By Dr. Jim Dahle, WCI Founder
I recently wrote about how whole life insurance is a crappy way to get a permanent death benefit or decent investment returns. In recent years, there has been a push to use a whole life insurance policy for a different reason- for “banking.” It has been popularized as the “Infinite Banking Concept” or “Bank On Yourself.” There is a great deal of marketing and hype involved, and even some scams, but the basic scheme itself is pretty interesting.
Bank On Yourself by Using Life Insurance Policy
Instead of borrowing money from a bank to buy your next car or other large expense, you borrow it from your life insurance policy. You can pay it back whenever you like. But you actually never have to pay it back if you don't want to. Even for those, like me, who say “I don't borrow to buy cars, I just save up the money,” advocates like to point out that you may be able to save up the money more profitably inside the life insurance policy than inside the bank account (especially given current interest rates.) They say it's like getting interest free loans with an added death benefit.
Non-Direct Recognition
The key to making this all work is to get a “non-direct recognition” whole life policy. With a “direct recognition” policy, when you borrow money from your policy the insurance company first subtracts the amount of the loan from the cash value, then calculates the dividend on the lesser amount. With an “indirect-recognition” policy, the insurance company doesn't. Cool huh. If you have $100K in there, they'll let you borrow about $90K, but still pay you dividends as though there were $100K in the policy.
Paid Up Additions
The problem with most whole life insurance policies is that it takes forever to get any decent cash value in there. For example, a policy provided to me by a WCI life insurance agent as the “best” $1 Million non-recognition policy he could find [MassMutual Whole Life Legacy 100] for a healthy 30 year old male in New York, demonstrates that the cash value doesn't equal the premiums paid until year 12. I'll need another car before then! That's a pretty lousy way to “bank.” So we have to figure out a way to get the cash into the policy sooner.The way you do this is with Paid Up Additions, meaning you dump more than you have to into the policy, ostensibly because you want a higher death benefit, but in reality because you want more cash growing in the policy so you can “bank” with it.
Borrowing Money from Life Insurance Policy
After 3 or 4 years of paying premiums and buying healthy paid up additions, you've got a tidy sum of money in the contract. Now you can borrow it tax-free at a certain interest rate, say 5%. Now that 5% doesn't go toward your cash value, it goes to the insurance company, but since this is a non-direct recognition policy, the insurance company is still paying dividends, say 5%, on the money you borrowed, so it's a wash to you. You've got yourself an interest free loan. Kind of cool huh. Of course, borrowing money from your bank account is also an interest free loan, but proponents of Bank on Yourself like to point out your bank account isn't paying 5% interest. If you kick the bucket during this process, your heirs still get the death benefit (minus the loan amount of course). The insurance company doesn't guarantee death benefit increases each year, but they generally do.
Tax and Asset Protection Benefits
Insurance policies have four main tax benefits. First, you can borrow from the policy tax-free. You have to pay interest on it, but you don't have to pay taxes on it. That's of course no different than “borrowing” from your bank account or from the bank itself, but it is different from cashing out of an investment with capital gains. Second, money compounds in a tax-free manner within the policy; there's no annual capital gains or dividend taxes on growth. Third, the death benefit is income tax-free to your heirs. Fourth, if you cash out, your basis is determined by the entire premiums paid, not just the portion that went to “the investment part.”
In many states, cash value in your insurance policy is protected from creditors up to a certain amount. Those of us constantly concerned about being sued see that as a benefit. The money isn't FDIC insured like a bank account, but states generally guarantee up to a certain amount from insurance company insolvency.
The Downsides of Using Life Insurance to Bank On Yourself
You can understand why at this point people are often pretty excited about this whole concept. Higher banking returns and tax-free growth all combined with a “free” death benefit. There's got to be a catch, right? Of course there is. Let's talk about catches.
The “Load”
When you put $10K into your bank account, the next morning there's $10K there. When you pay a premium into a life insurance policy or buy a PUA, the whole premium doesn't go into the policy. Like with a loaded mutual fund, a small percentage of that money goes toward the costs of the policy and toward the commission of the salesman. If the policy is paying 5% a year, and the “load” is 10%, it'll take 2 years just to break even.
Loan Rate vs Interest Rate on Whole Life Insurance
In my scenario above, I used 5% for both the loan rate and the interest rate. It's quite possible that the dividend rate can be higher than the loan rate or vice versa. Obviously borrowing at 5% and earning 2% is a losing proposition. In the policy discussed above the loan rate is variable, currently set at 4%. The current dividend rate is below 6%. It's easy to envision a scenario where those numbers reverse.
You Still Have to Pay the Life Insurance Premiums
MEC Calculations Are Complicated
The point at which the contract becomes an MEC is influenced by the amount borrowed and the current dividend rate. With all these moving parts, it's not that hard to accidentally make the proceeds of your policy taxable. The insurance company and agent are supposed to ensure this doesn't happen, but there may be times when you may be required to unexpectedly pay back a loan or contribute more money into the policy to prevent it.
Source of Funds
You have to take the money from somewhere in order to dump it into a life insurance policy. Proponents often recommend pulling it out of your 401K, IRA, house (via refinancing or a home equity loan) etc. When it's pointed out that there are serious opportunity costs, interest costs, or tax costs to doing this, they finally settle down to “put your emergency fund and/or short term savings in it.” But for a doctor, how much money is that really? $10-50K? Maybe $100K if you're doing really well? Making an extra 4% on $20K is only $800 a year. Not exactly the difference between poverty and financial bliss for a doctor. It especially bothers me to see people recommending you stop contributing to a retirement account that provides tax protection, asset protection, and solid returns in order to buy more life insurance, that has nowhere near the same tax benefits, asset protection, or estate planning benefits. Risking your house to invest in life insurance seems even more stupid.
Takes Time to Get Money from Life Insurance Policy
Loans from an insurance policy are a bit less liquid than what I think an emergency fund should be. I've never borrowed from one, but I understand it's a matter of days to weeks to get your money from the company. That's not the place for an emergency fund. Perhaps if you know a big purchase is coming a few weeks early it could work.
Additional Complexity Borrowing from Life Insurance Policy
Everywhere else in the financial world additional layers of complexity favor salesmen and the companies they represent. Why would this be any different? In fact, as you search the internet, you quickly realize that any discussion of these comments quickly breaks down into the proponents who suggest you need their expertise to understand it, and the detractors, who don't seem to completely understand it. I couldn't find anything anywhere that seemed to be a straightforward, unbiased analysis. The sales methods and opaque nature all screams “SCAM” to me. That doesn't necessarily mean it is, but as a general rule good financial products are bought, not sold. If an extensive sales process is required, or if I can't explain it to my wife in less than 2 minutes, I try not to have anything to do with it. There's a lot of people in this world smarter than the average insurance agent and it doesn't seem to me that very many of them are banking on themselves. I can't believe it's simply a matter of bias or the word simply “not getting out.” Good ideas don't stay hidden long.
