Today we continue our series on whole life insurance. This week we've learned how whole life works and that it isn't great insurance or a great investment. Yesterday we learned that whole life insurance isn't a great asset class, isn't the best way to save on taxes, isn't the best tool for estate planning, doesn't offer perfect asset protection, and is a lousy way to save for college. Today, we'll explore 5 more myths used by insurance agents to sell whole life.
Myth # 10 Whole Life Is A Luxury You Want
Insurance agents will occasionally fall back onto this argument when it has been pointed out that a client doesn't really have any kind of a need for a permanent death benefit. They admit that the client doesn't actually need whole life insurance. Then they try to sell it based on having it as a status symbol or luxury. “Sure, you don't need it, it's a luxury.” A luxury is by definition something you don't need. I prefer my luxuries to be something that I really enjoy. So before buying whole life insurance as a luxury, ask yourself, “What do I really enjoy?” If it is owning whole life insurance, fine, buy some. But I bet most of us would prefer a luxury such as a nice car, a cruise with the grandkids, or perhaps a donation to a favorite charity.
Myth # 11 Whole Life Lets You Spend Down Your Other Assets, Providing Valuable Flexibility In Retirement
Whole life isn't the best way to ensure you don't run out of money, annuitizing some of your assets is. Whole life isn't the best way to deal with the second to die issue, properly structuring pensions and annuities is. Whole life agents like to come up with retirement scenarios that make you feel like you have to own or at least want to own permanent life insurance, especially for a married couple. For example, they'll talk about a pension that only pays out until the working spouse died. Or they'll talk about annuitizing some portion of your assets based on the life of only one member of the couple. Then they'll suggest that the proceeds of the whole life policy be used for living expenses by the second to die spouse. There is no reason to use a whole life policy in this way. If you want your pension to last until you both die, then select that option. If you want your annuity to last until you both die, then choose that option. Yes, it will pay out at a slightly lower percentage, but the difference between payouts is less than the cost of a whole life insurance policy that would cover the loss of that pension. It simply isn't the right solution to the problem. Does whole life insurance provide some flexibility in retirement? Sure, but the cost for that flexibility is too high.
Myth # 12 Whole Life Is A Great Way To Buy Expensive Stuff
Whole life isn't the best way to buy expensive stuff, saving up for it is. There are some really creative insurance salesmen out there advocating for systems such as Bank on Yourself or Infinite Banking. The basic scheme is this- by structuring your policy appropriately with paid up additions, you get a lot of cash value into your policy in the early years, such that you break even in 3-4 years rather than 8-15 years. You also buy a policy that is “non-direct recognition.” This means that when you borrow from the policy, the insurance company continues to pay dividends on the amount that was in there before you borrowed it out, so the policy dividends essentially cancel out the interest payments due on the loan. Now, rather than going to your savings account or to a bank to borrow money when you need a car, a refrigerator, or an investment property, you borrow from your whole life policy at essentially no cost. Further, the cash value in the policy that you don't borrow will grow faster than the money in a savings bank.
So what's the problem? The problem is that you have to buy a whole life policy you don't need. You might break even sooner than you would with a traditional policy, but there are still several years of negative returns and in the long-term, the same low returns. Is it better to earn 4-5% a year after 5 years or earn 1% a year starting in year 1? Well, for the first 6 or 7 years you're better off with the 1% a year savings account. Also, if interest rates go up from their historic lows, you're still locked in to this system for the rest of your life. It wasn't very long ago that I could get over 5% from a money market fund. It also seems to be very easy to finance a car at a dealership at extremely low interest rates. 0% or 1% are not uncommon. You're better off borrowing from them at 1% than from your policy at 5%. It's a similar issue with appliances and mortgages. You go through all this effort so you can borrow from yourself, then realize it's cheaper to borrow from someone else. Finally, if you don't need to make a purchase for 5 or 10 years, you've got time to invest in something likely to have a much higher return than a whole life policy. Are those who bank on themselves being scammed? Not necessarily, but they're generally oversold on the benefits of their scheme. Its advocates are primarily insurance agents looking to increase sales through creative marketing. Saving up is simply a better way to make big purchases than buying a whole life policy.
