Indexed Universal life

[djr59]

So my friend turned me onto his financial guy. I sat with him and he tried to sell me on this policy. Sure it sounds great. By putting almost $300k into it over 12 years I can pull about $55k a year out tax free as a loan against like $750k in life insurance. Of course I have $750k in life insurance from day 1 but it starts to drop as I borrow against it. It sounds good and is probably good I think for younger people but at age 57 not sure it makes sense for me. Anyone have a policy like this?

 

[nun]

Walk away!!!!!!!!!!

 

[travelover]

So my friend ........

Trust me, this is no friend. You've been served up as raw meat.

 

[brewer12345]

Run. They are attempting to drown you in snake oil.

 

[REWahoo]

So my friend turned me onto his financial guy.

This 'financial guy' is looking to make a juicy commission by selling you something that will almost certainly benefit him far more than you. Tell him no thanks...

 

[djr59]

After researching it that was my decision and I didn't do it. Now he is trying to sell me an annuity. Not sure why I am so scared of all these things that promise large returns then in small print say "not guaranteed". I have done very well on my own. It wonder if I am missing or on moves I should make that I am not.

 

[bingybear]

I had one try to sell me something similar.... maybe identical. I ran into roadblocks when I tried to find out the details... fees, cost of insurance, participation rates, interest rate charged for borrowing my own money, etc.
The devil is in the details, and it expensive to terminate. If you get upside down ... where the interest payments and fees are more than the growth, you could have to make payments just to keep the policy from failing in which case you could owe quite a bit in taxes as those loans become taxable.

If you don't understand what you are buying ... don't walk, but run.

 

[REWahoo]

Not sure why I am so scared of all these things that promise large returns then in small print say "not guaranteed". I have done very well on my own. It wonder if I am missing or on moves I should make that I am not.

Doubtful. Most likely you're just making it a little harder for some salespeople to make their boat payments.

 

[Chuckanut]

Have you read the actual document(s) you will sign?

If not ask for a copy to go over. The first thing to notice is how many pages make up this contract. Then, can you read and understand all of it? If not, how do you know what you are signing.

My guess is that the contract has a clause in it that says only the contract terms and conditions apply, and anything the salesperson or brochure says is essentially meaningless.

 

[mickeyd]

Note to OP~The next time that he/she contacts you, I suggest that you inquire if he/she is a fiduciary. If the response is anything other than yes, ask that your name be removed from his/her contact list.

 

[capjak]

This sounds similar to a LIRP (Life Insurance Retirement Plan) that I read about in "The Power of Zero". I was researching LIRPs after reading David McKnights book still have not done anything or completely see how to make it work (including Long Term Care option). Sorry can not help other than to state to do your research.....slowly

 

[nun]

The only annuity you should ever consider is a Single Premium Fixed Annuity and only then in very particular circumstances and with a full understanding of your income requirements and how it fits in with the rest of your portfolio.

 

[gretah]

This sounds similar to a LIRP (Life Insurance Retirement Plan) that I read about in "The Power of Zero". I was researching LIRPs after reading David McKnights book still have not done anything or completely see how to make it work (including Long Term Care option). Sorry can not help other than to state to do your research.....slowly

CapJack -
You can find out more about different ways to use WHOLE life insurance policies at InfiniteBanking.org

I was impressed by The Power of Zero. I see McKnight has a new book all about LIRPs and plan to read it soon.

 

[djr59]

I have a whole life policy I bought when younger and needed extra life insurance. It has a decent cash value and I still pay the premium just because the amount it goes up in value is more than the premium I pay so why not. When I calculate out the yield over time I am making a decent rate of return. Obviously if I drop dead tomorrow my rate is return is even better. My plan is to keep it as long as the rate of return is decent. It's extra money for my beneficiaries.

 

[frayne]

Read the fine print.

 

[nun]

Read the fine print.

You'll probably be dead before reading and understanding the fine print on a Whole Life Insurance policy. I'd be amazed if the OP is getting a "decent return"........so a whole life insurance policy or a LIRP.......where do we begin? I follow the simple rule of never combining financial products and never buying anything I don't fully understand so my insurance policies are just that...they pay out if something breaks and have no investment component or cash value.

 

[Lakewood90712]

I have a whole life policy I bought when younger and needed extra life insurance. It has a decent cash value and I still pay the premium just because the amount it goes up in value is more than the premium I pay so why not. When I calculate out the yield over time I am making a decent rate of return. Obviously if I drop dead tomorrow my rate is return is even better. My plan is to keep it as long as the rate of return is decent. It's extra money for my beneficiaries.

Ok. So what is the decent rate of return

 

[djr59]

Around 6%

 

[nun]

Around 6%

So after fees the cash value of your policy works out to be the value of your premiums compounded at 6%?

 

[djr59]

Yes

 

[nun]

Yes

You have a very rare Whole Life Policy. If you feel comfortable could you tell us the insurance company, the fees, the premiums and the cash value?

 

[DrRoy]

6% seems reasonable if you have done the math correctly but I have always found that term insurance for the minimum period of time required and investment of the difference builds more NW. I am always sceptical of other insurance products or annuities.

 

[pb4uski]

You have a very rare Whole Life Policy. If you feel comfortable could you tell us the insurance company, the fees, the premiums and the cash value?

Actually, if you adjust the return for the value of mortality coverage at term insurance rates then I suspect that 6% is very possible over a very long run.

I have a whole life policy that I bought in 1977. Ignoring any value of mortality coverage during the time I have owned it it has returned 4.95% (interest rate given the current cash surrender value and premiums paid).

If I cashed it out and paid 15% taxes on the inside build-up, the after-tax return would be 4.53%. If I died tomorrow, the tax-free death benefit in relation to the premiums paid would represent a 7.55% after-tax return (death benefit in relation to premiums paid).

The cash value returns about 4% currently which is better than I can do with any similar low-risk fixed-income investment so I keep paying premiums.

That said, I think to buy term and invest the difference is better and that is what I did for most years that I needed life insurance.

IUL is typically not a fair product. One question to ask is if I had invested $100k in this product 3 years ago and wanted my money back now, how much would I receive. Typically, fees and surrender charges eat up the returns.

 

[6miths]

6% is rather high in the current climate. Not saying that it couldn't be if the policy was held through the good times for bonds. These products are designed to be sold and few have returns in the long term that are much greater than inflation. How could it be otherwise with the huge commissions that come out of the policy and the other expenses that the companies incur. The only way one wins on these is dying early - the return can be quite excellent then.

 

[nun]

Actually, if you adjust the return for the value of mortality coverage at term insurance rates then I suspect that 6% is very possible over a very long run.

Yes, in a similar way the IRR of an annuity will approach the initial payout rate the longer you live, annuities and whole life insurance work best when you can work those mortality credits. The one financial product I bought from an insurance company is a TIAA-Traditional Deferred Annuity which is currently paying annual interest of 4.85% and 6%/year over the time I've owned it. It's acts like a 10 year CD.