The Author in Pine Creek Canyon, Zion National Park
The posts on this website about cash value insurance continue to attract comments (mostly from those who sell it) like a knight in shining armor on a summit in a thunderstorm attracts lightning. Months or even years after I write a post the comments continue to grow into the hundreds. In a recent comment, one agent stated that whole life insurance was a lot like a Roth IRA.
Permanent Life Insurance Vs. Roth IRA
I've heard that comparison many times, but it is flat out wrong, so I called him out on it. This post goes in to more detail about the reasons why whole life insurance is not like a Roth IRA.
1) No Interest Free Withdrawals
The reason some people fall for this scheme is that the money in a whole life insurance policy does grow in a tax-protected manner, and when you borrow the money from the policy later in life (remember you can't withdraw the money, because that's taxable, so you borrow it), it comes out tax-free “just like a Roth IRA.” However, it is not interest-free. Just like when you borrow from a bank, when you borrow from an insurance policy you have to pay interest. It doesn't seem fair, I know, but that's the way life insurance works. You have to pay interest to borrow your own money. When you withdraw from your Roth IRA, you owe neither taxes nor interest.
2) Excessive Fees Lower Returns
Roth IRAs can be extremely inexpensive. There is no fee at all to open one at Vanguard. They also have no closing fees. The expense ratio for investments can be as low as 0.05% a year. Try comparing that to the typical whole life policy. The insurance policy not only has a number of “garbage fees,” but since these things don't sell themselves, the insurance company has to compensate its salesmen with large commissions (typically 40-80% of the first year's premium) in order to get any business at all. The more you pay in fees, the less that goes toward the investment, and the lower your returns.
3) Insurance Costs Lower Returns
Since whole life insurance is a hybrid insurance/investing vehicle, it requires you to purchase insurance, whether or not you want it. All the money that goes toward the cost of that insurance by definition cannot go toward your cash value, so your investment will grow slower, producing lower returns.
4) Complexity Favors The Issuer
It is very easy to open a Roth IRA. It's a simple proposition. You put in after-tax money, it grows tax-free and it comes out tax-free in retirement. You can put any reasonable investment inside it- stocks, bonds, mutual funds etc. Fees are clearly disclosed and, if you go to the commonly used mutual fund houses, quite reasonable. Insurance policy prospectuses, however, are hundreds of pages thick. Even the illustrations run dozens of pages. The fees are usually buried somewhere deep inside. I run into physicians every week who have been sold one of these policies who really didn't understand what he was buying. In general, complex financial instruments favor the issuer over the purchaser.
5) No High Rate Of Return Investments Available
When you invest through an insurance company (which is what you are doing with whole life insurance) you're stuck with the dividends that they want to pay you. Their dividends are limited by the investments that they use. These investments tend to be very conservative, often composed of 80-85% bonds. A Roth IRA, of course, can be invested in all kinds of investments with higher expected rates of return, such as US stocks, International stocks, REITs, small value stocks, emerging market stocks or even commodities.
6) You Cannot Stop “Investing”
With a Roth IRA, if you make less in any given year or just decide you want to blow your money on a boat, you can do that. Not so with a life insurance policy. If you don't pay the premiums, the policy will lapse. Proponents will argue that after a certain number of years, the dividends from the policy will be sufficient to pay the premiums. That may be true, but that period of time always seems to come much later than the initial projections. It may be 2 or even 3 decades before the policy can pay its own premiums, dramatically reducing your financial flexibility.
7) Different Asset Protection And Estate Planning Treatment
Roth IRAs and whole life insurance may be treated very differently when it comes to asset protection and estate planning issues. Depending on the state, some or all of your Roth IRA may be protected from creditors. The same goes for the cash value in a whole life insurance policy. In some states one is protected more than the other, and vice versa in other states. In some states neither receives much protection, and in other states both are completely protected. The point is they aren't substitutes for each other.
The same goes with estate planning issues. A Roth IRA passes to heirs income tax-free but subject to any possible estate taxes. It can be “stretched” to allow for additional years of tax-free growth for heirs. The cash value of a whole life insurance policy disappears when you die, and your heirs are paid the death benefit (minus any money you borrowed out of the policy) without having to pay income or estate taxes on it. Any additional earnings on that money, of course, would be fully taxable to the heirs. The money in both a Roth IRA and whole life insurance passes to heirs outside of probate. Both have their positive aspects, but they are very different.
8) Must Be Insurable
One of the biggest issues with investing in a life insurance policy is that the worse you are as an insurance risk, the worse the investment gets. If you are unhealthy, have bad habits like smoking, or engage in risky pursuits like climbing, parachuting or SCUBA diving, then the insurance costs in the policy will skyrocket, if they'll even issue you a policy. You also have to go through blood and urine tests and give out detailed private information about your health and habits. All you need to open a Roth IRA is income and a social security number. Since you can't really save much for retirement without those things, it's a pretty lower hurdle to get over.
The bottom line is that whole life insurance IS NOT like a Roth IRA, and anyone who tries to equate the two is likely trying to earn a commission by selling you whole life insurance. To make matters worse, a lot of these salesmen don't even know that high earners can still contribute to a personal and spousal Roth IRA through the backdoor. Whole life insurance is a bad enough investment when used in addition to a Roth IRA; it's downright horrible when used instead of one.
What do you think? Have you heard agents using this line? What other differences or similarities do you see between a Roth IRA and whole life insurance? Comment below!
The compensation filter that is created by the way Whole Life is sold is so large, it clouds the judgement of those who sell it so voraciously. To use one of my favorite quotes: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it”
The “Power of Zero,” by David McNight, forward by IRA Guru ED Slott, is an Amazon.com best seller. Find it there.
I’ve written about David McKnight’s book (without naming it as it wasn’t a particularly favorable endorsement of the book) here:
https://www.whitecoatinvestor.com/is-a-zero-percent-tax-bracket-in-retirement-a-good-idea/
His book is # 9, 15, and 58 in its Amazon categories. If that’s a best seller, I guess I’ve really got one. At best he’s sold a couple thousand copies.
Great quote.
Great post, just one correction: Life insurance death benefits are NOT necessarily excluded from estate tax.
Good point. If you’ve been the owner of the policy within 3 years of your death, the proceeds go into your estate. It has to go into something like an irrevocable trust in order to pass those benefits estate tax free.
If you’re a high wage earner and don’t have a trust or a SLAT, you’re an idiot and should be separated from your money.
#8 is the only truth here in this nonsense
For those that have not heard the term SLAT (Spousal Lifetime Access Trust).
https://www.kitces.com/blog/the-rise-of-the-spousal-lifetime-access-trust-slat/
I guess I’m an idiot. My understanding of the current use of a SLAT is to avoid state estate taxes. Since my state, and any state I would possibly considering relocating to, has no state estate taxes, I have chosen not to spend the money on a SLAT.
If you think this site consists of nonsense, you’re welcome to spend your time on another one. Nobody is holding a gun to your head and forcing you to read post after post while leaving mean comments on each one.
You can insure any healthy person in your immediate family. So there’s that.
Sorry if this is a little off-topic, but I’m interested in this debate on WL (mainly because I was talked into buying quite a bit of it when I started practice a couple years ago, and now I’m wondering just how big of a mistake I made). Anyway, what are your thoughts about buying a whole life policy for your children? When I bought my WL, I also bought a policy for my 2 year-old son. It’s a $500k policy, costs me about $2800/yr, and will be “paid up” after 20 years. There are a few reasons why this seemed like a really good deal to me. First of all, it’s a gift to him. He’ll never pay a penny in premiums, but he’ll be insured for life, plus have access to the cash if needed. Second, there’s no way to predict what medical issues could come up as he gets older. His mom developed Type I diabetes at age 9, so she’s essentially uninsurable for life. No matter what, he will at least have this for his family. Admittedly, I have some doubts about how wise it was to buy WL for myself, but I feel like it was the right choice for my kid. What do you think? I haven’t seen it mentioned on your blog, but would you recommend it?
That’s very kind of you to want to leave something for your kid. Unfortunately, I think insurance agents prey on those good desires to sell you insurance you don’t need. As a general rule, you should buy life insurance on someone when their death will financially affect you adversely. The death of my child, while tragic, would not be a significant FINANCIAL setback. In fact, it would probably save me money. Therefore, I don’t need life insurance on them. But wait, the agent says, what about if they can’t get insurance later? He’ll have to go his whole life without buying an insurance policy (from him, of course.) It happens, but not that often. Certainly not often enough that we ought to invite our insurance agent to the delivery to issue the policy as soon as the cord is cut. There are far worse things than not being able to buy a decent life insurance policy on yourself. The other thing to consider with these kiddie policies is that the amount of the insurance usually isn’t enough to matter. Yours is actually one of the larger ones I’ve seen. I often see these for $10-50K. Let’s assume the kid becomes uninsurable at age 9. Thank goodness you bought insurance on him when he was born so his future family doesn’t have to go without. How far do you think $50K is going to go? Maybe a year, if you’re really frugal. It certainly isn’t going to meet any kind of serious insurance need. When we need life insurance, we need a ton of it, although we probably only need it for 2 or 3 decades of our lives. Even your $500K…let’s say your son dies at age 40 leaving his wife and two children behind. Assuming 3% inflation, $500K in 38 years is the equivalent of $163K now. That’s not enough to meet any kind of real insurance need.