Myth # 13 Really Rich People Or Businesses Buy Whole Life Insurance So You Should Too
Whole life advocates, particularly those who advocate using your policy as a bank, like to point out that lots of very wealthy people and lots of businesses (including banks) actually buy whole life insurance. While true, it is irrelevant for the typical person. Big businesses don't have access to the tax-saving retirement account options that a middle class individual does. Ultra-wealthy individuals have already maxed these out. When you have far more money than you can ever need, the return on your money doesn't matter as much. Bill Gates can afford to invest in something that provides returns of 2-5% because he doesn't need his money to work very hard. That's simply not true for the vast majority of middle to upper class people, including doctors. As discussed above, ultra-wealthy people also have more use for the limited estate planning benefits and asset protection benefits of permanent life insurance. In short, the low returns inherent in whole life are much less of an issue for them than they are for you.
Myth # 14 You Should Buy Whole Life When You're Young
Whole life salesmen like to point out that whole life is a lot cheaper if you buy it when you're young. While it is true that the premiums are lower if you buy a policy at 25 than if you buy it at 55, once you take into account the time value of money and the fact that you'll pay the premiums for 3 extra decades, it isn't any better of an investment at a young age than at an older age. Actuaries are very intelligent people, and for a risk that is relatively easy to model, like death, they can price insurance quite efficiently.
Aside from the lower premiums, there are two other reasons why it seems better to buy it when you're young. First, that commission is spread out over more years, so it has less impact on your overall returns. But the alternative of not paying the commission at all is far more attractive. Second, it's possible that you will either become less healthy or take up some dangerous sport later in life. This is one of the serious downsides of using life insurance as an investment- not everyone can use it. Either they don't qualify for it at all, or the price of insurance is so high that the returns on the investment are even lower than they would otherwise be. I don't see that as a reason to buy it when you're young, I see it as a reason not to buy it at all. Can you imagine if Vanguard sent a paramedic out to your house to draw blood prior to letting you buy their S&P 500 fund?
Tomorrow we'll talk about 4 more of the myths of whole life insurance, but for now, let's talk about these five. Agree? Disagree? Comment below! Please reference which “myth” you're referring to in your comment and keep comments civil and on topic. Ad hominem attacks will be deleted.
I’ve been enjoying your newsletter and the recent series on whole life.
Perhaps in the next letter in this series you’ll provide some suggestions for those of us who made the mistake of buying a “permanent” lift policy.
I made the mistake if buying a 1M$ policy for myself and a 1/2M$ policy for my wife 8 years ago. Once I realized what a mistake this was, I needed to sort through the policy rules and restrictions to figure put my exit strategy. To quit the policy instantly would have lead to me losing about $20k in cash value (actually, I think even more).
My policy allowed you to quit at 10 years without a surrender fee. It also allowed us to reduce the face value every few years and to reduce the monthly payment to an amount that only covered the insurance cost.
Now, the policies have face values is $500k and $250k, low monthly cost, and in 2 years I’ll get about $40-50k back out.
Meanwhile, they still take 5% of any of my payments and the investments continue in relatively high expense mediocre mutual funds. Grrrrr…, but at least I’ll be out in 2 years (make that 21 months and 8 days – counting down).
That doesn’t sound like a whole life policy, it sounds like a variable universal life policy. Whole life cash value isn’t invested in mutual fund-like accounts. Holding on to a policy waiting for surrender charges to go away isn’t necessarily the best move. Surrender charges are a little bit like a “back loaded” mutual fund. They get the load one way or the other, either out of higher expenses as you go along, or if you don’t go along far enough, as a surrender charge. You always have to run the numbers. In general, if you’re going to get rid of a permanent life insurance policy (not always the best move, especially if you’ve had it ten years or more), earlier is better.
Indeed – my inaccuracy – it is a VUL. In my mind I was thinking of them as the same, when they clearly aren’t. But the similarities stand: Generally the same “myths” are used to sell the policies, they have high expenses, and, in the end, not a great device (IMHO).
Meanwhile… It still makes since for me to wait this one out (I think). In exchange for the ongoing fees/expenses, I’ll end up getting the cash out soon. better to keep paying small amounts now than pay $20-25k in surrender charges.
