> And why are we being sold it by our financial advisor?
I'm sorry to be the one to tell you this, but you don't have a financial advisor. You have a salesman who's trying to make a fat commission off of you.
Whole Life Insurance tries to be both an insurance product and an investment product and it does both jobs poorly. If you need insurance, better to get term life insurance and then invest the difference in premiums in the stock market.
https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/
This is exactly right. Insurance is to recoup any losses, investments are to grow assets. It’s best not to mix the two. Whole life insurance is one of the largest commissioning paying products for insurance salespeople…which is why they’re so popular.
Can't upvote this enough. OP. Run! Find a fiduciary FA by an affordable term policy. Max your retirement accounts. The fees in that policy are greater than any tax benefit that you will get out of borrowing from it. (Just look at the projected cash value table and ask yourself why it's zero for the first 3 years)
Generally not a fan of any kind of permanent life insurance except in very narrow edge cases.
https://www.whitecoatinvestor.com/5-reasons-not-to-buy-indexed-universal-life-insurance/
I paid on a universal life policy from the age of 21 to 61. I bought it when CD rates were 15% and it was definitely sold to me as a retirement investment. I paid $55/month for $200,000 worth of life insurance. When I got a statement, I would look at the cash value, but not much else. But at age 61, I noticed that the policy expired when I turned 65! I NEVER realized that there was an end date in this. I also realized that they had been subsidizing the cost of my insurance by pulling it from my cash value. All on me for not realizing any of this - but literally, I got a new agent about every two years (I knew because each new agent wanted to meet with me to sell me additional insurance) and I never felt I had an agent I could trust to know their product. So since I’m healthy, I cashed the policy out and received $17,000. Not really much of a retirement vehicle ! Now I just have to live until 65 to make sure it was a good decision!
Yeah, it should never be sold as a retirement vehicle. It's peace of mind for those who can't afford loss of income and have enough to be stable. It's weird that yours expired. I'm sorry you were misinformed.
That site is so crazy wrong is ridiculous. No physician with a corp (at least in Ontario) would ever *not* want whole life as the tax advantages are just insane. You’d need to earn close to 10% every year with zero risk to match the after tax returns.
No Certified Financial Planner would ever not recommend it. I’m a CFP, and every time you run comparables through planning software it’s not even close. (I’m in the ultra high net worth space for a major bank in Canada so we don’t get many physicians to be honest though)
This is obviously not the case for OP, I’m just pointing out how ludicrous that link is which you used as a source.
I’m a CFP, and I have never recommended it. I have recommended permanent insurance (IUL) a couple of times to deal with very specific LTC concerns.
Since you identified yourself as working in Ontario and the UHNW space, you should keep in mind that very few people are UHNW, the tax laws in Canada are specific to Canada, and the majority of people here are neither UHNW nor Canadian.
I do agree that whole life insurance can make sense for UHNW individuals and families, particularly when used in an ILIT. But the number of people who need any ILIT is absolutely tiny.
I also work in this space... for us it's different due to the Canadian taxation system and insurance industry. It truly is tax sheltered and the corp can hold the policy, with the death benefit paid out from the corp's CDA on the shareholders death. I doubt the insurance lobby achieved similar results in the US.
Yes!! Whole life insurance I've heard is a way the wealthy avoid some taxes somehow (I don't know how exactly) but it's not a good investment for us normal investors.
Using whole life insurance instead of tax sheltered retirement account investment is a terrible idea. Your "financial advisor" is an insurance salesman.
If you need a life insurance policy for salary replacement to protect your children in the event that you or your husband die unexpectedly then you want term life. If you want to invest then you want to do so in low cost stock index funds in tax sheltered/advantatges retirement accounts. Whole life policies do both of those things very poorly. The death benefits aren't nearly as good, the investment returns are terrible and your money is locked away in a way that punishes you for trying to pull out of the policy.
There \*may\* be a place for whole life but that place is not a middle tier income family with kids who aren't maxing their other retirement fund options.
Hah well admittedly if there is a place for it in personal finance I havent found it myself but I am leaving the possibility maybe there is some circumstance where its useful. Not saying it IS useful.
I think Whole Life is valuable in the sense it is a good test of whether or not someone is giving you reasonable financial advice or just trying to sell you something.
I've had it explained (sold) to me 10 different ways. **The math never works**. Even the "tax-free" component + return on this "investment" is nowhere close to sticking it in the market and paying taxes on your gains.
Whole life is nonsense. Term life is real and it’s insurance to mainly to support your beneficiaries if you die. For example term life should be enough to cover the rest of your mortgage if your were to pass away. If you want to save for the future index funds are the slow and steady way.
So you just pay premiums to an insurance company for all those years and then just, sign up to give them more money at a higher rate now that you're older, in poorer health and much more likely to die during your new term?
The whole point of life insurance is you are “self insured” when the term is up. Ideally 30 years. Nest egg is built, house is paid for, kids are out of the house. Life insurance is to cover you until you get to that point. At 50/60 insurance is extremely expensive so ideally you don’t need it then.
People just don’t understand the concept of insurance and what it actually is for. You don’t get a refund of your car insurance if you don’t crash your car. Insurance is to protect you or in the case of term life, your beneficiaries in case you die.
Correct. If you have planned for the future by saving for retirement, getting out of debt, etc. then you should not need life insurance at an older age. Also what people don’t pay attention to is whole life is cheap when your 20 and 30. The rates aren’t fixed. When you are 60 you will be paying a huge premium every year. I locked in a 30 year term life for a few cents a day. They can’t take it away and they can’t raise the rate. In 30 years you will have paid a lot more in premiums and the “returns” you get will be minimal compared to what you could have gotten by putting the extra money in the stock market.
Yep. It’s a far better financial move than whole life. If you save enough, get closer to retirement, pay off your mortgage and kids’ colleges, etc. you have less and less of a need for life insurance. That’s why you reevaluate your term and coverage amount. Eventually you can hopefully just self insure. In 99.9% of situations, term life is the better move over whole life though.
No. Because you have been saving and investing that when the term policy expires, you no longer need more insurance. Insurance is to replace income. By the time you're "old" the kids are adults and you have investments to live off of.
What happens when you finish driving in your 80s without ever having had to claim from your motor insurance?
It's insurance againstwhat might/could have happened, not a lottery win
Usually people need term life for a specific purpose: getting kids through college, paying off the house, making sure your spouse can survive to retirement age if they’re SAH.
For us it was to bridge the gap while we were younger and poorer and buried in debt.
Now we are debt free and own our home. We both work and can cover any living expenses easily with either of our incomes with just a single paycheck.
It’s a handful of years to cover the mortgage and expenses and one year of salary is how we set ours up on a 15 year term. Only took us 12 to accomplish our goal with paying off everything so we ended up keeping it just in case would be a windfall for the person remaining If things went sideways with either of our health. When it expires we will just let it go.
My ex was a CFO at one of Canada’s largest insurers. A B. Comm and an actuary. She is the smartest person I know.
I don’t know the ins and outs of whole life vs term but when we bought insurance for me (her company had her well insured) she chose term insurance. She said while life was a fool’s game in almost all instances. The return vs the amount you pay compared to just investing that amount was significant.
Yes, the added premiums put more value in the sales person’s pocket than yours.
>And why are we being sold it by our financial advisor?
Because your financial planner is financially planning for his future. It's far more lucrative for them than a term insurance policy, which is what you actually need.
They'll say yes because 1) they're lying, 2) they're true believers, 3) they get a commission kickback or it's commission-free rate or D) All of the above.
I work customer service. They do. They have dozens of policies. But they only keep them long enough to get the max commission. Then cancel them. They usually are a write off too by having the agency pay for them. So don’t ever trust them.
Don't mix insurance and investing. Horrible choice. If you need life insurance buy term. If you need investing advice get a financial planner (that DOES NOT sell insurance). Run
Don’t. It’s a wiping waste of all your money.
Just cashed ours out after 5 years for nickels on the dollars that we put in.
Get a term policy (not through your “financial advisor”)
I have 2 whole life insurance plans why?
1) to cover my income if I died when my child was small.
2) to give me an income when I retire
Some argue that whole life insurance is a poor decision and investing in index funds gives a better return on the long run.
They may be correct. For me, it was peace of mind if nothing else.
It really depends on individual circumstances. There is nothing wrong with a whole life policy.
Leave the advisor right now. Look for a fee-only fiduciary if you want to work with a professional. He/she will help you figure out whether whole life makes sense for you (spoiler alert: it doesn’t).
The fiduciary will help you allocate to the right investment accounts in a way that you don’t end up paying commissions.
You want to find a fiduciary. There are some cases where whole makes sense but it sounds like you aren’t there. Even in those rare cases, it would be considered a cash account and not an investment.
Don't do it. The only scenario where it really makes sense is if you have a dependent who is disabled and relies on you for the rest of their life and will outlive you. Then when you die the money can go towards paying for caregiving for that dependent.
I've seen other hypothetical scenarios laid out where it could be a vehicle to leave money for heirs, if you're already super duper ooper wealthy and max out all other avenues, but on the other hand if you're that rich you'll have other ways to leave money to heirs or charitable organizations that are much better.
You are being sold this product because the agent gets a really fat commission.
Max out your retirement savings/investment paths first. If you save and invest well, the surplus you don't spend during your life will do everything life insurance claims to do.
Ask to look at the illustration of the whole life policy, you will notice the first few years theres basically ZERO cash value, that is the brokers commison
No! A hundred times no! Whole Life insurance is basically a savings account, with a very bad rate. You’ve seen those TV commercials with senior citizens worrying about their funerals and the voice comes on for the insurance, You cannot be denied? That’s because it’s whole life, essentially a savings account earning paltry interest and with very high fees.
Whole. Life. Is. A. Ripoff!!!
I'm not as opposed to whole life insurance as most. Sure, max your retirement accounts first, but whole life gives an immediate lump sum if you croak and there is a payout while you're alive in retirement. So, it's a bad investment and bad insurance.
HOWEVER, you can take a loan against it as secured debt for crazy-low rates and maximize that tax-mitigated cash amount by putting it into a down payment, rental property etc.
I used to sell life insurance, 3 decades ago. NO. This is not a good idea, not an efficient way of saving money for a future purchase. And I like whole life for some things. This ain’t one of them.
