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Message
re: Anyone using a whole life insurance policy for income?
Posted on 6/9/23 at 5:50 pm to La Place Mike
Posted on 6/9/23 at 5:50 pm to La Place Mike
quote:
How would you lose money?
It's pretty easy.
Actuarial tables show how much the cost of the life insurance is. On top of maintenance fees, interest on loans, withdrawal fees, and/or surrender charges.
If you want numbers, how old are you and how much life insurance are you having to pay for by buying a life insurance policy which you are confusing as an investment vehicle?
I mean... I could use an investment vehicle that isn't going to charge me an actuarial cost for the hundreds of thousands of dollars (or more) of death benefit, but where is the fun in that? Buying an investment vehicle without an unnecessary added expense?
This post was edited on 6/9/23 at 5:51 pm
1
Posted on 6/9/23 at 6:06 pm to meansonny
quote:
which you are confusing as an investment vehicle?
I don't think life insurance is an investment vehicle.
Okay show me on paper how you will lose money. Use yourself as an example.
This post was edited on 6/9/23 at 6:08 pm
Posted on 6/9/23 at 6:18 pm to La Place Mike
quote:
As far as recommending it yes people should compliment their portfolio with permanent life insurance.
I have no dog in this fight. But I would only add that if you inserted “some people”, I would agree with your overall statement. In my situation, for example, it wouldn’t benefit me personally. I could make my heirs substantially wealthier once I pass on, but I have no desire to do that.
Posted on 6/9/23 at 7:36 pm to Jag_Warrior
quote:
But I would only add that if you inserted “some people”,
That's fair but there are uses for WL besides leaving a legacy.
Posted on 6/9/23 at 9:14 pm to tigeralum06
quote:
Yes. I get suckers to buy a whole life policy my company is pushing then I make income.
Same tbh
Posted on 6/9/23 at 9:41 pm to La Place Mike
quote:
Okay show me on paper how you will lose money
I lose money by paying a cost for life insurance.
Life insurance policies usually have about $75/yr maintenance fees.
A cost of about $200/yr in actuarial expense (which will go up every year that I get older. Significantly so as i near mortality ages above 65 years old. Actuarial expense could be several thousands per year at that time).
quote:
I don't think life insurance is an investment vehicle
The subject title in the thread reads "anyone using a whole life insurance policy for income".
If you happen to be in the wrong thread having the wrong discussion... I can't help you.
Posted on 6/9/23 at 10:59 pm to meansonny
quote:
Life insurance policies usually have about $75/yr maintenance fees.
A cost of about $200/yr in actuarial expense (which will go up every year that I get older. Significantly so as near mortality ages above 65 years old. Actuarial expense could be several thousands per year at that time).
Life insurance has fees and costs. That doesn't mean it loses money. Why are comparing WL to investing. WL is not an investment.
Simple question. Will you or will not have more cash value at 65 than the amount of premium paid in to the policy? If the cash value is more than the total amount of premium than you paid in then you have not lost money. It's very simple math. I will concede that if you cash out early you can lose money but that defeats the purpose of purchasing a policy.
quote:
The subject title in the thread reads "anyone using a whole life insurance policy for income".
I don't see the word investment any where in that sentence.
People can and do use the cash value from WL policies for income. That is indisputable. That doesn't mean that WL is an investment.
Posted on 6/9/23 at 11:42 pm to La Place Mike
quote:
People can and do use the cash value from WL policies for income
Are you referencing their principle return as income?
I didn't think so either.
Man... you are in the wrong thread.
If you want to invest for an income stream, don't invest in something with unnecessary fees and costs.
You will not come out ahead.
Posted on 6/10/23 at 12:33 am to meansonny
quote:
If you want to invest for an income stream, don't invest in something with unnecessary fees and costs.
You will not come out ahead.
I an not saying that you should invest in life insurance for your main income stream. WL is not an investment vehicle as you already know. The market will perform better.
There are strategies that use the cash value in a WL for temporary income but not as the main source of income. So is "anyone using a whole life insurance policy for income?" The answer is yes someone is.