Thanks again,
DK
I think with variable annuities there is a way of trading to a lower cost company like Vanguard. Wouldn’t it be nice if one could trade a high cost insurance policy to a lower cost provider. I think that Ameritas has “no-load, or low-load” insurance policies. I doubt though that the original insurance company would allow a trade to be done.
You can absolutely trade it. However, that generates a new commission….so in some respects you’re starting over. You can also trade a life insurance policy for a VA (such as at Vanguard) or even a long term care policy.
Dave,
Sorry to hear all the outrageous expenses that you have had to pay. My suggestion is to check with this guy. You just need to pay a small fee, but you will get an invaluable advice on your insurance plans. He is a trusted adviser and nationally renowned critic on this subject. Good luck.
http://www.peterkatt.com/index.html
Thanks for your continued great advice. I’m a new grad and just purchased Term life insurance. My agent wants to eventually convert it to a “cash savings policy”. Is that a version of whole life? If not, any thoughts on the cash savings policy?
It sounds like whole life to me.
WCI:
I just finished residency and am new to financial matters. I have had two separate advisors try to sell me on whole life. One plan by Northwestern Mutual was advertised as 18000/year policy with a death benefit of 1.214 million. 25 years of premiums and dividends puts the death benefit to 1.992, although it takes 11 years before the death benefit grows more than the to date premium payments. 15 years of just dividends ends at 2.346 million.
The idea is tax free loans can be taken out against the death benefit to supplement retirement and keep to a lower tax bracket. Now the death benefit will suffer, but ideally most of the drawing occurs in the late 60’s and 70’s where a high death benefit payout is not necessary. Secondary, if the market dips while in retirement a loan on the death benefit could replace 401k withdrawals while traditional investments recover in the market. I’m being told this is based on an approximately 5% return, not 2% which is not as bad when compared to conservative portfolio’s.
I suppose the question I have is, am I getting unrealistic projections from a salesman or am I missing something in how WL works?
Did you read this entire series? Everything you’ve brought up is addressed in it. Yes, you can borrow tax-free (but not interest free.) Yes, you could spend from life insurance while “the market” recovers. But the fact is if you invest in something with low returns, there will be less money to spend later. Make sure when looking at illustrations that you’re looking at the GUARANTEED column. While you’ll probably do better than that, the projected column is almost always too optimistic.
I see little reason for a doctor just out of residency to buy cash value life insurance, especially from NML. But do what you want. Just don’t come back here in a few years looking for this post:
https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/
This has been a very interesting series, thanks.
I’m trying to think through another approach to whole life which is somewhat related to Myth 11, but I think could deserve its own category if you so deem it.
We have the annuity puzzle that economists cannot understand why individuals seem so averse to buying income annuities and missing out on the mortality credits.
But what if the whole life policy could give someone the behavioral push to go ahead and buy an income annuity since they know that the death benefit would cover this loss of assets on the balance sheet used to buy the annuity. Thus, whole life is a behavioral finance tool to nudge someone into an income annuity.
Then, as well, there is the issue you are addressing that a couple could then get a higher payout by buying a single life income annuity instead of a joint life, as the proceeds from the death benefit could later be used to buy another single life income annuity if necessary. It seems for a conservative individual who may not otherwise be willing to assume a high return on their investment portfolio, the boost in spending power with the single life annuity could counterbalance the losses from expenses paid into the life insurance.
I’m not sure if this makes sense though. I’m just starting to try to think about it and would appreciate any feedback you have, and hope to see you again this year at Bogleheads. Wade
Wade, it’s good to see you on the blog and thanks for your work in this important field. I don’t know if I’m going to make the Bogleheads meeting this year. We’ll see.
There is no doubt that insurance based solutions can be an important part of an investing/saving/retirement plan for someone who is very risk-averse. The problem is that sometimes the solution isn’t to allow someone to be risk-averse but instead for that person to “suck it up” and realize that in avoiding market risk he is really increasing the risk of not meeting his goals/running out of money in retirement. Education and a realistic assessment of ALL RISKS an investor faces can go a long way. If they’re still risk-averse, well, they’ll have to suffer the consequences of that- working longer and/or spending less during the working and retirement years.