Lastly, which does your son need more? Insurance or assets? I would argue assets. He needs money to pay for school, pay for a wedding, buy a first car, put a down payment on a home etc. Which asset is likely to provide more money at age 25-30 when it is most needed, traditional investments or life insurance? $2800 a year for 25 years growing at 8% in traditional investments versus $2800 a year growing at 3% in a whole life policy is $221K vs $105K. I didn’t get either one from my parents, but I can tell you which one I’d prefer to get. The “insurance benefit” isn’t worth all that much. Don’t believe me? Look up what insurance costs for a 20 year old. A $500K 10 year level term policy costs $135 a year.
WL no, Index Universal life with the right company that’s properly structured, YES!!
In regards to taxes, then I have to ask what’s the solution? Many of our chief economists and even the congressional budget office state we, as a county, are going to be broke by 2023. There are two alternatives, raises taxes, or cut spending by over half. I’m going with the gov’t is going to have to raise taxes and I’m getting my money into tax favored accumulation vehicles.
Newbie to the finance world so correct me if I’m wrong but from what i have read recently an ‘8% annual real rate of return’ is pretty unrealistic versus an average one which (8% appears to be the most commonly quoted) you can’t make any calc on an average rate unless you have every years % of ups and downs which can drastically effect the projected numbers. WL is guaranteed on a good policy at 4-5% per year. I have one that I’m lookin at not that has me invest 1 million over 10y of POA even at 7-8y and grows to 2.5ish million (could be more w dividends) on illustration at 20y with yearly witHdrawals at age 51 of 140k for nearly the rest of my life…(unless I live past 95). Maybe I could make more on a mutual fund or something else but it’s guaranteed- I don’t have to do anything at all- no worry- no early 2000s or 2008 to effect me… however, depending on my other invests I may be able to let it go 10-15 more years at which time it’s 3.5-4 mill with a 6 mill death benefit…
Don’t get me wrong- I’m planning on doing both 401k, Roth, etc etc etc in addition to large POA WL policies.
One other thought, maybe you have already posted on this topic. Passing on a legacy… Personally, My financial goal is to live well now and in the future (meaning I’m buy used cars, okay house, etc etc nothing crazy- just don’t need it) but my number one financial goal want to pay for my kids kids kids kids kids college if I can and make their lives better than mine with possibly a little other cash (make my future family better off). I understand this isn’t probably what most of your readers are thinking about. I feel that Getting large death benefits into a trust seems to be a way to accomplish this type of financial goal? If I do it while I’m healthy and ‘insurable’ (maybe I’ll always be insurable), is there a better way to pass on significant life changing money outside of ‘my death’ or ‘winning the lottery’ as I can’t see it happening thru run of the mill low risk investments and high risk puts me at-risk for not accomplishing that goal. Would love to hear your thoughts! Can’t tell you how great of a resource this is to a 31yo trying to figure his financial $&/@ out. Thanks!
Whole life is guaranteed at 2%, projected at 4-5% IF you hold a well-designed policy for 3+ decades.
I use 8% because that’s a little less than what I’ve had over the last 12 years since I started investing. If you feel it is too high, run your own numbers using a lower number. Certainly many argue for lower future returns, but I don’t find the arguments all that convincing (aside from bonds if rates still low like this.) Historical stock market returns are about 10% annualized without any kind of small/value/emerging market tilts. Future returns are, of course, unknowable. You makes your bets and you takes your chances.
I think whole life insurance is a terrible way to pay for your children’s college. My children are getting “life changing money” in their 20s that is invested in boring old stock index funds in 529s, Roth IRAs, and UGMAs. By the time they need it, a whole life policy will be about breaking even.
But it’s your life, and if after careful analysis you believe whole life insurance returns will be superior to those of stocks and bonds over your investing horizon, nobody is stopping you from buying as much as you want. Just remember those illustrations are heavily dependent on the assumptions inputted into the illustration. Start changing those and the outputs in 60 years may be dramatically different. If you really need $140K a year out of a $2.5M portfolio, I’d suggest a SPIA for a big chunk of that.
It’s not universal to get 2% on WL. I get guaranteed 4-5-5% plus dividends on my policies (bit higher on ten pay policy) which has come out to be a real return of 5-6%. Not as good as yours but not bad compared to other people that I have talked to about their real returns. my negative years are guaranteed followed by my poison ice years from year 5-8 on. This is guaranteed money (unless of course the company goes belly up which is much less likely given they are 200+ yo). I’m doing both guaranteed via WL with above returns (my wife and I are both physicians and we will make plenty of money in our lifetime that we can live on later so generating huge sums of money while I’m alive doesn’t matter much to me to be honest-more on money growth that matters more to me later)…maybe I could have made more in the index funds or the similar maybe not. I’m planning on investing thru 401k, etc as well but I want to have guaranteed money that I know my wife and I can live on which we can obtain via WL without the roller coaster ride (this piece of mind for me and my wife is more important than a few hundred thousand dollars – obviously we are in a different position than many physicians but there’s also a lot of professional couples that can get the same benefit in my mind). I’m not the wolf of Wall Street or need in my lifetime some crazy amount of money- I just need enough to live comfortably which since I plan to work in the icu, ED and administratively until the day I can’t will never be a big problem for me or my wife-luckily I see medicine as a hobby and not a job…yet ;).
My kids will all have a 529 thru their grandparents I’m not funding my primary kids education via a WL policy though I could if needed (if I started now on an Ohio national policy I could have 120,000 profit from the account at 18yo- he is currently 1yo).
My question was more about developing funds via the ‘death benefits’ of insurance policies to gain family wealth (multiple policies in the millions) and then possibly put together a dynasty trust for my grandkids, great grandkids, their kids, etc. I get that this isn’t most investors goal but it is one of mine. I want to make sure my kids kids kids kids and their kids all have something that I can help them in their lives. So my real question about college funds isn’t about my kids (their grandparents are taking care of that via a 529). My question is about generational wealth development and how to ensure it continues (the world isn’t ending at my death but I might be able to start something that will benefit my family over multiple generations via my planning now). Would love to hear your thoughts on generational wealth development and possibly other ways to ensure that this is a financial goal I meet.
U should send wci a copy of an inforce illustration with name and stuff blocked out. You are not guaranteed the return you are quoting when one actually peels away the illusions.
You are talking about your child dying as saving you money!??
A person I worked with and his wife had a daughter born with EB… They lived at the hospital in the NICU for a month before being relocated to a special hospital in MN. They were there for another 4 months until there child died. He was unable to work during that time, and after the death had a few months until they decided to continue to live in MN get a new job and work part time for a non-profit help with EB research and funding.
This changed his life and (without life insurance and the help of a wealthy father) His life would have been not only emotionally ruined, but financially, because of the death of his child.
You INSURE the things that are most valuable to you in life… CASE CLOSED.
I have no idea what you’re referring to. You posted as a reply to a 3 year old comment that doesn’t seem to be discussing what you are discussing. However, I disagree with your last comment. You buy insurance against financial catastrophe that you cannot afford to selfinsure…CASE CLOSED.
Some of it’s true. Some of it’s a stretch.
I wouldn’t ever tell someone it’s like a Roth IRA because it isn’t.
You misunderstand taking loans when you retire. If you have 100k growing at 5% and you have 100k that you owe 5% on, that doesn’t cost you any money. You can easily take loans in your later years and you won’t owe any interest.
You fail to mention fees buy you 100’s of thousands of dollars of insurance.
On top of this, if you are making 5% on your money, then yes, maybe the insurance company is making 6.5% on your money and you are only netting 5% because the rest is coving death benefit. If that bother you then ok. Doesn’t bother me.
You actually can stop investing at pretty much anytime.
And lastly, you don’t have to be insurable to own a policy.
Don’t be so angry at life insurance. It can be a good thing.
Fund your Roth IRA. Good for you. Now you hit that ceiling pretty quick, now what?
What do you mean by “you don’t have to be insurable to own a policy”? Can you elaborate on that? I had to get a full physical when I purchased mine. My ex-wife, with type 1 diabetes, can’t get life insurance (at least not at a rate that’s affordable).
Yes, sometimes your loan is a “wash loan” on a non-direct recognition policy, although there is some debate as to whether non-direct recognition is actually a desirable feature or not: http://theinsuranceproblog.com/direct-recognition-vs-non-direct-recognition/
Some fees buy insurance, some do not. Many are cleverly disguised. If the insurance is unneeded, it’s just like any other fee.
Yes, you can stop “investing” at any time. What you fail to mention is that once you do so the policy starts eating itself (to pay the insurance and fees). Try it. Pay the first year’s premium on any typical whole life policy, then don’t pay any more and see what your cash value is at year 10.
Yes, you can buy a policy on someone else. Of course, that person has to be insurable. You also need that person’s consent and a reason why you will be financially adversely affected by their death. There aren’t many people in this life whose death will adversely affect me. My spouse is about it.
Yes, the limit on a Roth IRA is $5500 a year ($6500 a year after age 50.) After that I go to my wife’s Roth IRA. Then my HSA ($6450). Then my $401K ($51K). Then my cash balance plan ($15K). Then 529s for the kids. Then the taxable account. Then paying down my mortgage. Then I bonds. Then some investment real estate. Then a bigger boat. Get the picture? At no point am I left with nothing but whole life insurance to invest in.
I’m not sure why you think I’m angry at life insurance. I don’t have any problem with life insurance. My problem is with those who sell it claiming such things as “It’s just like a Roth IRA.” You need go no further than this comments thread to find someone who was sold a policy inappropriately. It happens all the time.
If you are using a life insurance policy for life insurance, then yes, reducing the amount of death benefit probably isn’t something you want to do.
