Are There Any Situations Where Whole Life Insurance is a Good Idea? 

Only problem with your plan is if there is a recession when you retire, you'd have to draw from your investments when they are down significantly which greatly increases your risk of running out of money, but otherwise you are absolutely correct

Wrong you just bought a poorly designed policy. Should have done more research first.

@jessemiles5856 yup, and the person who sold it to me said it was the best decision. Don't trust life insurance sales people. Start with financial advisors that look out for you and don't make profit selling you on plans.

​@@LooseArrowBoythe problem is that you're looking at whole life as an investment. It is NOT an investment, it's life insurance. As an investment it's horrible compared to others. There's many benefits a life insurance policy can bring you depending on what your goals are. Insurance is not for everyone, it all depends on the goals of the individual.

@theforce5191 exactly, getting life insurance at 18 doesn't really make sense. Even if I did need some kind of insurance I would come out further ahead with a term plan where I invested the remainder. I did the math and I would have saved and invested equal to the life insurance coverage and cash value by the time the term plan is over negating the need to have life insurance. The problem is these life insurances are pitched as investment vehicles. It was pitched to me as something I would gain money on after 5 years. After 11 at best it was a savings. If I invested it instead while having a term plan I would be much further ahead. Insurance is for the safety net. You would hope to never need it. If you're savvy, you would invest the savings, the majority would simply spend it and see no benefit.

These guys obviously don't know that ~98% of term NEVER pays out, and yet they say go and buy term.

You're naive. That much is clear.

A naive millionaire. That's fine with me. If you sell enough 'whole life' to confused (i.e. sophisticated) people, then YOU can be a millionaire, too! @@theforce5191

You must have some really high assets to have a trust with a WL policy. Hence the federal inheritance tax starts at $11.7 million. Most states don't have a tax. The ones that do (Kentucky, Maryland, Washington) start anywhere between $2 million to $5 million.

@@astroman30 Asset planning amongst our IDD and Non-IDD children. It’s not the inheritance tax rates for our retirement portfolio but rather the compressed tax rates for inherited retirement accounts accumulated within an SNT. The RMD would be paid to the SNT but will not be distributed outright to the beneficiary. Rather, the RMD will be accumulated inside the trust. As a result, the RMD, which is deemed ordinary income, will be taxed at very compressed trust tax rates. Fed tax 24% starting at $2,751 for 2022.

Do you sell that product?

If that were the case they wouldn’t spend time recruiting young people who have 0 shot of sitting down with anyone who would need access to a 500k loan in 5 years and pays 50k per year in premiums for a 7MM life insurance policy. On the big excel spreadsheets they demonstrate just take off a few of the 0’s to put it in context of a regular American and it makes 0 sense.

​@@themadhatter312 Of course he does! No one else would spew the talking points like he does.

3 bucket strategy addresses that quite a bit better than overfunded whole life.

@@jasonw8497 I use 3 bucket strategy thru a Retirement income framework, but too many studies proves that a non-correlated asset over the same time period will significantly increase tax-free income. Wade Pfau and Tom Wall both have PHD’s in Actuarial Science. I’ve read both their White Papers. Mathematically it still performs better. I don’t use WL in ever scenario though. I personally don’t believe it’s the right fit for everyone. I’ve had to sell people out of it, because it’s just not prudent. I’m product agnostic, I believe in planning based on a clients goals and belief systems.

@@jasonw8497 WL fits one of those buckets and seems to outperform bonds.

Tyler you clearly understand the product far better than most. I would like to ask you and the hosts (or others in the financial mutant community) whether you would consider the cash value within the policy an alternative to bonds needed within the rest of your portfolio. Obviously not instead of but in conjunction with. Does having the cash value policy mean you can afford to more aggressive with your stock portfolio and have a lower proportion in bonds?

No thanks. I’d rather invest elsewhere with more flexibility and most likely a better return.