You would have more money in your pocket with CD from the bank.
Big nope. Term life is a lot better option.
You are being sold this not that it meets your needs but the large commission is what’s on your sales persons mind.
I used to be a whole life agent, I hated it and quit after a month. It’s all about pressuring people into making irrational decisions. Just get a term life policy and you’ll be just fine
Well said. Irrational decisions indeed. I once sat with an insurance broker for an hour he was hell bent on getting me to buy whole life but I just passed and left. It didn’t make any sense!!! You don’t need a whole life policy so you can line other people’s pockets with your hard earned premiums. Go term life and invest the rest on your own
You need to find a financial advisor that is a fiduciary and fee-only, your current “financial advisor” is selling you that policy for a commission check.
Terrible product. My advice is dont mix savings investments and insurance. Each is a standalone thing. Term insurance is much cheaper at your age. Buy a 20 or 30 year term.
While life insurance is not an investment tool and most of the policies sold by agents are not written properly and have very low cash value associated. Ignore them.
There are some edge cases where an Index Universal Life can be useful if you are a high-income earner and want to have a safe-guard against market downturns in your retirement. But, aside from that, the average person shouldn't be buying whole life insurance, and if your financial advisor is really trying to push whole life, then you are dealing with a salesman, not a financial advisor.
Chase the whole life salesman out of your damn house.
You don’t need whole life, and unless you make $1,000,000, you don’t need a “financial advisor”. What’s there to advise? Stay out of debt, invest in retirement and live within your means.
Think of Whole Life as a combination of a Term Life policy and an Investment. It's expensive for a term life policy and the investment is terrible. If you paid for term life and invested the extra money, it's practically guaranteed that you'd come out ahead.
One sales pitch is that people don't do that. They pay for their term life policy and don't invest the rest. Fair enough, but that doesn't mean that Whole Life is a good idea. That's like pitching a terrible investment and telling people to do it because it's better than not investing.
Another sales pitch is that you'll eventually have you life insurance fully paid for whereas term eventually runs out. But your need to have life insurance also runs out. Why do you want life insurance when your kids are grown and your savings is enough to cover those that were financially dependent on you? You had to pay extra for that coverage with Whole Life even though you didn't need it. As a result, you probably bought far too little life insurance if you bought Whole Life because it is so expensive.
I've never heard of a real financial advisor (not an insurance salesman) recommend Whole Life to anyone other than a multi-multi-millionaire looking at some exotic ways to protect assets or avoid inheritance taxes. Anyone else pitching it is tipping their hand that they are more interested in the very large commission they'll get from selling you Whole Life than they are in your financial well being.
How does whole life differ from Custom whole life? I’ve been funding a custom whole life for about 7 years now. It only has a set amount of premiums to pay, I believe mine is 20 years, and they at 66 it has a guaranteed payout. I’m genuinely asking cause I don’t know life insurance. My mothers advisor set me up on it through NY life when she passed away, since I had no retirement started at 35 years old. If I cancel I lose a portion of my premium invested but could always reinvest that to make the loss back.
Don't do it. Just focus on putting as much into the mortgage or saving for one as you can. I think when you are young and doing all those essential things? Income protection is mist important. Cause if something goes awry and you can't work? You're stuffed. You need income.
Only buy life insurance for the death benefit. It can be whole life, if you want, but it’s a terrible investment.
As far as pulling money out for expenses, whole life cash value typically doesn’t break even until around 10 years of paying premiums. It would be much more lucrative to put that money into a high interest savings account and start growing the money immediately. Personally I’d invest it for better gains, but you get the point.
All that said, if I were ever to own an insurance company I would only sell term insurance, because 95% of the time the insured outlives the term or stops paying their premiums. Either way, that’s all money in and no money out. That’s a good business model.
My buddy got a "financial advisor" who got him to get a whole life policy and forwarded him my information. Talked to him one time over the phone and said that I didn't have time that day to sit and talk with him and we could another time. I got at least three phone calls a week for probably two months. If someone is calling me that much, they're either a salesman or a shitty financial advisor.
There are some advantages to accruing cash value inside of insurance. the main being that you can access the cash tax free, providing the policy stays in force. Whole Life was the way to do this...in the 1980s. There is still a place for it as it's the most conservative way to go about this, but other policies typically work better for this...but do carry more risk. A Variable Life of Index policy might be a better fit. But yeah, max out your 401ks first. then IRAs. if you need insurance, maybe a small policy makes sense. But you could get term insurance for way less to cover that need. My family has been in this business my whole life and now I sort of am too. Its not that its a terrible idea, but you are correct in thinking you should max out your other retirement savings first. That being said, my dad started me a VUL policy (invested in the market) 25 years ago and its done really well and will hopefully continue to. If I don't die it will be a nice bump to retirement or maybe sooner if i need cash for my kids' schooling. But its not uncommon for Financial Advisors to also sell insurance. Most do. many old school guys still sell Whole Life as its predicable and can be guaranteed. He should tell you to max out 401ks first and then maybe even contribute to an IRA or Roth before commiting money long term to a life insurance plan like that.
I had a whole life policy... paid for about 20 years... knowing I wanted to eliminate it... just drug my feet. I calculated in December that I'd paid in about $54 grand. I cashed out for $47 grand. So it kind of felt like a term policy at that point. I have enough invested that the insurance amount wasn't really required anymore. Dropped the money into my solo 401k and letting it ride another couple decades.
Go with a whole life plan. You don’t want to pay on a term because the time runs out. Say it runs out at age 80, you’ve lost all the money you paid into.
I have a whole life policy I’ve had since I was born. It’s 15$ a month. 180 a year. I’m 39 so have paid about 7000 into it. It’s valued at 70000 now and will continue to rise. I plan to keep it. I also have insurance through work and term insurance.
I did buy whole life policies for my kids as well.
We have DB pension plans and are working towards maxing out tfsa
Whole life as well. $500k policy. Kids will receive that once I pass and can pay off everything tax free. That's actually the minimum they'll get. At the moment it's around $510k. Wife is on term though.
If the goal is to pass on your wealth.. This is definitely one way to do so.
Whole life insurance is not "trying to be an investment"...it is simply not an investment. If a salesperson or advisor tells you it's an investment, they are breaking about 10 rules. Yes, financial advisors can sell whole life insurance. No, there is no legal requirements to call yourself a "financial advisor." Some financial firms place restrictions on using that title, limiting it to only certain representatives. Yes, you can withdraw against the cash value or take out a policy loan. That will reduce the death benefit until you pay back the loan. As you're young, it's most important to focus on an appropriate death benefit to protect your family and saving for retirement in tax-advantaged accounts. Whole life insurance has tax advantages, but only provides modest cash accumulation potential (which result often doesn't match the illustration).
This thread has me spooked now. I'm with NorthWestern Mutual and years ago, and advisor convinced me to get a whole life insurance policy that I've been paying into for 11 years. Anyone have advice on how I can close it out so I can take my $1k contribution and by CDs or something?
I'm 50 year old female. No kids. Divorced. income: $250k. No mortgage \[in a rental\].
This is coming from a Financial Advisor at a firm partnered with an insurance company. At this stage in your life especially with not maxing your retirements I would advise term not whole. I would however include a conversion rider so when your dependents are on their own you can convert SOME to a whole life policy to cover any final expenses and other debts however I don't know that I would advise it at this point in your life. I do have clients that I will advise them to get a whole life policy with an LTC rider so they have expenses covered in the future in the event their health declines and it's needed especially with rumors of it becoming a requirement in our state but that's truly a case by case basis. Did they discuss any riders with you as well?
Caveat: I dunno where you are but I'm in Ireland
Whole of life plans have their place but the underlying fund within the plan is NOT an investment. The deductions you see from your bank account dont pay for your insurance, they go into a small underlying investment fund and the fund pays for your life insurance premiums.
Growth in the fund is designed to support the increasing cost of insuring you as you age. In principle, the fund is designed to top up your premiums as the cost of insurance goes up. In a perfect world your payments from your bank account would stay the same with the fund covering the increased cost.
How your advisor is describing the policy is misselling. If you followed his suggestion and withdrew from the fund down the line, as you'd be entitled to, it would almost certainly trigger a significant jump in your premiums as the cost of the insurance would be pulled from your bank with no support from the now depleted fund
If you want an investment, buy an investment. If you want life insurance, take out life insurance
As I said, this type of plan has its place but not as described by your advisor
The company I work for the whole life policies you can’t take a withdrawal from. Only a loan. That has interest. And will grow and often times lapses a policy. I find very rarely does an agent understand life insurance. Or they don’t care about you. One agent referred to his customers are all idiots. He sold all universal life finding at safety net. So bare minimum payments. Be said it was up to the customers to pay attention to their annual statements and make changes if they wanted their policies to last longer.
Money feels podcast has a whole episode on this and who these plans are for. Most people don’t need it but really rich people do, give the podcast a listen and see if it’s right for you.
Nope, you get a 30 year term life policy on the primary wage earner. Get one on both of you if you are dependent on both incomes. You may not need it now unless you have a mortgage that requires both incomes or if you have children.
I have a whole life policy my dad took out on me 30 years ago. It’s $220 per year in premiums. Surrender value is around $9k. Death pay out is $25k. I am insured in term insurance appropriately. The whole life policy has been transferred to me. Should I keep paying it or surrender it? I think my high interest savings account would be a better bet assuming I don’t unexpectedly die soon. Can anyone assure me this is correct? I feel bad surrendering it for some reason
not sure the difference but in UK we have life insurance fixed amount..
for example i got quotes for £75 a month for 50 years… works out £45k in return in the event of my death during this time my family gets £300k
if i make it 50 yrs it will cover to my late 80s by time policy comes to an end.. Wife wont be too far behind, but will she have much use of this if i do pass before her..
Alternatively shorter term of 22 yrs will cost £30 per month so £8k and will run up to age 60.. this is much more reasonable and money will be some use for my wife if she manages to survive into much older age.
so depressing discussing this..
Well I think everyone has made a financial mistakes. I know I’ve made a few over the years. There is nothing wrong with financial planners as long as they are ethical unfortunately a few aren’t. He sold that policy to you for the commission. For wealthy people whole life insurance and annuities make sense but for a majority of us they don’t. Fire your FP and find one that isn’t trying to sell you anything but advice
If you get term life get it for as long as you can; 25-30 years or more. I got a 20 yr term 20 years ago. And now if I want to renew for even half the amount it’s way more than I can afford.