That being said. If you are using these policies for high cash value, and after the first year you cannot contribute anymore or you want to reduce contributions, you can–in most companies–reduce or eliminate premiums at any time after year 1.
If you don’t make adjustments, yes, it will eat itself. But simply converting your policy to a reduced paid up will eliminate all future premiums. It’s very simple to adjust down or entirely eliminate premiums.
A bigger boat? Really? I will really hate to be around to see your portfolio when the next crash hits, and that is a when not an if.
Great, don’t hang around then. Because a crash is coming and it will hit my portfolio. Actually, probably 5 or 6 crashes. That doesn’t scare me though, despite the scare tactics of many, many insurance salesmen who have come to this site before you. Despite the fact that crashes are coming, my portfolio is still highly likely to outperform whole life insurance over my investing horizon. In fact, whole life insurance is one of the worst investments I’ve ever purchased.
Glad you’re happy with yours. Good luck with your career selling it.
It’s not a scare tactic to state the truth, which you acknowledge as true. Not everyone wants their retirement to be on a roller coaster ride that they cannot get off of. In fact when given the choice between a few extra percentage points of promised growth or a stable growth that doesn’t lose, the vast majority pick stability. I understand why, they want to sleep at night. Of course any CPA worth his salt will tell you that slow and steady will beat the roller coaster in the long run. Turtle and the Hare and all.
What happened to you and your life insurance policy is what typically happens, but does not need to happen. Your agent structured the policy to maximize his/her commission. This directly translates into little to no cash value in the first years. This does not have to be the case. The way I structure policies my clients see cash value in the very first month. And these properly structured policies pay less commission, so most agents don’t structure them that way. However it creates people like you who get burned and now are on a crusade. WL is like a turkey dinner, if you do it wrong it’s as dry as the Gobi desert, done right however it’s a really great thing.
I would highly suggest reading “Confessions of a CPA” which is an excellent book about why the conventional wisdom is wrong on life insurance and other things like IRAs. The author is a CPA who used to sound a lot like you, but realized the math just doesn’t work. Which of course it doesn’t. An account that loses on a regular basis will never outpace a guaranteed account that never loses, especially after you figure in the broker fees on the underlying investments which are based on the value of the account instead of merely the premiums paid in.
My clients never walk out of my office upset that they are in a whole, never. You can’t offer that or rather you won’t.
Oh and by the way the whole trying to discredit someone simply because they sell something is a two edged sword. Your against it, does that mean no one should listen to you because you don’t sell it? Or should we not pay any attention to you on stocks and government accounts because you have them or sell them? Really the whole bias argument is silly. There is no such thing as objectivity, everyone has a bias. The important thing is not to act as if your objective, but to simply be honest about where your coming from.
Yes I sell it, but in my case at least I got my license because I believed in it, not the other way around. I got into this because I discovered how great it can be, but also how underserved many people are by agents who do not structure their policies correctly.
I often structure 10 paid up policies that have a cost of insurance that is almost exactly the same as a term policy by the 10th year, sometimes better. But after the 10th year, the client still has life insurance, and they have a growing tax free cash account for the same cost as the term policy which has now run out. I don’t have a single client that doesn’t think it’s awesome. And it’s hard to argue that it is not a better deal then term. In fact WL, in the long run, is the cheapest life insurance you can buy. I have seen the projections as well as the client statements. It’s just a fact.
Open your mind to possibilities you had not considered and do yourself and your clients a favor.
Geez, a completely civil comment from a whole life salesman! That’s the first one in a week I haven’t had to do any editing on. Seriously, congratulations. You have no idea how rare that is.
You may not be aware but I don’t have “clients.” I don’t sell mutual funds nor do I charge advisory fees. I just write a blog and sell ads. If people find it useful, they read it. If they don’t great. But honestly I have no dog in this fight. If someone wants to buy a whole life policy, it doesn’t affect me one way or the other financially.
I agree with you that many people choose stability over higher returns. However, that is usually a mistake and is because they don’t understand just how serious the consequences of low returns are. People don’t realize they absolutely NEED higher returns than whole life can offer in order to meet their reasonable financial goals. Obviously not everyone, since we’re all different, but if I need the higher returns at my income and savings rate, certainly most lower earners do.
I also agree with you that while whole life policies CAN be designed to provide a better return (such as 5% projected over the years) most are designed exactly as mine was-to maximize commission. Every week I have a doc email me asking about a policy he’s had for a while. Invariably, it’s one of the latter. Yet every agent who comes to post on this blog claims that he only designs his policies the right way and his clients never drop the policies etc. Well, I’ve got news for you. Either they’re lying or I somehow manage to attract only a tiny slice of agents. Forgive my skepticism….
Selling something induces a serious bias that makes it very difficult to trust advice. I’m not surprised a salesman disagrees with me on this. But would you expect those who purchase ads from me to come to me for advice on where they should advertise? I’m clearly biased. I’m sure every other salesman I’ve ever met is the same way. It would be a rare insurance agent who actually had a fiduciary duty to their client.
WL is only the cheapest insurance if you need a permanent policy. If you only have a temporary insurance need, like most people, term is far cheaper. I’d have to run the numbers to see what the break even point is, but I know it is long after I’ll be financially independent.
Filled your Roth and “now what”? Fill up the 401K and then open a taxable account with tax efficient stock index funds. Worlds better than the Whole Life policies that dirtbag salesmen attempt to peddle.
He probably means that you can be the policyowner on a policy that insures someone else’s life (like a spouse or other family member where an insurable interest exists). Essentially, using that person as a “stand in” for themselves due to the fact that they themselves are uninsurable (at least at a reasonable premium rate).
I have never understood why people try to compare Whole life, Universal Life, etc. to a Roth. With extremely few exceptions, the only people who should even consider such policies are those who much chose between that and a straight taxable account.
When I read this post I thought it was self-evident. But I guess there are people out there who need it. It blows my mind that there are people out there who forgo contributing to a Roth so that they can fund this type of policy.
I recently broke down my 23 year of my 401K with an attorney who is also a tax accountant. So, he might be the second smartest guy alive next to me when it comes to investing.
Over the last 23 years my 401K has grown about 478%. This is really exciting until I broke it apart with the 2nd smartest Investor Alive. I have accumulated $553,000 over 23 years. I am quite please with myself at this point since I earn about $130K annually at my job. We begin by breaking out my contributions…$276,000. Not bad. My money doubled. Except now I am reminded that my employer also contributed about $6,000/year as well or about $132,000. So, between my contributions and my employer contributions I have a combined contribution of $398,000. I am still not very upset as I have earned about 155,000. This is pretty exciting still as I have made quite a tidy sum. However, the 2nd smartest guy alive points out that I have earned a growth of about 39% over 23 years. I am still not too upset or frustrated because I still made 39%. I am now asked how much does that equal each year? I am the Smartest Investor Alive so I do the math and discover I made an astonishing 1.7% APR over 23 years. Huh? I thought I was making 8%? I am kind of frustrated until I start to really uncover the harsh dark reality of those conniving scum buckets brokers who lie about their fees and commissions. I have a no-load account and no commission becasue my guy is fee based….I have seperated from service and my money is in an IRA. Anyway, this is getting uglier by the minute for me. This a$$hole broke tells me I have no load and he is fee based…I believed all the liars that this guy was looking out for my best interest…..I am so angry I am getting black outs….His over all fee was 1.8% annually. This SOB made more money than I have. He made over $228,000. I don’t understand why no one gets these guys make millions off the lies they are so smart. I am an extremely talented EE from U of M (Go Blue), but this is BS. I am so pissed. ALL broker’s lie more than any other investor including Life Insurance agents. So, to all you buying into Brokers being better than life insurance agents beware. I have term, but if WL is guaranteed and I can stop these lying brokers from getting my money I am all for it. So, if you are an agent an can show me how a WL policy beats the market….email me: [email protected]. I am trying to fire my broker and every other lying a$$ broker.
I agree that there are plenty of sleazy brokers and sleazy insurance agents out there. Your story is far from unusual. Brokers are pretty easy to deal with them, just don’t. There’s no reason to ever call a broker. You’ll need to interact with insurance agents at some point however.
Whole life insurance in the Commonwealth of Nations, is a life insurance policy that remains in force for the insured’s whole life and requires in most cases, premiums to be paid every year into the policy.
Nobody is doubting that a Roth is a million times better than a WL policy. But I think the real issue is to compare something like a VUL policy to a taxable account. A taxable still probably wins in most cases, but I’ll bet there are some unique situations where a VUL might win in the long run, such as a physician that doesn’t have access to an HSA, cash balance plan, 529, etc. I suppose one would have to run the numbers for an individual’s specific situation.
That comparison will be coming up in the coming months. You’re correct that a very low cost VUL with solid investments does come out ahead in many situations and that running the numbers can be worthwhile.
WCI, I eagerly await this comparison. Rex, I did read the VUL thread very carefully, and I would be very interested to hear WCI’s thoughts about the type of VUL policy offered by Larson vs. a TIAA-CREF policy vs. no VUL at all.
I’m awaiting it too. I’ve seen preliminary figures and they look a lot better than I had expected. It still wouldn’t be right for me, but I can see how a lot of people would choose it. I think the TIAA-CREF VUL is also considered one of the better ones.
The idea that a Roth is better then WL is simply false. Roth IRA’s come with all kinds of government rules about when you can withdraw, rules about taking money out, borrowing from it, etc. WL has none of these problems. For that reason alone it is better. For tax purposes they are similar. However a properly structured WL policy can provide a retirement income as well as an inheritance to your heirs. Estate taxes? WL is like a super Roth, without the government strings.
