- 4,576
Term to 100 or term to 120 should be long enough for 99% of the population & the other 1% that outlive that make enough money as politicians in DC
Boomers and whole life. Or annuity
- Thread starter tippingpoint
- Start date
Term to 100 or term to 120 should be long enough for 99% of the population & the other 1% that outlive that make enough money as politicians in DC
- 4,576
Houston, we have a problem. If you are suggesting people get their money out of 401k, especially those under 59 1/2 & put it in life insurance that could get a tax disaster for most people, especially if you are talking about cashing out the 401k in a lump sum
- Thread starter
- #13
tippingpoint
Super Genius
- 109
I'm a new guy. I have no desire to attempt to advise on what I do not know and it sounds like anything other than keeping it very simple can send you down rabbit holes.
What do you guys recommend for mortgage life insurance?
What do you guys recommend for mortgage life insurance?
- 11,277
There's nothing wrong with "rabbit holes"... if you know where the holes are and how to properly do things. Taking an income taxation course and a retirement planning course can be very helpful if looking to discuss moving money from "forever taxable" to "never taxed."
I'm working on a $50,000 annual premium case right now doing exactly this.
- 6,462
Caveat, I am NOT an agent.
I have been trying to come up with some advice for someone on life insurance, annuity, savings issues.
From my amatuerish viewpoint, the bolded portions of DHK's comments above are the first basic key element in trying to find and evaluate options relating to the broad brush picture you tried to paint in your first post.
PrivClientSG
Guru
- 325
I read rhetoric like this all the time, hear all the noise and headtrash, and so on and so on.
As part of my professional life, I very often look at this business "vocationally" and "advocationally" (vis a vis, the industry, what do we do, what do financial institutions do, etc.). I've long felt that professionals, and clients, are focused on product, accumulation, performance, results, and so on. However, one aspect I've also long felt has been discounted, if not neglected, is the "distribution" and "consumption" (phase) of assets, or utilization of assets, wealth, etc.
Now, I am not a whole life only professional. I sell various types of life insurance. However, I place, and my clients acquire, life insurance for very non-traditional, creative, strategic and tactical reasons. Do I still sell second-to-die NLGUL strictly for DB and liquidity purposes? Absolutely. In this specific scenario, for this singular myopic "need," it is the right and "best" product fit. However, I don't judge or pre-judge whole life, or any life product. I view life insurance as a vehicle, a tool, yes, an asset -- one that can and should be used strategically and tactically. People don't pay a hundreds of thousands of dollars, even millions, annually in premium to have a policy sit on the shelf so to speak.
That said, if a married couple was only going to rely on the income produced by their investments, the industry has long told us what "spend" or "income" percentage that would be, that we could use, and so on. I don't care if it's 2.7%, 3%, or whatever (adjusted for inflation, and all the other variables we hear about). Simply put, the so called "plan" is reliant upon variables. Nothing is "fixed" or constant. One can make a case that when a so called "plan" is completely contingent upon variables, then the plan by design will fail. Debate for another time, LOL.
So, and I hate using generics, however, for my entire career, I've viewed the death benefit (from whole life) -- a guaranteed, under any and all circumstances -- as a capital asset, an asset that can be capitalized, or monetized. What whole life affords this married couple, is multifaceted, and multi-beneficial. What it affords them, first, when they hit retirement age, they have the ability to treat their "other assets" differently, and in doing so, strategically, they can do so with impunity. Now, that can be quantified, both from a cash flow perspective, and an ROI perspective. They can consume principal in forms and fashions because of that life insurance death benefit. They can utilize their assets, which gives the more cash flow to live on and enjoy. The inevitable death benefit of that life insurance replaces that consumption. Therefore, they can actually get higher cash flow, spend more, enjoy more, and keep assets for the family or surviving spouse -- and they can do so while also paying less in taxes!