Depending on the numbers, it may be better to get a SPIA on a single life annuity + permanent life insurance vs a SPIA on both lives. You’d just have to run them. Probably get a different answer for different folks depending on ages, medical conditions, insurance company used etc.
Claiming behavioral reasons for buying whole life seems a bit of a stretch to me, but I’ll buy it. I have no doubt that some people need the forced savings aspect of a whole life policy, just like a mortgage. Far better to buy whole life than to blow your money on hookers and coke.
If people want to leave money behind, life insurance can be a great way to do that. But it’s not like there’s something magic about it. Those guarantees cost money. Someone is more likely to leave more behind (and just as income tax-free as life insurance thanks to the step up in basis) using boring, run of the mill index funds as some exotic permanent life insurance product. It’s pretty easy to stay the course when it isn’t your money that’s being lost with market volatility. It’s like my 529s. Doesn’t bother me a bit to see them go down in value and my kids don’t watch them.
Thanks for the feedback!
I’ve been talking with a couple whole life agents. Originally, it was about them trying to explain to me how whole life insurance can be used as part of a retirement income strategy. But it has since evolved into trying to sell me a whole life policy. Over the weekend I tried to estimate my remaining life insurance needs (as I do know I need more than I have) and I’m coming to the conclusion that a few term policies are all I need. I shouldn’t require any life insurance after at most about 15 years from now, in terms of having sufficient assets to cover the remaining lifetime expenses of my family. The pricing differences between term policies and whole life policies are quite stark!
Hello,
Three years ago my wife and I bought whole life insurance policies. We were in our late twenties, both doctoral students (in the humanities, knowing nothing about finance) and came in to some money through inheritance. The insurance salesmen convinced us that whole life was exactly what we needed, and we agreed to policies with premiums of about $15k per year. In addition, the policies were structured with paid-up additions so the total we have put in is about $120k. The current cash value is roughly $100k. I never fully felt comfortable with the policies, but the salesman was known to my family and thought he could be trusted, which assuaged my doubts. After reading this, and some other online posts debunking whole life, I realize that we never should have bought into this. We are currently finishing our schooling and continuing to pay the premiums with savings, although we are committing much of that savings to other assets. Our agent tells us that in 10-14 years we won’t have to pay any more premiums because the dividends will cover them completely, or we can start to use the dividends to reduce the premiums in the next few years. My question: should we wait for that to happen and continue to pay in to the policy, knowing that it was a mistake but feeling like there is no better way out of it, or should we let the policy lapse now and take the $100k with the $20k loss? Thanks.
https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/
Hope that helps. Common question without a definite answer.
I was just sent this article from a client and I really got a kick out of #13. Don’t do what the wealthy do, do the opposite. I wonder when they audit the Fed how many billions of dollars of financial assets will they uncover that they have been buying with fake money to prop up the market? By the way, it would seem to me that the middle class guy would have more to lose gambling in the market than the ultra wealthy and not the opposite. I guess I’m just a life insurance agent and not smart enough to figure out all this high finance stuff. I cannot wait until you share another way we can invest our money in a government created account, since they have been so good with money over the years we should have nothing to worry about.
You’ve left 43 comments on this blog over the last 2+ years and this is the first time you’ve read this article?
Right?! On Tuesday I’m talking to 3rd and 4th year dental students as part of the Christian Medical Ministries Tooth & Truth. Inspired by reading your article here, my talk will be titled: Whole Life Insurance, The Only Thing You Should Buy……HaHaHa. No seriously, Whole Life Insurance, Someone Is Going To Try To Sell It To You, You Should At Least Know More About It. Too long of title? I’m just thinking they should at least learn about it from someone who actually owns a lot of it and why I only invest in things I can personally impact through the use of this savings tool.
Just what dental students need, someone preaching whole life at them.
I’m open for suggestions.
Over the last year we have been teaching them money management, practice management, how to create a brand, and how to correctly setup their entities each week in their Friday 8am Practice Management course. In addition to that class we mentor 10 students where we take a deeper dive helping them to: meet one-on-one with practicing dentists; learn to-do’s and not to-do’s; design an efficient office; communicate better with patients, etc.