I disagree.
Withdrawal rules are easily worked around, as discussed here: https://www.whitecoatinvestor.com/how-to-get-to-your-money-before-age-59-12/
All the money can be taken out all at once without paying any fees, taxes, or interest- far better than life insurance
You can’t borrow money from it, that’s true. A 401(k), yes, but not an IRA.
Similar for tax purposes? No they’re not. They’re not even close. That’s bizarre. If you want to cash out your whole life, you’re going to pay your full, ordinary income tax rates on all the gains (if you’re lucky enough to have any; many, or perhaps even most, who cash out actually have losses.) WL can’t be stretched either. The only way you can get your gains out of a whole life policy tax-free is to borrow them (and pay interest for the privilege of accessing your own money.) If you don’t want to pay interest, you have to pay taxes, and at a terribly unfavorable rate. Sure, you can get your basis out tax-free- but you can do that with a Roth IRA at any time (age 59 1/2 rule doesn’t apply to contributions) anyway. Why shouldn’t you be able to get your basis out tax-free? You’ve already paid taxes on that already.
WL isn’t a super Roth, it’s not even a regular Roth. The insurance company strings are far worse than the government strings in this case.
Equating WL to a Roth IRA (or worse, a super Roth IRA) is just another WL sales technique. It must be really tough (yet rewarding) to convince people to buy this stuff given just how hard so many salesmen work at selling it.
Why should you have to work around withdrawal rules? There should be no need for workarounds. Compared to a whole life policy where you ask the company for a check and get it, the difference is night and day on the side of WL.
Second they are similar for tax purposes only the WL is better since there are fewer strings. Why would you cash out your whole life policy? This would be a bonehead move. You WANT to borrow the funds out of your policy. The idea that you should steal from yourself is what is wrong. If you borrowed money from someone else wouldn’t you expect to have to pay them back with interest? Shouldn’t you at least treat yourself as well as you treat other people? By taking out of your account without paying back with interest you are harming your own growth. Don’t do that. Your should borrow from yourself and pay yourself back with interest, that is the financially prudent thing to do for yourself, and the insurance company knows it. That is how money works. WL works on a first in first out basis, so if you borrow or if you withdraw up to your basis it’s tax free first, then taxes kick in after you have withdrawn up to your basis. Of course if you borrow, and then repay with interest this will never happen. You can grow the thing until the day you die borrowing up to basis and paying back with interest and never pay a cent in taxes. As it grows your basis grows, and your ability to self finance grows.
The other thing is this. There is no legal limit on how many WL policies one can own. There is only one Roth per customer, and that comes with contributions limits. I can do so much more with a WL policy then you even can with a Roth. Not saying no one should ever have a Roth, but the flexibility of WL far outperforms it.
I’m glad you’re happy with your whole life policy. If you think it’s awesome, buy as much as you like. If you think it’s great for your clients, sell as much as you can.
I think it’s a lousy product with lousy returns for how long of a commitment you have to make to it. It’s sold inappropriately much (perhaps most) of the time as evidenced by the fact that 70-80% of those who buy it dump it prior to death. Not my data.
While you can’t “borrow” from a Roth IRA, you don’t need to – you can withdraw your contributions anytime tax-free. And, of course, these withdrawals are interest-free too. The liquidity of a Roth IRA is really good, and is a great choice (for example) for those early in their careers trying to decide between investing aggressively for retirement, and growing an emergency fund. A Roth IRA does both.
But the biggest advantage of a Roth IRA vs. whole life is that you just get tons more money in retirement. The combination of high fees and lower-return underlying assets mean you’ll have about triple the money after 40 years in a Roth IRA earning 8% vs. a WL policy earning 4% after 40 years. That’s the whole point of saving for retirement. Anyone trying to convince me I’d rather have (effectively) a $500k line of credit with an insurance company rather than $1.5M of assets I own and can withdraw tax-free is going to have a steep uphill climb. This should be reason #1, in my opinion.
I agree.
You might want to read the vul thread.
A WL policy is compared to a Roth since they are both funded with after-tax dollars and earn returns tax-free. You can buy a 10-pay policy–I believe all mutuals offer them–and your policy is paid-up in 10 years. Or you can overfund a WL99 type policy up to the MEC limit and that will likely mean that the policy will be self-funding in as few as six years (you can also do that with a 10-pay but you have to add enough term so it doesn’t MEC). The 10-pays have the highest IRRs because of their design, but not much higher that the WL99 (and if you die while funding these vehicles, your IRR based on death benefit is much higher, obviously).
A Roth IRA doesn’t have a death benefit, of course, and if you were to die, there is no completion of its planned funding. If you were to become disabled, there is no automatic completion of funding, which is available with Waiver of Premium.
When you distribute from a WL policy, you go to basis then borrow to not incur taxation. However, you’re still continuing to earn dividends that mitigate the cost of borrowing from the insurance company. Once you withdraw from a Roth, you no longer earn interest on that portion, correct?
If you wished to withdraw from a Roth prior to age 59 1/2, you do incur a penalty, unlike withdrawing from WL.
Now, don’t get me wrong: I LOVE Roth IRAs and think everyone who can should contribute as much as they can to them. But I also think that owning a WL policy that is quietly returning over 4% in its cash value and providing a death benefit while doing so is equally valuable. However, do NOT go down the path of VUL!
Let me add the caveats you failed to add- you continue to earn dividends only on a non-direct recognition policy. When interest rates were high, direct recognition policies also paid much higher dividend rates. Non-direct recognition isn’t free. http://theinsuranceproblog.com/whole-life-dividends-direct-recognition/
Yes, there is no Age 59 1/2 rule with whole life, but you probably ought to add that withdrawals do come with a penalty- earnings are taxed at your marginal rate and there are surrender fees, at least for the first decade or so. The Age 59 1/2 rule is relatively easy to get around as well. See this post for details:
https://www.whitecoatinvestor.com/how-to-get-to-your-money-before-age-59-12/
I always find it interesting to see that insurance agents hate all types of cash value life insurance except their favorite/the one they sell. The VUL guys say the VULs are great and whole life should never be used without caveat. The whole life guys say VULs suck and you shouldn’t “go down the path of VUl” without caveat. The universal life guys say universal is the only one to consider. The equity-indexed guys are the same. The reader is left to conclude that anyone without a direct conflict of interest thinks permanent life insurance isn’t a great idea.
The truth is that all of these products have tiny little niches where they’re useful and that although each of these products can be structured a little better to maximize the rate of return, the vast majority of the policies being sold out there are structured to maximize the commission. Take a look at Northwestern. If you compare two policies, the one with the lower commission/fees (and thus higher return) is sold far less frequently than the other. http://www.breadwinnersinsurance.com/evaluting-new-and-existing-policies/evaluate-disclosure (See Table 10)
I don’t understand why you continue to believe that you do not earn dividends on direct recognition policies. In fact, you earn a higher dividend because, currently, the insurance company “directly recognizes” that you are borrowing at higher than market rates (potentially, at least). Direct recognition policies have fixed interest rates according to contract. For the Guardian it’s 8% for the first 25 years and until you reach age 65, 5% thereafter. With direct recognition and the corresponding higher dividend rate you receive the actual rate is about 7%.
If you needed to take money out of your policy, then you could either withdraw cash values with no taxable consequence, or you could borrow from the insurance company AND continue to earn dividends. Most people would choose to borrow, I believe.
it is truly one of my favorite things, how insurance companies tout the tax-free return of basis (after all, it was your money that you contributed right?) and then also how great their dividends are, which are due, in large part, because they charged you too much for the insurance and thus have to return some to you.
Those loans by the way, aren’t free. They end up getting repaid, either by you or your heirs, and you do get charged interest on them. And, if you take too many out, your policy lapses, and you can get hit with capital gains. But those points never make the brochure.
The reason they tout the return of basis–which also happens when you annuitize–is that it preserves the tax-free aspect of distributing income from a policy. If you were to go from basis to paid-up additions, then it would become a MEC and be taxable. Inhererent in any discussion of life insurance should be the admission that, yep, you can die prematurely. My friend Erik died this spring at age 53, stroking out after a heart valve replacement. He had 5 million in WL insurance that was paid to his family within a week. He didn’t plan to die. The 5 million was supposed to grow and he was going to use it to supplement retirement and use it for legacy purposes. Of course loans are repaid, by the way. They are collateralized by the cash values of the policy and either the policy values will support the loan if the policy was sufficiently funded OR if the premium is continued to be paid. Your policy will never lapse with loans as long as you pay premiums.
U get with the higher income tax u mean and not capital gain
Of course for that price he could have had a zillion in term.
Buying perm when there is an unmet need in term insurance is an absolute NO-NO, in my opinion.
Anyone who is letting Death Benefit need go unmet for a Permanent LI sale isn’t doing their job right.
Not overly impressed with WCI here. I cannot have a Roth IRA because of my income (I am aware of the Roth conversion possibility but that’s another discussion.)Baackground about me – 38, healthy, male
So in addition to contributing to my 401k, I have a custom whole life policy with NYL. I’m 5 years in on a 17-pay and to this point, the cash value accumulation has exceeded projections in my contract. I did plenty of research before I bought the policy and for someone in my position, who would love to contribute to a roth but can’t, the WL makes a ton of sense. It’s important, in my opinion, to buy from a mutual company and non-direct recognition makes a HUGE difference. I’ll have a legacy to pass on to my family, and I’m diversifying my retirement portfolio. Would this make sense for me if I was unhealthy and the insurance cost was eating away at my premium? Absolutely not. It needs to be the right fit.