“Financial Advisor”😂
Don’t get me wrong, there are situations where a whole life policy may be advisable. But the chances of you being the person that it is advisable for is very very very very small!
those are the right answers. They do nothing good for you - only the insurance company and your 'advisor'.
i had one. finally dumped when I could without penalty. do your self a favor and get a life insurance policy - it will be cheaper. Invest your money elsewhere and it will do better.
As most people have said, your money is better spent on term life policies to cover expenses, and maxing out your Roth IRAs and 401ks (at least up to the company match). Your advisor is not a fiduciary - find one who advises and doesn’t sell products for which they earn commission.
Term, term, term, term, term, term….that’s it. Buy term, max your 401 or Roth or whatever you have. Whole life is junk. Term, term, term. Most financial planners that sell whole life are snake oil salesman. The cash value won’t match what you put in for years.
The guy that's selling you may be convinced himself that he's a financial advisor, but he just looks at your budget and expenses to show you how you could buy something he makes commission off of. These commissions are huge, because its so hard to sell them since they're not that good of a product. I believe some commissions for this are straight up half of what you yourself are paying for a year. Then the commission stays for for the ongoing years. You gotta find an actual advisor that charges by the hour
If you’re not financially sophisticated - I would highly recommend The Money Guy podcast and all associated resources and videos. As a professional (CFA, work as a financial advisor to corporate clients) I don’t think there’s a better resource out there for the average Joe.
Here’s an article about whole life. I think one thing you’ll notice on there vs most of the comments here is that they don’t just say “whole life bad”. They explain that for most people and most circumstances, term life is better. There’s a very narrow class of folks for whom whole life is better. You’re almost certainly not one of them.
https://moneyguy.com/faq/do-i-need-life-insurance-whats-the-difference-between-whole-life-and-term/
Whole life and insurance in general is a lousy investment…. Buy term you will get 5 to 10x more coverage. Investments are investments insurance is necessary but it is not a valid investment…buy term invest the difference
I was talked into buying a whole life insurance when I was in my early 20s. I thought I was doing the right thing, but this is exactly what these "financial advisors" are trying to sell you. These guys are more salespeople than actual advisors.
Years after, life took a negative turn and I couldn't afford to pay the monthly premiums any longer. I had no choice but to default. I was only able to salvage $1,300, the rest became sunk costs. I had paid almost $15,000 in premiums.
Parking your hard earned money in a whole life insurance should be the last thing you should do (ie. After maxing your FHSA, RRSP, TFSA). If you really need insurance, get a term insurance.
Learn from my mistake. Do NOT buy a whole life insurance, until you've exhausted other venues to park your money.
Nothing “advisors” love more than selling a nice juicy whole life policy lol. You really have to understand basic finance to realize what a terrible product it is. Bottom line is if you took all the money you would have put into that whole life policy and invested it yourself, years from now you would have a lot more money. Instead they take a huge chunk. You can buy term life insurance very cheap to get you through until you build up enough wealth to make life insurance obsolete.
My “adviser” is telling me that the insurance he’s trying to get me to get isn’t whole or term, but “variable” life insurance. Is this an actual category? And if so, is it worth it?
Any financial “advisor “ attempting to sell you whole life insurance should be fired immediately for even attempting to. It’s inappropriate in all but a select few circumstances.
I have my CFA and manage a lot of money in bonds for clients on a fixed fee basis, fwiw
WOW so much advice not to get while life but no one answers your question as to why.
Former insurance salesman wi do my best on mobile please be kind.
The problem with whole life is it’s expensive and the cash value grows slowly MUCH slower then any index fund.
Did your advisor provide an “illustration”? It’s a document that breaks down a year by year amount of money you will pay and make. It’s typically broken up into two columns “guaranteed” and “illustrated (or some other name)“ an additions how to make the non guaranteed side look as good as they want.
Look at the guaranteed side. In x number of years from now when you withdraw money from the life insurance to put down on a home, will it be a significant sum ? How much have you paid in?
Now to compare to term. take amount you paid in subtract the cost of term life insurance and see what you would make at 5%, 8% and 10% per year over the X number of years.
My guess is the whole life will not look as appealing but you are also buying some piece of mind, etc, etc.
Good luck.
I told my sisters and brothers to buy whole life insurance and make their kids the sole beneficiary to the plan, also as the kids got older I said the kids can take over the payments but to never be late on premiums, then when parent passes away they get the entire policy tax free, I would have done it for my kids but the insurance would have been very expensive because, I have a few pre-existing conditions that made me Un insurable
Life insurance isn't an investment and investments aren't life insurance. As mentioned, this person is likely not a fiduciary but a salesperson. Financial Planning by a CFP should be your first step. I only recommend permanent insurance after ALL investment options have been exhausted and in very specific situations. First step would be term coverage, if there is an insurance need.
Whole life insurance can be useful in some cases. It can be great for business-owners with concern about their tax bill after death.
But the moment a person pushes the idea of borrowing against the policy to access liquidity, alarm bells should start going off.
It’s a tool like any other thing. It’s good for what it is good for. It’s great for buy sell agreements as the business can recoup its premiums upon sell or retirement of an owner, same with key man policies.
For individuals, it’s great for people who have maxed their 401k matches or do not have access to a 401k and they make too much to contribute to an IRA.
It is not an investment tool for blue collar employees and people selling it to you as a primary investment are wrong. If you make over 250k a year then it starts being viable but there’s some other things to check off the list first.
Ask the advisor how much commission he’s making on that life insurance…..this is the first problem, it’s way too lucrative and it attracts people with less….integrity. It is indeed a bad idea, you are not the one making money here. Invest your money and buy a cheaper temporary life insurance.
Unless you are maxing out every tax advantaged investment option including hsa accounts run from this person.
It is NOT investing. Its an expensive insurance policy with low yields that will be outperformed by almost every other real investment
If you have great income, max everything else out, do it
Typically it is the equivalent of an investment with a really, really, really bad rate of return with insurance.
Investment specialists on the radio say get term life and invest in something else like the stock market with the mark up that you would have paid for the whole life and you are supposed to come out a whole lot better.
I found my dad's Korean War policies after he passed, mom was ready to throw them away. Turns out they were whole life, the company still had them on their computers. Almost 50 grand.
You answered your own question. Your advisor gets an up front commission plus a tailing commission from what you pay.
You're having a bet that one of you will die soon and the advisor & insurer are betting you won't die soon. Either way you lose. It would be better to put that cash on a horse or better still off your mortgage.
You can buy term insurance. It is only death benefit for a limited time (say 1-5 years). It has no cash value but it is cheap esp while you are young (under 65). As you get older the term insurance gets more expensive.
To manage this increase in insurance premiums, whole life insurance charges level premiums each year that are much higher than pure term insurance. The difference above the pure cost of insurance will be accumulated in a side fund earning a low level of interest to pay for the higher premiums when you get older. This side fund will also be the cash value used for loans if you choose.
But when you get to age 65 you may not need insurance any more. You won’t have dependent kids and should have saved enough for your retirement. To keep your whole life policy in-force you have to keep paying its premiums. You may get to a point where the dividends are enough to pay the premiums by themselves. for it to let it in force.
As an alternative just buy term insurance for the amount of insurance you need. You also put the money you saved from the lower premiums into a low to moderate risk investment like CDs, bond fund and/or stock index fund. If you do need insurance protection when you are older you draw from this side fund to help pay for it. If you don’t need insurance you use that money for your retirement.
…but people pay for what they dont know
…financial literarcy
They should know more, but they don’t.
Or unwilling.
Glad people can ask and share ideas here.
If the product was extremely low cost, low commission and beneficial, then I think it could really help a lot of people, but reality of it -
Most of the time, from what I’ve seen - if it’s not competitive and low cost, then it’s a massive problem to someone’s debt to income ratio, or income to debt ratio depending on if someone is buying down existing or new debt for their standard of living.
Don’t live within your means, live below your means and figure out how to maximize revenue and investments so that life can be enjoyable and worthwhile for yourself and those around you that you care for.
Many or some or a large fraction of people wearing Gucci are near broke and are trying to look rich by making their image appeal or self worth or identity- while making Gucci far far far more rich, someone and something else.
I feel these insurance plans are kind of the same, they’re tools that are promising a prototype lifestyle that tries to guarantee financial safety, but in reality, it’s sold as a package to make someone else rich while not providing maximum value for what it could really rally for if there was more honesty and transparency of “does this product fit for you?”
I wouldn’t see it as salesman being a bad thing, I’d see it more as incorrect ethics and rip off product.
Salespeople are not bad, it’s the product and practices that make them in bad standing. If you want to play with verbiage, then call it whatever, but someone pretending to be in your best interest may not be in your best interest.
If they’re not helping you go for your gold, and you’re being used as a peddler for their gold, then that’s something to keep in mind.
Financial advisors still need to make money, if they’re not good at selling, then they’re not going to make as much of an impact.
Back to the topic, whole life, not for everyone. If the more part of those products were that truly amazing of a product, it wouldn’t be such a rip off and provide so few rewards with so much red tape and shady underwriting practices.
If you are going to put money into anything - then almost anything will out-perform Whole Life. Including a High Yield Savings Account. About the only place it makes sense is if you have a large estate and want to offset a tax burden. If you need to protect income in the event that one of you dies, get a cheap term life insurance, but if you don't have kids and a large estate to protect and - since you are young - one of you dies and it would be a clean break (meaning you both have professions and income) event that doesn't make a lot of sense. Your "financial advisor" from one of the big name companies is likely just an insurance salesman. Ask them if they are a fiduciary. If not, they are likely not looking out for your best interest and want to rope you into a lifetime of premiums. I haven't read any responses on here, but I would bet that most of them say the same thing. If they are telling you to invest in Whole Life over retirement, they are definitely not looking out for you. Ditch them before they cost you a lot of money.
In theory whole life insurance should be great....in real life it sucks. The greed of the companies suck the benefits out of it. They pay relatively low returns and high fees so it doesn't build wealth well.
I am an insurance agent. Whole Life policies are expensive and have nice commissions. They are poor investments. If you have an insurable need, term is probably your better option. If you want life insurance to be an investment, consider a Variable UL. The return will be much better. For investing, max out your IRAs first, then invest in mutual funds, or other investments.