I guess I felt like it would also behoove them to learn about a financial product in a non-sales environment to prepare them for the inevitable conversation with a financial advisor/insurance agent down the road.
You don’t think you would have benefited from someone teaching you the pro’s and con’s prior to buying that awful policy?
I just can’t think of any pros for a dental student considering the purchase of whole life. What they need to know about it at this stage in their career can be summed up in a single sentence.
I agree that most dental students have no need for a whole life insurance policy while in school. The purpose would be to prepare them for the conversation that will happen in the future. You do agree that the conversation will happen, right? Do you think they should be informed on what to ask and know prior to being in the conversation?
Yes and yes. But knowing what you think and feel about whole life from previous comments, I don’t think you’re the best person to be providing that education. Is any education better than none? I don’t know.
That’s funny, you almost had me going.
I’m really glad you have an awesome site that creates cash flow for you. To whom much is given, much is expected.
Have you ever made a list titled “how to identify an insurance salesmen in disguise based on these words…” where the most common phrased used by them would be “gambling in the market”. I noticed in every insurance salesmen comment throughout various posts, it has always been mentioned to create fear and exploit consumer ignorance regarding how capital markets work
That might make for an interesting post, but those of us who have interacted with lots of them can pick them out anywhere. Unfortunately, that’s not the case for many docs.
Russ,
You curriculum with the dental students sounds good.
That has been your most reasonable and least antagonistic post and, as a bystander, I’d like to say I’m glad to see it.
Yes, I wish someone had taught me more before I bought my “awful” policy (mine was a VUL, actually, but close enough in my book).
Thank you for your efforts with the dental students.
David
David,
Thanks for the feedback. Sometimes my passion gets in the way of better judgment. I need to meditate more on my fighter verse James 1:19.
VUL- I know a lot about those. I unfortunately sold and bought those too. The idea of getting your cake (stock market returns) and eating (tax benefits of life insurance) it to was just to tempting to pass up. Unfortunately they don’t tell you how average returns which are illustrated differ from actual returns effect the result of the accounts. When the market crashed in 2008, I realized I was not quite the financial genius I thought I had conjured up in my head. However, I wouldn’t change that experience for anything. It has led me to teach people about more sound money principles and not games of chance.
I shouldn’t poke at WCI as much as I do but the only reason I do is b/c I’ve been there. I have sat in more investment account meetings with fund advisors, analysts, and portfolio managers than I want to recall. They are well meaning but the truth of the matter is that they don’t know what’s going to happen. They are all living off the money that is pouring into these accounts, that goes for the index funds too. Nobody does it for their health.
WCI has a passion for teaching which I love and obviously has hit a nerve with the market. Unfortunately if it is all market based advice will it really matter if people save .50% on management fees when the bubble bursts again? I’m not saying the stock market is bad, I’m just saying understand it’s gambling or maybe worse and play accordingly.
Hopefully that wasn’t antagonistic. Not intended to be.
Shamelessly I will plug a Freedom Conference we are hosting next week on this very topic.
[Nope, you won’t-ed].
You have rather extreme views on stock market investing. If you can’t see the difference between the roulette table and purchasing shares in some of the most profitable businesses the world has ever seen, I don’t think you’re a great source of financial information for others.
I’m not trying to convince you to not invest in the stock market. However with the amount of derivatives being sold now compared to the 2008 crash, and the asset base of the Federal Reserve increasing 450% from 800 billion to 4.5 trillion without anyone being able to find out what they are buying. Yes I would compare investing in the stock market to roulette. Actually that would probably be unfair to roulette. In roulette (with an unlimited amount of money) you can eventually guarantee yourself from not losing by betting on the same color and doubling your bet. (Not advising anyone to try this).
Now you can’t. You have less than a 50% chance each time of getting red and less than a 50% chance of getting black. Your expected return on roulette is negative. Plus, eventually you’ll get enough black in a row that you’ll go broke and not be able to double your bet.
I don’t know why you think you’re not trying to convince me not to invest in the stock market. You’re saying it’s a lousy investment. I disagree.