I understand the negative criticisms to WL policies, but if they’re structured properly and it’s the right scenario, it’s an outstanding vehicle to use.
I’m glad you’re happy with your well-researched decision.
I don’t find the Roth conversion possibility (AKA Backdoor Roth) to be another discussion at all. Due to some factor you haven’t mentioned, you’ve decided to forgo $5.5K into a Roth IRA and $5.5K into a spousal Roth IRA and to put that money into whole life insurance instead. I find whole life insurance relatively unattractive when compared to a taxable account, but a ridiculously bad idea when you’re passing up tax-deferred or tax-exempt retirement account options to do it.
Readers may find it interesting to see what your current cash value is after 5 years and what your premiums have been each year. You talk about having a legacy to pass on to your family, and then in the same sentence you talk about diversifying your retirement portfolio. Which is it that you want, because you don’t get both with whole life insurance? You either get the death benefit, or the cash value, not both. If it is a legacy you wish to leave, and you die at your expected age, you will likely leave more money (i.e. a bigger legacy) by using aggressive investments instead of one that is projected to give you a 4-5% return over 5 decades. If it is money you wish to spend in retirement, most people will find that 4% returns simply don’t provide the growth necessary to meet their financial goals, especially once you subtract out 3% or so for inflation. That means your money doubles once every 72 years. That’s snail-like growth.
I find diversification into an “asset class” with poor returns to be diversification I am not interested in getting. You can diversify your portfolio by buying horse manure too, but that wouldn’t be a good move. Perhaps the main issue with using WL as an asset class in a retirement portfolio is that the returns are so low (and that’s the projected returns, not the guaranteed ones.)
I find “outstanding” to be an extremely optimistic description of whole life as a retirement savings vehicle. Adequate? Perhaps. Sufficient for my needs? Again a reasonable description. Outstanding? Way off the mark IMHO. Especially for someone passing up a 401K or a Roth IRA to do it.
Again, no disrespect but this simply isn’t true with a good whole life policy (by good I mean Mass Mutual, Northwestern Mutual, or the life). I am not sure where that info came from. You DO get your cash value AND the death benefit. Plus, it is paid TAX FREE, both the cash value to you or, if you die, the cash value PLUS the death benefit.
Again too, your growth statement is simply not true with a good mutual company. Take it or leave it, cash growth last year in my friend’s policy was 13.7%, it is a Northwestern Mutual Adjustable Complife policy and his cash value has grown much more quickly than 72 years.
This information is simply not true for all policies.
I like Roth’s but they are greatly limited if you have any good income and can’t save nearly enough.
Also, it depends greatly on how you fund it. You should over fund your policy greatly. In other words, if your yearly premium is $5,000 a year, you should be paying $20,000 into it every year you can, just be careful of the MEC laws. If your premium is $5,000 in year one and you pay $20,000, your cash value in year one is $15,000. In year two cash value will be about $33,000 and by year 3 cash value will be about $53,000—-if you overfund it, which is the ONLY way I would agree to a policy.
I agree that the return on whole life policies is improved by funding them up to the MEC line.
One other thing, in over funding your whole life policy, you want a policy that not only pays you a yearly dividend but one where the death benefit increases each year through your paid up additions or through over funding. If your death benefit does not increase, the model does not work in getting the death benefit and the insurance amount.
I would greatly encourage you to meet with several people, don’t buy the first thing you see. Just keep an open mind and talk to people you trust. This is a great tool if used properly and you get good guidance.
The only people I know who recommend investing in whole life insurance are those who benefit from its sale. Those are not the people I trust for unbiased advice on this subject.
“The only people I know who recommend investing in whole life insurance are those who benefit from its sale. Those are not the people I trust for unbiased advice on this subject.”
Again, misleading. Do you distrust anyone who makes a profit on anything they sell you?
So, if you go to a doctor and he benefits by getting paid for the advice he gives you or the services he sells your for your treatment, you simply don’t trust him—-because he gets paid? What? I agree there are bad ones out there but just because someone is getting paid doesn’t mean it’s wrong or bad. Remember, I said talk to people YOU trust and shop around. I sure did.
I have met with several people who gladly gave me free advise and/or encouraged me to research before I ever looked into this. One adviser would not even meet with me or sell me anything till I read that Nelson Nash book on infinite banking. He even wants you to give him a report on the book.
If you want unbiased advice on a car, you go to Consumer reports, not to the local dealership. Nelson Nash doesn’t count as unbiased. Nor does Pamela Yellen.
Am I to assume you are admitting you are a whole life salesman?
I’m curious how you define “cash growth”, because I’ve never seen a whole life policy that provides any kind of legitimate return that is anywhere near 10%, much less 14%.
You do NOT get your cash value and your death benefit. Anything you “borrow” from the cash value is subtracted from the death benefit prior to it being paid to your heirs. If you have a policy that will allow you to borrow out all the cash value, then pay your heirs the entire death benefit, I’d be very interested in seeing it.
Send me an illustration that shows my return projections are wrong. It’s not like I’m making this stuff up. I’m taking it directly off hypothetical illustrations provided by legitimate insurance agents from legitimate companies.
Um, well, without being sarcastic, he had right at about $70,000 in cash value last year (12/1/13) and has not paid anything yet this year and has a cash value of about $79,7xx if I remember correctly. 9700 ÷ 70,000 = 13.8%
That was year 3 of his policy and he doesn’t even over fund like we are talking about. This is what got me looking at these policies.
Moving on: At the risk of this becoming a childish “yes” “no” “yes” post, you DO GET BOTH if you have the proper policy.
I believe your heart is in the right place and that you are trying to help folks but the information in this post is flat wrong. You get BOTH (if your death benefit grows).
I agree, if you borrow cash value and don’t pay it back, that cash value is gone but the death benefit remains intact.
My policy gives out the cash value AND the death benefit. Why would I pay an insurance company for cash value and let them keep my money?–that’s the definition of term life insurance.
Say, I take out a policy for $1,000,000 today. After 30 years, I have a policy that has a cash value of $2,500,000 and the death benefit has grown to $3,500,000.
I now borrow/take out $1,000,000 of that cash value to give to my church.
I am left with $1,500,000 cash value, right? Right.
Now after 30 years, my policy death benefit has also grown, because the cash value has grown. The TOTAL death benefit to my family, after the loan, is now $2,500,000 ($1,500,00 plus the $1,000,000). BE CAREFUL—Some illustrations could separate the two into a death benefit and cash value column and you do NOT get to add these together, that is not what I am talking about. I used to think this too.
A $1,000,000 policy’s death benefit today may grow to $3,500,000 (or more) over 30 years because the cash value has grown. I know mine will, its guaranteed.
Over 30 years, you are only paying for a $1,000,000 death benefit but it grows to $3,500,000 in this example and that is what your family gets, total, if you don’t touch the cash value. ALL $3,500,000.
As I said above, if you had borrowed/taken out $1,000,000, your family only gets $2,500,00. $3,500,000 total death benefit MINUS the $1,000,000 loan.
You do not get to take out a loan AND not pay it back at death. But you do keep the death benefit and the remaining cash value.
Remember, you CAN NOT borrow into the death benefit (a $1,000,000 policy taken today has $0 loan available).
You don’t get both, and your explanation shows why. Thank you for admitting you were wrong when you said you get both. Readers need to be aware that the death benefit is not guaranteed to grow, but it probably will at some rate below the rate of inflation.
Regarding your “friend’s’ return, please send the illustration. It’s like the guy who said he bought a stock just before it went up, then sold it just before it went down.
Does it make any kind of logical sense that an insurance company can compound your money at 13.7% year in and year out? Of course not. So that cannot be the return. You, or your friend, are leaving something out, most likely a premium payment that is now due but which will not increase cash value or the premium payment from last year. But if you have paperwork showing I’m wrong, I’d love to see it, not to mention invest in it.
By the way, this is an Adjustable Complife policy I am using as the example. Sold by Northwestern Mutual. Happy to provide emails etc. but you can talk to anyone who sells these things you trust and they can show you.
Again, I don’t sell this stuff and don’t know everything about them but this is a good tool.
A good tool for what purpose?
additionally the comment on non direct recognition doesnt fly. There is no free lunch. If they dont charge you as much for the loan by crediting you the same regardless of having one then they give you less in dividends then companies that do the opposite. There is no magic. Its a matter of choice but both being inferior to other investments. Also there is no diversification with WL. You are just buying the same types of things mostly bonds and treasuries through an insurance company but with higher costs. If those bonds/treasures go bust then so does the companies ability to pay your death benefit. No diversification period.
Costs are irrelevant in the absence of value.
Publicly traded companies have to incur “fees” in their accounting departments to properly report to the SEC.
MBS’s have tons of fees involved wih issuing their securities.
All that matters is “what is this thing doing for you compared to some supposedly ‘better’ alternative?” The fees to achieve this are pretty irrelevent.
If my WL contract has better death-benefit, price-stability & long-term return traits than the bond mutual fund market + term insurance, then I really don’t care about what fees are involved… or which ones are most obvious to some guy advocating that I put 100% of my money into the S&P500 index fund at .1%. I care about what is most strategically beneficial.
WL may not offer much diversification from bonds, but it is a better way to get a safe RoR than bonds are, IMO. Principal protection that long-bonds don’t have, and long-term guarantees that short-bonds don’t have.
When value is guaranteed, sure. When it isn’t guaranteed, taking a look at costs and commissions gives you great insight into the likelihood of various future returns you may obtain.
