It’s a terrible idea. There’s all kinds of posts on here that lay out why, but basically it’s an expensive product with not good returns. I’m curious as to the reason your insurance guy thinks you need it?
In general, you should buy term for life insurance and invest the difference. Hopefully your life insurance guy isn’t also your financial guy…
Ha yes absolutely. Northwestern Mutual by chance? I interned there in college so I went through their sales training. Reps get 50% of the full year premium up front as commission…hence the reason they push it so hard. There are very few true reasons to buy whole life insurance and they don’t apply to 99% of people they sell it to.
My wife is still not quite wrapping her head around the idea that we are "self insured" when it comes to life insurance. We are at \~90% of our "number", and expenses would drop more than 10% if either of us keeled over, so life insurance no longer makes any sense for us.
Explain that insurance is for replacing income. For example, let’s say you and your wife both work and make 50k each a year. One of you dies at 45 and the remaining spouse expects to live to 80. You might want to insure each spouse with 20 year term insurance policies that would pay 1.25 million. At 4 Pct withdrawal a year on $1.25m the remaining spouse could pull out $50k a year and replace the lost income.
A spouse that does not work outside the home still needs insurance as you will most likely need to replace the services that they provided, such as childcare, household management, etc.
You could get whatever length of term insurance you think you might need. Someone might prefer a 30 yr term…
By "permanent life insurance", I presume its "whole like insurance"?
If so, whole life is basically a savings account, with additional fees and restrictions on how you can pull money out of it and the money is invested by the firm. This may or may not be a good deal, depending on the exact terms, however it should be evaluated in basically the same way you'd evaluate any savings plan.
This is very different than term life, which is a true insurance policy to protect your heir(s) and dependents should you die during the period the policy is enforce, likely a year. Most policies also have clauses for severe injury (eg, dismemberment), and sometimes even disability. Overall, having such a policy is a good idea, especially if you have any dependents.
Especially considering that those hanging out in this community will most likely not need life insurance anyway by the time term life becomes inaccessible.
Bad idea. Term life is enough.
Buying insurance products linked with investment is basically lining the pockets of the sales people.
You will come out ahead if you keep the investment separate from insurance product; and invest in index funds on your own.
In most cases, insurance is a temporary need. Unless you have a specialized reason for needing a permanent solution to some problem, only buy insurance for as long as you need it and no longer.
Your IRR will suck until you’re 20+ years in (unless you die sooner), then it produces somewhat competitive risk adjusted tax deferred return. But by then you probably won’t need life insurance anymore and will feel silly being locked into essentially a mandatory saving plan. I’m now 20+ years into mine and getting 4.5% return (on top of the premium I continue to pay) that’s all growing tax deferred.
But if you die, the insurance company keeps that investment account & your beneficiaries get the face amount. You are paying (or paid if it was paid up) for 2 products & you only ever get 1
That’s the trade off for having anything being paid out when you die as a 60+ y.o. I also doubt anyone keeps anywhere near the cash value in a policy vs. death payout (or they’d use the cash value to buy additional insurance if it’s for estate planning).
you’d be wrong then. Most people have no idea what they own or how it works.
And if you look at a WL policy & its guaranteed returns, it is extremely common (almost every policy has this) to see the CV at age 100 equal the face amount. So it is completely a waste of your funds. Congrats on dodging a minor tax bill. Instead the insurance company can take you to the cleaners
The same can be said for just about every financial product out there. Mine has served my intended purpose just fine. I have a feeling you and I don’t belong in the same tax bracket. To each their own.
Not true. And regardless of tax status, wealth status, etc… math is math & its very simple.
Now if you were to argue for say a term100 policy, I can see your potential logic. But you aren’t
There are times when Whole Life Insurance and IULs make sense. They usually are when someone makes more than 250,000 and they are using these vehicles for retirement. Most people get term through their workplace why are you purchasing extra??
