Multi Index Universal Life Insurance

[brewer12345]

Whatever instrument you chose or decided against to defer taxes to a high income individual, provide LTC and give yourself unattachable funds is your private decision, but to say publicly that something is wrong, as a blanket statement, is naive.

Awesome. So you are suggesting a combo UL/LTC product now? Wow.

 

[nun]

You don't have to wait 5 years to withdraw >contributions< to a Roth IRA, they can be withdrawn immediately and without regard to age. It's only the >earnings< in a Roth IRA that have restrictions WRT the age of the account and the age of the Roth's owner.

Thanks, I remembered wrongly.

 

[nun]

no need to apologize.. I'm not saying you should not have responded

I just don't want to go down this never ending road of back and forth.. I think discussions are great when both sides learn from each other but that typical back and forth .. "this thing is the greatest .. the other thing is the worst" .. is childish to me..

There are many tools at your disposal.. learn as much as you want about each so you know when it's best to use each tool for your own application. Insurance agents for the most part are under educated about life insurance.. and the financial industry has an incentive to bash permanent insurance .. but it has its place.

I was not thinking that at all as you initially encouraged the response, but got all shy when one was offered.

I have absolutely no need for any form of life insurance as I am single with no dependents and believe that there are better ways that whole life to invest and fund retirement.

 

[6miths]

What percentage of the population can really make use of WL or UL? 1%? .1%? I am comfortable saying the everyone that it is a terrible idea. If I am wrong about their very unusual situation, one of their many advisors will point it out to them.

This!

Permanent life insurance is not an investment and no one who has a fiduciary duty could possibly suggest this to anyone but a very, very small segment of the population and yet an attempt is made to sell it to almost everyone who has a few extra bucks lying around.

I have a 'very good' paid up permanent policy which represents a relatively small portion of my NW and if I could go back and undo it I would. When pressed on numbers, even the company's actuaries admit that the return is just not very good.

 

[COcheesehead]

Awesome. So you are suggesting a combo UL/LTC product now? Wow.

Yep, pretty phenomenal too. You should check out the thread on here about it. Get your LTC or tap the cash for retirement or both. Great product, but it requires an open mind to the power of WL. The Dave Ramsey's of the world have said WL is "bad". It's not. It is just not for most, but for high earners who don't want to p*ss away funds for LTC insurance, want to build tax free or tax deferred cash, unattachable cash, tax free inheritance for their heirs or a charity, it has its place.
I am not an insurance salesman, just an informed, open minded consumer looking to FIRE.

 

[nun]

Yep, pretty phenomenal too. You should check out the thread on here about it. Get your LTC or tap the cash for retirement or both. Great product, but it requires an open mind to the power of WL. The Dave Ramsey's of the world have said WL is "bad". It's not. It is just not for most, but for high earners who don't want to p*ss away funds for LTC insurance, want to build tax free or tax deferred cash, unattachable cash, tax free inheritance for their heirs or a charity, it has its place.
I am not an insurance salesman, just an informed, open minded consumer looking to FIRE.

Sure 1% of us 1%ers might benefit from whole life for estate planning.

 

[COcheesehead]

Sure 1% of us 1%ers might benefit from whole life for estate planning.

Not really, probably many more.
The rhetoric regarding insurance is so deeply ingrained in financial discussions, the truth gets buried and thus it is just dismissed.

 

[brewer12345]

Yep, pretty phenomenal too. You should check out the thread on here about it. Get your LTC or tap the cash for retirement or both. Great product, but it requires an open mind to the power of WL. The Dave Ramsey's of the world have said WL is "bad". It's not. It is just not for most, but for high earners who don't want to p*ss away funds for LTC insurance, want to build tax free or tax deferred cash, unattachable cash, tax free inheritance for their heirs or a charity, it has its place.
I am not an insurance salesman, just an informed, open minded consumer looking to FIRE.

Whatever you say, kemosabe. As my kids surely are tired of hearing, "de gustibus non disputandam."