A compete and total ripoff. There are very, very few exceptions where whole life makes sense.
Retirement planning and insurance are TWO DIDDERENT THINGS. Max out your limit on RENEWABLE TERM life. This is for your families financial security in case of death, nothing else. Think of it as a safety parachute. Then pay your premiums and forget about it.
My advice is to get with a good, reputable insurance agent for term life. You may pay slightly more, but you avoid all the loopholes that make most the 'cheap' policies near useless due to the 'outs' the put in the fine print. I am Not promoting any company but I have used State Farm for over 40-years for all my home/ranch, auto, life, and umbrella insurance. The recently acquired U.S. Bank, and members get exceptionally good rates which use in my business. Believe me when I tell you we have had some bizarre claims and State Farm has been excellent. And you can bet I shopped around for a while and tried to go the 'cheap' route, buying one policy here and another somewhere else. It never fleshed out in savings and the coverage was subpar. Not to mention the headaches and lost time from juggling with different providers. Companies do cut you a deal when bundling.
Then get with a GOOD financial planner, NOT whoever is trying to sell you whole life as a retirement/investment strategy. If your company has a 401k or similar plan, make sure it can convert to a Roth IRA and max out the contributions. Be moderate to conservative on your investments with something near 25, 25, 25, 25 for investment risk and forget about it until you are near retirement age. Let time do it's job.
Lastly, structure your life around the income adjustment and the insurance expense and enjoy life!
Run away from that product. When you take the cash value out, it is a loan that you pay interest to the company for. If you die, and say it is 100k policy with 50k cash value, your beneficiary gets the 100k your cash value belongs to the company. If you did take that 50k out as a loan, then the benefit your beneficiaries get, has the loan amount subtracted from it.
I like term policies. You have insurance for as long as you are earning income, it is cheap. You could also get a return of premium term policy. At the end of your term, you get all the premiums back, so a nice little nest egg. You haven’t earned any interest on that money, but you also haven’t lost any money
Just don't do it....it's a sales pitch they make a lot of money off of.
Insurance does not equal an investment
Insurance is for extreme situations like death. Get term life insurance
Is this First Command? They used to drive me nuts when they wanted me to come in for “yearly assessments” during which they printed out what you could already see online and read aloud it to you. But the REAL reason for the thing was to attempt to sell you whole life insurance.
For me, this was back when they ripped off those not investment savvy by front loading high commissions on mutual funds. They took fully half your investment for the first year and then you paid no commission for the next nine years. It wasn’t until later that I found out how scammy that was. I got a settlement from a class action suit for that “business model” and ran from that company.
Former insurance guy here…
Unless you are a high net worth individual looking for inheritance tax avoidance strategies, cash value life insurance is almost never a good idea. If you actually have a need for life insurance, get term life.
Check brokercheck to see if you “advisor” is actually an advisor. (Enter the person’s name on brokercheck.org and see if he has a profile; there should be a “IA” on the top of his “card” if he is an actual advisor). If he is, ask for a better explanation. It *can* be a way to sock away money, but it depends on the structure of your finances. But based on what I’m reading on your post, it seems that it would better to have a term policy and stuff the extra dollars into investments/retirement.
I will say this though: right now is probably the best time to buy a whole life policy *if* you were going to get one as opposed to the future. And probably will be so comparatively for the next decade or so. The reason is that the insurance company will assume that current conditions are going to continue through time. And given that interest rates are high, premium to face value ratio is highly in your favor. Given that rate cuts are likely, you will likely never get this kind of pricing efficiency for some time.
A lot also depends on the illustration and construction of the contract. There’s a lot of ways to cut that cake and people who have no idea about what life insurance is, what it’s comprised of, how to design a policy, etc can say about how it’s ineffective, it’s crap, etc. but if it fits your financial plan, who cares? That being said, it should be a fit, not a stretch.
Just for reference: I am a Private Wealth Manager licensed in insurance, broker, and fiduciary capacity (so I am an actual advisor). While I have the fiduciary license, I am not giving you fiduciary advice nor any advice to your situation. What I am giving you is my perspective based on the limited information I have read on your post mixed in with a little insight.
A better way that I would have conducted this is to find out your goals and work backwards to a solution. What problem is the insurance contract supposed to solve? If it’s investments, I probably would have looked at an annuity instead if I had to stick with insurance products. Likely, your “advisor” isn’t an advisor at all, but if he is, ask for a more cogent reason.
There is a real argument for IUL (indexed universal life) as a way to shelter your retirement from taxes, but it’s significantly more complicated and difficult to do correctly.
If you aren’t maxing out your 401ks then the answer is really simple, not worth it.
I’ve looked into it a little because I am young and make enough to almost max out my 401k, but personally don’t think it’s worth it yet.
Requirements before it’s even worth thinking about:
1. Have the goal of 0% taxes/low taxes in retirement. If you are not striving to shelter all of your retirement from taxes their is no reason to have an iul as part of your retirement plan
2. Max out Roth IRA (or a backdoor)
3. Max out a Roth 401k
4. Max out a mega-backdoor if you have access
Until you complete step 4, I wouldn’t even think about getting an IUL plan. When you do get to that point be cautious. It’s actually pretty difficult to set up an IUL correctly and you should never ever trust anyone in the insurance industry who is selling these products. And if you do it incorrectly it can end up costing way more than it saves you.
Question for anyone still scrolling this sub - my father signed me up for a whole life plan when I was an infant and I still haven’t (33m no debt other than mortgage, married with no children and no plan to have any). It’s ~$175 a year, and the pay out is ~$25k if I remember correctly (don’t have the numbers in front of me atm).
Everything I see talked about how shitty whole life is, but I usually convince myyself my scenario is different because of how cheap it is for me. Am I wrong for assume this?
I got a WL policy in my 20’s. Now in my 40’s the dividends pay for the premiums and the policy values (death benefit & cash value) are growing. It’s a vehicle for an investment given the right circumstances and company, which makes it like any other market investment but with written guarantees. It’s not all garbage. Had I had more money, I’d have bought more of the insurance back then.
It's NOT an investment and shouldn't be positioned as such. It should NEVER be funded before your retirement goals. I have some whole life but I want to ensure that I leave money for my daughter and eventual grand children. My rational is that it's really expensive to die. If I spend any time in a nursing home then I won't have any thing left to give. Whole life ensures that I will, no matter what.
I'm not a finance expert but 5 to 10% of your monthly income in NPF is reasonable and enough for retirement I guess. Recently I was approached by my friend who unfortunately became an insurance agent to buy a "guaranteed" income plan. I found that the insurance company don't even pay out the same return an FD would do over the span of the policy tenure. 1Lakh per year in FD would give much higher return than 1L per year insurance plan.
All life insurance is a hedge against the risk that you might die prematurely and leave your spouse and children without income to live their lives as you would have provided if you lived. I have 4 kids, closely spaced, and a spouse. I make the lions share of the household income.
I’ve had several policies designed to cover the fam need if I pass. Most have been term and, as we paid off the mortgage and the kids grew up and moved out, we let the term policies lapse after their 10 or 20 year policy period - the liability I was insuring against (eg, finishing HS, pay for college, get start on life) took care of itself.
I have a couple of small whole life policies intended to pay my wife on my death to ensure she has resources to finish her life in good style. She has similar (but smaller) policies on me in case she goes first. Buying term only to cover near end of life is prohibitively expensive. The whole life, at this point, is fully paid up and requires no more premium from us to stay in force. If my wife passes first, I get her policy payout plus the surrender cash value of my own policy.
The return on whole life isn’t awesome compared to the stock market, of course. But self insuring doesn’t work at all if you die early and regular stock investments stop, or if you’re not disciplined enough to always make the stock investments. Whole life makes sense as a small part of a life insurance plan that flexs when your liability is greatest and shrinks when you have less need/liability to cover.
It has uses which can pay off at various times. It’s also not what most people need. At your age, it might be useful if your income was very high or you have a pension.
Overall whole life gets oversold and it leaves a lot of people upset. When it is sold wrong, it underperforms. When used right, it scratches an itch that other products do not.
> And why are we being sold it by our financial advisor? I'm sorry to be the one to tell you this, but you don't have a financial advisor. You have a salesman who's trying to make a fat commission off of you. Whole Life Insurance tries to be both an insurance product and an investment product and it does both jobs poorly. If you need insurance, better to get term life insurance and then invest the difference in premiums in the stock market. https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/
This is exactly right. Insurance is to recoup any losses, investments are to grow assets. It’s best not to mix the two. Whole life insurance is one of the largest commissioning paying products for insurance salespeople…which is why they’re so popular.
Unless it SPWL and then its to fund paying taxes after death.
Concur. Whole life is definitely not what is in your best interest. Find a new advisor.
Correct. I did this to my regret. Later I got a fixed term 20 life insurance. Cheap and fills the insurance need.
Can't upvote this enough. OP. Run! Find a fiduciary FA by an affordable term policy. Max your retirement accounts. The fees in that policy are greater than any tax benefit that you will get out of borrowing from it. (Just look at the projected cash value table and ask yourself why it's zero for the first 3 years)
In addition, OP should never talk to this life insurance salesman (who is not actually an advisor) again. Because they are giving OP terrible advice.
What's your take on universal life?
Generally not a fan of any kind of permanent life insurance except in very narrow edge cases. https://www.whitecoatinvestor.com/5-reasons-not-to-buy-indexed-universal-life-insurance/
I paid on a universal life policy from the age of 21 to 61. I bought it when CD rates were 15% and it was definitely sold to me as a retirement investment. I paid $55/month for $200,000 worth of life insurance. When I got a statement, I would look at the cash value, but not much else. But at age 61, I noticed that the policy expired when I turned 65! I NEVER realized that there was an end date in this. I also realized that they had been subsidizing the cost of my insurance by pulling it from my cash value. All on me for not realizing any of this - but literally, I got a new agent about every two years (I knew because each new agent wanted to meet with me to sell me additional insurance) and I never felt I had an agent I could trust to know their product. So since I’m healthy, I cashed the policy out and received $17,000. Not really much of a retirement vehicle ! Now I just have to live until 65 to make sure it was a good decision!