I don’t know why you are always disagreeing with me. I didn’t say you were guaranteed to win money in roulette but I did say with an unlimited amount of money you can keep doubling your bet so you wouldn’t lose. Not sure how you disagree with that statement. Bet black and double until it hits black, at that point you are back to even. Unfortunately no company in the stock market you invest in gives you that guarantee.
I didn’t say investing in the stock market was a lousy investment. I do think buy and hold is a lousy strategy. I do think day trading for 99% of the public is dumb. There are always opportunities in the market. If you can find one buy it, take the winnings, and move on. However before I would ever invest in someone else’s business I would encourage them to invest in theirs.
I disagree with you because I view many of your views as extreme and you continue to post them on my website.
With an unlimited amount of money why would you be gambling in the first place?
I’m sorry I got us off on a rabbit trail. We didn’t get to hear your reasoning why the stock market is not gambling.
My opinion was based on fake money being printed and the government using that to buy financial assets. If accurate would make the current price of the market extremely overvalued. Secondly the derivative market which was the catalyst for the 2008 bubble has grown back and exceeded the 2008 volume.
3rd reason as to why to market is inflated. Corporate buy-backs. Companies are using low interest rates to go out on the open market and buy back its on stock. This means they are not producing anything but the higher demand creates a higher price.
In 1978, the government created the Revenue Act of 1978. A clause in this act gave birth to the 401k. In 1980 an executive at J&J started the first 401k and every major company followed suit. This gave the middle class guy a chance to invest in the stock market, before that only the ultra wealthy would have had a stock broker. It’s not shocking as to why the market over the next 19 years grew 1700%. This was obviously a good thing for the market. Using this 19 years in the last 115 gives you the 10-12% growth we have marketed to us. However subtract that period of time and it drops to less than 5%.
I’m not wanting to subtract that period of time. However I ask you and anyone reading this blog to consider, will the market have anything close to what happened in the 80’s & 90’s again? If so please share with me so I can learn.
I believe this 10-12% illusion has become so powerful that it is what drives the insiders to play games with EPS. That is why I believe investing in the market is gambling. I don’t think it was always gambling, I think like you it was investing in production of companies. Not anymore. Why do you think energy prices are so low? Companies aren’t producing as much, so they are not using as much energy. Supply and Demand.
If you prefer to invest in whole life contracts instead of the stock market, you are more than welcome to. You can also purchase investment real estate in your town or even start your own business. No one is making you invest in the stock market.
My entire investing career has been AFTER the 80s and 90s. And returns have been just fine to retire on. My 75/25 portfolio has made 8-9% returns, about what I expected. You are missing the forest for the trees. It isn’t about the market. It’s about what you can buy at the market. You get to buy shares of the most successful businesses the world has ever seen. You then own them. You then share in any profits they make both through dividend payouts and appreciation of value. A share of that business is worth precisely what someone else is willing to pay for it. If they’re not willing to pay as much as you think it is worth, you do not have to sell. If you feel the shares are being sold too dearly, you do not have to buy.
But this conspiracy theory that there is some nefarious force out there trying to cheat you out of your hard-earned money is a little silly.
“Fake money being printed” is a bit silly. Your “fake money” spends just as well as your “real money.” The flaws in this gold-buggish argument can be seen by looking at what happened when there was an economic downturn and “fake money” wasn’t printed. It’s called The Great Depression.
Second is your issue with the derivative market. It’s widely known that the 2008-2009 Global Financial Crisis was primarily caused by lending money to people for real estate that should not have been lended. Sure, those loans were bundled up into securities that eventually went bad, but at its root, the issue wasn’t derivatives.
Third, corporate buybacks increase shareholder value. Every time a corporation buys back shares, the value of the remaining shares goes up proportionally. That’s not the issue. Now corporations diluting their shares by giving them to executives as part of a ridiculous compensation package, that’s a problem. But corporate buybacks are the equivalent of a dividend, not some reason to go invest in whole life insurance instead.
Now, rather than criticizing and furthering your conspiracy theories, why not propose what you think readers should invest in so people can clearly see where you’re coming from and judge for themselves whether they agree with you or not.
Sorry for wasting our time.
You’re forgiven, again. I assume that means you won’t be posting what you think people should invest in instead of stocks?
