Anyone here have Whole Life Insurance?

tonyb

I think Joey is on the right track, and something we can all agree on is diversify. Nobody wants to be caught with all their eggs in one basket so to speak. No one financial instrument is a guarantee or should be depended on for retirement.

Those numbers Joey for whole life seem way out in left field, you sure that's right ? When I was your age whole life was like 60 bucks a month, but then that's back when Abe Lincoln was ruling the roost.

For the money they are asking, over 3k a month, you would get better returns by simply investing in the markets. That's a good hunk of change.

I understand some who have an adverse reaction to the markets, being the casino it is. Markets go up and go down, but long term is always up. If people would have left their investments alone after the 08 crash, they'd be better situated today, just 7 years later.

mhardy6647

tonyb wrote: »

I think Joey is on the right track, and something we can all agree on is diversify. Nobody wants to be caught with all their eggs in one basket so to speak. No one financial instrument is a guarantee or should be depended on for retirement...

Yup.

... I understand some who have an adverse reaction to the markets, being the casino it is. Markets go up and go down, but long term is always up. If people would have left their investments alone after the 08 crash, they'd be better situated today, just 7 years later.

Yup.

mhardy6647

Consider even the most recent (China, August) market "crisis", which received some lively discussion here at the time:
http://forum.polkaudio.com/discussion/169063/wow-bad-day-for-the-market/p1

Let's take a contextual look at that little imbroglio via the DJI.




FWIW (and I realize that's not much!) I think the most consistently prudent and level-headed advice I've seen in the present (whole life) thread is from Moose68Bash. One's investment strategy should be diversified and it should also evolve from (as they say) growth to income. High(er) risk, high(er) return when one is young (and those inevitable investment drops have time to be mitigated) and a more predictable, lower-risk portfolio to live off when one gets older. It should be a strategy -- the worst thing some folks do is to panic and "sell low" after they bought high. Those are the folks who bemoan the market, but the market isn't the "root cause" of their unhappiness.

(Again, FWIWI) I retired from regular full time employment at 56. I might (i.e., my wife and I might!) end up living in a cardboard box, but if we do, I am pretty sure it won't be just us.

tonyb

You can fit a lot of cardboard boxes on the beautiful hunk of land you have there.

mhardy6647

Sure, as long as I can pay the taxes... we're not gonna do an "Ed Brown" here :-P

If you don't know about Ed Brown & his (erstwhile) property on the other side of our little town (recently, finally, sold for back taxes)... google him. It's a little too -- political to chat about comfortably.

EDIT: Back a little bit closer to on topic ;- )

Long-term care insurance, which someone mentioned, is (I'd opine) worthy of consideration. It has gotten to be horrifically expensive, but for a young person might still be cost-effective. I do have a long-term care policy, actually. I got in young enough and before rates truly skyrocketed... but it is one of those things that's a life-time commitment (i.e., a choice to bail out after a few years - or decades - will have been simply urinating away money).

Joey_V

tonyb wrote: »

I think Joey is on the right track, and something we can all agree on is diversify. Nobody wants to be caught with all their eggs in one basket so to speak. No one financial instrument is a guarantee or should be depended on for retirement.

Those numbers Joey for whole life seem way out in left field, you sure that's right ? When I was your age whole life was like 60 bucks a month, but then that's back when Abe Lincoln was ruling the roost.

For the money they are asking, over 3k a month, you would get better returns by simply investing in the markets. That's a good hunk of change.

I understand some who have an adverse reaction to the markets, being the casino it is. Markets go up and go down, but long term is always up. If people would have left their investments alone after the 08 crash, they'd be better situated today, just 7 years later.

tonyb wrote: »

I think Joey is on the right track, and something we can all agree on is diversify. Nobody wants to be caught with all their eggs in one basket so to speak. No one financial instrument is a guarantee or should be depended on for retirement.

Those numbers Joey for whole life seem way out in left field, you sure that's right ? When I was your age whole life was like 60 bucks a month, but then that's back when Abe Lincoln was ruling the roost.

For the money they are asking, over 3k a month, you would get better returns by simply investing in the markets. That's a good hunk of change.

I understand some who have an adverse reaction to the markets, being the casino it is. Markets go up and go down, but long term is always up. If people would have left their investments alone after the 08 crash, they'd be better situated today, just 7 years later.

