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Old 04-28-2014, 02:34 PM   #21
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Whole life insurance can be a pretty great savings vehicle for retirement though, or so I've heard.
Well, not so much. Whole life insurance is only "pretty great" for the person selling it, there are >much< better ways to save money for retirement.
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Old 04-28-2014, 03:16 PM   #22
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We have a policy on my life since DW will only get 50% of my non COLA pensions when I die, so the longer I stay on the right side of the grass the less important the policy is.
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Old 04-28-2014, 05:19 PM   #23
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Well, not so much. Whole life insurance is only "pretty great" for the person selling it, there are >much< better ways to save money for retirement.
While I wouldn't agree with whole life being a "pretty great" investment for retirement in the post you're responding to I don't view it as bad as you and many others do.

If I die tomorrow, the death benefit paid to DW on the whole life policy that I have had for 36 years will have an after-tax return of over 8% since the death benefit is tax free.

Probably not very far behind buy term and invest the difference using the same cash outflows and allowing for taxes.

But I concede you need to have discipline and a long time horizon for whole life to make sense - that's why they also call it "permanent" insurance.
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Old 04-28-2014, 05:44 PM   #24
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When the kids were young we bought 20 year level term on me. Costs $25/mo and will expire about the same time we retire (and the kids finish college).

Simple and cheap, and just about to be unnecessary.
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Old 04-29-2014, 03:43 PM   #25
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If I die tomorrow, the death benefit paid to DW on the whole life policy that I have had for 36 years will have an after-tax return of over 8% since the death benefit is tax free. . . .

But I concede you need to have discipline and a long time horizon for whole life to make sense - that's why they also call it "permanent" insurance.
It also helps a lot to buy when fixed interest rates are at/near historic highs, as you did, especially if inflation later falls, as it did.

For most people, I don't think whole life ever makes sense. There are a few people who can benefit if their tax situation is just right and they've run out of other ways to avoid high tax rates. For every person like that there are probably 20 people paying more than they should for less coverage than they could otherwise get (and might really need).
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Old 04-29-2014, 09:47 PM   #26
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I would NOT do that. First, if you cashed it in you will probably have a taxable event for the excess of the cash value over the premiums you have paid in. Second, my guess would be that the current growth of your whole life policy is greater than your mortgage interest rate. Finally as you probably well know, it you were to die your beneficiaries would receive the death benefit tax free.

I view my whole life policy as a bond equivalent. Even ignoring the mortality protection I am earning a long term bond rate with minimal credit risk and no interest rate risk. The mortality protection is gravy.

Just keep making the payments on your mortgage - it will be gone soon enough if you stay the course.
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Old 05-12-2014, 08:20 PM   #27
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Yes, some life insurance may be needed.
Ex: the years 2001-05, and 2007-13, equity markets really tanked and housing collapsed in the Great Recession. Most of us have our nest retirement assets in these two asset classes, unrealized. If one of you died in one of the periods, would there be enough for the survivor to continue? In retirement, two can live as cheaply as one, so the current living costs continue with one. There is no practical way to minimize this risk except for insurance either by life insurance/acct life benefit in an annuity, or by options contract which is insurance.

Our term life insurance had decreased in value relative to the retirement assets and in both recessions, the life insurance was no where near the asset losses. I opted to buy V annuities with the insurance for part of assets.
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Old 05-12-2014, 08:37 PM   #28
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But I concede you need to have discipline and a long time horizon for whole life to make sense - that's why they also call it "permanent" insurance.
The WL company is probably trying for you to take a loan or pushing variable life on to you. Your whole life policy is killing them in today's low bond yields.
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Old 05-12-2014, 08:44 PM   #29
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Back in the mid 80's, my wife each purchased a whole life policy thru Northwest Mutual. Now the cash value on the policies are equal to our home mortgage balance (about $40,000). We are wondering if we should cash the policies in and pay off the mortgage. Has anyone done this?
If your current mortgage rate is high, I d refi for the lower payments and giving you cashflow and options to accelerate mortgage payoff or extentions.
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Old 05-12-2014, 09:59 PM   #30
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The WL company is probably trying for you to take a loan or pushing variable life on to you. Your whole life policy is killing them in today's low bond yields.
Neither. You obviously don't understand participating whole life. Dividends are based on the contributions to profit from that group of policies. They are still making money on that group of policies - if they weren't then I wouldn't be getting any dividends. The dividend rate has declined as interest rates have declined, but are still pretty good because most of the premium were received and invested in bonds when interest rates were much higher.
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Old 05-12-2014, 11:30 PM   #31
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Neither. You obviously don't understand participating whole life. Dividends are based on the contributions to profit from that group of policies. They are still making money on that group of policies - if they weren't then I wouldn't be getting any dividends. The dividend rate has declined as interest rates have declined, but are still pretty good because most of the premium were received and invested in bonds when interest rates were much higher.
Interestingly Prudentials Closed Block (made up of participating policies sold before the de-mutualization) raised its dividend last year.
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Old 05-13-2014, 06:55 AM   #32
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Interestingly Prudentials Closed Block (made up of participating policies sold before the de-mutualization) raised its dividend last year.
That is a bit if a surprise, I haven't heard of any dividend increases but am no longer very in the know since I retired. Good for them and their closed block policyholders.
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Old 05-13-2014, 09:55 AM   #33
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Everyone must be dead today. It's almost 8am pacific time, and I've been up since market opening. If it takes LI, CV or Term, to get people up in the morning, then go get some LI. :stretch:
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Old 05-13-2014, 10:11 AM   #34
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Funny story. I got a term life policy at age 22 - rate guaranteed for 25 years. I got a call a while back asking me to up the policy and declined. The caller said I needed to start thinking about replacing my policy with something bigger when my term expires, I said thanks but no, I plan to be debt free and retired by then. No kids, no need for insurance at that point.