It would be irresponsible of me to say what they should invest in without knowing their full financial picture. I don’t mind sharing what I do. I personally have 12 dividend paying life insurance contracts that I put about 25% of my income into per year. I use the cash borrowed against those to invest in Real Estate, Small Businesses, & Loans to 3rd parties.
What if those same small businesses go public? Do you sell the shares because they’re now part of the stock market?
Well played sir (slow clap).
I’m serious. At it’s root, the stock market is a collection of businesses. I mean, it’s a bit like a casino in that the house gets their cut every time you buy and sell. But if you walk in there, buy, leave, and don’t come back for 30 years, the house isn’t getting much of a cut. And those businesses you’re buying actually make money. And you actually share in the profits.
Guys, I’m stuck getting all the emails on these comments because I made an earlier comment. But White Coat Investor, at this point you are just feeding the troll. He keeps apologizing for wasting everyone’s time, and then keeps come back to continue wasting everyone’s time. Enough.
Wade, I agree. I stopped the conversation b/c it’s obvious we are not changing each other’s minds. I hope you and others will do your own research and determine who’s stance is more accurate and not take our word for it.
Sorry hit send to soon. Did you hear Ben Carson last night mention Corporate Buy-Backs and the Fed’s monetary policy as a reason for an over-valued stock market? If you are looking for financial advice from a doctor you might consider listening to Dr. Carson. Just sayin….
I’m pretty sure Wade (Pfau) will do his own research. 🙂
You might even be interested in it:
http://retirementresearcher.com/reading/
Wade- You’re probably right. Imagine if you were subscribed to all twenty of the whole life threads on the site! It would give you an idea of what I deal with.
Keep in mind that you can unsubscribe from any thread. Each emailed comment should include an unsubscribe link. I can do it manually if you need me to.
I have a comment for everyone. There are two things that a retiree is concerned when he or she is retiring – income and health. All this debate about the best investment of money to provide income during retirement is to me half baked – because it is only concerned with the income problem. As a financial adviser one should think of the whole person’s needs. All this arguments fail to consider the health part of the retiree’s needs. How will investment in stocks,ETF, index funds solve the long term care problem of my clients. One year in a nursing facility and all your gains are gone. If you bought term insurance will that solve that need. To date, in the market, only life insurance is solving the long term care problems of retirees. Of course, you may want to spend down all your assets to avail of Medicaid. Or maybe use your house equity. Permanent life insurance has long term care riders to help with the problem There are even life insurance hybrids that provide long term care for life. So i believe at least for that reason life insurance is something that a financial adviser worth his salt should advise.
Ummmm…..that’s a terrible argument to buy whole life insurance. So bad that it’ll be included in the next update of this “myths” series. There are at least TWO other (and I would argue BETTER) ways to pay for LTC.
# 1 Just use your assets. This is what I plan to do. I mean, if you’ve got $200K in retirement income and it costs $80K a year to put one spouse into a nursing home, what’s the big deal? Even if you’re paying $100K a year and you’re in there for a decade, that’s still only a million bucks. Self-insuring that is very doable for many docs. And if you’re single….you use up your assets and then go on Medicaid, no biggie. You probably won’t even know where you are by the time your assets are gone and you probably won’t even have to change nursing homes. If you’re a doctor and can blow through all your gains in one year in a nursing home, you really blew this whole investing thing.
# 2 Long term care insurance. Not even close to perfect, but I’d go there before buying a whole life policy for LTC needs.
Given this recommendation, I’m having a hard time believing you’re even a real financial advisor and not a whole life salesman masquerading as one. Easy thing to figure out though, all it takes is the answer to this question:
Do you receive commissions for selling whole life insurance?
What about a Universal Life Policy? Me and my husband got one 3years ago. Paying $330/month combined for $500k each death benefit. Is this the same as whole? I know that our policy accumulate cash value as well.
We have 2 young kids, Im guessing Term Life Insurance would be a good option as well?
Glad to stumble on this article!!! Thank You 🙂
What about it? Why did you buy it? I’m not hearing some permanent need for insurance. In some ways, a universal life policy is worse than whole life insurance as the cost of insurance goes up each year so many elderly folks find themselves having to feed the beast in their golden years to keep the policy from collapsing.