 

[brewer12345]

Not really, probably many more.
The rhetoric regarding insurance is so deeply ingrained in financial discussions, the truth gets buried and thus it is just dismissed.

Feel free to enlighten us. Be sure to include all relevant details on policies one can actually purchase today.

 

[nun]

Feel free to enlighten us. Be sure to include all relevant details on policies one can actually purchase today.

I'm single and have no relatives where I live so I have LTC insurance. I took the approach of just buying the insurance I needed and not combining it with investments etc. When I was 37 I bought a MetLife policy through my employer. The cost is $28/month and the benefit is $200/day with a lifetime cap of $365k. It might not cover all expenses, but if I do need care, in home or at a live in facility, it will help with the cost......I consider $28/month as a trivial amount.

 

[COcheesehead]

Feel free to enlighten us. Be sure to include all relevant details on policies one can actually purchase today.

So you won't listen anyway? I get my audience here.

 

[COcheesehead]

I'm single and have no relatives where I live so I have LTC insurance. I took the approach of just buying the insurance I needed and not combining it with investments etc. When I was 37 I bought a MetLife policy through my employer. The cost is $28/month and the benefit is $200/day with a lifetime cap of $365k. It might not cover all expenses, but if I do need care, in home or at a live in facility, it will help with the cost......I consider $28/month as a trivial amount.

The difference from just a LTC policy and an LTC rider on WL is that the policy retains a cash value that will grow at some base rate. Mine is 4% from KC Life. You will get the benefit of most of the death benefit that you can apply to LTC for yourself. If you chose not to utilize the LTC or can't use it, the cash is still there to tap tax free for retirement, emergencies, or other needs. With just a LTC policy, the money is gone.
The cash can also at some point, self fund the policy so you don't have to carry the cost of insurance into FIRE.

 

[nun]

The difference from just a LTC policy and an LTC rider on WL is that the policy retains a cash value that will grow at some base rate. Mine is 4% from KC Life. You will get the benefit of most of the death benefit that you can apply to LTC for yourself. If you chose not to utilize the LTC or can't use it, the cash is still there to tap tax free for retirement, emergencies, or other needs. With just a LTC policy, the money is gone.

I think some numbers would be good here to see the actual benefits and costs.
I pay $336/year for my LTC.....an amazing deal as I bought early and through my employer. I bought it at age 37 and it provides a max benefit of $365k.
Yes my premiums are just used to buy the insurance, but they are low and I invest my money in a boring mix of mutual funds that have returned 8.5% annually over 30 years.

 

[COcheesehead]

I think some numbers would be good here to see the actual benefits and costs.
I pay $336/year for my LTC.....an amazing deal as I bought early and through my employer. I bought it at age 37 and it provides a max benefit of $365k.
Yes my premiums are just used to buy the insurance, but they are low and I invest my money in a boring mix of mutual funds that have returned 8.5% annually over 30 years.

If it works for you, be happy with it, but you should check on LTC rates today. They are nowhere near that.
A LTC policy for my wife and I would have been $4000 plus a year. The WL is about $2200/ year.

 

[nun]

If it works for you, be happy with it, but you should check on LTC rates today. They are nowhere near that.
A LTC policy for my wife and I would have been $4000 plus a year. The WL is about $2200/ year.

Sure, which is why people should plan ahead.

How much do you estimate your WL policy will provide if you to must pay for LTC.

 

[COcheesehead]

Sure, which is why people should plan ahead.

How much do you estimate your WL policy will provide if you to must pay for LTC.

Combined for my wife and me, it is at about $1 million. The cash value right now is about $125,000 so it can already self fund if I choose, but I like having a portion of my "cash" or bond allocation in a non fluctuating 4% tax free account so I will keep paying until I FIRE in 4 years.

 

[nun]

Combined for my wife and me, it is at about $1 million. The cash value right now is about $125,000 so it can already self fund if I choose, but I like having a portion of my "cash" or bond allocation in a non fluctuating 4% tax free account so I will keep paying until I FIRE in 4 years.