If whole life was $60, that's a bargain... But also was it a level plan (meaning the payments doing go up over time) or was if an escalating plan (starts cheap and ramps up).

I always choose level as net output is less overtime.

My term life is insured me for 3M, my wife 1M, my baby is getting her own also but hers will be whole.

Cost at this time is:
My 3M = $166/mo
Wife's 1M = 46/mo

If I convert all 4M, it will be approx 4400/mo.

Are you sure tony that you were quoting whole and not term?

Beauty about 4M is in 30y when it matures, the cash value w dividends will be approx 4M while my total input is 1.5M.

Now that 4M is magnified by the fact that entire number, all 4,000,000 is tax free (to be verified by my guy). Compare that to 6M in the stock market minus taxes = 4.2. This is because dividends are conservatively at 6%.

To get 1.5M to hit 6M in 30 years requires an annual yield of 8% in the stock market.

I think my 401k will literally hit that 4-5M number when I'm done. And the whole life will buffer the rest.

Just in my head, but a final peg to this triangle offense would be a pure stock market account handled by one of my financial advisors. Probably aim a couple grand in there a month... May hit 2M in the end.

All combined, I should be able to retire well.

Then again maybe all this talk is for naught. I have a massive heart attack and blech...

Plan for the best. Kinda hope against the worst.

It's all we can do in life my friends.

mhardy6647

So, I just ran a calculator: I realize this isn't exactly the right model, but a present sum of $1.5 M compounded over 30 years to give $4 M corresponds to an annual rate (compounded monthly) of about 3.3%

Joey_V

mhardy6647 wrote: »

So, I just ran a calculator: I realize this isn't exactly the right model, but a present sum of $1.5 M compounded over 30 years to give $4 M corresponds to an annual rate (compounded monthly) of about 3.3%

Did you start with a present sum of 1.5M?

If you start with a present sum of $1 (one dollar)... and put in approx 4200 per month, and let it ride for 30 years at 7%... you get 4.7M.

Either way, to match the 4M of Whole Life Insurance money, you need to hit approx 5.5-5.7M of taxable income/equity. Which puts us at 8-9% annual yield.

8-9% over a span of 30 years is not easy to get in the market. 7% maybe....

You gotta start doing some Halen-style trading to keep that number near the 10% mark.

----
Compound Interest Calculator
Use this calculator to determine how much your money can grow using the power of compound interest.
Current Principal: $
1

Monthly Addition: $
4200

Years to Grow:
30

Interest Rate:
7
%

Compound Interest
1
time(s) per year

CalculateReset
Results
Future Value $4,760,831.24
---

mhardy6647

Yes, as I said, starting with $1.5M today at 3.3% for 30 years, compounded monthly gives a hair over $4M. Which, as I also said, I realize is not the same model as a monthly pay-in. A monthly pay-in would by necessity (i.e., now that I think about it) require a higher annualized rate to get to $4 megasmackers that quickly. I guess that is what it boils down to -- if one is unwilling or unable to invest $1.5 million now, one has to basically double the rate of return to get to 4 million in 30 years, doing it piecemeal.

I am still surprised that's a 7% ROI, but if it is, it is. I'd also be very surprised that a fiduciary would recommend whole life as a major investment vehicle for someone with a modicum of wealth. Insurance is structured to maximally benefit the companies that sell it, as far as I know.

It is really interesting if a party with no interest in the choice you make recommends an investment in that much life insurance; that's a lot of money to commit to spending monthly over a fairly long time -- more than any mortgage we ever had, e.g. But then, we've kept our investment in housing/property under seven figures. That might not be your case, I realize.

Insurance is AFAIK widely considered notoriously poor investment vehicle -- but it is a very easy one and there are certainly scads of people paid well to sell it to customers. It makes good sense, I'd opine, for very undisciplined and or disinterested investors as it requires no thought, just a monthly check to the company.

We got such plans (not for $4M, though) for our kids when they were born; under those circumstances, they're almost no-brainers, I'd opine.

Joey_V

Would be nice to put in 1.5M now but that's not in the cards. This is a piece meal investment strategy.

mhardy6647

Gotcha. That may well be the fulcrum.

madmax

So is it true that if you die your family gets the insurance payout only and the company keeps any cash above that? Whereas, if you invested the money in normal investments your family gets the whole investment, and of course no insurance payout? I think I've heard Dave Ramsey explain it this way.