Purpose
The books and websites that most push this concept like to talk about buying cars, as if saving up to buy a car vs taking out a car loan is the biggest financial concern in the world. Most doctors can buy a decent used car out of last month's paycheck. Maybe save up for 3 months if you want a new one. You've got to think about what you're actually going to borrow money for. If you're going to borrow it to pay off credit cards, don't you think it might be smarter to pay off credit cards at a guaranteed “investment” rate of 15-30% than to buy a whole life policy? When is the last time you went car shopping? All the signs and ads I see are advertising 0% APR car loans. Why bother dealing with an insurance policy when the car dealer will give you 0% right now? A mortgage? Why pay “myself” 5% when I can pay a bank a tax-deductible 2.75%? It just doesn't pass the sniff test. I don't really finance much anyway, why do I need a “new, innovative” way to do so?
Ongoing Interest Payments on Life Insurance Loan
Let's say you want to take some money out of the policy and NOT pay it back. You still have to make the interest payments each year. My goal is to minimize my fixed expenses, especially the closer I get to retirement. If you don't make enough payments, not only does the policy risk collapsing, but that death benefit starts decreasing too.
I'm obviously not running down to the local whole life salesman to start banking on myself. I don't think you'll benefit much from it either. In my opinion, the downsides outweigh some significant positives. You're better off not mixing investing and insurance.
What do you think? Do you have a whole life policy you use for “banking?” Do you still feel like it's a good idea? Comment below.
Call me the minority…although I don’t sell WL the companies I sell term through gives me the access to “run the numbers”. I have looked at the numbers. BOY/IBC etc just does not add up. Giving WL the benefit of the doubt and going off of projected numbers (because all of my companies have paid a dividend for the past 100 years) I cant see where borrowing from your policy and paying it back ever adds back to where you would have been at had you not touched the money. Even if you pay the interest you would be charged to finance through a bank, back to your policy you still don’t come out ahead in the projections. And yes these are non direct companies (Mass Mutual only goes direct when you take the fixed loan). I get that if I finance a 50k car at 5.2 for 36 months its going to cost me about 4100 in interest spread out over 4 years. I have run the numbers for not taking any policy loans, vs taking policy loans and paying back principle and interest, vs taking policy loans, paying back principle and investing the interest outside of the policy.
If this concept is all its cracked up to be am I missing something here? Here is the scenario I ran. Year 1 of policy age 34. At age 42 this guy will start buying cars every 4 years for his wife and every 8 years for himself. He is putting 15k a year in. Cars are not cheap so I figured 50k per car. Obviously some years he will have to draw out 100k to purchase himself and his wife a car just because of how it falls. If he doesn’t touch the cash value at 65 he will have bought 8 cars and have 1,057,900 in cash. If he borrows and pays back with interest (from his policy) his cash would be around 1,039,910 and if he borrows and pays back the principle and invests the interest elsewhere he is at 978,778 in cash.
If you can explain how this scenario is in the best interest of a client I will be more than willing to listen. Now granted if he invests the interest elsewhere and earns 11% each and every year then I can see it being a wise choice, but with Madoff in prison I don’t know too many people who can get those returns. The theory that is being sold is you are never interrupting the compounding curve or missing out on lost opportunity costs, but I just dont see where that is the case.
Im not saying I am right here. It is very likely that I have missed something, but from an outside perspective it just does not add up to me.
sorry i meant the 4109 would be spread out over 3 years
The idea is you’re taking money that would have been compounding at 1% (which is what my savings account is paying) and instead having it compound at 2-5%. You’ve got to go through that initial period where you take big losses, but you can minimize that so you break even in less than 5 years. It’s not some magic deal, but 4% beats 1%, at least until short term rates go back up! The issue I have with it is all these examples used for it are like yours-somebody that would otherwise be borrowing money all the time. That’s not me. When I want a car, I go down to the auction and plunk down $4K for it out of my checking account. Or if I wanted a fancy nice new one for $50K, I save up for that over a few months, then buy it. Then I drive it for 10 or 15 years. Financing stuff just isn’t a big financial need for me. Plus insurance companies charge me a bunch extra due to my bad habits, so that further lowers the benefit for me.
Im playing both sides of the fence/Devils advocate here. I am not 100% against the concept or 100% for it. But to touch on your point of saving up for the fancy new car once you spend that 50k (in a depreciable asset) you not only lose the 50k but you lose the money it would have earned it. Obviously this is the argument that would be made if you are pro BOY.
Lets be clear here before I get accused of anything again. I am trying to get all opinions because this is something that peaks my interest that I have contemplated using in my personal life. I am not a IBC practitioner or making MDRT because I sell a crap ton of WL.
Yes, and there’s a cost to that privilege (of still having the money while using it to pay for something else.) That cost is the relatively low returns on the money, the costs of insurance, the time value of money that could have been used elsewhere etc.
Yes, and there’s a cost to that privilege (of still having the money while using it to pay for something else.) That cost is the relatively low returns on the money, the costs of insurance, the time value of money that could have been used elsewhere etc.
And please spare me the whole “you are borrowing your money” arguement.
I read through all the comments here to determine if WL is a good financial decision. I understand everyone’s point and have come to the conclusion that WL is a good vehicle to park my money to minimize my market risk and inflation risk while making much higher returns with working capital using multiple asset classes and leverage. thank you to everyone contributing to this post.
Glad you’re making an informed decision.
I‘m kind of bummed that I have to write this another time as this is not the first time I got timed out and then have to rewrite my whole comment, but for information purposes, I think it is useful. WCI, if you can do something about that, it would be great.
It’s my 4 year anniversary on my policy. I figured it is a good time to see where we are in terms of premiums put in versus cash value accumulated to see where this is from an “investment” perspective. Let me put this in perspective as I have said in other comments: This is not my only investment. I have used this for diversification purposes, the fixed income portion of my portfolio. I think of it as a supercharged savings bond – one that has a much higher guaranteed interest rate, a variable dividend kicker, and the ability to take policy loans out via non-direct recognition (which I have not needed to do but plan on doing for cash flow consumption later in life).