Now, pre-retirement, part of their strategy can be "retiring on less" knowing the above is available to them. A couple in their 30's, 40's, or 50's -- looking for permanent death benefit cannot look to any other product -- other than whole life, if they also want accessible, and guaranteed "cash" and "death benefit" as a capital pool. Cash value -- is guaranteed -- and can be accessed two ways, via the policy, or via third party lenders. Via collateral assignment -- the cash value stays in the policy -- I can borrow via a line of credit from numerous major banks. My bank offers (a cash value line of credit program) 24 hour approval, to loan up to 97% of the cash value on whole life only, at prime minus a substantial percentage, offers a fixed option as well, and will overnight me a checkbook! They will increase my line of credit every year -- because the cash value is guaranteed to increase every year. All of this, and the line of credit does NOT appear on my credit report. The bank views this policy as an asset -- actual collateral -- and they have no problem acquiring that collateral. Why? Because it's not just an asset -- it's their preferred asset -- it's cash! So, the couple, pre-retirement, is also treating their life insurance as a (capital) asset, an asset that can be capitalized, monetized, etc. So why can they not acquire the life insurance as an asset decision? Rhetorical question.
What this couple gets for this is a -- pre-retirement, the ability to retire on less, a reduction in lifetime income taxes, in several possible ways, add certainty to their plan, and their lives, and then at and during retirement, they have the ability to consume and spend more, again while paying less in taxes, which allows both directly and indirectly having more to consume, and so on. Post-retirement, and at death, they have the ability to replace that consumed wealth to a surviving spouse or family. If death is not near, the life insurance can produce not just income, but "principal" or "lump sum" monies in a variety of other ways. Several. All of this we can account for and quantify. It actually becomes more accumulation and spending/consumption pre-retirement, at retirement, during lifetime, and throughout lifetime.
When I entered this business in the late mid-late 80's, the life expectancy for a 65 year-old in good health was approximately 75. The insurance company would say 78. Remember, there is more than one set of actuarial/life expectancy tables. Now, today, a married couple that I meet with, have a joint-life expectancy of 95! That means there is a 50% probability that one of the two will survive to age 95.
Taking all of this into consideration, there is significant risk when people are relying on their investment returns to produce the income for the rest of their lives that they need. Inflation/cost of living, market volatility, changes in tax laws, changes in lifestyle (early retirement vs. late retirement), changes in healthcare needs, scientific, technological, sociological, and cultural change, family dynamic change, and so on and so on. However, if there is a permanent death benefit, that’s going to be delivered at the end of someone’s life, age 85, 90, 100, whatever the case might be -- then the individual can actually take those investments and either annuitize (components of) them and produce higher cash flow for all of life -- and with no risk! Or, they can simply pay/spend-down (components of) assets. The various vehicles included in these techniques and strategies are whole life insurance, and the use of "longevity" annuities (SPIA’s, DIA’s, etc.). If you look at these vehicles and how they are being utilized here -- in this environment -- what is it you are seeing? Ever hear of non-qualified deferred compensation? Ever hear of Sc. 162 planning? Even many life insurance professionals don't truly understand how it actually works. COLI? Key-man coverage? Cost-recovery? "Spend" recovery? Cost "recapture" and replacement? Even opportunity cost (read the Stern Stewart study on EVA). So, in setting, these vehicles are being used as a hedge -- to hedge the risk, eliminate the risk; of what? Longevity, consumption, and more. In a sense it is proving options, flexibility, and freedom. There are countless white papers and studies out there that show that cash value of whole life insurance actually increases the return, and reduces the risk, of any (asset allocation) portfolio. These studies and others also shows that whole life insurance makes the cash flow off the portfolio, better. The facts do not have to change emotion, headtrash, preconceived thoughts, prejudices, etc. However, that doesn't change the fact...that they are still facts. Thank you very much.
As part of my professional life, I very often look at this business "vocationally" and "advocationally" (vis a vis, the industry, what do we do, what do financial institutions do, etc.). I've long felt that professionals, and clients, are focused on product, accumulation, performance, results, and so on. However, one aspect I've also long felt has been discounted, if not neglected, is the "distribution" and "consumption" (phase) of assets, or utilization of assets, wealth, etc.
Now, I am not a whole life only professional. I sell various types of life insurance. However, I place, and my clients acquire, life insurance for very non-traditional, creative, strategic and tactical reasons. Do I still sell second-to-die NLGUL strictly for DB and liquidity purposes? Absolutely. In this specific scenario, for this singular myopic "need," it is the right and "best" product fit. However, I don't judge or pre-judge whole life, or any life product. I view life insurance as a vehicle, a tool, yes, an asset -- one that can and should be used strategically and tactically. People don't pay a hundreds of thousands of dollars, even millions, annually in premium to have a policy sit on the shelf so to speak.