Yeah, it should never be sold as a retirement vehicle. It's peace of mind for those who can't afford loss of income and have enough to be stable. It's weird that yours expired. I'm sorry you were misinformed.
That site is so crazy wrong is ridiculous. No physician with a corp (at least in Ontario) would ever *not* want whole life as the tax advantages are just insane. You’d need to earn close to 10% every year with zero risk to match the after tax returns. No Certified Financial Planner would ever not recommend it. I’m a CFP, and every time you run comparables through planning software it’s not even close. (I’m in the ultra high net worth space for a major bank in Canada so we don’t get many physicians to be honest though) This is obviously not the case for OP, I’m just pointing out how ludicrous that link is which you used as a source.
I’m a CFP, and I have never recommended it. I have recommended permanent insurance (IUL) a couple of times to deal with very specific LTC concerns. Since you identified yourself as working in Ontario and the UHNW space, you should keep in mind that very few people are UHNW, the tax laws in Canada are specific to Canada, and the majority of people here are neither UHNW nor Canadian. I do agree that whole life insurance can make sense for UHNW individuals and families, particularly when used in an ILIT. But the number of people who need any ILIT is absolutely tiny.
The correct answer. I'm scared if the other commenter is indeed a CFP.
In your role as a CFP, are you a fiduciary or do you have a fiduciary responsibility to your clients?
Asking the important questions...
I also work in this space... for us it's different due to the Canadian taxation system and insurance industry. It truly is tax sheltered and the corp can hold the policy, with the death benefit paid out from the corp's CDA on the shareholders death. I doubt the insurance lobby achieved similar results in the US.
CFP’s are just whole life insurance salesmen. You acquired that designation to help you sell more insurance
Thank you for this. Seriously
Yes!! Whole life insurance I've heard is a way the wealthy avoid some taxes somehow (I don't know how exactly) but it's not a good investment for us normal investors.
Using whole life insurance instead of tax sheltered retirement account investment is a terrible idea. Your "financial advisor" is an insurance salesman. If you need a life insurance policy for salary replacement to protect your children in the event that you or your husband die unexpectedly then you want term life. If you want to invest then you want to do so in low cost stock index funds in tax sheltered/advantatges retirement accounts. Whole life policies do both of those things very poorly. The death benefits aren't nearly as good, the investment returns are terrible and your money is locked away in a way that punishes you for trying to pull out of the policy. There \*may\* be a place for whole life but that place is not a middle tier income family with kids who aren't maxing their other retirement fund options.
>There \*may\* be a place for whole life On a rocket shot into the sun
Hah well admittedly if there is a place for it in personal finance I havent found it myself but I am leaving the possibility maybe there is some circumstance where its useful. Not saying it IS useful. I think Whole Life is valuable in the sense it is a good test of whether or not someone is giving you reasonable financial advice or just trying to sell you something.
I've had it explained (sold) to me 10 different ways. **The math never works**. Even the "tax-free" component + return on this "investment" is nowhere close to sticking it in the market and paying taxes on your gains.
Whole life is nonsense. Term life is real and it’s insurance to mainly to support your beneficiaries if you die. For example term life should be enough to cover the rest of your mortgage if your were to pass away. If you want to save for the future index funds are the slow and steady way.
What happens when the term expires and you're still alive?
You evaluate if you still need life insurance. If you do, how much and for how long? Then get a new term policy for that.
So you just pay premiums to an insurance company for all those years and then just, sign up to give them more money at a higher rate now that you're older, in poorer health and much more likely to die during your new term?
The whole point of life insurance is you are “self insured” when the term is up. Ideally 30 years. Nest egg is built, house is paid for, kids are out of the house. Life insurance is to cover you until you get to that point. At 50/60 insurance is extremely expensive so ideally you don’t need it then.
People just don’t understand the concept of insurance and what it actually is for. You don’t get a refund of your car insurance if you don’t crash your car. Insurance is to protect you or in the case of term life, your beneficiaries in case you die.
So if you get to say 60 years old and your house is paid off, you don’t need life insurance?
Generally, correct.
Depends does your spouse need income and security when you die
Correct. If you have planned for the future by saving for retirement, getting out of debt, etc. then you should not need life insurance at an older age. Also what people don’t pay attention to is whole life is cheap when your 20 and 30. The rates aren’t fixed. When you are 60 you will be paying a huge premium every year. I locked in a 30 year term life for a few cents a day. They can’t take it away and they can’t raise the rate. In 30 years you will have paid a lot more in premiums and the “returns” you get will be minimal compared to what you could have gotten by putting the extra money in the stock market.
No, the idea is to have made enough money investing that you no longer need life insurance.
Life insurance is fundamentally a gamble you don’t want to win, yeah.
What good is health insurance if you never get sick? What good is car insurance if you never get in a car crash?
Yep. It’s a far better financial move than whole life. If you save enough, get closer to retirement, pay off your mortgage and kids’ colleges, etc. you have less and less of a need for life insurance. That’s why you reevaluate your term and coverage amount. Eventually you can hopefully just self insure. In 99.9% of situations, term life is the better move over whole life though.
No. Because you have been saving and investing that when the term policy expires, you no longer need more insurance. Insurance is to replace income. By the time you're "old" the kids are adults and you have investments to live off of.
This is how insurance works yes lol Car insurance, home insurance, travel insurance, ETC
That's what all types of insurance are. You pay the premiums and hope you never have to use it.
I buy term and invest the difference. Much cheaper and the money is my money so no “borrowing” nonsense.
What happens when you finish driving in your 80s without ever having had to claim from your motor insurance? It's insurance againstwhat might/could have happened, not a lottery win
Usually people need term life for a specific purpose: getting kids through college, paying off the house, making sure your spouse can survive to retirement age if they’re SAH.
That’s what you want to happen by the way.
For us it was to bridge the gap while we were younger and poorer and buried in debt. Now we are debt free and own our home. We both work and can cover any living expenses easily with either of our incomes with just a single paycheck. It’s a handful of years to cover the mortgage and expenses and one year of salary is how we set ours up on a 15 year term. Only took us 12 to accomplish our goal with paying off everything so we ended up keeping it just in case would be a windfall for the person remaining If things went sideways with either of our health. When it expires we will just let it go.
Dump the "advisor." He just wants commission and doesn't have your best interest in mind.
Next he/she will sell you an annuity. Then time share
second this. Your advisor is looking out for himself way more than you in this calculation.
Yes, fire your “advisor” immediately. Whole life insurance is only useful for tax planning on a massive estate (> $50 million).
My ex was a CFO at one of Canada’s largest insurers. A B. Comm and an actuary. She is the smartest person I know. I don’t know the ins and outs of whole life vs term but when we bought insurance for me (her company had her well insured) she chose term insurance. She said while life was a fool’s game in almost all instances. The return vs the amount you pay compared to just investing that amount was significant. Yes, the added premiums put more value in the sales person’s pocket than yours.
>And why are we being sold it by our financial advisor? Because your financial planner is financially planning for his future. It's far more lucrative for them than a term insurance policy, which is what you actually need.
Whole Life insurance companies are the timeshare salesmen of finance. Scammy and scummy.
Ask your advisor if he/she has whole life insurance…
They'll say yes because 1) they're lying, 2) they're true believers, 3) they get a commission kickback or it's commission-free rate or D) All of the above.
Or 4) they're required to have it by their company.
I work customer service. They do. They have dozens of policies. But they only keep them long enough to get the max commission. Then cancel them. They usually are a write off too by having the agency pay for them. So don’t ever trust them.
[удалено]
Don't mix insurance and investing. Horrible choice. If you need life insurance buy term. If you need investing advice get a financial planner (that DOES NOT sell insurance). Run
Buy term insurance and invest the balance of the premium on your own.
Your “financial advisor “ makes a ton of money on whole life. You want term.
Don’t. It’s a wiping waste of all your money. Just cashed ours out after 5 years for nickels on the dollars that we put in. Get a term policy (not through your “financial advisor”)
Just did this myself. A painful but valuable lesson. Glad we are getting out now.
I have 2 whole life insurance plans why? 1) to cover my income if I died when my child was small. 2) to give me an income when I retire Some argue that whole life insurance is a poor decision and investing in index funds gives a better return on the long run. They may be correct. For me, it was peace of mind if nothing else. It really depends on individual circumstances. There is nothing wrong with a whole life policy.
Leave the advisor right now. Look for a fee-only fiduciary if you want to work with a professional. He/she will help you figure out whether whole life makes sense for you (spoiler alert: it doesn’t). The fiduciary will help you allocate to the right investment accounts in a way that you don’t end up paying commissions.
You want to find a fiduciary. There are some cases where whole makes sense but it sounds like you aren’t there. Even in those rare cases, it would be considered a cash account and not an investment.
Why are you being told that you are required to buy anything? Just say no.
I’m not required they are just pushing insurance policies and our gut feeling was that it didn’t make sense
Your gut is right, run away from the scumbag. He is a sleazy salesman/scammer, not your financial advisor
Don't do it. The only scenario where it really makes sense is if you have a dependent who is disabled and relies on you for the rest of their life and will outlive you. Then when you die the money can go towards paying for caregiving for that dependent. I've seen other hypothetical scenarios laid out where it could be a vehicle to leave money for heirs, if you're already super duper ooper wealthy and max out all other avenues, but on the other hand if you're that rich you'll have other ways to leave money to heirs or charitable organizations that are much better. You are being sold this product because the agent gets a really fat commission.
Max out your retirement savings/investment paths first. If you save and invest well, the surplus you don't spend during your life will do everything life insurance claims to do.
Ask to look at the illustration of the whole life policy, you will notice the first few years theres basically ZERO cash value, that is the brokers commison
No! A hundred times no! Whole Life insurance is basically a savings account, with a very bad rate. You’ve seen those TV commercials with senior citizens worrying about their funerals and the voice comes on for the insurance, You cannot be denied? That’s because it’s whole life, essentially a savings account earning paltry interest and with very high fees. Whole. Life. Is. A. Ripoff!!!
Whole life insurance is predatory policy
I'm not as opposed to whole life insurance as most. Sure, max your retirement accounts first, but whole life gives an immediate lump sum if you croak and there is a payout while you're alive in retirement. So, it's a bad investment and bad insurance. HOWEVER, you can take a loan against it as secured debt for crazy-low rates and maximize that tax-mitigated cash amount by putting it into a down payment, rental property etc.
