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without seeing your policy i can't say what your real deal is personally . but i can comment with 100% certainty as to how plans are priced and work and why they should not be used for other than their intended purpose .
life insurance is for dying -----annuity products are for spending and living .
Quote:
Originally Posted by KaraG
Life insurance is for dying, not paying interest to borrow your cash value in retirement for fun money. Is that how they sold the policy to you?
Thank you both for the responses.
I'm leaning AWAY from whole life right now....BUT, i wanted to play devil's advocate for a moment....
Yes, "life insurance is for dying...not paying interest to borrow your cash value in retirement for fun money..." but what's wrong with 'YOU' using the money that you've built up, instead of giving it to your wife and kids? Whole life seems to be a vehicle that allows that. Also, the tax free withdrawals are a huge incentive (although i learned that you cannot withdraw it all without lapsing the policy and having to pay taxes on ALL the gains. but you can withdraw tax free amounts nonetheless. i think around 21k a year for 15 years, on a 400k policy)
Anyways, 'whole life' has always sounded shady to me.....the math never seemed to make sense.....but i think if you're OK with 4 or 5% gains over the long term, and if you know that you can make the high payments for 10 or 12 years without missing a beat, perhaps they're worthy options.....that allow you to have some level of coverage, but also allow 'you' to borrow against the built up cash value.
the deal you get from the insurer is different when you die vs pull the cash value , especially the farther away from age 100-105 you are which is when the death benefit and cash value equal each other ..
the cash value is a refund for not using your policy that includes "restocking charges " if you want to call it that . dying has no restocking charges so it is not the best thing to do when you pull the cash value out . by restocking fee i don't mean surrender fees which are something else .
You don't want your family to suffer financially if you die accidentally. You should get at least 1 million dollar life insurance. It will probably cost $1k per year for age 35 for a 20 year term.
at age 55, all your kids are grown, you probably no longer need life insurance.
the deal you get from the insurer is different when you die vs pull the cash value , especially the farther away from age 100-105 you are which is when the death benefit and cash value equal each other ..
the cash value is a refund for not using your policy that includes "restocking charges " if you want to call it that . dying has no restocking charges so it is not the best thing to do when you pull the cash value out . by restocking fee i don't mean surrender fees which are something else .
Yes, completely agree. In the scenario that was ran for me, the death benefit value was at 750k and the cash value at 350k after 25 years. (156k of total contributions by me)
So, if I die at 60 (in 25 years. I'm 35), "I" get 750k, or i can start withdrawing 21k 'tax free' for 25 years (until i'm 85) and have like 300k death benefit and 240k of cash value at 85 years old.
figure out what interest rate you got over 25 years for 156k to be worth 350k . also many times those are not actual cash values but projected cash values which can be less at that point and usually are . your policy has to be "guaranteed cash values " to actually get that when the time comes . many times the projections are not run with the minimum rates so they look better .
figure out what interest rate you got over 25 years for 156k to be worth 350k . also many times those are not actual cash values but projected cash values which can be less at that point and usually are . your policy has to be "guaranteed cash values " to actually get that when the time comes . many times the projections are not run with the minimum rates so they look better .
Yeah, good point. the returns 'for the cash value' start with -77% for the first year, and build up to about 4.61% after 25 years (at 60 years old) and pretty much stay between 4.5% and 5% thereafter. When i asked if that percentage is guaranteed, he of course said no, but that New York Life Insurance has a 175 year track record of paying dividends/etc. and the projections are pretty accurate, if not conservative. (not sure i believe him on that entirely).
I did my own calculations and i'd have to earn an average of 7% a year for the first 25 years, and an average of 4% for the following 25 years (60-85 years old) in order to break even with the above, assuming the same $156k total contribution level over the first 13 years.
this is primarily due to the fact that at 60, the 21k withdrawn from the whole life policy is tax free, and i had to calculate for the taxes i'd have to pay on the 'invest on my own' approach, bringing that up to 25,500 roughly.
dividends are a refund of over payment of insurance . they are a neutral event with life insurance .
states require that if insurers over estimate your insurance costs each year with whole life that they return the overage you paid to you .
instead of actually handing you back your over payment they buy a mini poicy buying more insurance with the money you over paid .
hmm...pretty sneaky....
So, what do you think of my above post? #66
one thing i forgot to mention....even though the 7% returns on my own would get me to break even with the whole life policy returns/withdrawals, it comes with no death benefit! (forget about term for a second; because i'm getting that regardless). So, unless i get ABOVE 7% over the next 25 years, i'm better off with the whole life (in terms of the numbers, and assuming the rate of return they've quoted me is in fact accurate.)
you cannot analyze the real deal with whole life .
whole life has guaranteed interest rates but there is a but to that . . the flip side is they don't have guaranteed mortality rates so the internal cost of insurance varies . they can certainly give you that guaranteed rate , but the flip side is they are allowed to pull from it if the costs don't meet projections .
when you are over charged you get a dividend back , when you are undercharged it comes out of the policy balance .
so there is no way for you to know your real deal in advance . only projections can be shown . industry calculations show 3-4% is the norm for an roi if you live to average life expectancy ages but other studies show it is actually falling out in the 2.60% range despite these guarantees because of lower rates the insurers are getting themselves . .
but like they say " i never met a projection i didn't like " ha ha ha
Last edited by mathjak107; 01-14-2017 at 02:44 AM..
you cannot analyze the real deal with whole life .
whole life has guaranteed interest rates but there is a but to that . . the flip side is they don't have guaranteed mortality rates so the internal cost of insurance varies . they can certainly give you that guaranteed rate , but the flip side is they are allowed to pull from it if the costs don't meet projections .
when you are over charged you get a dividend back , when you are undercharged it comes out of the policy balance .
so there is no way for you to know your real deal in advance . only projections can be shown . industry calculations show 3-4% is the norm for an roi if you live to average life expectancy ages but other studies show it is actually falling out in the 2.60% range despite these guarantees because of lower rates the insurers are getting themselves . .
but like they say " i never met a projection i didn't like " ha ha ha
haha
thanks!
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