Joey_V

madmax wrote: »

So is it true that if you die your family gets the insurance payout only and the company keeps any cash above that? Whereas, if you invested the money in normal investments your family gets the whole investment, and of course no insurance payout? I think I've heard Dave Ramsey explain it this way.

In whole life, the money you invested Northwestern Mutual keeps. The actual cash value/insurance value goes to your family TAX FREE.

If you take a 95-98% loan on the value of your insurance at whatever point in time it is (it accrues value over time), then you have to pay back the loan + 8% apr... thing is, you don't have to pay it until you die, they take it out of your total insurance policy and usually there's still left over to go to your family.

Plus, that's also TAX FREE (but I have to doulbe check).

I'll post a sheet so it makes sense when I get it from my dude.

Joey_V

madmax wrote: »

So is it true that if you die your family gets the insurance payout only and the company keeps any cash above that? Whereas, if you invested the money in normal investments your family gets the whole investment, and of course no insurance payout? I think I've heard Dave Ramsey explain it this way.

Also, remember....


... estate taxes.

WHole Life does not count into estate taxes. It is 100% tax free.

When you come close to 5M... this is a big difference between someone walking away with 5M or 2.5M (or whatever the estate tax is now).

madmax

So the actual insurance policy is worth 5 million if you die? How much is the total amount you pay?

Strong Bad

Joey_V wrote: »

madmax wrote: »

So is it true that if you die your family gets the insurance payout only and the company keeps any cash above that? Whereas, if you invested the money in normal investments your family gets the whole investment, and of course no insurance payout? I think I've heard Dave Ramsey explain it this way.

In whole life, the money you invested Northwestern Mutual keeps. The actual cash value/insurance value goes to your family TAX FREE.

If you take a 95-98% loan on the value of your insurance at whatever point in time it is (it accrues value over time), then you have to pay back the loan + 8% apr... thing is, you don't have to pay it until you die, they take it out of your total insurance policy and usually there's still left over to go to your family.

Plus, that's also TAX FREE (but I have to doulbe check).

I'll post a sheet so it makes sense when I get it from my dude.

My policy is with Lafayette Life and the APR on policy loans is 5%. Here's an interesting tid bit...

Let's say I have $50k available for loan and take $25k of that out and setup to repay over 2-3 years or whatever length of time you choose. When annual dividends are calculated and paid out on my policy, they are paid as if you do NOT have any loans. Loans do not affect your yearly dividend payouts.

Another benefit is, when your cash value and available to loan gets up there, you can essentially use that as your bank and make loans on it as you see fit. No need to take loans from conventional banks and/or run up credit card debt. Oh, any loans on your policy don't show up on your credit report either. You can get a check from them fairly quickly by making a loan online. In emergencies, you can, for a small fee, have them rush things through and direct deposit funds. I prefer to throw it on my credit card to rack up rewards points, then take out a loan and pay off the card before interest hits it.

Check out the Book "The Bank on Yourself Revolution" by Pamela Yellen. Check out "Becoming your own banker" by Nelson Nash as well. Some of the figures are a bit outdate in his book, but the essence of it all is there, crystal clear.

I know Dave Ramsey and Suze Orman have done their share of bashing on it and i've heard them explain their points...but they just don't get it. They overlook a lot of things with this concept.

cfrizz

madmax wrote: »

So the actual insurance policy is worth 5 million if you die? How much is the total amount you pay?

That all depends on when you die. When I worked at New England Life I had to get folders on people to pay for their insurance exams. One day I got this folder that was stamped deceased.

The woman had applied for 200k of insurance, put down her deposit (which is usually the first months premium). Four days after she had signed on the dotted line, her husband found her dead in their bathroom. She was 44 years old and left behind a husband and two kids.

The cause of death was asthma attack. On her medical info part of the app, she admitted to having asthma, but she had not had an attack in years.

The Attending Physician Statements we got from her doctors confirmed that she stated the truth.

Because she paid the first months premium, and all info that she gave was coo berated, her family received a check for 200k. The case hadn't even made it into the home office to be underwritten! It was simply a case of bad timing.

There is a two year contestability clause for life insurance. If you die within that two year period and they find out you died of an undisclosed ailment that you knew you had and lied about on your application and we find out via death certificate and medical records, you get zip! I believe the same applies to suicide within that 2 year period.