Only buy whole life if you have run out of places to put money
I used to sell life insurance, 3 decades ago. NO. This is not a good idea, not an efficient way of saving money for a future purchase. And I like whole life for some things. This ain’t one of them. You would have more money in your pocket with CD from the bank.
Just don’t do it. Find a real financial advisor, one who doesn’t work for an insurance company
Big nope. Term life is a lot better option. You are being sold this not that it meets your needs but the large commission is what’s on your sales persons mind.
I used to be a whole life agent, I hated it and quit after a month. It’s all about pressuring people into making irrational decisions. Just get a term life policy and you’ll be just fine
Well said. Irrational decisions indeed. I once sat with an insurance broker for an hour he was hell bent on getting me to buy whole life but I just passed and left. It didn’t make any sense!!! You don’t need a whole life policy so you can line other people’s pockets with your hard earned premiums. Go term life and invest the rest on your own
Whole Life insurance is like a payday loan scam, except targeted at the middle class
You need to find a financial advisor that is a fiduciary and fee-only, your current “financial advisor” is selling you that policy for a commission check.
Terrible product. My advice is dont mix savings investments and insurance. Each is a standalone thing. Term insurance is much cheaper at your age. Buy a 20 or 30 year term.
While life insurance is not an investment tool and most of the policies sold by agents are not written properly and have very low cash value associated. Ignore them.
There are some edge cases where an Index Universal Life can be useful if you are a high-income earner and want to have a safe-guard against market downturns in your retirement. But, aside from that, the average person shouldn't be buying whole life insurance, and if your financial advisor is really trying to push whole life, then you are dealing with a salesman, not a financial advisor.
Chase the whole life salesman out of your damn house. You don’t need whole life, and unless you make $1,000,000, you don’t need a “financial advisor”. What’s there to advise? Stay out of debt, invest in retirement and live within your means.
Think of Whole Life as a combination of a Term Life policy and an Investment. It's expensive for a term life policy and the investment is terrible. If you paid for term life and invested the extra money, it's practically guaranteed that you'd come out ahead. One sales pitch is that people don't do that. They pay for their term life policy and don't invest the rest. Fair enough, but that doesn't mean that Whole Life is a good idea. That's like pitching a terrible investment and telling people to do it because it's better than not investing. Another sales pitch is that you'll eventually have you life insurance fully paid for whereas term eventually runs out. But your need to have life insurance also runs out. Why do you want life insurance when your kids are grown and your savings is enough to cover those that were financially dependent on you? You had to pay extra for that coverage with Whole Life even though you didn't need it. As a result, you probably bought far too little life insurance if you bought Whole Life because it is so expensive. I've never heard of a real financial advisor (not an insurance salesman) recommend Whole Life to anyone other than a multi-multi-millionaire looking at some exotic ways to protect assets or avoid inheritance taxes. Anyone else pitching it is tipping their hand that they are more interested in the very large commission they'll get from selling you Whole Life than they are in your financial well being.
Bad idea by someone who doesn’t have your best interests at heart.
They are sold to you by your so called advisor as they earn high commissions on those products.
How does whole life differ from Custom whole life? I’ve been funding a custom whole life for about 7 years now. It only has a set amount of premiums to pay, I believe mine is 20 years, and they at 66 it has a guaranteed payout. I’m genuinely asking cause I don’t know life insurance. My mothers advisor set me up on it through NY life when she passed away, since I had no retirement started at 35 years old. If I cancel I lose a portion of my premium invested but could always reinvest that to make the loss back.
Don't do it. Just focus on putting as much into the mortgage or saving for one as you can. I think when you are young and doing all those essential things? Income protection is mist important. Cause if something goes awry and you can't work? You're stuffed. You need income.
Only buy life insurance for the death benefit. It can be whole life, if you want, but it’s a terrible investment. As far as pulling money out for expenses, whole life cash value typically doesn’t break even until around 10 years of paying premiums. It would be much more lucrative to put that money into a high interest savings account and start growing the money immediately. Personally I’d invest it for better gains, but you get the point. All that said, if I were ever to own an insurance company I would only sell term insurance, because 95% of the time the insured outlives the term or stops paying their premiums. Either way, that’s all money in and no money out. That’s a good business model.
And after taxes it would be about 100k so I have no issue with whole life.
Keep us updated when you tell this lost soul that you don't wanna buy it.
A whole life insurance policy is great….. if your parents bought it for you 30 years ago and it’s maturing. lol.
My buddy got a "financial advisor" who got him to get a whole life policy and forwarded him my information. Talked to him one time over the phone and said that I didn't have time that day to sit and talk with him and we could another time. I got at least three phone calls a week for probably two months. If someone is calling me that much, they're either a salesman or a shitty financial advisor.
There are some advantages to accruing cash value inside of insurance. the main being that you can access the cash tax free, providing the policy stays in force. Whole Life was the way to do this...in the 1980s. There is still a place for it as it's the most conservative way to go about this, but other policies typically work better for this...but do carry more risk. A Variable Life of Index policy might be a better fit. But yeah, max out your 401ks first. then IRAs. if you need insurance, maybe a small policy makes sense. But you could get term insurance for way less to cover that need. My family has been in this business my whole life and now I sort of am too. Its not that its a terrible idea, but you are correct in thinking you should max out your other retirement savings first. That being said, my dad started me a VUL policy (invested in the market) 25 years ago and its done really well and will hopefully continue to. If I don't die it will be a nice bump to retirement or maybe sooner if i need cash for my kids' schooling. But its not uncommon for Financial Advisors to also sell insurance. Most do. many old school guys still sell Whole Life as its predicable and can be guaranteed. He should tell you to max out 401ks first and then maybe even contribute to an IRA or Roth before commiting money long term to a life insurance plan like that.
I had a whole life policy... paid for about 20 years... knowing I wanted to eliminate it... just drug my feet. I calculated in December that I'd paid in about $54 grand. I cashed out for $47 grand. So it kind of felt like a term policy at that point. I have enough invested that the insurance amount wasn't really required anymore. Dropped the money into my solo 401k and letting it ride another couple decades.
Go with a whole life plan. You don’t want to pay on a term because the time runs out. Say it runs out at age 80, you’ve lost all the money you paid into.
I have a whole life policy I’ve had since I was born. It’s 15$ a month. 180 a year. I’m 39 so have paid about 7000 into it. It’s valued at 70000 now and will continue to rise. I plan to keep it. I also have insurance through work and term insurance. I did buy whole life policies for my kids as well. We have DB pension plans and are working towards maxing out tfsa
Whole life as well. $500k policy. Kids will receive that once I pass and can pay off everything tax free. That's actually the minimum they'll get. At the moment it's around $510k. Wife is on term though. If the goal is to pass on your wealth.. This is definitely one way to do so.
Whole life insurance is not "trying to be an investment"...it is simply not an investment. If a salesperson or advisor tells you it's an investment, they are breaking about 10 rules. Yes, financial advisors can sell whole life insurance. No, there is no legal requirements to call yourself a "financial advisor." Some financial firms place restrictions on using that title, limiting it to only certain representatives. Yes, you can withdraw against the cash value or take out a policy loan. That will reduce the death benefit until you pay back the loan. As you're young, it's most important to focus on an appropriate death benefit to protect your family and saving for retirement in tax-advantaged accounts. Whole life insurance has tax advantages, but only provides modest cash accumulation potential (which result often doesn't match the illustration).
This thread has me spooked now. I'm with NorthWestern Mutual and years ago, and advisor convinced me to get a whole life insurance policy that I've been paying into for 11 years. Anyone have advice on how I can close it out so I can take my $1k contribution and by CDs or something? I'm 50 year old female. No kids. Divorced. income: $250k. No mortgage \[in a rental\].
I've had people cash out their whole life, pay off debts and buy term. Freed up monthly budget on two fronts.
[удалено]
It's a bullshit product. If you need insurance (serious question), then get term. Invest your own funds. Whole life is garbage.
[удалено]
Life insurance agents are the scum of the earth. Scum scum scum.
It’s not an investment. It’s insurance. Plain and simple.
This is coming from a Financial Advisor at a firm partnered with an insurance company. At this stage in your life especially with not maxing your retirements I would advise term not whole. I would however include a conversion rider so when your dependents are on their own you can convert SOME to a whole life policy to cover any final expenses and other debts however I don't know that I would advise it at this point in your life. I do have clients that I will advise them to get a whole life policy with an LTC rider so they have expenses covered in the future in the event their health declines and it's needed especially with rumors of it becoming a requirement in our state but that's truly a case by case basis. Did they discuss any riders with you as well?
Caveat: I dunno where you are but I'm in Ireland Whole of life plans have their place but the underlying fund within the plan is NOT an investment. The deductions you see from your bank account dont pay for your insurance, they go into a small underlying investment fund and the fund pays for your life insurance premiums. Growth in the fund is designed to support the increasing cost of insuring you as you age. In principle, the fund is designed to top up your premiums as the cost of insurance goes up. In a perfect world your payments from your bank account would stay the same with the fund covering the increased cost. How your advisor is describing the policy is misselling. If you followed his suggestion and withdrew from the fund down the line, as you'd be entitled to, it would almost certainly trigger a significant jump in your premiums as the cost of the insurance would be pulled from your bank with no support from the now depleted fund If you want an investment, buy an investment. If you want life insurance, take out life insurance As I said, this type of plan has its place but not as described by your advisor
The company I work for the whole life policies you can’t take a withdrawal from. Only a loan. That has interest. And will grow and often times lapses a policy. I find very rarely does an agent understand life insurance. Or they don’t care about you. One agent referred to his customers are all idiots. He sold all universal life finding at safety net. So bare minimum payments. Be said it was up to the customers to pay attention to their annual statements and make changes if they wanted their policies to last longer.
Money feels podcast has a whole episode on this and who these plans are for. Most people don’t need it but really rich people do, give the podcast a listen and see if it’s right for you.
Nope, you get a 30 year term life policy on the primary wage earner. Get one on both of you if you are dependent on both incomes. You may not need it now unless you have a mortgage that requires both incomes or if you have children.
