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Inappropriate Whole Life Policy of the Week

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  • Craigy
    replied




    You will never stop them from trying to sell this so I wouldn’t even bother asking agents to do differently. You can only try to educate to prevent people from falling into the trap. Even with education, it’s an uphill battle.
    Click to expand...


    Sucker born every day.  And one that graduates from medschool every day  

     

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  • The White Coat Investor
    replied




    You will never stop them from trying to sell this so I wouldn’t even bother asking agents to do differently. You can only try to educate to prevent people from falling into the trap. Even with education, it’s an uphill battle.
    Click to expand...


    I can still yell at them.

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  • PhysicianOnFIRE
    replied
    Meanwhile, the S&P 500 is up just over 100% over that time period (with dividends reinvested). Shameful.

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  • Inappropriate Whole Life Policy of the Week

    This could be a regular column. This one via email with enough details obscured to maintain privacy:



    My spouse and I are both physicians, W2 employees in academics.  We are at a loss (quite literally) at what to do with a whole life policy we purchased right out of residency.  I have read many of your blogs and read your book, and both of these have really changed the way we handle our finances.  Unfortunately, we got the policy before I started following the WCI.


    We purchased the policy in 12/2011 and the annual premium is $10,800. The plan for this policy was to use it as an alternative source of money for retirement.  It currently has a cash value of $32,000, so we are approximately $22,000 under what we have paid in.  I just had my insurance provider send me updated tables for the policy, and it looks like we won't break even until year 11 (in another 6 years).


    We already max out our pretax retirement options, including two 457s and a state bonus account. We do not do the backdoor Roth, but it is something I am considering.  We contribute to a taxable account via Vanguard, and I would likely increase these contributions if we got rid of the whole life policy.  We have a fair bit of loans left but the rates are 2-3% and will be paid off in 5 years if we do not change the payments.  Only have one 15 year mortgage.  No credit card or car debts.  I really dislike the policy but have already committed five years of payments.  I am having a hard time deciding if taking a 22K loss is worth regaining 10,800 each year for other investments.

    So, for those following along at home, the return on this is a cumulative -47%, or -8.8% per year. Sold to brand new attendings who not only aren't maxing out Backdoor Roths, but still have student loans. That's basically financial malpractice. 11 years to break even, and that's not even guaranteed. They've lost $10K in real money, plus opportunity cost of at least $5K but possibly as much as $20-30K.



    INSURANCE AGENTS- Stop selling this crap to doctors!



    DOCTORS- Stop buying this crap! If you already have, read this post: https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/
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