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Old 04-23-2013, 06:06 PM   #21
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Why not take full spouse benefit option? That way she would not be in a bind. The amount would be lower, but she would also get hers, and both together might equal choosing a 10 year option?

Also to clarify, the agent "only" gets 60% the first year, on each policy year after, typically they will get 11% commission on new monies, and a 5% or so retention bonus on the entire policy. Lots of folks on here rip on FAs for compensation, but there is REAL MONEY to be made in life insurance..........
That is what I would have done, and left it at that. But he is trying to leave assets for his children, and didn't think they could save as much on their own as a life insurance would give them. The full option would have dropped his pension close to $1000 a month, coupled with the fact he is paying 2k a month into policy, would have left them with little extra money to enjoy retirement on a monthly basis. I don't think he is familiar with the power of compounding interest. As, I showed him if he took the same $2k and invested it in stocks assuming just 4% return, he would have more money than the base guarantee death benefit, plus being in control of his money. Then I showed him how much more that was compared to the "surrender value". The difference is that was almost double! Very shocking to him... I don't think he realizes the guy is a salesmen, not a financial advisor. I think if he walked in their to the agent saying he wanted every extra penny put in that policy plus money he borrowed, the agent would have set him right up without question!
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Old 04-23-2013, 08:03 PM   #22
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That is what I would have done, and left it at that. But he is trying to leave assets for his children, and didn't think they could save as much on their own as a life insurance would give them. The full option would have dropped his pension close to $1000 a month, coupled with the fact he is paying 2k a month into policy, would have left them with little extra money to enjoy retirement on a monthly basis. I don't think he is familiar with the power of compounding interest. As, I showed him if he took the same $2k and invested it in stocks assuming just 4% return, he would have more money than the base guarantee death benefit, plus being in control of his money. Then I showed him how much more that was compared to the "surrender value". The difference is that was almost double! Very shocking to him... I don't think he realizes the guy is a salesmen, not a financial advisor. I think if he walked in their to the agent saying he wanted every extra penny put in that policy plus money he borrowed, the agent would have set him right up without question!
I guess I am not sure why he is so adamant about leaving assets to his kids, WHAT about his WIFE?
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Old 04-23-2013, 08:24 PM   #23
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I guess I am not sure why he is so adamant about leaving assets to his kids, WHAT about his WIFE?
I don't really think he has given serious consideration to either one dying relatively young since both their parents are still alive. He is thinking the million dollar policy would take care of her needs, because she will still have her 2k a month COLA'd pension, also. I imagine it will suffice, though I don't know if she would know what to do with it. I am sure that insurance guy would try to convince her to buy another whole life policy with it. Those fees agents receive from that kind of policy just astounds me.. That yearly check up meeting by the agent now makes sense...he wants to make sure he keeps things on track to get that retention bonus!
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Old 04-23-2013, 08:44 PM   #24
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Btw- Financedude, maybe ignorance is bliss, since the process was done....I lifted your response concerning agents fees and sent it to him. His response was only about the hockey game he was watching and I didn't even mention the game in my email...Well at least it will keep him from buying more of something he doesn't need when agent tries to sell more of the product. He mentioned something earlier about the agent was wanting him to not pay income taxes out of his pension, put it in another whole life policy, and then pay the taxes quarterly by withdrawing it back out of the policy to pay them and it will generate another X amount of whole life insurance with of course, some up front money. He said the agent was doing that himself. Well now I get it, of course he is going to make money off it. He is going to get a 60% commission and retention bonus on his own money!
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Old 04-23-2013, 09:27 PM   #25
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My understanding is that in California, being a Community Properrty State, when I took my CalPERS, anything other than full spousal protection would have required her sign off. Just my understanding.
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Old 04-23-2013, 10:24 PM   #26
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My understanding is that in California, being a Community Properrty State, when I took my CalPERS, anything other than full spousal protection would have required her sign off. Just my understanding.
Apparently it is also true of ERISA pensions in general, as if married when I applied for my pension, if I had been married and took anything other than a survivor annuity option it took spousal approval. (Being single it was of course irrelevant).
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Old 04-23-2013, 11:13 PM   #27
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The problem with buying term insurance and investing the difference is:

PEOPLE DON'T.
I did.
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Old 04-24-2013, 08:04 AM   #28
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I did.
Me too. It works!
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