@@andyk4972 Im not your financial advisor so as a disclaimer I’m not going to give you specific financial advise. What I can say is that a solid mutual insurance company which has been around for over 150 years with a proven track record seems like a pretty safe place to store some money. My contract is set up to be profitable inside of the policy by about year five with much of that return being guaranteed. By about year 10 I’ll have access to more money outside of my policy than what I ever put in through colateralized loans. It is giving me exposure to a bond like investment while insuring my family very well for life. After year five my cost of insurance for ever is net zero. You need the right advisor to set it up though as in needs to me optimized for cash value. What I’m doing is getting a whole life insurance policy with the least amount of whole life insurance proportionally to my premium paid as possible. I want to maximize the amount of cash paid in up front and add some term Insurance riders to help it get there. In my situation being young I’m paying in for 25 years because I want to be able to put as much money as I can for my whole life until im 120 yrs old. After year ten I don’t see much of a mathematical reason to ever stop funding it though I have a lot of flexibility to do so if I want. I do like to store cash in here and have it available to buy investments on the cheap outside of the policy. Long term it works like a very high interest savings account. It’s very handy right now when it seems we are moving toward an economic ressesión and cash is king. It pairs really well with realestate. I cash out refinanced my realestate recently at 3.2% 30 yr term then out the cash into here earning me 4% - 6%+ for life tax free. Then I colateralize the asset and borrow the money out at 3% through a bank and buy other investments as I see fit. I do fund my Roth IRA and HSA with money I borrow out of here to get more tax advantages. This allows me to have long term realestate debt while keeping the cash in an investment vehicle which is earning more interest long term safely and has more liquidity. It also help me maximize the tax advantages of my realestate and it’s a great place to store rainy day money.

@@habbadabbado5765 you can do both. Have your money working for you in insurance and an outside investment at the same time. 🙂 it really just compliments my other investing.

@@habbadabbado5765 See but the key thing you’re missing is that returns alone are not everything. If you already invest in a 401k or IRA consistently and have some have extra money a permanent policy will provide liquidity (after a period of years), collaterilization (especially for RE investors), at a GAURANTEED (very important) rate, with tax free compounding growth and of course diversification through a separate asset class and not to even mention the actual insurance and estate planning portion of the policy (Yano, the main reason people have life insurance) It’s not perfect, and definitely has its cons. but imagine you’re near retirement and all your money is in the market through an IRA and the market swings down 20%+. If the person in this scenario has a permanent policy such volatility is meaningless. I find it to be very good for those who are already maxing their retirement accounts and want another solid asset class.

Variable Life can be a great accumulation strategy, but it can implode if not properly funded and the separate account isn’t funding correctly.

VULs, IULs, ULs are garbage. The cash value is eaten up by fees/commissions leaving out of pocket costs to cover the term. Worse than whole life.

I would seek an estate attorney before I'd go out and buy a trash value policy. Hence the federal inheritance tax starts at $11.7 million. Most states don't have a tax. The ones that do (Kentucky, Maryland, Washington) start anywhere between $2 million to $5 million. Try harder.

​@@astroman30it seems like you're against insurance. It may not be from everyone but there are people who benefit from having an insurance policy, after all you never know when you're going to die...

@@theforce5191 I’m not against term Insurance, Sport. Just against trash value insurance

@astroman30 well, buddy. Insurance isn't for everyone. You might as well not get term since they don't pay out ~98% of the time, 🤣.

@@theforce5191 I’m not your buddy and take your childish emoji to your mom. Anyways, I purchase homeowners insurance every year and never made a claim. Does that mean it’s a bad purchase? NO!!! It’s a RISK MANAGEMENT buy. Which is exactly the only reason insurance should be bought. Do your homework before you post anything else that is stupid.

Ok buddy. Do you even know anything about insurance, 🤣 🤣?

Okay, you keep believing term is more expensive than whole life.

@@rajbeekie7124if you don’t die during the term, your rate of return is -100%! Compare that to my whole life that I will pull out WAY more than I’ll ever pay in. Tell me again which one is more expensive??

That must be some type of new math

Says the insurance sales person 🤦‍♂️- pensions have large contributions from your employer - only you fund your whole life policy and commissions

@@MoneyGuyShow I am not insurance sales person, I am owner of my own company and large contribution from your employer in my case becomes large contribution from my own pocket and whole life insurance become much more favorable.

