A Cautionary Tale...

[chinaco]

This FPJ article is about Regulation. The authors anecdotal story about Life Insurance is what caught my attention.

I tell this story because it is another example of what is wrong with our regulatory environment. Most everything Bob and Barb were told was true. At 70½, he is subject to RMDs; IRA withdrawals are taxable; if you surrender to basis and switch to loans from a VUL, there is no tax; life insurance on your life, owned by you, is includable in your gross estate; and if the cash value earns enough, no further premiums will be needed. It is all true and it is almost all rubbish.
I have my suspicions but in one sense it doesn’t matter whether it is an issue of incompetence or an ethical breach—Bob and Barb paid the price.

A Cautionary Tale in the SRO Debate


I would never.... never trust a life insurance agent to be a financial adviser. NEVER!

I have had family members that were sold insurance products that were inappropriate for their circumstances. What I have noticed is that many times.... tax shielding was put out there as the bait. All they heard was improved rate of return and no taxes.


This is apparently one of the industry's dirty secrets.

The turnover as an agent in the life insurance industry is very high. Most agents don't make it past 2 years.

Do You Know Your Life Insurance Agent? - Jeffrey Root


Life Insurance is probably one of the most complex personal products and contracts on the planet. 2 years or less experience??

 

[2B]

You know that insurance products are sold and not bought. When insurance agents start their pitch you need to be very well versed on the product to realize that the only person's financial situation that will improve is the agents.

If you are a "big dog" corporate officer or other type of high income individual, some forms of variable annuity products may make sense. The plans I have seen available to these people are not available to mere mortals like most of this forum. Think Ken Lay and Jeff Skilling.

SPIAs may be the exception of bought and not sold but I'm no fan of them except in very limited situations.

Where are the hordes of annuity trolls attacking you? What's happened to this forum?

 

[rescueme]

Where are the hordes of annuity trolls attacking you? What's happened to this forum?

It depends. What do you classifiy as an "annuity troll"?

Disclaimer: DW/me have an SPIA ...

IMHO, as long as one can understand that an insurance product (any kind, including different types of annuity products) are not investment vehicles, but rather income insurance vehicles, there may be a reason to go with an annuity.

In DW/my case? While we did investigate VA's, we found they did not fit our need at the time, while the SPIA did (to provide "pension like income in ER, along with allowing us to delay our respective SS claims).

Not every "product" is bad, IMHO. Rather you need to match the product to the need. In that case, there is no standard answer for everyone, nor can anybody speak about a specific insurance/annuity product to meet such unknown need.

 

[chinaco]

...

Where are the hordes of annuity trolls attacking you? What's happened to this forum?

Information (articles) for those that might be the target of a Commissioned Financial Adviser [-]being sold by a Life Insurance Agent[/-]!

 

[MasterBlaster]

Life insurance has the potential to be a valuable tool.

If it just wasn't for those high fees, and the lack of flexibility ...

 

[FinanceDude]

Life insurance has the potential to be a valuable tool.

If it just wasn't for those high fees, and the lack of flexibility ...

term life has high fees?

 

[MasterBlaster]

term life has high fees?

Term Life doesn't have much that is attractive to someone fianancing their retirement. The spouse (if there is one) may think it's a good thing. But for (most) singles it isn't useful.

 

[FinanceDude]

Insurance is not investment, it is insurance. Annuities are NOT investments!!

 

[MasterBlaster]

Insurance is not investment, it is insurance. Annuities are NOT investments!!

The tax free borrowing from annuities has "the potential" to be valuable.

One has to weigh the tax-free feature against all of the very high fees.

If, and only if, the tax free feature outweighs the high fees will it be valuable.

Note: I am not advocating this approach. In most cases the fees are so high that any tax benefit is lost.

 

[brewer12345]

term life has high fees?

Return of Premium term arguably does. Trust this industry to complicate even the simplest product.