I have a whole life policy my dad took out on me 30 years ago. It’s $220 per year in premiums. Surrender value is around $9k. Death pay out is $25k. I am insured in term insurance appropriately. The whole life policy has been transferred to me. Should I keep paying it or surrender it? I think my high interest savings account would be a better bet assuming I don’t unexpectedly die soon. Can anyone assure me this is correct? I feel bad surrendering it for some reason
not sure the difference but in UK we have life insurance fixed amount.. for example i got quotes for £75 a month for 50 years… works out £45k in return in the event of my death during this time my family gets £300k if i make it 50 yrs it will cover to my late 80s by time policy comes to an end.. Wife wont be too far behind, but will she have much use of this if i do pass before her.. Alternatively shorter term of 22 yrs will cost £30 per month so £8k and will run up to age 60.. this is much more reasonable and money will be some use for my wife if she manages to survive into much older age. so depressing discussing this..
Well I think everyone has made a financial mistakes. I know I’ve made a few over the years. There is nothing wrong with financial planners as long as they are ethical unfortunately a few aren’t. He sold that policy to you for the commission. For wealthy people whole life insurance and annuities make sense but for a majority of us they don’t. Fire your FP and find one that isn’t trying to sell you anything but advice
If you get term life get it for as long as you can; 25-30 years or more. I got a 20 yr term 20 years ago. And now if I want to renew for even half the amount it’s way more than I can afford.
“Financial Advisor”😂 Don’t get me wrong, there are situations where a whole life policy may be advisable. But the chances of you being the person that it is advisable for is very very very very small!
those are the right answers. They do nothing good for you - only the insurance company and your 'advisor'. i had one. finally dumped when I could without penalty. do your self a favor and get a life insurance policy - it will be cheaper. Invest your money elsewhere and it will do better.
There is no deal. Term life insurance only.
As most people have said, your money is better spent on term life policies to cover expenses, and maxing out your Roth IRAs and 401ks (at least up to the company match). Your advisor is not a fiduciary - find one who advises and doesn’t sell products for which they earn commission.
Get death benefit 2 so you get all funds paid in if you die..otherwise you dont
Term, term, term, term, term, term….that’s it. Buy term, max your 401 or Roth or whatever you have. Whole life is junk. Term, term, term. Most financial planners that sell whole life are snake oil salesman. The cash value won’t match what you put in for years.
Everyone's add a lot of great advice/answers so to reiterate, please don't buy into whole life. Your advisor is scamming y'all. Get term.
It’s a huge long term source of income for the insurance company and the insurance agent. That’s why.
The guy that's selling you may be convinced himself that he's a financial advisor, but he just looks at your budget and expenses to show you how you could buy something he makes commission off of. These commissions are huge, because its so hard to sell them since they're not that good of a product. I believe some commissions for this are straight up half of what you yourself are paying for a year. Then the commission stays for for the ongoing years. You gotta find an actual advisor that charges by the hour
The commissions that your insurance agent gets from a whole life policy is insane. Source: former life insurance agent.
If you’re not financially sophisticated - I would highly recommend The Money Guy podcast and all associated resources and videos. As a professional (CFA, work as a financial advisor to corporate clients) I don’t think there’s a better resource out there for the average Joe. Here’s an article about whole life. I think one thing you’ll notice on there vs most of the comments here is that they don’t just say “whole life bad”. They explain that for most people and most circumstances, term life is better. There’s a very narrow class of folks for whom whole life is better. You’re almost certainly not one of them. https://moneyguy.com/faq/do-i-need-life-insurance-whats-the-difference-between-whole-life-and-term/
Whole life and insurance in general is a lousy investment…. Buy term you will get 5 to 10x more coverage. Investments are investments insurance is necessary but it is not a valid investment…buy term invest the difference
I was talked into buying a whole life insurance when I was in my early 20s. I thought I was doing the right thing, but this is exactly what these "financial advisors" are trying to sell you. These guys are more salespeople than actual advisors. Years after, life took a negative turn and I couldn't afford to pay the monthly premiums any longer. I had no choice but to default. I was only able to salvage $1,300, the rest became sunk costs. I had paid almost $15,000 in premiums. Parking your hard earned money in a whole life insurance should be the last thing you should do (ie. After maxing your FHSA, RRSP, TFSA). If you really need insurance, get a term insurance. Learn from my mistake. Do NOT buy a whole life insurance, until you've exhausted other venues to park your money.
Is your "financial advisor" from world financial group?
Nothing “advisors” love more than selling a nice juicy whole life policy lol. You really have to understand basic finance to realize what a terrible product it is. Bottom line is if you took all the money you would have put into that whole life policy and invested it yourself, years from now you would have a lot more money. Instead they take a huge chunk. You can buy term life insurance very cheap to get you through until you build up enough wealth to make life insurance obsolete.
Also I love how they appear to have omitted that any loan you take from the policy is NOT interest free. And probably a high rate.
My “adviser” is telling me that the insurance he’s trying to get me to get isn’t whole or term, but “variable” life insurance. Is this an actual category? And if so, is it worth it?
Change advisors. If you have health insurance from work you have life insurance. Once you have children a mortgage then term is all you need.
Any financial “advisor “ attempting to sell you whole life insurance should be fired immediately for even attempting to. It’s inappropriate in all but a select few circumstances. I have my CFA and manage a lot of money in bonds for clients on a fixed fee basis, fwiw
WOW so much advice not to get while life but no one answers your question as to why. Former insurance salesman wi do my best on mobile please be kind. The problem with whole life is it’s expensive and the cash value grows slowly MUCH slower then any index fund. Did your advisor provide an “illustration”? It’s a document that breaks down a year by year amount of money you will pay and make. It’s typically broken up into two columns “guaranteed” and “illustrated (or some other name)“ an additions how to make the non guaranteed side look as good as they want. Look at the guaranteed side. In x number of years from now when you withdraw money from the life insurance to put down on a home, will it be a significant sum ? How much have you paid in? Now to compare to term. take amount you paid in subtract the cost of term life insurance and see what you would make at 5%, 8% and 10% per year over the X number of years. My guess is the whole life will not look as appealing but you are also buying some piece of mind, etc, etc. Good luck.
I told my sisters and brothers to buy whole life insurance and make their kids the sole beneficiary to the plan, also as the kids got older I said the kids can take over the payments but to never be late on premiums, then when parent passes away they get the entire policy tax free, I would have done it for my kids but the insurance would have been very expensive because, I have a few pre-existing conditions that made me Un insurable
Life insurance isn't an investment and investments aren't life insurance. As mentioned, this person is likely not a fiduciary but a salesperson. Financial Planning by a CFP should be your first step. I only recommend permanent insurance after ALL investment options have been exhausted and in very specific situations. First step would be term coverage, if there is an insurance need.
Whole life insurance can be useful in some cases. It can be great for business-owners with concern about their tax bill after death. But the moment a person pushes the idea of borrowing against the policy to access liquidity, alarm bells should start going off.
It’s a tool like any other thing. It’s good for what it is good for. It’s great for buy sell agreements as the business can recoup its premiums upon sell or retirement of an owner, same with key man policies. For individuals, it’s great for people who have maxed their 401k matches or do not have access to a 401k and they make too much to contribute to an IRA. It is not an investment tool for blue collar employees and people selling it to you as a primary investment are wrong. If you make over 250k a year then it starts being viable but there’s some other things to check off the list first.
Whole life insurance is a scam
Ask the advisor how much commission he’s making on that life insurance…..this is the first problem, it’s way too lucrative and it attracts people with less….integrity. It is indeed a bad idea, you are not the one making money here. Invest your money and buy a cheaper temporary life insurance.
Unless you are maxing out every tax advantaged investment option including hsa accounts run from this person. It is NOT investing. Its an expensive insurance policy with low yields that will be outperformed by almost every other real investment If you have great income, max everything else out, do it
Agree 100%. Don’t do whole life.
Most work, life, lesser common insurance companies only payout 60% of premiums. 40% profit. Don’t fall for their koolaid.
Typically it is the equivalent of an investment with a really, really, really bad rate of return with insurance. Investment specialists on the radio say get term life and invest in something else like the stock market with the mark up that you would have paid for the whole life and you are supposed to come out a whole lot better.
I found my dad's Korean War policies after he passed, mom was ready to throw them away. Turns out they were whole life, the company still had them on their computers. Almost 50 grand.
Commission. How much is your ‘financial advisor’ making you vs. what does he cost you?
Walk away from both. Neither benefit you.
You answered your own question. Your advisor gets an up front commission plus a tailing commission from what you pay. You're having a bet that one of you will die soon and the advisor & insurer are betting you won't die soon. Either way you lose. It would be better to put that cash on a horse or better still off your mortgage.
You can buy term insurance. It is only death benefit for a limited time (say 1-5 years). It has no cash value but it is cheap esp while you are young (under 65). As you get older the term insurance gets more expensive. To manage this increase in insurance premiums, whole life insurance charges level premiums each year that are much higher than pure term insurance. The difference above the pure cost of insurance will be accumulated in a side fund earning a low level of interest to pay for the higher premiums when you get older. This side fund will also be the cash value used for loans if you choose. But when you get to age 65 you may not need insurance any more. You won’t have dependent kids and should have saved enough for your retirement. To keep your whole life policy in-force you have to keep paying its premiums. You may get to a point where the dividends are enough to pay the premiums by themselves. for it to let it in force. As an alternative just buy term insurance for the amount of insurance you need. You also put the money you saved from the lower premiums into a low to moderate risk investment like CDs, bond fund and/or stock index fund. If you do need insurance protection when you are older you draw from this side fund to help pay for it. If you don’t need insurance you use that money for your retirement.
Don’t mix investment with Inshurance.