What I will provide is not the exact numbers of my policies, but percentages. For example, if the maximum premium of my base WL policy + Term Rider + PUAs is $10,000 and I only put in $3500 that year, I will say 35% invested. So, let’s what the numbers show and I’ll throw some comments in after:
Year 1 – 100% invested – 81.52% cash value available (CVA)
Year 2 – 100% invested – 90.875% CVA
Year 3 – 100% invested – 95.09% CVA
Year 4 – 50% invested – 98.46% CVA
I still have the initial proposal from the insurance agent, so I thought let’s look at what the percentages are from the initial proposal. These assume 100% investment from every year. I will just put 3 numbers next to each other – my actual percentage as you see above, the guaranteed percent and non-guaranteed next to each other:
Mine Guaranteed Assumption
Year 1 – 81.52% 82.68% 84.55%
Year 2 – 90.875% 89.55% 92.52%
Year 3 – 95.09% 93.11% 97.23%
Year 4 – 98.46% 98.17% 101.13%
So the first question to ask is how is my percentage lower than the guaranteed for Year 1? Because I was misinformed. The insurance company used to give full credit of a dividend for the year provided you were one month before your next anniversary date on your policy. To put this into dates, if the anniversary date of your policy was January 1 and we use our $10,000 example again, you had to put in $2000 to keep the policy active for the year. You had up until December 1 of that same year to put the remaining (optional) $8000 and get FULL credit for the year. It made no logical sense but that’s what was dispensed. Instead, they now do it logically. If you invest more on your anniversary date, it has more time to compound within the policy. Years 2, 3, and 4 reflect that.
Why did I only invest 50% for Year 4? Because my business took a major nose dive for the first half of 2014. It has been corrected and we are back on pace with growth moving forward, but the flexibility of the policy was key. If I was obligated to put in 100% every year, it would have been a huge constraint. To be able to keep the policy active at even less than what I did put in was a huge plus.
So what are the takeaways? First, if I was 100% invested from Day 1, Year 1 instead of staggering in to the 100% investment, it is a fair presumption that the insurance company’s assumption would have been fairly accurate. So, put in as much money on the anniversary date each year and let compounding start early.
Two, to be “breakeven” at year 4-5 is, I believe, a fair policy written for the end user.
Three, was this the best “investment”? Looking at hindsight, one would obviously say no since the stock market has had tremendous growth the last few years. But I know what I wanted from my specific plan so it has worked for me as intended.
Moving forward, I will be putting in 90% of maximum this year and decreasing the investment into the policy by 10% each year moving forward until I get to 10-20% investment. Why? I got the base of the policy in place, the compounding has started, and I got to break even of premiums = cash value. If I continue to max this out, I will be too heavily tilted on the fixed income side of the asset allocation plan. When it’s time for policy loans in the golden years, this will be a nice income supplement and smooth out cash flow.
Is there anything I would change about the policy itself? Nothing specifically about the policy itself. However, if this policy was written with a direct recognition policy, the dividend credited rate would be higher because I have not taken out any loans. So if this could be written exactly the same with say, Northwestern Mutual, my cash value percentages would be higher because their crediting rate has been 7-8% per year the last few years versus the 5+% from my company. I would then use an outside company to do the policy loans against my cash value (think HELOC). By doing this two-step process, it makes a direct recognition policy look like a non-direct with a higher crediting rate. And 1-2% compounding over decades can be a substantial difference.
I hope this was helpful.
Sorry for the hassle. Hopefully an issue that will go away with the new site design. One work around is that anytime you write something really long (i.e. long enough that you’d hate to rewrite it) copy and paste it into Word or similar (or at least copy) prior to hitting submit. Bear in mind this comment is 924 words- the length of many of the posts on this site.
I love seeing examples like yours, so thank you for sharing. It really demonstrates how the returns for these things are so frequently between the guaranteed and the projected and that purchasers really do have to be happy with the guaranteed returns, with anything else just being icing on the cake.
The other nice thing about your particular situation is that you’re breaking even relatively early, about year 5. Lots of people, for various reasons, don’t hit that in the first decade.
Glad you’re happy with your purchase. Realistic expectations and proper policy design are key.
Howard,
Just a few thoughts.
#1 – if you had gone with a company like northwestern mutual, you would have less cash value, because their policies do not provide good early cash value.
#2 – I personally don’t look at whole life as an investment, I use it as the vehicle for other investments, mostly real estate in my case. You are correct to look at it as a bond-like return when left with the insurance company.
#3 – When you decrease your premium payments, the base premium and the term rider are the things that get paid first, and those generally contribute the least to your cash value. The PUA will add the most to your cash value.
#4 – if you are looking at changing the way you are using the policy with decreasing premiums, ask your agent for an in-force illustration based on your proposed changes, and see if this policy still makes sense based on those parameters.
#5 – don’t forget about inflation. As time passes, each dollar is worth less than it was the previous year. Make sure the dollar amounts at retirement are sufficient when adjusted for inflation.
#6 – as a small business owner, there are likely many ways that you can take advantage of your whole life policy. In fact, you could probably have taken a policy loan to pay the remaining portion of your annual premium, and then repaid it when your cash flow improved.
Just a few thoughts that I thought might help. There are many creative ways to use whole life. If you need some ideas, drop me an email, and I can tell you how we have used them in our businesses. [email protected]
Cheers!
WCI:
I am glad you found my comment informative. I wasn’t expecting this to shoot for the moon. That was never the intention of this policy, but I was expecting to get back to break even quickly. For me, that was less than 7 years. As shown it would have been four if I knew their new policy year 1 and could have maxed out Year 4. But you are correct, it is doing exactly as I wanted it to and expected it to. I have no complaints as this is my personal situation and my choice.
John K: I know we will have an offline conversation but I wanted to address each of your points for the public discussion.
1) I said if NWM could have done the exact same policy, a 7-8% crediting rate is greater than 5%. That’s just numbers and compounding. NWM interprets the MEC rules different than NYL and MM and my company. Apparently even my company has come back to the group since my policy was written so I couldn’t get the exact same type of policy I have now.
2) Correct. It’s not an investment but people do look at it that way, so I wanted to have the numbers out there for people to compare. I am glad you can leverage the non-direct recognition of your policy to double lever returns. I am more conservative with this money, so I have not been adventurous to try and double up.
3) Absolutely correct, which is why Year #4 my CVA came back towards the guaranteed. Which goes to show how these policies are created on the front end matters on the back end. The more PUAs you have available, the better. And the more you can put in the first 5-7 years on the anniversary date, the better.
4) I did ask for an in-force at 50% investment. I saw what the CVA was to be predicted. I feel my way is better because of stacking early and about your fifth point with inflation, but I will always put in that 10-20% for the opportunity to put in more if I want. It’s all about flexibility.
5) The tricky point. You are correct but I’ll add one other bonus. By taking policy loans, you are withdrawing money tax-free so you kind of have a second Roth. Yes, we have to be wary about collapsing the policy, but to have a second tax free income stream available is nice.
6) I am sure there are numerous ways, and that discussion we can have offline, but as I said earlier, this is conservative money. I would really have to feel good about the risk/reward to use it now. But again, that’s just me. Real estate, using your example, is so hot down here in Texas that it feels bubble like. At some point, it will pop and I have the perfect luck that I would be holding the bag.
It’s all a matter of how the policy is written. Below is the most recent policy I put in place. I treat it like any other investment or business, it has a start up cost. Whoever writes it needs to be paid and there needs to be a profit for the company. The second year I almost break even and the 3rd year I’m profitable. Almost all of my policies are with Ameritas as they have the best track record from any company that I’ve found.
