Life Insurance

[tommyguns2]

Woodwise, you are absolutely correct! Whole life isn't an "investment", but can play a role as a piece in an overall financial plan, especially if you're in a high tax bracket. Further, the question here is not whether to buy a new whole life policy... I think we'd all agree that is not a good idea for LK. Rather, the question is whether LK's whole life policy is best to keep or cash in and re-invest at this time. I would definately talk with a financial planner who can take a look at the policy and discuss your present financial status (tax status) and give you some input.

I presently don't have any life insurace products, excepts a term policy, and don't have any plans to purchase, but I'll continue to revisit as I get older to see if my tax situation makes the calculus change.

 

[Lizard King]

I'm comfortably into the Alternative Minimum Tax with no escape in sight, lol

 

[monsoon]

I think I pay $150 a month for a $100K policy which I see as pretty useless since I get like $750K through work and can up that to $1M for pennies on the dollar.

You are being raped my friend, especially if you purchased it when you were under 40.

 

[Lizard King]

You are being raped my friend, especially if you purchased it when you were under 40.

Yes, I was well under 40 when I purchased, non-smoker was the only thing they checked for with a swab. I just left a message for the broker to call me back and find out what it is all about.

I assume if I do cash this out it would be taxed?

 

[monsoon]

When you cash it out, it will be less than the full value you put in because they will deduct the insurance. Not sure about taxes, mine wasn't. Get your term in place before you cancel the whole. Just in case. If you have dependents.

 

[Tuffoldman]

Buy term policy only. BUT be sure and look at the length of the policy. You may find cheap cheap cheap $500,000 policy for next to nothing but if you look it might only be good for 3-7 years then you have to buy a new one at the new higher rate based on age and health. Now if you look for 20-30 year term you will pay more now but the rate is locked in for that full term for that price.

I have $250k term policies w 30 year terms.. first one I bought 12 years ago, (cheap) second I bought 2 years ago (fair priced since I am 10 years older) and in 8 more years I will buy another one so during the Prime money earning years and best chance I will die and leave my wife with no extra income I will have 3 policies paying and then as I get older the policies will run out but I will be covered until I am about 90 years old.. after that **** 'em I told her just rack up all the bills you can then die on the creditors.

But long term when you are young and keep it doing.

Just my 2 cents.

 

[JackD]

LK, get a term life policy, it's like $25 a month for a million policy for maybe 30 years. Whole life is a waste of money, take the $120 extra you are paying and invest it, in 30 years, you'll have more than that policy cost you. Call around to different insurances places and get the rates. Even your investing company you are with should offer term policy's.

 

[Lizard King]

Ok, got off the phone with the broker. I've had it for 10 1/2 years, have a value of a little over $15K with a year dividend of around $500. Once the dividend starts going over my premium the plan pays for itself basically. It's a 65 Life policy so I can pay into the plan until I am 65 and can cash it out at any time tax free. I can also apply my current dividend against my premium and reduce my premium by about $500 a year which he said would slow the growth of the fund somehow (didn't get that part)

So now I remember why I bought it, basically tax free income once the dividend satisfies my premium, if the dividend is over my premium, I can withdraw as cash, so a long term investment with a shitty return, lol

 

[JR Ewing]

Sit down with your financial planner and look it all over, and see where it will or will not fit into your total financial picture. Woods and Tommy are correct in that regard.

You cannot and should not make such decisions based upon recommendations from a few people on a BB message board who do not know your particulars and the particulars of the policy. Your age, income, tax situation, net worth, goals, risk tolerances, etc come into play.

Generally these types of products tend to be best for those in higher income and higher net worth ranges, since they are apart from the taxable estate and shielded from creditors, lawsuits, etc. "Rich Man's Roth IRA"... But you should still sit down with your financial planner and look at everything. A 5% "guarantee" on investment may be ideal for someone at some point, even if it is not ideal now, for example.

 

[Lizard King]

I need to get me a financial planner, I've been doing it all myself and I'm sure I have some areas where I can improve.

 

[JR Ewing]

You always want to ask yourself if the guy selling you a product with as much as a 5-8% or more upfront commission and perhaps an additional trail each year is suggesting you buy and keep the product because it's in your best interest or his. Planners / investment advisors who get paid mostly or entirely on a flat % can be better than insurance agents and even brokers in that regard...



But insurance products can have their place - they're just not likely something you want to keep all or a majority of your money in. A possible PIECE of the pie, basically.

If you can benefit from putting at least a little in something with a reasonable fee structure, respectable underlying investment choices to invest in, tax and liability benefits, perhaps a guaranteed stream of income, etc - it may be a good thing for the right situation. And something that grows tax free or tax deferred from a little to a lot or offers a guaranteed minimum annual payout after age 59.5 or whatever can be a good place to put a few bucks.

 

[graniteman]

Not surprisingly you mis-read my post. I did not say my partner recommended whole life as an investment. I just said that as part of overall financial planning, whole life has a place, and if LK bought it when he was young, it may turn out to be a good value for the money, especially compared to purchasing new life insurance now.

Any person who is taking an honest look at their financial picture will understand that insurance can and does play an important role in creating security for your family.

I frequently recommend to my estate planning clients, that they consider life insurance sufficient at a minimum, to cover their debts, so they will leave their surviving family debt free. Also disability insurance is very important to a person's long term financial security. Anyone with a decent job and a family to take care of, should consider disability insurance. A good policy can cost as little as $100 per month and give you full income for life (with inflation adjustments), in the event you become totally disabled.

So, for example, if you purchase term life insurance of $500,000 for $150 per month, and die within 10 years, your family will be leagues ahead of where you would have been had you put the $150 per month into investments.

And if you buy whole life insurance and let its cash value grow, you can borrow against it in the future, and never have to repay a thing, and your family can still get the full life insurance benefit when you die. My business partner told me his life insurance was by far the best investment he has made in his 40 years of investing. He had the security of a life insurance policy, then he put his son through college by borrowing against it, then he borrowed even more when he got cancer. And now, the policy still has the full death benefit.

So I would suggest any financial planner who is not recommending insurance as part of the overall picture has his head up his a$$, or is simply trying to sell products that generate the financial planner better commissions.

You on the rag again? I read your post fine, you just changed your tune in your reply. Duhh insurance is a must for a family - term. Whole life is a great thing for a VERY Affluent individual. From what LK has posted he seems to be handling his finances and with the info he has given the money he's ''investing'' at this point is like putting it in a bank savings account. I got suckered into whole life many years ago but when I learned to put my money to work for ME I discovered in whole life my money is working for the insurance company.
When I get to the point I need a Annuity it won't matter anyways!
PS, I've only had one moneyman talk about ''whole life '' with me, it was to tell me it was a terrible vehicle for building financial independence.