Whole Life Insurance

[krldrummerboy]

So, I have a old high school classmate that "friended" me on Facebook. He will often post the cryptic messages on days when the market moves south. Stuff like "are you protected?" and "do you need help creating new revenue streams in retirement?". In my head I answered "I don't know" and "gosh I'm not sure" to these questions. I IMd him and it turns out he is selling whole life and indexed universal life insurance through a multi-level marketing company called World Financial Group. He said something to the effect "now that I've made my fortune, I just want to help people". I told him thanks, but, no thanks, and grimaced through a short recruitment pitch to join his organization.

Aside from this particular company, I would like to hear some opinions on these types of policies.

Are they valuable to a working dual income family that has no term insurance but does carry?
51 yo, 44 yo spouse, two kids 5 and 7, ~170k combined salary, ~750k savings (401k, roth, cash) aside from home value. we max both 401k and back door Roths each year and still have some cash left to invest.

My worry is their complexity (mixing insurance and investing) and loads.

But, I like the idea of additional tax-deferred growth that can be drawn at 59 1/2, but also was really intrigued by the potential college funding benefits (he claimed they were much better than a 529).....

[Walt34]

Your "friend" is not your friend. He is trying to transfer as much money as he can from your wallet to his. If you want life insurance buy decreasing term insurance and invest the rest.

Life insurance is to replace your lost earnings if you die early. That's why decreasing term because the longer you work the less insurance is needed to replace your lost earnings.

I understand that for some very wealthy people whole life policies do have a place but for most people they are simply a ripoff.

[aja8888]

Oh no! Another whole life insurance thread!

Buy term....insurance and investing don't mix well.

[krldrummerboy]

Yea. Sorry! I bet there are a bunch of these threads. I hear ya

[REWahoo]

Quote:

Originally Posted by krldrummerboy Aside from this particular company, I would like to hear some opinions on these types of policies.

These policies are great - if you are the agent selling them.

[greydog17]

...grimaced through a short recruitment pitch to join his organization

Your 1st paragraph ending comment is curious, since being 'recruited' is not part of a usual ins sales pitch. Google turned up this info which kind of explains it;
World Financial Group Review — The Finance Guy


Seems they are a multi-level marketing organization... so like other multi level marketing orgs everyone above you in the chain may get a piece of your fees. Be cautious.

And, 529 for college savings is good and more flexible option particularly in a state that gives tax break. Use life ins to cover the expected college costs in case something happens to you. We used this approach using our state's 529 plan and a term life pol.

[krldrummerboy]

Thanks Greydog. I read up a lot about WFG after my conversation with the agent. For me, I want no part of this stuff. I opened with it because it's a funny story. But, I really feel for folks that end up regretting buying into a policy they cant afford and then end up having to walk away. I read a non-negligible percentage of whole life policy buyers end up in this situation

But, it got me thinking and looking into these policies in general. My conclusion was they are complicated, but if structured correctly may have some benefits. This is why I threw it out here.

[tfudtuckerpucker]

Reminds me of an

old Woody Allen movie

.

[REWahoo]

Quote:

Originally Posted by krldrummerboy My conclusion was they are complicated, but if structured correctly may have some benefits. This is why I threw it out here.

I think you have to be a relatively high net worth individual to see any benefits but those who sell these policies don't let that stand in their way of marketing them to anyone who will listen.

[ERD50]

Quote:

Originally Posted by krldrummerboy So, I have a old high school classmate that "friended" me on Facebook. .....

Inspired by the Woody Allen clip, your friend wouldn't happen to be "Ned", would he? "Ned"? "Ned Reyerson"?

https://www.youtube.com/watch?v=xkW_ZkMtmlQ

-ERD50

[krldrummerboy]

Quote:

I think you have to be a relatively high net worth individual to see any benefits but those who sell these policies don't let that stand in their way of marketing them to anyone who will listen.

Totally agree. This guy claims to do just that and that he's a "helper". I wasn't going to engage him in a debate, but, he's really smooth. A bunch of his fellow WFG team will thank him on his FB posts. He travels all around the country and it appears as though he's "helping" a lot of people. His team won a Ferrari last month. Supposedly, I could win one, too. . .

