self insuring and still paying them yearly fees until death.
thats the part everyone misses who raves about how good of a deal their plan is. the interest /dividends going back in and the fees for management go on forever.
its a lose/lose for you and a win/win for them.
if you take the cash value out of the plan then you way over paid for the cost of insurance because they are charging you internal rates based on you having coverage when your no longer insurable into old age..
if you keep it until you die and dont take the cash value then you in effect forfeit that cash value at death and only get the death benefit.
im not so sure you understand the inner workings of your policy.
there are some older policies out there that do have decent rates of return but not many and even less are still in effect long term as over 97%% of the policies are cashed out way early in the game making them horrible choices.
you dont buy life insurance as a product to fund you living via its cash value . its a product designed to cover you dying...... at least if you want a product thats based on covering you if you live buy the right product and look at some low cost annuities . even then unless you have a use you can do better on your own.
im not anti life insurance either as there are genuine uses for these cash value policies but as an investment isnt one of them.
once i retire i intend to sell insurance and annuity products as a part time hobby but i will market them in a manner that they should be to my clients.
Thanks, I understand the inner workings of my policies very well. I'm also well diversified in other investments.
The only people who tout whole life insurance are young salesmen from companies like Northwestern Mutual...the type of guys who seem very earnest, but probably the last people you should be getting any financial advice from.
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