Here is a link to an article in Forbes by Wade Pfau about using WL as a Volatility Buffer. I hope you find it interesting and enlightening.
WL as Volatility Buffer
Wade Pfau has a PhD in Economics from Princeton and is a meticulous researcher. I have learned a lot from reading his articles.
This post was edited on 6/10/23 at 12:35 am
Posted on 6/10/23 at 8:59 am to La Place Mike
You do know what a volatility buffer is... right?
Literally every asset class that isn't tied to the stock market.
Cash in a mattress? Yup.
Laddered treasuries? Yup.
Laddered CDs? Yup.
Money market? Yup.
Checking account? Yup.
Savings account? Yup.
Universal life insurance? Yup
Whole life insurance? Yup
An equivalence to volatility buffer can also be accomplished in other ways:
Purchasing bulk groceries at Costco when the markets are up.
Investing in ones home energy conservation when the markets are up.
Eliminating unnecessary subscription services when markets are down.
So congratulations. Whole life insurance works as a volatility buffer in equivalence to cash under a mattress. And is comparable to canceling Netflix and other nonessential subscription services during a market downturn.
Literally every asset class that isn't tied to the stock market.
Cash in a mattress? Yup.
Laddered treasuries? Yup.
Laddered CDs? Yup.
Money market? Yup.
Checking account? Yup.
Savings account? Yup.
Universal life insurance? Yup
Whole life insurance? Yup
An equivalence to volatility buffer can also be accomplished in other ways:
Purchasing bulk groceries at Costco when the markets are up.
Investing in ones home energy conservation when the markets are up.
Eliminating unnecessary subscription services when markets are down.
So congratulations. Whole life insurance works as a volatility buffer in equivalence to cash under a mattress. And is comparable to canceling Netflix and other nonessential subscription services during a market downturn.
Posted on 6/10/23 at 9:05 am to meansonny
quote:
Whole life insurance works as a volatility buffer in equivalence to cash under a mattress. And is comparable to canceling Netflix and other nonessential subscription services during a market downturn.
You cant be serious?
quote:
An equivalence to volatility buffer can also be accomplished in other ways:
Yep.
This post was edited on 6/10/23 at 9:08 am
Posted on 6/10/23 at 9:20 am to La Place Mike
quote:
You cant be serious?
quote:
You do know what a volatility buffer is... right?
Literally every asset class that isn't tied to the stock market.
Where is this statement incorrect?
Posted on 6/10/23 at 9:30 am to meansonny
quote:
Where is this statement incorrect?
You compared canceling Netflix and other subscriptions as the equivalent to cash value in a WL policy being used as Volatility Buffer. That's absurd.
Stop going off in different directions and answer these questions. Can the cash value in a WL policy be used for income, yes or no? It's a simple question. Then answer the question OP's question "Anyone using a whole life policy for income?"
Posted on 6/10/23 at 9:35 am to La Place Mike
quote:
Stop going off in different directions and answer these questions.
You post a generic online magazine article and I ask a question about it which you won't answer.
And you are stuck on the income possibilities of the non-investment vehicle Whole Life Insurance (does your compliance department force you to say the words in that order?).
I'd love to know how many people in the MT are using their whole life insurance for income. I really do think that is a great question.
Posted on 6/10/23 at 9:52 am to meansonny
quote:
You post a generic online magazine article and I ask a question about it which you won't answer.
I did answer. I said "yep" there are other assets that can be used as Volatility buffers.
quote:
And you are stuck on the income possibilities of the non-investment vehicle Whole Life Insurance (does your compliance department force you to say the words in that order?).
The OP's question was about taking income from a WL policy. Discussing income possibilities being taken from the cash value is relevant to the OP's question.
quote:
I'd love to know how many people in the MT are using their whole life insurance for income. I really do think that is a great question
It is a good question. I wish he had been more specific and asked "anyone on this board using whole life insurance policy for income?" But he wasn't. He just said "anyone".
