Index Universal Life for retirement? Yes or No? (coverage, separate, years)
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Basically, all I need to do is pay $205 a month. A percentage of which goes towards a life insurance policy that covers about $300k. A little goes into some misc fees? And the rest goes into your cash account which is "Tax Free Savings" as they put it.
After 30 years, I would have paid about 73K, but would have a cash value of over $240k waiting for me to pull out for retirement.
Earning an average rate of 9%
Seems like a good deal no?
Anyone actually have this plan? Good or Bad experience?
don't do it . any annuity with the words variable or indexed can be an overly expensive minefield .
the way they are configured is complex , they will guarantee you a very high gain but it is only on an annuitized amount not actually a pile of money you can touch take or feel if it is a sizable amount they promise . .
i had one pitched that offered me a minimum of 10% for 10 years . it sounded great until i looked under the hood.
it started out with them promising me a minimum of 10% a year return for 10 years if the annuity was on myself or 5% a year min if it extended to my wife too . if my variable investments were worth less they would increase me to either 5% or 10% min depending which i took. . if i died my wife gets to continue the plan and she gets the 5% minimum option.
that's where it got interesting.
i asked if i could take that money out and of course no you cant.
that 10% a year guarantee are only bonus bucks good towards an annuity conversion into a lifetime income stream..
however here is s the catch. you pay expenses on your average yearly account value. those bonus bucks after 10 years have your expenses running double because they are based on that phantom value.
if you started with 100k had 3600.00 a year in expenses before the fund expenses those bonus bucks after 10 years have you paying 7200.00 a year plus fund expenses .
there were options everywhere to add to the plan each one increasing costs as well.
as best as i could tell here are the expenses,and keep in mind historically the return on a 50/50 mix is about 7% when not in an annuity.
the expenses below are based on the total account value with the phantom bucks being included they give you.
mortality and expense risk charge 1.10%...
administrative fee .20%
combination enhanced death benefit .45%
beneficiary protector .35%
10% lifetime income option charge 1.2%
10% spousal continuation charge .30%
total 3.60% but we haven't included the fund expense fees so tack on another .45 to 1.94% depending what funds you picked..
is that an amazing fee structure for the un-aware?.
those bonus bucks are only good if at the end of the investment stage if i annuitize into a lifetime income stream locking in more expenses on the payout for life.
folks be careful of these offers. we guarantee you x% a year minimum regardless of what your investments do isn't exactly as you think it is .
if you want an annuity only get an immediate annuity when it is time and shop vanguard . it is like buying a cd with no other fees or expenses.
What about a 20 Year EE bond? Which I can buy at a bank at "half face value"? And in 20 years, it will be worth exactly face value? While earning interests on the actual price paid for the bond?
So if I put $50k, I'll have $100K + whatever interests earned 20 years later?
Also thinking about putting some funds in a SEP or Roth IRA.
this is indexed -many have investment segments in them that work just like the annuity above with all the feesand the annuitize option . .
do you think they are really paying you 9% in this environment ? many have an annuitize conversion option and only give you that bonus if you take it
there is so much smoke and mirrors behind that number of 9% so you will never see that . just the fact it is indexed means it can very so they run projections based on perfect scenario's . what you want to see is the minimum guarantee after expenses .
i will bet the fine print on that 9% is so involved and full of what if's that you can't even figure it out ..
problem with the bond is it isn't life insurance if you need the protection now
Last edited by mathjak107; 09-02-2015 at 03:58 AM..
The best deals are not bundles. You want a 300k life policy? Buy term, with the coverage period long enough to either be sure you will have time to build up assets or to likely cover you for your entire life. Save and invest separate from the insurance.
the saying buy term and invest the difference rarely ends up that way .even i couldn't do it while raising a family , the money always ended up going some where else . it is like the old adage
rent and invest the difference , it rarely happens in practice for most .
trying to combine life insurance and investing sounds better than it works as most folks can only afford term with no extra investing outside of their 401k or ira's which they would have done anyway even without buying term .
i prefer to call it buy term and just continue investing as you have been , because like i say there usually is no difference left to invest .
that is why most whole life policy's get cancelled eventually . folks find they cannot maintain the high premiums raising a family .
Last edited by mathjak107; 09-02-2015 at 04:19 AM..
What about a 20 Year EE bond? Which I can buy at a bank at "half face value"? And in 20 years, it will be worth exactly face value? While earning interests on the actual price paid for the bond?
So if I put $50k, I'll have $100K + whatever interests earned 20 years later?
Also thinking about putting some funds in a SEP or Roth IRA.
As A L Williams said buy term and invest the difference. If you are looking to put money into your mattress then bonds are for you. The value of that money will not appreciate enough to keep up with COL.
Depending on how old you are get a good term life insurance policy. Spend pennies on the dollar for that by comparison. The remainder of that 205 which depending on your age and health could be 190 a month would make a heck of a bigger splash put in an index fund that tracks the S&P or the NASDAQ. There are several others but those are the known indicies that funds follow. Buying in at increments means you get to dollar cost average. Some days it is buying high and others it is buying low. In the long run you will gain 8 to 10 times what a bond will yield.
trying to combine life insurance and investing sounds better than it works as most folks can only afford term with no extra investing outside of their 401k or ira's which they would have done anyway even without buying term.
That's pretty much my strategy but I have been contributing the max (including catch up the last few years) to my 401k for several years and doing little else. One big 401k, some smaller IRAs that were 401ks at previous jobs and my wife has a smallish brokerage account. I don't really know that much about the markets and funds; I just follow competent advice and don't shift things around all that often. My balance looks good; our FA ran a bunch of scenarios and the vast majority covered us well. My point it that it can be that simple if you just follow a couple of rules - always contribute and don't do anything stupid. You don't have to do ten different things and learn everything about investing (not knocking doing that; I would probably be doing a little better if I did).
i will add one other thing . keep your mind open to the fact that what you believe may actually turn out to be wrong .
i always believed ALL annuity products and ALL whole life products were useless over priced instruments.
but now that i learned how to play the 2nd half of the game meaning not the accumulation stage but the spending down stage i am learning there are all kinds of strategy's with insurance products that when combined with your own investing improve outcomes by a lot .
so my advice is never stop learning and never take the words of talking heads . they are likely just as mis-informed as the public in certain areas .
Something to think about. Guess I'll just stick with the ROTH / SEP IRA.
I already have a scottrade account where I play with stocks but I'm not doing to good since the correction.
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