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How do you figure? I'm not putting in the dividends???
No, actually I do not. Say I have a 20 year term policy that costs me $500/year, that is $10,000 in premium and after 20 years, it's money out the window if I don't die. Say I have a whole life policy that costs me $1000/year and after 20 years I have a cash value of say $48,000. I've recouped any premiums I would pay into the policy, say a 65 Life policy, and that cash value continues to grow. Say after age 65, that cash value is in the $200,000 range, minus the $40,000 or so I might have paid in, I still have $160,000 that is mine....so which one costs more now?
You're making up numbers which do not reflect actual costs. I'm not certain what that is supposed to prove.
A whole life policy which has a cash value of 48k after paying in 20k of premium? That's a real knee slapper.
10k of term costing $500 per year? Maybe if you're 75 when you take it out.
You're making up numbers which do not reflect actual costs. I'm not certain what that is supposed to prove.
A whole life policy which has a cash value of 48k after paying in 20k of premium? That's a real knee slapper.
10k of term costing $500 per year? Maybe if you're 75 when you take it out.
Actually, my whole life figures are from my own policy, 10+% RRR thanks .
It wasn't 10K of term, it was 10K in premiums over the life of the policy. Again, the point you are missing, unless you die, term will ALWAYS cost more because there is no cash value and no pay out....vs permanent where you will always get a payout and with dividends from a good company, your out of pocket costs will be a very, very small amount of the pay out or cash value.
Actually, my whole life figures are from my own policy, 10+% RRR thanks .
It wasn't 10K of term, it was 10K in premiums over the life of the policy. Again, the point you are missing, unless you die, term will ALWAYS cost more because there is no cash value and no pay out....vs permanent where you will always get a payout and with dividends from a good company, your out of pocket costs will be a very, very small amount of the pay out or cash value.
My bad, you did say 10k of premium, not 10k of term life insurance.
Term life often does not pay out. That is why it is cheapest. Most people are far better off buying the coverage they need via term then funding their tax-advantaged accounts.
My bad, you did say 10k of premium, not 10k of term life insurance.
Term life often does not pay out. That is why it is cheapest. Most people are far better off buying the coverage they need via term then funding their tax-advantaged accounts.
No, not really. There is a use for whole life as well....
No, not really. There is a use for whole life as well....
The idea is that because the term insurance has much lower premiums for the same death benefit, you can emulate the benefit of whole life coverage by buying term insurance that extends out a long time (20-30+ years) and taking the monthly savings and contributing to your retirement account. If you die during the term of the term policy, then it pays out just like a whole life policy would, so the beneficiary gets the same benefit as with whole life. If you are still alive when the term policy is over, no problem, because you now have all the accumulated investments (contributions plus earnings) that you can simply will to the same beneficiary (of course the beneficiary statement on mutual funds must be completed correctly!), so that in this way they will still get a payout, just as if you had purchased whole life insurance.
Of course this strategy requires that you actually have the discipline to invest these savings on the premiums rather than simply allowing your lifestyle to expand to consume the money.
The idea is that because the term insurance has much lower premiums for the same death benefit, you can emulate the benefit of whole life coverage by buying term insurance that extends out a long time (20-30+ years) and taking the monthly savings and contributing to your retirement account. If you die during the term of the term policy, then it pays out just like a whole life policy would, so the beneficiary gets the same benefit as with whole life. If you are still alive when the term policy is over, no problem, because you now have all the accumulated investments (contributions plus earnings) that you can simply will to the same beneficiary (of course the beneficiary statement on mutual funds must be completed correctly!), so that in this way they will still get a payout, just as if you had purchased whole life insurance.
Of course this strategy requires that you actually have the discipline to invest these savings on the premiums rather than simply allowing your lifestyle to expand to consume the money.
Not really....there are many benefits of whole life that you can't get from a "savings account"....
Not really....there are many benefits of whole life that you can't get from a "savings account"....
In general they can all be emulated using term and investing the saved premiums. Where you are concerned with things like tax-deferral, they either can be emulated using the tax benefit of the retirement account, or are not large enough to worry about, in other words, even after paying all the non-deferred taxes on investment growth, the investments will STILL be worth more than the lost death benefit after 30 years of a term policy.
Of course if you are slightly more pessimistic about the investment returns, you might need a more clever structuring of term policies of different lengths to cut the premiums down more and yet ensure that the sum total of portfolio plus death benefit never drops below the corresponding whole life policy, so that the beneficiary is not shortchanged for any possible time of your demise.
only one i know of , you can borrow out the bit of interest on over funding tax free.
other than that except for estate passing i can't think of any .
No, you can borrow the entire cash value, tax free and depending on your purpose of the insurance, not pay it back...thus the tax free advantage in retirement years, and you don't have to over fund the account to do this. You just need to make sure you keep it out of MEC or you will pay taxes. Most insurance companies that are reputable won't allow that to happen. It's a great option for those that don't or didn't qualify for a ROTH, it's a nice stable, tax free income in retirement too. Our accounts also kept gaining during the worst recession since the depression. Estate passing is another great use, as is buy/sell agreements, key person policies for businesses and a host of other options. Not to mention that a lot of your bank accounts are backed by whole life policies that the bank has invested in......
Now, if you buy this from your State Farm guy, no you won't see this, but from a reputable mutual company like NWM, NYL, etc. you would see the value of these accounts....and there is no way I could have the same gains on the very small premium difference, especially living through the worst recession since the great depression...
No, you can borrow the entire cash value, tax free and depending on your purpose of the insurance, not pay it back...thus the tax free advantage in retirement years, and you don't have to over fund the account to do this. You just need to make sure you keep it out of MEC or you will pay taxes. Most insurance companies that are reputable won't allow that to happen. It's a great option for those that don't or didn't qualify for a ROTH, it's a nice stable, tax free income in retirement too.
But it makes zero sense to take a 3% return simply to avoid taxation when you can instead go for an 8% return, pay 20% taxes on it, and still walk away with 6.4% in your pocket.
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Originally Posted by Qwerty
Our accounts also kept gaining during the worst recession since the depression.
Short term effects are not a game-changer with a time horizon of 30 years!
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Originally Posted by Qwerty
Estate passing is another great use,
You mean "a" great use, because the others are simply not all that great.
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Originally Posted by Qwerty
as is buy/sell agreements, key person policies for businesses and a host of other options. Not to mention that a lot of your bank accounts are backed by whole life policies that the bank has invested in......
No, they are backed by the FDIC at any bank I, and other financially prudent folks I know, would consider using.
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Originally Posted by Qwerty
Now, if you buy this from your State Farm guy, no you won't see this, but from a reputable mutual company like NWM, NYL, etc. you would see the value of these accounts....and there is no way I could have the same gains on the very small premium difference, especially living through the worst recession since the great depression...
Short-term, no. But long term yes.
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