Agents love to talk about “principal protection” with permanent life insurance, but how about the doc who was just sold an $80K WL policy that now has a $30K cash value. He lost $50K despite having “principal protection.”
Very well explained!! After reading this post people will be aware about the difference between a Roth IRA and whole life insurance. Thanks for sharing.
Anti-WL/UL’ers need to do one of two things:
1) Actually lay out a reasonable advocacy for a 100% equity portfolio.
2) Compare WL/UL RoR to the BOND market rather than the equity markets.
Also, we can all (hopefully) agree that a non-properly designed WL/UL is about as bad as an over-priced under-performing front-load “managed” mutual fund.
Properly structured “blended” WL is MUCH better on the front end (and better LT RoR) than a base policy alone. It also has a ton of flexibility that a base-policy alone does not have (increase payments into cash, decrease payments, remove “term” portion of coverage).
Regarding dividends, WL dividends could be considered returning “what you overpaid,” but that’s better than having never returned it at all in a 30-year level term contract, where the insurance company keeps the spread on cost-of-insurance as a profit.
Lastly, there are a LOT of people approaching retirement who would lose $20,000 in annual SS Income if a spouse died. If all they have left is $200k, the surviving spouse could have to make huge adjustments in retirement. That permanent death benefit in combination with a safe cash-value base can be a much more balanced way to hold safe money than “bonds,” for someone looking at a huge adjustment if one spouse dies prematurely, losing the survivor a fat SS check..
While I agree it is important to be reasonable in all this, you bring up a couple of “myths” used to sell cash value insurance.
The “compare whole life to bonds” argument is Myth # 23: https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance-part-5/
The “leave money to spouse” argument is Myth # 11: https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance-part-3/
People whose portfolio will ever be anywhere near $200K beyond age 50 have no business buying permanent life insurance as part of their portfolio. They’ve got far better tax-advantaged accounts available to them.
Two points. One, when someone says Hey look the index fund only charges a half of a percent, and the whole life policy charges 50% first year, and 6% every year after. Wow what a rip-off that whole life stuff is. You gotta ask one question. Percentage of WHAT?!?!
When can a half a percent be more then 6%? When it’s the percentage of a larger amount, that’s when. In any mutual fund, you are paying a percentage of your account value, which if you have any hope of retiring should be north of one million dollars. The whole life percentage is of the premiums paid, not the total and growing value of the account.
This is a classic example of short term thinking, which is especially inappropriate when thinking about long term savings such as for retirement or large purchases. Sure the commission in the first year outstrips the fees of the fund and in the first few or so, but if your mutual fund grows as it should, those fees will soon out strip the commission on a whole life policy by orders of magnitude since a whole life premium never goes up.
First, half a percent is a ridiculous fee on an index fund. You can buy Admiral TSM at Vanguard for 5 basis points a year.
Second, how many years of expense ratios does it take to equal the commission on a whole life policy? Let’s say you’re investing $50K a year into either TSM or a whole life policy with a total commission of $50K. How long will it take before your Expense ratio adds up to $50K? Well, 5 basis points on $50K is $27. In year two, that’ll be $83. In year three, it’ll be $170. According to my calculations, if that index fund makes 8% a year (after expenses), it will take a grand total of 35 years before the ER adds up to more than just the original commission. Of course, at that point you’ll have $9.3M in the index fund vs the $3.8M you’d have in the whole life policy.
Third, it’s not like the commission is the only expense on a whole life policy. There are all kinds of ongoing expenses, which are actually quite a bit higher than the 5 basis points in an index fund. Insurance isn’t free and insurance companies aren’t charities.
There are legitimate arguments to buy a whole life policy. This is not one of them.
I agree that half a percent is a ridiculous fee for an index fund, but that does not mean it is unheard of. In fact the average is only .25% and the king of all index funds the Vanguard 500 is .18%. The fund you cited has only returned a meager 5.25% since 2000. You can easily match those kinds of returns and have the guarantees of WL.
The point I was making however was not to quibble over numbers but to point out a principle that does not go away no matter what the numbers are. That point being you have to look at the long term not just the short term. Now as far as that issue goes, your question about how many years of expense ratios does it take to equal the commission on a whole life policy of course depends on three factors. The expense ratio proposed, the commission involved, and how long the policy will be held for. The last part most people forget about. But if you average commission over the life of product (which you should) and compare the annualized expenses then how long it is held makes a big difference. Whole life has a high up front cost, no doubt, but if you run the numbers in the long run, AND you compare a properly structured whole life policy (which reduces the commission by as much as 80%), to any index fund, it compares favorably and in my opinion preferably. One of the big reasons is because even a .25% commission on a whole amount will grow to be more then a much larger percentage of a much smaller amount. This is Wall Streets dirty little secret, and why they lobbied so hard for the Roth IRA and other tax qualified plans to begin with. To enduce the common man to invest in the market. Whole life insurance was not developed because of Wall Street lobbying Washington, it was developed because term insurance clients complained that they never collected on their premiums. So the insurance companies responded to the market place demand and developed Whole Life.
None of this even takes into consideration the market risk involved in index funds or any market based asset whatsoever. Whole Life insurance comes with guarantees that funds never do. A lot of people are attracted to the idea of not waking up one morning and being worth less then when they went to sleep the night before. As we all know this happens a lot. Oh, but just wait they say. But what if you can’t wait, we don’t stop aging simply because it is a down market. The timing of these market drops are pretty dam inconvenient for many. If the roller coaster ride is a problem for you, then Whole Life, especially participating Whole Life is a solution.
If you love whole life insurance, invest all your money in it. Or you can cruise around the internet, find 18 month old blog posts, and then post comments half as long as the original post on it. Seriously, all you whole life lovers/sellers (isn’t it the same thing, really?) ought to start your own website dedicated to the virtues of investing in whole life. I’m sure it will be broadly read and very popular. But as long as you wish to post these comments on my website, I guess I’m going to have to respond to them.
Those who would give up their freedom for security, deserve neither. Those who would give up their high returns for low volatility, have the unenviable problem of not being able to meet their goals. All the “arguments” mentioned in your lengthy comment have been addressed dozens of times at one point or another over the last 3 years on this website. None are new. None are particularly strong.
First, the cherry picked time period beginning in 2000. This is a favorite tactic of salesman of anything besides S&P 500 index funds. Why not start in 2002? Or 1995? Or 2009? Oh, that’s right. Because it makes your argument look terrible. Instead, pick the very worst period you can find, and use that in your example. The best part about this argument is it is becoming less and less effective the further out we get from 2000. It used to be “Look, the S&P 500 returned zero” and now it’s “Look, the S&P 500 only returned 6%.”
Second, I disagree that whole life compares favorably against an S&P 500 index fund from 2000 to present. The guaranteed returns on a typical whole life insurance policy bought today and held 30-50 years are around 2%. Projected returns are in the 4-5% range. However, over a relatively short 14 year time period, the returns are quite a bit lower, with many policies barely breaking even around that time period. But if you can meet your financial goals with 2%-5% returns, then be my guest. Invest all your money in whole life. Your decision. Your money. Your consequences.
Third, nice little sleight of hand using the investor shares of the Vanguard 500 Index fund. Sure, the ER is 0.18%…until you have $10K in it. Then it’s 0.05%. That’s basically free. That’s $5 a year on $10K. One latte. It’s going to take a lot of years of that to make up for a commission equivalent to the first year’s premium on a whole life policy. And that doesn’t even look at all the other expenses inherent in whole life, which add up to 1-2% a year….ongoing……forever. But hey, if you think 0.05% is a lot more money than 1-2%, invest in whole life. It’s your money.
Fourth, Wall Street might have a lot of dirty little secrets. So does the insurance industry. In fact, most people just lump the entire financial services industry together and call it “Wall Street” for a reason. But hey, set up a Boogie man and then provide the solution. That’s Sales 101.
Fifth, the guarantees on your investment return for whole life insurance isn’t worth much (obviously the death benefit has some value). Seriously, it’s around 2% if you hold the thing until death. Tell you what, send me all your money, let me hold it until you die, and I’ll guarantee you 2% a year. Meanwhile, I’ll go buy a few 30 year treasuries and keep the difference. Actually, that’s a pretty good description of what the insurance companies do now that I think about it. I’d rather just buy the treasuries myself and keep the difference.
Sixth, stocks might be volatile. But what do you call an investment where all or most of your entire principal disappears the second you invest it? That seems an awful lot like volatility, no? Sure, it only goes up from there. It’ll even get to zero by year 10 or 15! Sweet! No volatility. I put in all this money over the last 15 years and it’s all still there…unless you count inflation.
At any rate, I’ve got some other stuff to do than respond to the 1500th+ whole life comment on the blog, especially considering it’s so far down almost no one is ever going to read it. But if you think whole life compares favorably to investing in stocks, then invest in whole life. No skin off my nose. I don’t think it’s a great idea, but it’s not the worst one I ever heard, and if you save enough, it’ll probably work out fine. You have run those numbers, right? I did. I found that if you want to replace 60% of your pre-retirement income, and you only get a 4% return (1% real) you’ll need to save 43% of your income for 30 years, or 30% of your income for 40 years. You’re doing that, right? If not, you might want to rethink your investing strategy.
https://www.whitecoatinvestor.com/the-reason-you-take-market-risk/
I do not have all of my money in WL, I have gold, real estate, and WL. Not that it is any of your business but your ad hominem approach is silly. I never once advocated everyone should put all of their money in any one vehicle. That said, it does nothing to show that my argument is not valid that I have other assets. And by the way, WL is not investing, it is savings. Investing involves risk of loss, savings does not. Since WL comes with guarantees it does not involve investment risks. It is specifically designed to accumulate and preserve wealth not invest. This is a common misconception. Anything that makes guarantees against losses is savings, not investing. This is precisely what insurance is by it’s very nature. I don’t invest in insurance I use it as a savings vehicle, from which I make investment. It provides a benchmark from which to judge wether an investment is worth taking money out for as well which is insanely helpful.