Now do you care to answer my questions and the OP's?
Posted on 6/10/23 at 10:28 am to La Place Mike
I consider any policy that provides a return as an investment. The value increases and it can be used as income.
If I pay 1000/month and after 7 yrs, I have more than 100k in it, with a balloon payout if I happen to die, I don't see that as terrible. When you factor in the tax advantages, its value to me increases.
To answer the OP, I have not used mine for income but will at some point, assuming I exist long enough.
If I pay 1000/month and after 7 yrs, I have more than 100k in it, with a balloon payout if I happen to die, I don't see that as terrible. When you factor in the tax advantages, its value to me increases.
To answer the OP, I have not used mine for income but will at some point, assuming I exist long enough.
Posted on 6/10/23 at 2:33 pm to Milesahead
Well I have a whole life that guarantees dividends to increase the value. I also have a U.I.L. Policy that is based on index funds and on average grows faster than the whole life policy. I started using the flex method to pay the annual premiums, where you borrow money to make the payments. Hopefully it will earn more in dividends or interest than the borrowing rates. Another selling point is that it’s like a Roth IRA in that it grows tax free. So the income or payments you take after 5 or 6 years of growth aren’t taxable. However, you are borrowing those payments from your insurance company and they charge you interest rates. So essentially it’s no different than paying a tax. You don’t ever have to pay the money back until you die and the death benefit is paid to the beneficiaries. Just wondering if someone else has done or is doing this?
Posted on 6/10/23 at 3:30 pm to Milesahead
quote:
I consider any policy that provides a return as an investment. The value increases and it can be used as income.
If I pay 1000/month and after 7 yrs, I have more than 100k in it, with a balloon payout if I happen to die, I don't see that as terrible. When you factor in the tax advantages, its value to me increases.
To answer the OP, I have not used mine for income but will at some point, assuming I exist long enough.
Good post.
And this perfectly explains why using whole life as an investment is the wrong frame of mind.
If I need to pay into something that breaks even at 7 years, I've got a lot of lost opportunity cost that I can never get back.
Interest. Dividends. Tax deferred. All of that should be white noise when I need to pay in for 7 years just to break even.
I get it.
If you need life insurance.
And you want a conservative portfolio piece.
Cash value life insurance policies can fit both of those molds.
My personal issue is, "how young is too young to be holding an expensive, conservative piece to the portfolio?"
If I'm not retiring for 30 years, does this make sense vs market returns?
25 years?
15 years?
And as I shrink the number of years for this to make sense as a conservative, expensive portfolio piece, how much is the life insurance really costing me?
It is dirt cheap (1 year actuarial basis) through the 50s.
But in the 60s, the worm turns. And in one's 70s, there is no such thing as cheap life insurance (1 year actuarial basis).
Is the return and 7 year period to break even really worth the expensive nature of the life insurance?
Posted on 6/10/23 at 4:05 pm to Cycledude
quote:
using the flex method
Kirk Stafford.
Posted on 6/10/23 at 6:45 pm to meansonny
This is to no one in particular but I find it interesting how emotional people get with the topic of cash value life insurances. I view it all as just math, which is anything but emotional.
If a SME explains the pros and cons and you think it wrong for you, it is. If the pros outweigh your cons, you should jump in.
I was originally taught "buy term, invest the diff". Then I read a book on wealth management, roughly 13 chapters, and 2 were on cash value insurances. Their numbers made sense to me (it wasn't selling anything and mentioned no companies; it did say there were prob only 5 mutual companies worth using). I then added that to my plan. Simple as that.
If a SME explains the pros and cons and you think it wrong for you, it is. If the pros outweigh your cons, you should jump in.
I was originally taught "buy term, invest the diff". Then I read a book on wealth management, roughly 13 chapters, and 2 were on cash value insurances. Their numbers made sense to me (it wasn't selling anything and mentioned no companies; it did say there were prob only 5 mutual companies worth using). I then added that to my plan. Simple as that.
This post was edited on 6/10/23 at 6:47 pm
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