So the first year I put in $95,000. The next 9 years I put in $45,000 to maximize the cash in my policy. After the 10th year I leave it at $24,000. Whether I have the cash in that policy or not, it still earns interest and dividends as though it was there so I borrow it out and finance the things I need to buy (cars, house, other investments) and I pay myself back at 12% interest. Ameritas charges me 12% and following Neslon Nash’s advice I am an “honest banker” and charge myself more just as the bank would if I were to borrow money from them, thus capitalizing my bank even more. If you can show me an investment that I can borrow from that will still pay me interest and dividends, that is 100% guaranteed, and protected from creditors I’d love to hear it but in 14 years of investing I have as of yet to find it.
Plus above and beyond, my wife and children have the security of knowing they are very well taken care of in the event something happens to me, and it’s all tax free.
Male, Age 42, Preferred Non Tobacco
Contract Premium Mode: Annual
FPUR Mode: Annual
Keystone Whole Life
Age Year Contract Premium Curr Cash Value Curr Death Benefit Curr Cash Flow
43 1 95,000.01 69,655 2,634,289 0
44 2 45,080.01 92,962 2,708,507 0
45 3 45,180.01 139,566 2,780,719 0
46 4 45,290.01 190,711 2,850,522 0
47 5 45,400.01 242,664 2,918,016 0
48 6 45,520.01 299,302 2,985,278 0
49 7 45,585.01 357,287 3,055,019 0
50 8 45,665.01 416,650 3,123,667 0
51 9 45,780.01 479,362 3,191,294 0
52 10 45,910.01 543,652 3,258,130 0
53 11 24,150.01 591,007 2,769,732 0
54 12 24,150.01 638,987 2,782,563 0
55 13 24,150.01 689,499 2,795,635 0
56 14 24,150.01 740,669 2,809,058 0
57 15 24,150.01 792,552 2,822,897 0
58 16 24,150.01 845,246 2,837,228 0
59 17 24,150.01 898,559 2,851,861 0
60 18 24,150.01 954,463 2,866,513 0
61 19 24,150.01 1,013,090 2,881,473 0
62 20 24,150.01 1,070,827 2,897,100 0
63 21 24,150.01 1,135,399 2,917,582 0
64 22 24,150.01 1,202,555 2,944,298 0
65 23 24,150.01 1,272,407 2,974,577 0
66 24 24,150.01 1,343,142 3,008,286 0
67 25 24,150.01 1,418,513 3,045,159 0
68 26 24,150.01 1,498,546 3,084,870 0
69 27 24,150.01 1,579,555 3,127,233 0
70 28 24,150.01 1,665,348 3,172,077 0
71 29 24,150.01 1,754,367 3,219,626 0
72 30 24,150.01 1,844,922 3,270,170 0
73 31 24,150.01 1,956,921 3,340,045 0
74 32 24,150.01 2,073,777 3,422,603 0
75 33 24,150.01 2,193,730 3,509,194 0
76 34 24,150.01 2,318,800 3,599,782 0
77 35 24,150.01 2,451,033 3,694,404 0
78 36 24,150.01 2,587,043 3,793,454 0
79 37 24,150.01 2,727,215 3,897,536 0
80 38 24,150.01 2,873,810 4,007,278 0
81 39 24,150.01 3,027,030 4,123,004 0
82 40 24,150.01 3,183,574 4,245,301 0
83 41 24,150.01 3,349,045 4,374,084 0
84 42 24,150.01 3,518,084 4,509,427 0
85 43 24,150.01 3,694,552 4,651,536 0
86 44 24,150.01 3,878,728 4,800,917 0
87 45 24,150.01 4,067,148 4,958,107 0
88 46 24,150.01 4,263,541 5,123,418 0
89 47 24,150.01 4,466,330 5,297,340 0
90 48 24,150.01 4,675,369 5,479,951 0
91 49 24,150.01 4,890,725 5,671,498 0
92 50 24,150.01 5,113,880 5,870,741 0
93 51 24,150.01 5,344,946 6,077,671 0
94 52 24,150.01 5,583,605 6,292,092 0
95 53 24,150.01 5,830,018 6,514,434 0
96 54 24,150.01 6,085,157 6,744,193 0
97 55 24,150.01 6,350,080 6,979,280 0
98 56 24,150.01 6,626,599 7,217,849
Correction, Ameritas charges me 5%, not 12.
I’m glad you’re happy with your policy. It is not unusual for me to find insurance agents who are not only happy, but enthusiastic about the benefits of their policy.
Your line “If you can show me an investment that I can borrow from that will still pay me interest and dividends, that is 100% guaranteed, and protected from creditors I’d love to hear it but in 14 years of investing I have as of yet to find it” is full of sales lines frequently used by insurance agents to sell whole life policies. Readers may be interested to see the devil behind the details discussed in this series:
https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/
However, I find it extremely disingenous for you to pretend you are not an insurance agent and recommend your firm to readers without mentioning that you are a VP at the company.
I sell P&C, not life. Thanks though. Appreciate your input. Your previous comment about giving Mr. Pantozzi a bad review is just about all the proof I need that you are a fraud and that nobody should listen to any investment advice listed on any of your blogs. Besides, if you’d like to dispute any of the numbers I posted, please do that. Otherwise you’re just posting nonsense. I posted hard factual numbers. You’re posting opinion and rhetoric.
I think it’s hilarious that you call me a fraud after recommending your own firm “anonymously.” It would be even funnier if it hadn’t already happened a dozen times on this site. I’m not sure why insurance agents feel a need to defend life insurance that is so great that it justifies dishonesty. It is what it is. Some people love it. It has a few uses. But it’s hardly the answer to all of life’s financial worries that insurance companies teach their agents it is.
What number were you expecting me to dispute? The ones from the illustration you posted? They’re just projections so I see little point in “disputing” them.
WCI:
Outside of that, if this is the projected policy page, J Baker doesn’t know how to read it. The CV available should be what is projected at the end of the first year. His break even point is year 8. At year 3, he put in $185,000 and the CV is projected to be at $140,000.
@J Baker
Hi J
If you are an insurance agent then please just acknowledge it. Yiu comments are insightful and I appreciate them and it doesn’t take away anything from your message if you are. However failure to state your industry background diminishes your credibility. I listen to doctors employed by drug companies all the time. However when they don’t acknowledge their relationship to a drug company it is considered an unethical practice that can result it stiff penalties against their medical license. If you are jumping into a doctors audience blog please keep this in mind.
Thanks
dan kang. MD
Those aren’t an illustration, those are factual hard numbers. The non-illustrated numbers are much higher. For the purpose of this debate I did not post those as I knew you would not accept them.