Your freedom for security reference is quite tortured. What Franklin was referring to there was people entrusting the state with their security by giving it too much power. This is precisely what is happening of course, but on the tax qualified plan side which are essentially government solutions to government created problems. Life insurance is a free market product and predates the Republic itself.
Oh and before you go accusing people of cherry picking, you should check up on things first. I got the 2000 date from Vanguards own website. They claim a return of 5.25% since 2000, not me. That’s as far back their chart went, so the question is why would Vanguard cherry pick a date to make their fund look bad? They wouldn’t. Also it’s Vanguards own site that says that the Vanguard 500 is .17% (which according to them is 84% lower then average) so unless you know something they don’t. Might want to look into that. It’s not slight of hand to get numbers off of the sources own website.
It is slight of hand however to talk about the guarantees of WL only without talking about dividends as well. Mass Mutual declared a dividend of around 7% last year. That compares very well when you consider the lack of volatility. You comments don’t engender confidence that you understand the reasons for the volatility of the market. Why it goes up and why it goes down. It has a great deal to do with fractional reserve banking systems and the availability of capital to invest on margin. This margin investing results from very low interest rates due to Federal Reserve money printing. Insurance is by nature insulated from this sort of thing due to it’s dollar for dollar backing requirements. You do need to stay ahead of inflation, but unless there is a hyperinflation a properly designed WL policy does keep ahead of 2-3% inflation handily. Gold should be held in case of a Weimar Republic type scenario.
The question of market risk is vital. You may be comfortable sticking your retirement funds in volatile funds, but are most people? Should you be investing, risking, retirement money? Or money for college? Or money for the family car? Generally no, you should be investing with money you can afford to lose. This is why they have qualified investor status. Those people have money they can afford to lose. If your trying to save so you can live in your old age, that is NOT money you want to risk. Yet the conventional wisdom these days is that it is normal. It never was normal just a few generations ago. This kind of “advice” is how people wind up broke after a lifetime of work. I have seen it happen.
Most people lump the financial services industry together because they don’t understand it. Are we really going to compare a mutual insurance company like State Farm to Lehman Brothers? No, that would be silly. State Farm is more stable then the US government. Ever hear State Farm being called “too big to fail”? No, and you never will because they will never need a bailout from the taxpayers. Don’t even get me started on Wall Street or the Medicare program.
If you want to focus on returns, that is your prerogative, but when polled most Americans when given a choice prefer safety over a larger return. The difference has to be substantial to justify taking risks, and they just are not that much better if better at all. Warren Buffet’s rules of investing are 1. Don’t lose money and 2. Remember rule #1. Good advice.
I’m not sure what you consider ad hominem. You are an insurance salesman, no? That’s not an attack, simply a statement. Would you feel less “attacked” if I said “You love whole life, invest SOME of your money in it?”
Did you forget rule # 1 or rule # 2 in the recent gold and real estate bear markets? Gold is down 38% from its peak. Surely that counts as “losing money.” Real estate is more local, but the recent bear market in real estate seems pretty well known to anyone reading the news in the last decade.
Now we’re into the “whole life is for savings, not investing” argument. One of my favorites. You don’t “save” for something that is 40 or 50 years away. You invest for it. You save for something you’re buying next month. That money doesn’t belong in whole life. What whole life salesmen mean when they say “it’s savings” is that “it has low returns.” I agree.
You certainly can lose money with whole life. I lost over 30% of what I “invested” (or is that saved?). 7 years of premiums paid. Still under water by a third. How is that not losing money? Guess what? That’s typical. Around 80% of whole life insurance policy purchasers surrender their policies before death. 1/3 of them do it in the first 5 years. Looks to me like about half of those who put money into whole life lose money. Not my facts. I just point them out.
Most Americans live on Social Security in retirement. Polling Americans about their financial knowledge seems a lousy way to determine what the best course of action is.
You don’t think starting in the year 2000 is cherry picking huh? You just went over to Vanguard’s site and that was what they used, so that’s what you used huh? Seriously? You must not think much of the readers here or of me if you expect me to buy that. Let me stroll on over to Vanguard’s site and see what it says about your much derided Vanguard 500 index fund. It says here that the date of inception for admiral shares is 2000. And the return since then is 5.09% annualized. However, if you look one line above that, you’ll see the investor shares, with a date of inception in 1976. Far more data than just going back a lousy 14 years. What is the return there? Oh, it’s 11.14% annualized. Oh crap, I don’t want to use that. It’ll make whole life returns look really terrible. I’ll just use these here admiral shares. But I won’t use the admiral shares ER. I’ll use the investor shares ER. Please stop cherry picking, it’s embarrassing to have to explain to you what it is.
Life insurance, product of champions and Ben Franklin. Makes me want to stand up and sing I’m Proud to Be An American. Guess what? The stock market also precedes the Republic. So does real estate. And gold.
I hope you don’t really think that the dividend rate is the rate of return on a whole life policy. Please don’t make me embarrass you by pointing out that isn’t true.
Check your history. Lots of insurance companies failed in the Great Depression.
Time for me to go to bed. Seriously, if you love whole life. Go buy it. If you think it’s awesome, go sell it to as many people as you can talk into it. But don’t be surprised when those who have no financial incentive to talk people into or out of buying it point out the issues with it. I sincerely hope your investing strategy allows you to meet your financial goals. I hope you don’t take offense to anything I’ve written. Just realize it is no kidding about the 100th time I’ve written it in response to a comment like yours.
Is the 11.14 actual or average? Also is that before or after taxes and fees?
It’s annualized (so that’s actual, i.e. geometric, not arithmetic or average). Vanguard reports their numbers before taxes and after fees.
I dont know alot about investing (which is my next step) but im looking at the vanguard site and it shows since inception 31Aug1976 11.06%. But the heading says Average Annual Returns.
Couldn’t theoretically I average 25% annually and still have the same amount I originally started with? The reason I say that is because I was shown an example of how I could average 25% return on my money and not earn a single penny.
yes, theoretically you can.
Any investment promising 25% returns long-term qualifies as too good to be true. At 25% a year you can grow $10K into $8M over 30 years.
We had this discussion on Bogleheads recently. You’re right that the heading says average annual returns, not annualized, but what is actually printed there is annualized. Maybe Vanguard thought people wouldn’t know what annualized meant. You can double check it here: http://www.moneychimp.com/features/market_cagr.htm where the difference between the two is clearly emphasized.
By the way, you the same fred who used to work for State Farm and now works for The Simmons Group? I really dislike insurance agents who pretend they aren’t on this site.
Property and Casualty agent…that is correct. Homeowners, Auto, Commercial some term sprinkled in there. Had term until I met with an Agent from Ohio National who changed my way of thinking but was interested to see what other sides of the argument were. Not quite sure where I ever said I was or was not an “insurance agent”. I am very interested in learning the investment side of things (which I clearly stated) but obviously some of the points that I made pushed you to a level of discomfort that you felt the need to investigate thus putting potentially personal information out there. I appreciate that. If you must know like i referenced to many times I am not completely sold on the WL concept that was sold to me by my WL AGENT and was curious to know the pros and cons from a different point of view. However up until this moment I have not been able to see a response from you on what would be a better alternative.
Thankfully now that I am an independent I don’t have a sales leader pushing lousy credit cards or worthless bank products down my throat. I can use my own brain to determine what I believe is best. If I decide I need to form my own RIA then I have the ability to do that. If I truly believe that I can better help individuals by selling them properly structured WL then I can do that too. For now I am doing what I know best which is insuring houses and businesses. Good job Matlock. You cracked the case
I just get a lot of “advisors” and insurance agents on here “playing dumb” like they’re a client seeking out investment information when in reality they’re just trying to promote their pro-WL views in a sneaky way.
Even if your work is mostly property and casualty, it bothers me that you’d consider selling WL when you’re still trying to “learn the investment side of things.”
Why did you bring up State Farm and The Simmons Group and leave out U.S. Army? You a fan of the Marines or something?
That is understandable. However I have yet sell 1 WL policy in 2015. In fact I have sold a total of 13 term policies in 2015. I did sell a few WL last year but that was more for people who wanted the insurance their entire life. I have yet to present the bank on yourself concept to anyone other than my wife until I feel more confident in the “theory”. When I say learn more about the investment side of things I am not referring to IRAs or anything like that. My latest interest is in Triple tax free Muni bonds. I would love to get your insight on those.
Not much insight to offer. If the after-tax rate for a muni bond or bond fund is higher than the after-tax rate for a taxable bond or bond fund of similar risk, you should buy it instead if you wish to hold bonds in your portfolio. Triple tax free in this case refers to income taxes- federal, state, and local. It would also be a good idea to make sure the bond interest isn’t subject to AMT if that applies to you.
If it’s indexed to the SP500, the actual is more like 9.6%. Here are the numbers from NYU, look at the geometric average. That’s the actual return. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
wouldnt taxes lower my overall return or am I missing something here?
Not if it is in a Roth IRA, no. Just about any other qualified plan, yes.
10-4
that’s coming from a whole life insurance agent, better check twice cause we are evil and stuff. lol
Just one agent talking to another one as near as I can tell.