[YVRRocketSurgery]

Not sure about tax laws in the States vs Canada but from my perspective, there's very limited situations where a whole life policy is practical.

You've got situations where you are at risk of future health issues that may impact the renewal cost of your term life insurance.

From an investment perspective (at least in Canada), it's generally more practical to maximize your investments in your other tax sheltered accounts first. After which, there might be value in a whole life policy if you want to pass on an inheritance. I don't think life insurance benefits are taxed in Canada. (open to being corrected)

I've also vaguely heard about some aggressive techniques where you use your cash value as collateral to purchase real estate.

The whole life policies do typically earn the salesmen quite a bit of commission compared to other products.

[youbet]

This reminds me of a chore I keep procrastinating on..... Both DW and I have WL policies our parents bought on us when we were kids. Today, they have a death benefit somewhere in the $40k's each.

It's been many years since we paid a premium. When the divs became large enough to cover the premiums, we made that choice. When the divs became large enough to pay the premium plus buy some additional paid-up insurance, we did that. So, no premium to pay and the death benefit slowly grows. All we do is receive a statement every year and file it.

The problem is that it's now soooo easy to just forget about the policies in terms of their opportunity cost going forward. I know they have cash value and I should investigate exactly how much and determine if we'd be better off collecting that now and investing the money. OTOH, we don't need the cash or a larger FIRE portfolio, so keeping the policies gives us a way to handle expenses generated from the other dieing without needing to hold a separate, liquid stash for that.

Likely, I'll never get around to doing the analysis. Momentum is on the side of the current status.

BTW, I don't need the lecture on the fact that the polices were a bad investment and term should have been purchased later in life when needed. I more than understand all that now. But 60+ years ago when our folks purchased the policies, they didn't understand. And 30+ years ago when the divs exceeded the premiums and I decided to just keep the policies and just go on that way, I didn't understand. Today, I understand, but it's all water under the bridge. The need is to figure out what to do now.

[nun]

There was a fun thread that went onto many pages a few months ago. An insurance salesman participated and it was ok as I could walk away from the keyboard at any time...

[Ready]

This thread reminds me of a lesson I learned early in life:

Really good products sell themselves. The rest require a salesman.

[krldrummerboy]

I just received an IM from him

"I need to talk to you about how the laws are changing around the old 401k's and IRA's this week, and not for the better. Just wanted to help you get grandfathered in if it is something you want to consider, otherwise the option will disappear."

[Souschef]

Quote:

Originally Posted by krldrummerboy I just received an IM from him "I need to talk to you about how the laws are changing around the old 401k's and IRA's this week, and not for the better. Just wanted to help you get grandfathered in if it is something you want to consider, otherwise the option will disappear."

That sounds like the broker who wanted to put me in QLAC to minimize my RMD

[Gumby]

I do have a universal life policy (very similar to whole life). I got it because the young wife and I were totally maxed out on all possible tax deferred investment vehicles (401k, 403b and 457) and were still in the 46% combined state/federal tax bracket. Because we got it directly from the insurer (Navy Mutual Aid Ass'n.) there were no commissions and no surrender fees, and the crediting rate was competitive with alternatives (and still is). I treat the cash value as part of my bond allocation.

My policy is now paid up. I keep it for two reasons: 1) I expect to predecease the young wife. Since she is subject to the GPO, when I die the social security stops; she will not get a survivor benefit. If she annuitizes the death benefit, it will equal or exceed my social security, so her standard of living need not change; 2) The death benefit can also be drawn on for long term care if that becomes necessary.

[OldShooter]

Quote:

Originally Posted by Walt34 Your "friend" is not your friend. He is trying to transfer as much money as he can from your wallet to his. ...

This.

[growing_older]

These guys are everywhere. We had one at work trying to talk the young engineers out of using the 401k (which he is a broker for) and instead invest directly with him in an annuity to "avoid RMD problems" later in life. There's no accountability so they are using any excuse at all to try to make sales.