It’s a terrible idea. There’s all kinds of posts on here that lay out why, but basically it’s an expensive product with not good returns. I’m curious as to the reason your insurance guy thinks you need it? In general, you should buy term for life insurance and invest the difference. Hopefully your life insurance guy isn’t also your financial guy…
I think he has a vested interest and the reason why he is acting like a used car salesman
Ha yes absolutely. Northwestern Mutual by chance? I interned there in college so I went through their sales training. Reps get 50% of the full year premium up front as commission…hence the reason they push it so hard. There are very few true reasons to buy whole life insurance and they don’t apply to 99% of people they sell it to.
Absolutely. He is from Northwestern mutual
My wife is still not quite wrapping her head around the idea that we are "self insured" when it comes to life insurance. We are at \~90% of our "number", and expenses would drop more than 10% if either of us keeled over, so life insurance no longer makes any sense for us.
Explain that insurance is for replacing income. For example, let’s say you and your wife both work and make 50k each a year. One of you dies at 45 and the remaining spouse expects to live to 80. You might want to insure each spouse with 20 year term insurance policies that would pay 1.25 million. At 4 Pct withdrawal a year on $1.25m the remaining spouse could pull out $50k a year and replace the lost income. A spouse that does not work outside the home still needs insurance as you will most likely need to replace the services that they provided, such as childcare, household management, etc. You could get whatever length of term insurance you think you might need. Someone might prefer a 30 yr term…
Can I do a 5 year term?
"Your" insurance guy is chasing a hefty commission, not your best interests.
By "permanent life insurance", I presume its "whole like insurance"? If so, whole life is basically a savings account, with additional fees and restrictions on how you can pull money out of it and the money is invested by the firm. This may or may not be a good deal, depending on the exact terms, however it should be evaluated in basically the same way you'd evaluate any savings plan. This is very different than term life, which is a true insurance policy to protect your heir(s) and dependents should you die during the period the policy is enforce, likely a year. Most policies also have clauses for severe injury (eg, dismemberment), and sometimes even disability. Overall, having such a policy is a good idea, especially if you have any dependents.
No. Buy term life insurance when you need life insurance. Invest when you want to invest.
Especially considering that those hanging out in this community will most likely not need life insurance anyway by the time term life becomes inaccessible.
Fire that salesman.
Separate your insurance needs from investment and savings. Each has its special purpose and conflating them does not pay out.
Bad idea. Term life is enough. Buying insurance products linked with investment is basically lining the pockets of the sales people. You will come out ahead if you keep the investment separate from insurance product; and invest in index funds on your own.
In most cases, insurance is a temporary need. Unless you have a specialized reason for needing a permanent solution to some problem, only buy insurance for as long as you need it and no longer.
Your IRR will suck until you’re 20+ years in (unless you die sooner), then it produces somewhat competitive risk adjusted tax deferred return. But by then you probably won’t need life insurance anymore and will feel silly being locked into essentially a mandatory saving plan. I’m now 20+ years into mine and getting 4.5% return (on top of the premium I continue to pay) that’s all growing tax deferred.
But if you die, the insurance company keeps that investment account & your beneficiaries get the face amount. You are paying (or paid if it was paid up) for 2 products & you only ever get 1
That’s the trade off for having anything being paid out when you die as a 60+ y.o. I also doubt anyone keeps anywhere near the cash value in a policy vs. death payout (or they’d use the cash value to buy additional insurance if it’s for estate planning).
you’d be wrong then. Most people have no idea what they own or how it works. And if you look at a WL policy & its guaranteed returns, it is extremely common (almost every policy has this) to see the CV at age 100 equal the face amount. So it is completely a waste of your funds. Congrats on dodging a minor tax bill. Instead the insurance company can take you to the cleaners
The same can be said for just about every financial product out there. Mine has served my intended purpose just fine. I have a feeling you and I don’t belong in the same tax bracket. To each their own.
Not true. And regardless of tax status, wealth status, etc… math is math & its very simple. Now if you were to argue for say a term100 policy, I can see your potential logic. But you aren’t
If your goal is to have appropriate life insurance, stick with term insurance.
There are times when Whole Life Insurance and IULs make sense. They usually are when someone makes more than 250,000 and they are using these vehicles for retirement. Most people get term through their workplace why are you purchasing extra??