I never said that this was the best investment or the only investment. I use this to take over the financing function in my life. I do not pay outside interest to ANYONE. Recapturing all the interest has grown my net worth by 6x in the last 9 years. Of course I have other investments, I would be a fool not to. If you are arguing that these cash values are not guaranteed, you are 100% wrong or a liar. Pick one and let me know. I have about 80% of the total cash value of my policies borrowed out yet it continues to pay me my 4-5% interest plus dividends as though it were still there. Again, if you have another investment that will allow me to do that, please let me know as I would love to hear about it. I hear you slamming a lot of things on here but I don’t see you posting a lot of what you buy and why. What did you invest in the last 10 years? How much did you lose in 2008? I lost 40% in my 401k but didn’t have too much in it, and about 200k in my house. My life policies continued to grow exactly as promised with zero fluctuation.
I trust others with the education and titles to do this for me as it is not my area of expertise. Mr. Pantozzi has about every title after his name that you could ask for and does not waiver when he gets an 8 figure check for one of these policies. He knows he is taking care of the customers best interest and urges them to teach their kids and grandchildren the same principles so that it can be passed on from generation to generation. How do you think the ultra wealthy families pass down money from generation to generation? Why would Bank of America have more cash value invested in whole life insurance than real estate if it were a bad investment? Either they are really…. really dumb or they know something the rest of us do not.
So again, those are hard factual numbers. If you would like to dispute them please be my guest. I tried to post the whole illustration on here but your blog is scripted terribly and doesn’t allow it to transfer properly.
I agree this isn’t your area of expertise.
I have grown my net worth by 100 times in the last 9 years. If you’re interested in how, read the rest of the site. 🙂
Sorry my site isn’t set up for you to be able to cut and paste an insurance policy illustration (or whatever your random string of numbers was) into the comments thread. I’m sure there are lots of sites elsewhere on the internet that can accommodate your wishes. Honestly, it’s not even clear to me why you posted that. You just did it without explaining to anyone what it was or where it came from as if it somehow supported your “salesman-speak” arguments in the text above about how awesome whole life insurance is.
I’m guessing you’re not going to apologize to readers for misrepresenting yourself as an unbiased party while recommending your own insurance firm?
As mentioned earlier, I’m glad you like your policy and that it is working out well for you. I sincerely hope it helps you to reach your financial goals, whatever they may be.
If those are the guaranteed numbers, then it’s year 8 where CV is greater than premiums, but whatever.
If I could get an 8 figure check for writing one of these policies, I would have retired the next day.
If those are the guaranteed numbers, then it’s year 8 where CV is greater than premiums, but whatever, which puts it in line with my policy from a different insurance company.
If I could get an 8 figure check for writing one of these policies, I would have retired the next day.
Howard, they don’t make a commission off the total amount you invest. They make a % off the amount that goes towards the death benefit. The cash value is not commissionable.
Mr. White Coat, I have nothing to apologize for. I do not make my living off these policies. I sell property and casualty insurance, mostly large commercial policies. As it is not my area of expertise, I refer them to people that deal with them on a daily basis. The customer is better off that way.
Also, if you start with $5 and grow it by 100x, you still only have $5000. The multiplier is meaningless without the base figure.
Dr. Kang,
As you can see from the above posts I have already said I sell insurance. I sell general liability, workers comp, HOA, etc etc etc. I do not sell these or any whole life products. I do know plenty about them as I obviously buy them.
I agree multipliers are meaningless without a base figure. So why did you throw your multiplier out there without a base figure? Did you just want to throw some meaningless number out there to try to impress someone that whole life insurance is awesome? Why exactly did you mention that?
As far as your not seeing anything to apologize for. The general level of business ethics possessed by most insurance agents results in an ethical bar so low a grandmother two days out from a knee replacement wouldn’t trip on it. But in case anyone else is interested in this, let me spell it out a little for you what I think you did wrong.
You showed up on the blog and posted this as your first comment:
Now, the casual reader would read that and say, “Oh, here’s a guy who is just like me and really likes his BOY/IB policy. He seems unbiased. He likes his insurance agent so much he put in a free plug for him. Maybe I’ll call him.”
However, that isn’t really who you are. After your second post full of the usual whole life salesmanny schpiel that is so frequently seen here, it became pretty obvious that you are an agent. A quick Google search not only confirms you are an agent, but pulls up your Linked In profile which reveals that you are a VP at Joe Pantozzi’s “Alpha and Omega” Firm.
“I made sure I did my homework and found a firm that works for me,” you said. Uh huh. Then you wonder why people have such a low level of trust for insurance agents. You should be ashamed of yourself, but I can’t say I’m surprised you’re not.
Part of doing my homework was finding an agency that I would associate myself with. That was by far the most important aspect to look into before agreeing to any partnership of any kind. They conduct themselves beyond reproach and I am extremely thankful they gave me the opportunity to take care of the P&C needs of their clients.
So, that really is who I am. I came from a background that was not insurance. When I was introduced to it I started with State Farm and sold mom and pop their auto and home insurance. When I decided to go out on my own I got more interested in commercial policies as they have higher premiums and of course higher commissions. I never sold big life policies. An occasional term policy here and there but nothing big. I really do like my BOY/IB policy. It really has worked for me and my family. I really did to my homework. I really have taken over the financing on the 3 cars I currently own, my primary home, my business, and all of my investments. I really do pay myself back at 12% interest. I really do not write my own policies. I could go on but I think you get the point. Have a good day gentlemen.
That’s all great. I’m sure the firm is wonderful and doesn’t need the type of negative publicity you have provided with your dishonesty.
I’m glad you like your policy.
@ Jason: thanks for clarifying your position as an agent.
May I ask one more follow up question?
Do you or your firm or family member get any sort of referral fee/commission/benefit from even though you don’t sell them directly yourself?
I think if you can’t answer with a definitive NO then you are in some way benefiting from the sale of a policy even though you don’t sell them directly.
We look forward to hearing back from you.
FYI: I actually purchased a WLI last year from an agent. I have nothing against them.
thank you
Dan
Dr. Kang,
As I am licensed in Life I can take a cut in the policies that are written on myself and my family, and I do. As for my customers and those I refer over, I take nothing. Not a dime. Not a percentage or a referral fee. I take care of their insurance risk needs and refer their life needs over to a professional better educated to serve those needs. I know my profession inside and out and could answer just about any question you could throw at me. The life side, not so much. I know it well enough to buy it but if an estate attorney started asking me questions about my ILIT, I would refer him to my life agent.
Now that is the first time I ever heard the commission is based off of the death benefit. I’ve always heard it’s roughly equal to the cost of the base whole life portion of the policy plus a small part for the term rider.
Jason, I posted how my policy has done as I have no fight to pick. I put what has happened with my policy so people can get a fair, non-biased in real time depiction on what occurred with someone who is not in the insurance industry. As WCI said, it has worked for you and your family. My policy is working the way I have intended. And I don’t care if others do them or not, but just want them to be fully informed on the process.
I agree about the commissions. Whatever they’re based on, they’re typically equal to something like 50-100% of the first year’s premium for most types of life insurance policies. The agent doesn’t get that entire amount, of course, but that’s what the commission is.