I like some stability too and for that I use TIAA-Traditional. Your current cash value would be depleted pretty quickly if both you and your wife needed LTC.

 

[ERD50]

Yep, pretty phenomenal too. You should check out the thread on here about it. Get your LTC or tap the cash for retirement or both. Great product, but it requires an open mind to the power of WL. The Dave Ramsey's of the world have said WL is "bad". It's not. It is just not for most, but for high earners who don't want to p*ss away funds for LTC insurance, want to build tax free or tax deferred cash, unattachable cash, tax free inheritance for their heirs or a charity, it has its place.
I am not an insurance salesman, just an informed, open minded consumer looking to FIRE.

Maybe in a separate thread so as to not bog this one down, but I'd be very interested in you showing me how this works. In the examples I've seen, LI can be used to provide liquidity to pay estate taxes, but is not a method to increase the after tax inheritance to heirs (unless you cherry pick, and the insured dies in the early years - but that's a gamble, not a plan).

-ERD50

 

[meierlde]

Combined for my wife and me, it is at about $1 million. The cash value right now is about $125,000 so it can already self fund if I choose, but I like having a portion of my "cash" or bond allocation in a non fluctuating 4% tax free account so I will keep paying until I FIRE in 4 years.

The issue with whole life is in general the first few years don't generate a lot of cash value as the salescritters get their commissions. However after 20 years you find a very high percentage of the premiums go to cash value. Unfortunately the participating whole life policies are getting rarer however which enable thru the miracles of paid up additions to add to the death benefit. For example a policy my parents got me at age 17 paid up last year and with using the dividends and reinvesting the dividends on the paid up additions the policy whose death benefit was 10k now has a death benefit of 51k.

 

[FIRE'd@51]

If you chose not to utilize the LTC or can't use it, the cash is still there to tap tax free for retirement, emergencies, or other needs.

Do you mean by borrowing against the cash value? My understanding is that any cash value tapped (other than by borrowing) is treated as ordinary income.

 

[meierlde]

Do you mean by borrowing against the cash value? My understanding is that any cash value tapped (other than by borrowing) is treated as ordinary income.

The rule on how cash value tapped depends on the kind of policy, on a regular whole life, you can withdraw an amount up to the premiums paid on a tax free basis then the rest becomes taxable. If you have converted to a paid up policy it becomes a modified endownment contract and is taxed on a last in first out basis so you pay taxes on withdrawals until the amount remaing is equal to the premiums paid, the opposite of a regular whole life policy. Note that this appears to apply to policy loans also.

 

[nun]

The rule on how cash value tapped depends on the kind of policy, on a regular whole life, you can withdraw an amount up to the premiums paid on a tax free basis then the rest becomes taxable. If you have converted to a paid up policy it becomes a modified endownment contract and is taxed on a last in first out basis so you pay taxes on withdrawals until the amount remaing is equal to the premiums paid, the opposite of a regular whole life policy. Note that this appears to apply to policy loans also.

I've been putting the money in my ROTH (50% Wellesley and 50% VTSAX) since 2000. I have a nice amount now that I can tap penalty free before 55 and obviously after 59.5 it's all available with no tax at all and no worries about interest on loans.

 

[Big_Hitter]

I max out my 401k every year so I can't do a Roth - however, I can purchase paid up additions (up to a limit) on my whole life policy that accumulate tax free. I maxed those out last year too.

I'm not saying whole LI is a panacea, it works for me though.

 

[COcheesehead]

I like some stability too and for that I use TIAA-Traditional. Your current cash value would be depleted pretty quickly if both you and your wife needed LTC.

The LTC is based on the death benefit, the $1 million, not the cash value. The cash value and the death benefit go down proportionally based on how much you tap the policy.

 

[Big_Hitter]

The LTC is based on the death benefit, the $1 million, not the cash value. The cash value and the death benefit go down proportionally based on how much you tap the policy.

that's how mine would work if i had that rider

it's just an acceleration of the death benefit