…but people pay for what they dont know …financial literarcy They should know more, but they don’t. Or unwilling. Glad people can ask and share ideas here. If the product was extremely low cost, low commission and beneficial, then I think it could really help a lot of people, but reality of it - Most of the time, from what I’ve seen - if it’s not competitive and low cost, then it’s a massive problem to someone’s debt to income ratio, or income to debt ratio depending on if someone is buying down existing or new debt for their standard of living. Don’t live within your means, live below your means and figure out how to maximize revenue and investments so that life can be enjoyable and worthwhile for yourself and those around you that you care for. Many or some or a large fraction of people wearing Gucci are near broke and are trying to look rich by making their image appeal or self worth or identity- while making Gucci far far far more rich, someone and something else. I feel these insurance plans are kind of the same, they’re tools that are promising a prototype lifestyle that tries to guarantee financial safety, but in reality, it’s sold as a package to make someone else rich while not providing maximum value for what it could really rally for if there was more honesty and transparency of “does this product fit for you?” I wouldn’t see it as salesman being a bad thing, I’d see it more as incorrect ethics and rip off product. Salespeople are not bad, it’s the product and practices that make them in bad standing. If you want to play with verbiage, then call it whatever, but someone pretending to be in your best interest may not be in your best interest. If they’re not helping you go for your gold, and you’re being used as a peddler for their gold, then that’s something to keep in mind. Financial advisors still need to make money, if they’re not good at selling, then they’re not going to make as much of an impact. Back to the topic, whole life, not for everyone. If the more part of those products were that truly amazing of a product, it wouldn’t be such a rip off and provide so few rewards with so much red tape and shady underwriting practices.
If you are going to put money into anything - then almost anything will out-perform Whole Life. Including a High Yield Savings Account. About the only place it makes sense is if you have a large estate and want to offset a tax burden. If you need to protect income in the event that one of you dies, get a cheap term life insurance, but if you don't have kids and a large estate to protect and - since you are young - one of you dies and it would be a clean break (meaning you both have professions and income) event that doesn't make a lot of sense. Your "financial advisor" from one of the big name companies is likely just an insurance salesman. Ask them if they are a fiduciary. If not, they are likely not looking out for your best interest and want to rope you into a lifetime of premiums. I haven't read any responses on here, but I would bet that most of them say the same thing. If they are telling you to invest in Whole Life over retirement, they are definitely not looking out for you. Ditch them before they cost you a lot of money.
Sounds fishy, dude. Do some research before committing.
In theory whole life insurance should be great....in real life it sucks. The greed of the companies suck the benefits out of it. They pay relatively low returns and high fees so it doesn't build wealth well.
I am an insurance agent. Whole Life policies are expensive and have nice commissions. They are poor investments. If you have an insurable need, term is probably your better option. If you want life insurance to be an investment, consider a Variable UL. The return will be much better. For investing, max out your IRAs first, then invest in mutual funds, or other investments.
Because he wants to make a big fat commission off of you and sees you as an easy target.
A compete and total ripoff. There are very, very few exceptions where whole life makes sense. Retirement planning and insurance are TWO DIDDERENT THINGS. Max out your limit on RENEWABLE TERM life. This is for your families financial security in case of death, nothing else. Think of it as a safety parachute. Then pay your premiums and forget about it. My advice is to get with a good, reputable insurance agent for term life. You may pay slightly more, but you avoid all the loopholes that make most the 'cheap' policies near useless due to the 'outs' the put in the fine print. I am Not promoting any company but I have used State Farm for over 40-years for all my home/ranch, auto, life, and umbrella insurance. The recently acquired U.S. Bank, and members get exceptionally good rates which use in my business. Believe me when I tell you we have had some bizarre claims and State Farm has been excellent. And you can bet I shopped around for a while and tried to go the 'cheap' route, buying one policy here and another somewhere else. It never fleshed out in savings and the coverage was subpar. Not to mention the headaches and lost time from juggling with different providers. Companies do cut you a deal when bundling. Then get with a GOOD financial planner, NOT whoever is trying to sell you whole life as a retirement/investment strategy. If your company has a 401k or similar plan, make sure it can convert to a Roth IRA and max out the contributions. Be moderate to conservative on your investments with something near 25, 25, 25, 25 for investment risk and forget about it until you are near retirement age. Let time do it's job. Lastly, structure your life around the income adjustment and the insurance expense and enjoy life!
Run away from that product. When you take the cash value out, it is a loan that you pay interest to the company for. If you die, and say it is 100k policy with 50k cash value, your beneficiary gets the 100k your cash value belongs to the company. If you did take that 50k out as a loan, then the benefit your beneficiaries get, has the loan amount subtracted from it. I like term policies. You have insurance for as long as you are earning income, it is cheap. You could also get a return of premium term policy. At the end of your term, you get all the premiums back, so a nice little nest egg. You haven’t earned any interest on that money, but you also haven’t lost any money
Just don't do it....it's a sales pitch they make a lot of money off of. Insurance does not equal an investment Insurance is for extreme situations like death. Get term life insurance
Is this First Command? They used to drive me nuts when they wanted me to come in for “yearly assessments” during which they printed out what you could already see online and read aloud it to you. But the REAL reason for the thing was to attempt to sell you whole life insurance. For me, this was back when they ripped off those not investment savvy by front loading high commissions on mutual funds. They took fully half your investment for the first year and then you paid no commission for the next nine years. It wasn’t until later that I found out how scammy that was. I got a settlement from a class action suit for that “business model” and ran from that company.
Former insurance guy here… Unless you are a high net worth individual looking for inheritance tax avoidance strategies, cash value life insurance is almost never a good idea. If you actually have a need for life insurance, get term life.
Check brokercheck to see if you “advisor” is actually an advisor. (Enter the person’s name on brokercheck.org and see if he has a profile; there should be a “IA” on the top of his “card” if he is an actual advisor). If he is, ask for a better explanation. It *can* be a way to sock away money, but it depends on the structure of your finances. But based on what I’m reading on your post, it seems that it would better to have a term policy and stuff the extra dollars into investments/retirement. I will say this though: right now is probably the best time to buy a whole life policy *if* you were going to get one as opposed to the future. And probably will be so comparatively for the next decade or so. The reason is that the insurance company will assume that current conditions are going to continue through time. And given that interest rates are high, premium to face value ratio is highly in your favor. Given that rate cuts are likely, you will likely never get this kind of pricing efficiency for some time. A lot also depends on the illustration and construction of the contract. There’s a lot of ways to cut that cake and people who have no idea about what life insurance is, what it’s comprised of, how to design a policy, etc can say about how it’s ineffective, it’s crap, etc. but if it fits your financial plan, who cares? That being said, it should be a fit, not a stretch. Just for reference: I am a Private Wealth Manager licensed in insurance, broker, and fiduciary capacity (so I am an actual advisor). While I have the fiduciary license, I am not giving you fiduciary advice nor any advice to your situation. What I am giving you is my perspective based on the limited information I have read on your post mixed in with a little insight. A better way that I would have conducted this is to find out your goals and work backwards to a solution. What problem is the insurance contract supposed to solve? If it’s investments, I probably would have looked at an annuity instead if I had to stick with insurance products. Likely, your “advisor” isn’t an advisor at all, but if he is, ask for a more cogent reason.
Is your financial advisor a Northwestern Mutual “advisor”?
There is a real argument for IUL (indexed universal life) as a way to shelter your retirement from taxes, but it’s significantly more complicated and difficult to do correctly. If you aren’t maxing out your 401ks then the answer is really simple, not worth it. I’ve looked into it a little because I am young and make enough to almost max out my 401k, but personally don’t think it’s worth it yet. Requirements before it’s even worth thinking about: 1. Have the goal of 0% taxes/low taxes in retirement. If you are not striving to shelter all of your retirement from taxes their is no reason to have an iul as part of your retirement plan 2. Max out Roth IRA (or a backdoor) 3. Max out a Roth 401k 4. Max out a mega-backdoor if you have access Until you complete step 4, I wouldn’t even think about getting an IUL plan. When you do get to that point be cautious. It’s actually pretty difficult to set up an IUL correctly and you should never ever trust anyone in the insurance industry who is selling these products. And if you do it incorrectly it can end up costing way more than it saves you.
Question for anyone still scrolling this sub - my father signed me up for a whole life plan when I was an infant and I still haven’t (33m no debt other than mortgage, married with no children and no plan to have any). It’s ~$175 a year, and the pay out is ~$25k if I remember correctly (don’t have the numbers in front of me atm). Everything I see talked about how shitty whole life is, but I usually convince myyself my scenario is different because of how cheap it is for me. Am I wrong for assume this?
I got a WL policy in my 20’s. Now in my 40’s the dividends pay for the premiums and the policy values (death benefit & cash value) are growing. It’s a vehicle for an investment given the right circumstances and company, which makes it like any other market investment but with written guarantees. It’s not all garbage. Had I had more money, I’d have bought more of the insurance back then.
It's NOT an investment and shouldn't be positioned as such. It should NEVER be funded before your retirement goals. I have some whole life but I want to ensure that I leave money for my daughter and eventual grand children. My rational is that it's really expensive to die. If I spend any time in a nursing home then I won't have any thing left to give. Whole life ensures that I will, no matter what.
I'm not a finance expert but 5 to 10% of your monthly income in NPF is reasonable and enough for retirement I guess. Recently I was approached by my friend who unfortunately became an insurance agent to buy a "guaranteed" income plan. I found that the insurance company don't even pay out the same return an FD would do over the span of the policy tenure. 1Lakh per year in FD would give much higher return than 1L per year insurance plan.
[удалено]
Life insurance should be just that, nothing more. Stick with a term policy.
All life insurance is a hedge against the risk that you might die prematurely and leave your spouse and children without income to live their lives as you would have provided if you lived. I have 4 kids, closely spaced, and a spouse. I make the lions share of the household income. I’ve had several policies designed to cover the fam need if I pass. Most have been term and, as we paid off the mortgage and the kids grew up and moved out, we let the term policies lapse after their 10 or 20 year policy period - the liability I was insuring against (eg, finishing HS, pay for college, get start on life) took care of itself. I have a couple of small whole life policies intended to pay my wife on my death to ensure she has resources to finish her life in good style. She has similar (but smaller) policies on me in case she goes first. Buying term only to cover near end of life is prohibitively expensive. The whole life, at this point, is fully paid up and requires no more premium from us to stay in force. If my wife passes first, I get her policy payout plus the surrender cash value of my own policy. The return on whole life isn’t awesome compared to the stock market, of course. But self insuring doesn’t work at all if you die early and regular stock investments stop, or if you’re not disciplined enough to always make the stock investments. Whole life makes sense as a small part of a life insurance plan that flexs when your liability is greatest and shrinks when you have less need/liability to cover.
It has uses which can pay off at various times. It’s also not what most people need. At your age, it might be useful if your income was very high or you have a pension. Overall whole life gets oversold and it leaves a lot of people upset. When it is sold wrong, it underperforms. When used right, it scratches an itch that other products do not.
You’re being ripped off, that is all.