If you have to pay them, and they’re overall positive, then yes, it lowers your return. If you donate shares to charity from an IRA, then no tax due. If it’s in a Roth IRA, then no tax due. If you’re in a low enough tax bracket that your capital gains/dividend rate is 0%, then no tax due. If it’s an HSA, then no tax due. If you have enough carry over losses from tax loss harvesting, then no tax due. If you get the step up in basis at death, then no tax due etc etc. Certainly the technique far too many insurance guys use (take the stock return and subtract your full marginal tax rate from it) isn’t anywhere near accurate.
I just know that my CPA was anti WL at the beginning. During my first meeting with what would become my life agent, he asked if there was someone who participated in my decision making process (my cpa) and invited him to our follow up meetings. At some point in the process he was able to show us how rate of return was not the answer to my long term problems (I was going to have to earn something like 12% every year not avg.) What I remember is him saying “with Madoff locked up he didn’t know anyone who could help me”. The fact that my CPA walked away with a different mindset made me a believer.
At the end of the day I still realize that it doesn’t matter if he is an Insurance agent or a Financial Advisor (most of whom I have met are more broke than the people they are advising) they are all salesmen so I still have doubts if I made the right choice or not.
You misread what was written above if you think it’s “like 9.6%.” I was discussing the return of the S&P 500 index fund since inception. That’s currently 11.06% (remember the comment was written months ago.) Here’s the link:
https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list
If you go back to 1926 looking just at the S&P 500 it is lower, but not that much lower. It’s about 10.14%. http://www.moneychimp.com/features/market_cagr.htm
I grant that the rate since inception of a given fund may indeed be different then the S&P over it’s longer history. I would point out that the longer history is a better indication of long term expectations, and the link I provided gives those numbers. The link I gave is from NYU and the bond rates there comes directly from the Federal Reserve, those are the correct numbers, and going back to the 20s that number sits currently at 9.6% geometric. Here is the link again. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
Your article is very interesting. I’m 26 years old and currently have a ROTH IRA. I am debt free, unmarried, work full time and have no dependents. How do I figure out if I should purchase any life or even disability insurance?
Are you financially independent? If not, you need disability insurance.
Do you have enough money in your investments to be buried? Then you don’t need life insurance.
you need disability insurance as a minimum. Given your age, which is a huge advantage, I would figure out how much savings you would like to put away each month and buy a properly designed whole life policy as your savings instrument. Being young when you start saving is a huge advantage. WL is not investing, it is saving.
Did you seriously just recommend the purchase of a permanent life insurance policy to someone with no dependents? That’s like recommending a hysterectomy to a male patient- not only unnecessary but probably malpractice.
You are plagued by short term thinking. It is a Whole Life policy that means it is good his whole life. Will he have dependents someday, most very likely. Your focused on the here and now, not the long term with a comment like that. Second of all I did recommend it as a savings vehicle primarily. It is possible, with the right agent, to design a policy that maximizes the savings aspect of a policy over the death benefit. You use it for what you want to use it for, not what someone else tells you it is for.
IULs are a big sham. They are ART policies in which your cost of insurance grows every year. That premium you send every month will get eaten up by cost of insurance plus administration costs. Your cash value will get depleted. It’s too bad that all you need is a life license to market it and not a securities. I’d rather talk to Merrill Lynch or Charles Schwab about my money.
If my WL policy is completely off the grid of the IRS and when I retire I have 1 million in cash that I can withdraw tax free via policy loans, how does rate of return have anything to do with anything? If I take policy loans of 80k a year out tax free, which also does not put me over the provisional income limit for my SS and I can still qualify for food stamps if I wanted (not that I would), doesn’t that make ROI irrelevant? To someone like me when I was presented with this idea it made sense. Can the Gov put an excise tax on a Roth if they want? They just tried to do it to our 529 plans. Plus if I can use policy loans to purchase vehicles, pay for weddings, and college throughout my lifetime doesn’t that increase my overall wealth by eliminating lost opportunity costs on interest that I would have paid (or the cash I would have used)??? Also to know that if during my working years I am ever disabled the insurance company will pay the premiums for me (of if I die unexpectedly my loved ones will at least have some of my economic life potential to help them)?? I think what some of the agents on your blog are saying is that sometimes to some people, like me for instance, rate of return is not the most important thing.
If WL is such a bad thing then why would the Government care how much people put into them? Why would they create qualified plans shortly after establishing the MEC? I am far from a conspiracy theorist but I do understand that the gov wants to tax our money so bad that they make us take it out of our qualified plans via RMD’s. My original question prior to going with WL was “what if the Gov decides to change the tax rules regarding WL”. I quickly learned that 25% of banks portfolios consisted of BOLI (bank owned life insurance) and that the top 1% pump millions upon millions into WL each year (Michael Dell puts 1.2 million a month that we know of. When you consider the fact that the top 1% are also the top contributors to political campaigns I strongly doubt there will be a long line of politicians waiting to jack around with WL. I also learned that when the Gov did touch WL policies with the MEC that it grandfathered in all the previous policies.
With all that said I believe my Agent said it best. If there was 1 right way to plan for retirement then there would be no need for “experts”. It all boils down to each individual and what they like or feel comfortable with. My agent told me his goal is not to do business with everybody who needs what he does, it was to do business with the people who believe what he believes. Its not for everyone and that is perfectly fine.
I forgot to mention that I was told I also can have access to funds from my Death Benefit if I were to need Long term care which will eliminate the need to pay thousands of dollars in Premium for something I may or may not ever use. To me and the way it was explained, i just cant see how rate of return can even be calculated on something like this. Maybe I am naive and just the victim of a heck of a salesman? I do like hearing your point of views as it gets me thinking!
No one mentions that, but LTC policies are very expensive indeed. Because LTC is expensive, is why.
A LTC rider on a whole life policy can allow you access to cash in that event or it can spread the death benefit over a period of time to pay for LTC or something else similar like Hospice care. If your going to go slowly rather then fast that could be a useful feature and of course no one knows how that is going to go down. LTC riders do add to the premium however, but they are not as expensive as a separate LTC policy because it merely extends the death benefit already there.
Or, even better, self-insure against any LTC need with the millions extra you’ll have by avoiding investing in whole life. 🙂
What I gather from that statement is you think I would be better off by gambling? In the long run wouldn’t I be better off by staying out of the casino all together? When building wealth isn’t it better to avoid the losses instead of trying to pick the winners?? Every financial advisor I talked to in the past told me how they can get me a better rate of return. But not one told me about the impact opportunity cost throughout my lifetime can have on my overall wealth. Every financial advisor I have been around has been telling me to fill my leaking bucket with more water instead of plugging the holes. If I never have to finance anything ever again and pay finance charges, or lose the cash that I was going to pay for that same item am I not coming out ahead in the long run? Accuse me of being sold on the build your own bank concept but it just makes sense to me.
I am all ears. What else is out there for someone like me that can provide all the benefits of WL along with the opportunity to avoid lost opportunity costs throughout my lifetime?
The problem is not “the benefits” of WL, it’s the cost, i.e. the opportunity cost of not having higher returns on your money. If you’re fine with low returns despite tying your money up for decades, then buy as much whole life as you like. But I find it odd that almost all of the true believers just happen to sell the stuff.
I actually don’t have a big problem with the whole “bank on yourself” concept, as long as the person wanting the policy is wanting to do that and the policy is designed well for that.
is it possible to use the bank on yourself concept with something besides WL? If you can access the principle in a ROTH without penalty then theoretically couldn’t you use a roth to bank on yourself or would that interrupt the compounding curve? Is the non direct recognition the only way that WL will work with the bank on yourself concept, when the dividends and interest outweigh the interest on the loan?
I realize that my questions might come off more as answers but honestly I am looking for answers that I dont have.
I would think that if you had significant equity in your house then you could use that to bank on yourself. The house will appreciate regardless if you have equity in it or not and there is 0 rate of return on equity. With rates as low as they are on 30 year mortgages I feel like it makes sense.
Sorry not trying to turn this post into a bank on yourself topic so I will leave it alone after this!
No, that’s not quite how the house would work. You own the whole house. If it appreciates by $100K, you made $100K. If it loses $100K, you lose $100K. It doesn’t matter how it is financed. So if you borrow against the house to buy a boat or another investment, the house still appreciates at the same rate. If the house is rented out, the rent is exactly the same no matter how much of the house is financed.
I suppose you could do it with real estate or even stocks. Not sure I would though. If I wanted to do the bank on yourself thing, I’d probably use life insurance.
The recognition piece is critical, so you wouldn’t want to do it with a Roth. You can’t borrow from a Roth, you can only withdraw. It would have to be a taxable account you were borrowing against.
Im not looking to prove you right or wrong. i came to this site to get an unbiased knowledgeable opinion about something I am doing myself and something that I find quite interesting. I apologize for not stating the fact that I was an insurance agent ( I really don’t see what occupation has to do with anything, apparently all insurance agents either suck or sell WL) I take that back I can see how an “insurance agent” would be adamant about proving they are right about WL. Like I said, I am not trying to prove a point just simply trying to see things from a different set of shoes.
You’d probably be more interested in this thread:
https://www.whitecoatinvestor.com/a-twist-on-whole-life-insurance/
It’s more about the whole bank on yourself thing. I think whole life is a pretty lousy retirement investment- the returns are just too low for what most people need their retirement money to do. But I’m fairly indifferent on the bank on yourself thing. It’s not right for me, and it’s no miracle financial product despite all the marketing surrounding it, but I get why a few people like it.