You must sell whole life insurance.

@@brianjames9832 lmao no. I was listening to a real estate investor talk at dinner and they were talking about how all the rich people borrow against whole life policies to buy property. It's a trick they use. Made me look into it.

The point of term life insurance is to only cover the years you need it, like when you have little kids and a mortgage. By the time it expires you should be out of debt with kids mostly on their way in life and shouldn't need life insurance anymore. By then you and your spouse should have decent retirement funds and it wouldn't be financially devastating if one of you passes.

1. That's true, but only to a very limited extent. You are charged interest on the loans (and usually it's fairly high), and that loan value and interest decreases the cash value in the policy, which can both raise your monthly premium payments, and decrease the death benefits. If you never pay it back and do this repeatedly, you can completely drain the cash value of the policy, which can force you into maintaining what is essentially a term life policy at whole life rates (which are far FAR more expensive). 2. Why though? You can technically use a savings account or a chest buried in the backyard as a retirement account too, doesn't make it a good idea or a selling point. That's pure marketing. 3. If you are taking a serious look at the differences between whole and term life insurance, you are probably not one of the people who suck at savings. But even if you are, locking someone into a bad investment is not the correct solution to being bad at savings, it's taking advantage of ignorance. 4. Yeah, that's kind of the point. Life insurance isn't for you, it's for the people who depend on you. And saying that you get nothing is deceptive, because it isn't factoring in the extreme difference in cost between the two kinds of policies. According to google, whole life costs 5-15 times as much as term for the same amount of coverage; let's just average that out to 10x more. If you took out a 30 year term for $100 a month, or a whole life for $1,000 a month, assuming term expires after 30 years, yeah, in the most shallow sense, you have nothing, while the whole policy is still chugging along, with a sizable cash value to boot. However, you don't actually have nothing with the term policy; you have 30 years of $900 per month savings, which equates to $324,000. That alone is probably more than the cash value of the comparable whole life plan, but if you had been investing that money instead (to make it an apples to apples comparison) and gotten a fairly modest 6% annual return, you'd have over $900,000. So to say that term leaves you with nothing after it expires is misleading to the point of being wrong, and counts on you not understanding what an opportunity cost is.

Totally agree. I also commented on top. Pls read

How?

@@HHHunters why would you pay $800 a month in premiums for a crappy rate of return. If you invested $800 a month in an index fund you would earn an avg 10% return on you your money

@@Anthony-zw1qb guaranteed 10%?

@@HHHunters no, but id rather make That investment over a guaranteed 2%-4% anytime. If I wanted 2-4% I’d go buy a CD or a money market. Compound interest and dollar cost averaging is an Amazing thing

@@Anthony-zw1qb Whole Life is not an investment, it should not be compared to investments. Stock market will outperform it in rate of return. WL is like a savings account with 2-4% growth and other benefits. It can be compared to money you might put in bonds or CD. CD is only short-term, it's great now but it was below 1% for over 10 years. If you have maxed 401k, Roth IRA, HSA, and invested 90% of the rest into stocks, and still have money left over, then I'd say consider WL.

As a fiduciary, I execute full financial plans. In some cases, WL isn’t the right tool. I’ve turned young people away and focused on the financial order of operation. Investments first. WL works great as a volatility buffer. Actuarial Science is the concept to follow. Wade Pfau has a white paper on this topic too. Ernst and Young also wrote an article. Check it out. I love this conversation

The problem is that term can only be written for 30 years max. 401ks and IRAs are tax time bombs. A whole life can be designed with a whole life policy with a term rider and give you 10X income at a reasonable price.

Anytime someone says something is worse 100% of the time for 100% of people that should be questioned.

Better tell 2/3 of ALL US BANKS that have billions in whole life. 😀

@@firecraig They buy it for certain employees. Not as an investment. LOL!

@@billcarlson1730 it’s a Tier 1 asset for a bank. Never said it was an investment. Investments can lose money. It’s a savings alternative.

@@billcarlson1730 “never a reason”??? Might want to look up what a volatility buffer asset is.