I’m not totally against banking on yourself policies. What I’m against is people being sold policies they don’t understand, and once they do understand don’t want. I’m also against agents misrepresenting themselves in order to generate business.
You’re right on some part. The reason I have my policies with Ameritas is because they don’t pay those huge commissions. They pay 50% of the total premium that goes to the death benefit. That’s what allows them to pay a higher interest rate and guarantee a higher dividend. Other publicly traded companies have huge upfront commissions well over 100% and their illustrations and cash values are terrible. They don’t let you borrow the first year even if youre lucky enough to have cash value in the policy. Hope that helps clear some things up.
Via email:
Based on the illustration, a cash value at ten year of $543,652, and investment of $495,000, that comes to annual <3% dividend rate guaranteed. I believe that includes what Mr Baker is calling interest payments on the loan or cash value. If he is paying 12% interest, that is a whopping spread that Ameritas is keeping. Even at 5% (which he keeps on changing the actual number between different comments), he still is paying more than his return for his own money. Based on the 2013 annual report, company had revenue of 2 billion on assets of 34 billion. Simple math it is a return on equity of 5.8 %. It would not be possible for company to be paying dividends more than return on assets on policies. Based on the $0 cash flow and all the dividend going towards partly for PUA and rest for cash value increases, policy values indicate fair amount of mortality and administrative deduction close to 9% of the new premium. These numbers are pretty similar to most of the insurance companies policies and I have NWM and MM policies with similar design and projections. I would like to have Mr Baker share his current older policy original projection and current statement information to see how good his all the loans under infinite banking has turned out to be. How good is that with a load of 9%, return of under 3% guaranteed (with inflation close to 2%) and maximum <6% returns actual likely and that is after ten years of holding? Granted that there is tax deferral and guarantees and insurance portion cost that you are paying for. Simpler thing is to keep it simple and straight with separating them. Get what you need from best vehicle that can get the job done the best.
“Granted that there is tax deferral and guarantees and insurance portion cost that you are paying for.”
[Ad hominem attack deleted]
There are no tax deferrals. It is tax free growth. No taxes, ever. It was put in with after tax money and provided you do not cross the MEC line, it comes out anytime you want tax free. You also do not seem to comprehend that those are the guaranteed projected cash values. I have money borrowed out of that policy to pay for other things and I pay myself back at the aforementioned 12%. [You seem to be saying that a whole life contract is taxable.]
[Ad hominem attack deleted.]
You know that’s not my comment, right? It came in via email.
If you keep up the personal attacks you will find that your comments start disappearing.
I agree that when you borrow against your policy, like when you borrow against your home or car, you do not pay taxes on the money you borrow. So, tax-free but not interest-free.
via email from J Baker:
Make them disappear? Lol. It showed you as the author my friend.
[See how that works?]
Via email from the previous commenter, in case it isn’t clear- this isn’t my comment:
I apologize for the post not being clear. I did not mean to indicate that whole life contract is taxable. What is tax deferred is the growth or return on the premiums and that includes dividends. You are right that premiums are with after tax dollars and like a cost basis to any investments, are nontaxable. Any money removed permanently in excess of the premium total is taxable as ordinary income and life insurance contract amounts are included in the estate taxes. You are mistaken that it is tax free growth! growth is tax deferred not tax free if you remove from the policy during one’s life time.
This is the quote from Ameritas website
A Word About Taxes Cash value life insurance, like Keystone Whole Life, offers two tax advantages: • income tax-free death benefit and • income tax-deferred growth on accumulation of cash value. Neither Ameritas nor its representatives provide tax or legal advice. You may want to consult your attorney or other tax professional for more information.
You two are talking past each other. Just so everyone reading this is clear,
1) If you surrender a policy, the basis (total of premiums paid) comes out tax-free (like any investment you do with money you have earned and on which you have paid income tax as you earned it) and the earnings are fully taxable at your regular marginal tax rate.
2) If you borrow against a policy, no taxes are due.
3) If you die, the death benefit is income tax free to your heirs, although depending on whether you used an irrevocable trust or not, estate taxes may be due on the death benefit.
So in that respect, it could be tax-deferred or it could be tax-free growth, depending on what you do with it on the far end.
I’m sorry but you have been grossly misinformed. Because the policy was purchased with after tax dollars everything inside it is tax free unless you hit the MEC line. This includes loans, dividends, etc. I would NEVER suggest that someone surrender their policies as they usually equal around the same amount they can loan out of it. If they do surrender, there can be tax implications. Anyone with any financial or estate planning background will confirm this. Also, anyone with any decent amount of money should have an ILIT set up. Even without one, the money from the policy also goes to the beneficiary tax free.
Nope. Dividends are “return of premium.” Once the premiums have been returned, they’re fully taxable. https://dividends.uslegal.com/taxation-of-dividends/insurance-dividends/
One benefit of surrendering a policy instead of borrowing from it is you no longer have to make premiums on it.
A whole life policy should NEVER be put in place if you ever have the intention of cancelling it. If people do not have the means to start a policy and continue it, it is wiser to put your money elsewhere. That is why we do so many lump sum policies with our estate planners and put it in an ILIT. Surrendering a policy is the absolute worst thing you can do and should only be done if you absolutely must.
From the very site you quoted “Normally, insurance dividends are tax free since they are not reported on the tax returns.” – See more at: https://dividends.uslegal.com/taxation-of-dividends/insurance-dividends/#sthash.ejoDqeoB.dpuf”
Only if you turn it into stock options instead of dividends can it be taxable.
I agree a policy you plan to cancel shouldn’t be put into place.
Read the whole paragraph. They’re only tax-free up to basis.
The way these policies are set up they should never become taxable. They should never reach a MEC or Modified Endowment Contract level. Ever. Especially when we teach our clients to continually borrow out of their policies. We have been taught by banks and normal financial advisors to let our money sit for 30 years and let it earn compound interest. All the while banks use velocity to make money. They don’t let their money sit. They constantly keep it in motion and have it work for them. That’s all we teach our clients to do, just on a smaller scale. Taxes will inevitably go up, because of inflation, our money today will always be more than our money tomorrow, yet we stuff all our savings in 401ks and other government controlled funds where we are penalized if we touch it before retirement. It’s estimated that 35 years from now a dollar will equal .17 cents in buying power. Then you have to take into consideration that higher tax bracket you will almost inevitably be in. It’s a no-brainer.
I agree. When you buy one you should plan to keep it for life so it never becomes taxable. Unless you realize after you bought it that you don’t really want it in the first place.
I’d be careful with the word always.
I disagree that a typical physician retiree is likely to be in a higher tax bracket. That’s actually very unusual.
Most people, Doctors included want to continue the same lifestyle they had when they were working. That along with the inevitability of taxes going up in the future it is safe to assume that taxes will be the same, if not higher than they currently are. 18 Trillion in debt taxes have to go up, they always will. Unfortunate effect of politicians spending like there is no tomorrow not thinking about our children and what they will (won’t) be leaving them.