He got SO mad at me. He hung up, enraged.

I was a bit baffled. Still am.
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Old 05-13-2014, 11:20 AM   #35
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To the OP ... We are 47 and 45, nearly FI and not yet RE .. likely in < 3 yrs we will be fully FIRE.

Bought 20 yr term for each of us when the kids were small; I think we were 31 or 32, in an amount enough to pay off our then-large mortgage balance and college tuition. We no longer have a mortgage and have saved enough for school (we think), but will keep the term probably until the kids are out of school or the term runs, whichever happens first. It is very inexpensive, relatively.

I also have a portable LT disability policy purchased about the same time (sole breadwinner, two little kids and much higher earning capacity than DW at that time b/c of adv prof degree). That is $$ and we will drop it as soon as we're FIRE.

Last, I was suckered into a relatively small whole policy that I will probably keep for the reasons mentioned above in this thread.

Bottom line our take on it is to drop the insurance you no longer need unless doing so is tax inefficient. YMMV, of course.
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Old 05-13-2014, 01:28 PM   #36
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I carried a large term insurance policy and stopped paying this year after house paid off and DS nearly done with school. Whole life insurance makes a terrible investment vehicle except for the insurance agent. Better off buying term and investing what you save.
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Old 05-13-2014, 01:43 PM   #37
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The intent of life insurance is to protect against lost income if the insured dies. If you're relying on their salary or pension, and the pension spousal survivor payment is not 100% to the beneficiary, then maybe it's worth keeping some life insurance. Otherwise it's just to pad your wealth for your beneficiaries.
Not to mention your taxes if applicable go to single status.

I wonder every year when the premium comes due if we should drop coverage for DH, as I know my expenses would be far less than his should I go first. But I also think about a possible nursing home bill in the event of a disabling accident or illness that leads to death.

We have term insurance until age 70, and at only 58 now, have decided to keep it in place until at least SS age. If we just knew when our time would be up!
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Old 05-13-2014, 02:22 PM   #38
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Funny story. I got a term life policy at age 22 - rate guaranteed for 25 years. I got a call a while back asking me to up the policy and declined. The caller said I needed to start thinking about replacing my policy with something bigger when my term expires, I said thanks but no, I plan to be debt free and retired by then. No kids, no need for insurance at that point.

He got SO mad at me. He hung up, enraged.

I was a bit baffled. Still am.
I am baffled that he did not try to sell you an annuity.
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Old 05-13-2014, 03:03 PM   #39
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Early in my career as an actuary, I agreed to meet with the husband of a friend who was trying to get his start as a life insurance salesman. He tried to sell me an annuity and when I pulled out my compound interest tables to show him that it wasn't a good deal, he backed down. Poor guy.

I've been lucky that during the years when I really needed life insurance, I was working for employers that provided a lot of it at no additional cost. I was planning to get rid of the company life insurance at the next open enrollment period because the taxes on the imputed income were costing me about $600 a year and we didn't need it. Then I quit last week, anyway.

DH is a dear man but I didn't marry him for his money and, at 75, with chronic health issues, he's virtually uninsurable. We now have enough assets that if I'm run over by a multicolored bus, DH could live out his remaining years as a dissolute playboy and there would still be money left to put our grandkids through college.
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Old 05-13-2014, 03:22 PM   #40
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While I agree with you on BTID, the rub sometimes is that people buy term and piss away the difference rather than investing it so like many things in life, it only works if you have the discipline to actually do the investing. Like it or not, one positive aspect of whole life is that it provides stealth savings for the subset of people who would not otherwise save.


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I carried a large term insurance policy and stopped paying this year after house paid off and DS nearly done with school. Whole life insurance makes a terrible investment vehicle except for the insurance agent. Better off buying term and investing what you save.
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