Even if tax brackets increase, doesn’t mean a retiree will be in a higher tax bracket. A typical physician can continue his same lifestyle on 25-50% of his peak earnings income. More details here: https://www.whitecoatinvestor.com/percentage-of-current-income-needed-in-retirement/
WCI, you have to love the passion of J. Baker. As you and I have discussed in the past IBC isn’t for everyone. It’s not a magical elixir that fixes all ills. It’s a process to control money and create generational wealth. The world has taught us to think about the here and now and for everyone who buys into that they could care less about the next generation.
You say taxes on physicians won’t go up in the future. Who will they go up on? I encourage you to read the Power of Zero. The opening paragraph details a radio conversation where the guest CPA states that taxes will have to double in the future in order for our country not to go into bankruptcy. The CPA gives a 4 letter word for the reason, MATH. You say “who is this CPA, what credentials does he have to make such a bold statement”. This CPA just happened to be David Walker, the Comptroller General for the US from 98-09, or in other words the CPA of the USA.
We are embarking on a new voyage and using past information might not be so pertinent. There are lots of ways to get your tax bracket lower and using a whole life policy is one of them. Still not the cure all but one. However as a fellow financial educator we need to shine light on the fact that deferred tax without the ability of avoiding tax in the future is scary. Anyone contributing to a Tax Qualified Plan should take pause and consider the path of our country. Just for the record, insurance policies cash values do grow tax deferred as you mentioned earlier and their loans and withdrawals up to basis avoid taxation.
Indeed Russ. Taxes have always gone up and will continue to always go up. The more reckless our government gets, the worse it will get. Amazingly our country ran just fine before the FED was established. That’s without taking inflation into consideration. I’ve done the numbers on Truth Concepts, it’s amazing.
The devil in this discussion is in the details. When you say “taxes will go up” you need to define what you mean. Do you mean that the rate on any given tax bracket will increase? That may very well be true. Do you mean the overall total of taxes collected will go up? That will almost surely be true, especially on a nominal basis. But that has little to do with whether the individual marginal tax rate for a retiring physician will be higher than what it was during his peak earnings years. As I have written elsewhere, most physicians will need (and have) far less taxable income in retirement as during their peak earnings years (despite having the same standard of living), and thus their marginal tax rate will be much lower. Instead of being in the sixth bracket, they may be in the fourth. So even if the tax brackets go up a point or two, they still enjoy a lower marginal and effective rate in retirement. And that doesn’t include the fact that much of that income will come from Roth accounts, at lower qualified dividend/capital gains rates, may be in a lower tax state, and of course without any payroll taxes.
This whole “taxes have to go up” thing is simply a myth used to sell more cash value life insurance by causing unnecessary fear.
The former Comptroller General of the US said taxes will have to double and you say maybe taxes will go up a point or two?. How do you read this and all you can say is that taxes might go up a point or two? Those making over $160k pay 60% of all the taxes paid. If taxes are going double who do you think they are going to go up on? The bottom? Do you disagree with his assessment?
Do you believe he has gone into life insurance sales and that fuels his comments?
You are great at sharing your opinion and throwing some humorous sarcasm in for added flavor. However my fear is that people who read your blog are not seeing a doctor playing financial advisor in his spare time. As you know people can make some real bad decisions by just taking someone’s word for it. Unless that person is in a position to give the most critical and accurate advice possible I seriously ask you to not make such definitive statements.
You make some valid points about one’s income being lower in retirement, yet you don’t mention the numerous deductions that won’t be available anymore that these same physicians have been using during their working years. If they have now paid off their home, where’s the mortgage interest deduction? If they are in retirement, where are the credits and deductions for kids that are no longer in the home? I assuming they are no longer contributing to that 401k anymore either?
You mentioned fear and yes I’m fearful but that’s my own sinful nature and I ask God to forgive me for that. I don’t use fear in my practice, I prefer hope. That is exactly why I don’t participate in things that I cannot impact and why I advise the dentists and doctors I work with to do the same.
Keep up the satirical blog!
I love that you think doctors get deductions for their kids. Have you spent much time looking at how taxes work for those in the upper brackets in their peak earning years? Even my mortgage interest is getting phased out.
If you truly believe your effective tax rate will double, then I suggest you tax gain harvest all your taxable investments and convert your tax-deferred accounts to Roth accounts right now at our apparently super low tax rates. Alternatively, you can go see a life insurance salesman to see what he recommends you should do, but don’t be surprised when he answers, “Buy more life insurance.”
Lol, I got on such a roll there I threw that child tax credit in without thinking it through. It’s a good thing I’m not doing anyone’s taxes. You were going to respond to why you disagree with the former Comptroller General’s comment that taxes will double? I’m sorry I got you on a rabbit trail, please proceed.
What do you mean by double? You mean that someone with a taxable income of $250K will have a marginal tax rate of 66% Federal? I suppose I disagree. If I didn’t I’d be doing a Roth 401(k) and I would have converted my old 401(k)s to Roths and I haven’t done that.
I didn’t say they would double, David Walker (former Comptroller General of the US) said they would have to double. You say?
Please don’t respond to this paragraph b/c I really want you to focus on the above, but for those interested marginal rates are lower since WWII but they are higher than they were in 1988. Almost every time our government has lowered brackets they have taken a deduction or credit away. This is just a game for the unintelligent. We don’t have many more deductions left so what do you think will follow? Betting on the market when it’s at is highest and betting on tax rates to stay low when they are at their lowest seems naïve. Read the Power of Zero.
One last rhetorical question. When the government creates a problem (onerous taxation) and turns around and grants you an exception to the problem they created (401k, Roth IRA, etc) don’t you feel just in the slightest that you are being manipulated? If they wanted to give you a tax break wouldn’t the easiest thing be to do away with the tax?
After responding to the 1st paragraph I would like to hear your thoughts on this. Your previous comments revolved around the use of government created plans 401k & Roth IRA’s. Are you not suspicious at all of their mismanagement of funds to question whether or not you should be participating in their programs? You don’t have to look very far to find governments who have confiscated pension plans to wonder when will it happen here. Do you just feel it will be after your lifetime? You are pretty young though, right? I’m truly interested in your opinion and hope you will expound past the insurance sales fear created shtick.
I’ve read and reviewed The Power of Zero and thought it was a terrible, fear-mongering book written by an insurance agent (who is actually somewhat distantly related to em.) More details here:
https://www.whitecoatinvestor.com/is-a-zero-percent-tax-bracket-in-retirement-a-good-idea/
I don’t pretend to understand why the tax code is like it is. I simply look at the rules and make my decisions accordingly. If/when the rules change, I’ll change my strategy. If one of your main concerns with your finances is that the government is going to take all your money, then I suggest you bury a big stack of gold in your backyard and buy some AK-47s with plenty of ammo. If you’re a little more realistic, you’ll realize that there are far more significant things to spend your time worrying about.
Inflation is a form of taxation, and a far easier one for the government to use to deal with its debts. I’d focus on making sure your portfolio has sufficient returns to keep up with it much more than I’d worry about confiscation of assets through hyperaggressive taxation or outright seizure.
Thank you for your opinion and response.
I don’t know if you have kids or if you do if they are old enough to be in school yet or not. I just finished reading this article and thought it might be worth your time to read given our discussions.
https://exodusmandate.org/public-schools/top-five-reasons-not-to-send-your-kids-back-to-public-school
That wasn’t worth my time. My children attend the 3rd best elementary school in the state (by test scores) where the vast majority of the kids, teachers, and administrators just happen to be Christians (the point of the linked article being that “government” schools are evil). It’s a public school and far better than we’d do home schooling them. By letting some excellent professionals teach our kids math, reading, writing etc, it frees us up to spend our time and energy teaching them other things and contributing to our community in other ways (like volunteering in said school, further enriching the experience.)
I find home schooling at least as extreme as investing mostly in cash value life insurance.
I’m sorry you feel that way. I think investing in our kids lives is the most important thing we can do. If my kid isn’t good at math, reading, writing, etc. but knows and loves God we will have spent our energy in the best way.
Just for the record you cannot “invest” in a whole life policy. It’s a savings vehicle. Lumping it with other cash value life insurance plans confuses the average reader.
I agree investing in our kid’s lives is one of the most important things we can do. I disagree that homeschooling them is the best way to do that. I prefer a kid that loves God and is good at math.
I love how you guys try to pretend it isn’t an investment so that it doesn’t look so bad when put alongside real ones. Yet that is exactly how it is sold, even if that particular word is not used. Retirement savings = retirement investing.
A normal whole life policy can be looked at many ways but usually not an investment. Even an IBC policy is not as much an investment as it is a way to take over the banking and financing function in your life. At the end of the day if you have a loan with an outside company, or you pay cash for something, you’re leaving money on the table. You’re either paying interest to a 3rd party or dealing with lost opportunity cost by paying cash. Simply by financing the vehicles and other things I buy through my own banking system, I am ahead of anyone else doing it any other way. Period.
To be fair WCI, a lot of that is regulatory. The insurer takes your premium, invests it in the GIA, gives you interest credits. It then gives you policy “enhancements” in the form of dividends which the IRS legally writes up as “return of premium” (inexplicably even after dividends exceed premiums) because insurers convinced them that that’s what it is.
In the days of endowment contracts, it was pretty transparent. The thing was an investment contract.
Today, everyone sees through this with WL, but no one is legally allowed to call a spade a spade because it means no tax benefits and our tax system is really screwed up. But, that’s an entirely different discussion.
Still lumping things together. I don’t compare returns. It would be unfair for me to compare the guarantees in a WL policy against something with a guarantee of 100% loss.
Knowledge doesn’t equal Understanding.
Watch this video to prove it.
https://www.youtube.com/watch?v=MFzDaBzBlL0
I can read all I want about medicine and trauma but I won’t have an understanding of what you do until I work in an ER and see the first hundred cases, maybe more. That knowledge will not give me understanding.
If you haven’t noticed this is about more than life insurance, commissions, rates of return, fear, whatever other insignificant point that has been made.
This is about CONTROL.
Banks, Government schools, Government Tax Qualified Plans were created to control you.
It’s crazy to me that people as smart as you don’t see this.
Ooooh Kay…..Let me see if I can find my tinfoil hat around here somewhere.
I think it is pretty fair to give that blanket statement of “taxes HAVE to go up” because it’s obvious to me, and should be obvious to anyone in the financial business. They have always gone up, with mounting debt, there is no where else to get the money. They going to start taxing welfare recipients? Nope, just as always the higher tax bracket will carry the burden and the country. So if you are not taking taxes into consideration for your clients, you are doing them a huge disservice.
I don’t believe anyone here, including live insurance salesmen are saying that life insurance is the only answer. It is however a great option and in my opinion should always be used in any serious plan set forth to a certain level of client. Do they put 100% of their wealth into it? Not my decision to make, and most probably wouldn’t. But if done right an IBC policy can and will take care of many of the financial needs/risks that top tier tax payers have.
You’re still talking in generalities. When you say “taxes have always gone up” you don’t say what you mean by taxes. I presume this is due to a lack of understanding of the tax code. If you mean tax rates have always gone up, you’re misinformed. In fact, marginal tax rates have continued to fall since WWII. https://www.richardfitchen.com/wp-content/uploads/2015/01/US-Income-Tax-Marginal-Rates-copy.png
So I assume you mean something else when you say “taxes have always gone up.” Please inform the readership what you mean.
Regarding life insurance, I would say that life insurance not only is not “the only answer,” it isn’t even part of the answer for the vast majority.
I like that you hold my posts for 8 hours until you have time to respond to them. Convenient. I am speaking in generalities because generally it’s all the same isn’t it? Taxes go up. Period. It’s not that difficult to see or understand. Was there even a federal tax code when life polices were created? Nope. Did this country still run just fine, yep. Everyone from middle income families on up will continue to pay more in taxes. Period. I’m pretty disheartened at your failure to run this blog transparently. See you in the morning when you release this post with another diatribe immediately after it.
None of this is “salesman speech” or rhetoric to sell more life insurance, it’s factual and you disputing it is either really ignorant or really arrogant, I haven’t decided yet. Were not even talking about a normal whole life policy to pass down wealth from generation to generation either. Were talking about a fund set up that provides protection from creditors, tax benefits, and cash flow. All of which Doctors, lawyers, etc can benefit from. If the day comes that you’re driving down the road, you look away from the road, and you hit and kill someone you can and probably will be sued for everything you have and likely everything you will have. Thankfully I live in a state where the cash value in my life policy is protected and cannot be seized. I could go on for days but you will continue to hold my posts, continue to argue with me and continue making comments like the one above. I’m not sure if you’re trying to deceive your readers here or if you just don’t know better. Have you ever sat down and spoken with a certified IBC professional? Have you attended a Nelson Nash seminar? I’m not talking about some quack that sells life policies because he wants a commission. I’m talking about the half dozen professionals in this country that honestly care about their clients and their well being and do the very best for them and if a commission comes from doing their job and making sure they are taken care of, just a bonus. There are good honest people in the business out there yet you seem to believe they are all just a bunch of greedy scum looking for that check. Being that cynical, I wish you luck in life.
I hold all posts of people I find misrepresenting themselves on the site. If they do it twice, I just block them so I don’t even see them.
It’s not all the same. If you’re saying “tax rates have always gone up” that’s not true. Tell me what you’re actually saying and then we can have an intelligent conversation about it. But “taxes are going up” is just a scare tactic.
So you think all but 6 insurance agents in the country are quacks? Even I’m not that cynical!