That said, if a married couple was only going to rely on the income produced by their investments, the industry has long told us what "spend" or "income" percentage that would be, that we could use, and so on. I don't care if it's 2.7%, 3%, or whatever (adjusted for inflation, and all the other variables we hear about). Simply put, the so called "plan" is reliant upon variables. Nothing is "fixed" or constant. One can make a case that when a so called "plan" is completely contingent upon variables, then the plan by design will fail. Debate for another time, LOL.
So, and I hate using generics, however, for my entire career, I've viewed the death benefit (from whole life) -- a guaranteed, under any and all circumstances -- as a capital asset, an asset that can be capitalized, or monetized. What whole life affords this married couple, is multifaceted, and multi-beneficial. What it affords them, first, when they hit retirement age, they have the ability to treat their "other assets" differently, and in doing so, strategically, they can do so with impunity. Now, that can be quantified, both from a cash flow perspective, and an ROI perspective. They can consume principal in forms and fashions because of that life insurance death benefit. They can utilize their assets, which gives the more cash flow to live on and enjoy. The inevitable death benefit of that life insurance replaces that consumption. Therefore, they can actually get higher cash flow, spend more, enjoy more, and keep assets for the family or surviving spouse -- and they can do so while also paying less in taxes!
Now, pre-retirement, part of their strategy can be "retiring on less" knowing the above is available to them. A couple in their 30's, 40's, or 50's -- looking for permanent death benefit cannot look to any other product -- other than whole life, if they also want accessible, and guaranteed "cash" and "death benefit" as a capital pool. Cash value -- is guaranteed -- and can be accessed two ways, via the policy, or via third party lenders. Via collateral assignment -- the cash value stays in the policy -- I can borrow via a line of credit from numerous major banks. My bank offers (a cash value line of credit program) 24 hour approval, to loan up to 97% of the cash value on whole life only, at prime minus a substantial percentage, offers a fixed option as well, and will overnight me a checkbook! They will increase my line of credit every year -- because the cash value is guaranteed to increase every year. All of this, and the line of credit does NOT appear on my credit report. The bank views this policy as an asset -- actual collateral -- and they have no problem acquiring that collateral. Why? Because it's not just an asset -- it's their preferred asset -- it's cash! So, the couple, pre-retirement, is also treating their life insurance as a (capital) asset, an asset that can be capitalized, monetized, etc. So why can they not acquire the life insurance as an asset decision? Rhetorical question.
What this couple gets for this is a -- pre-retirement, the ability to retire on less, a reduction in lifetime income taxes, in several possible ways, add certainty to their plan, and their lives, and then at and during retirement, they have the ability to consume and spend more, again while paying less in taxes, which allows both directly and indirectly having more to consume, and so on. Post-retirement, and at death, they have the ability to replace that consumed wealth to a surviving spouse or family. If death is not near, the life insurance can produce not just income, but "principal" or "lump sum" monies in a variety of other ways. Several. All of this we can account for and quantify. It actually becomes more accumulation and spending/consumption pre-retirement, at retirement, during lifetime, and throughout lifetime.
When I entered this business in the late mid-late 80's, the life expectancy for a 65 year-old in good health was approximately 75. The insurance company would say 78. Remember, there is more than one set of actuarial/life expectancy tables. Now, today, a married couple that I meet with, have a joint-life expectancy of 95! That means there is a 50% probability that one of the two will survive to age 95.
Taking all of this into consideration, there is significant risk when people are relying on their investment returns to produce the income for the rest of their lives that they need. Inflation/cost of living, market volatility, changes in tax laws, changes in lifestyle (early retirement vs. late retirement), changes in healthcare needs, scientific, technological, sociological, and cultural change, family dynamic change, and so on and so on. However, if there is a permanent death benefit, that’s going to be delivered at the end of someone’s life, age 85, 90, 100, whatever the case might be -- then the individual can actually take those investments and either annuitize (components of) them and produce higher cash flow for all of life -- and with no risk! Or, they can simply pay/spend-down (components of) assets. The various vehicles included in these techniques and strategies are whole life insurance, and the use of "longevity" annuities (SPIA’s, DIA’s, etc.). If you look at these vehicles and how they are being utilized here -- in this environment -- what is it you are seeing? Ever hear of non-qualified deferred compensation? Ever hear of Sc. 162 planning? Even many life insurance professionals don't truly understand how it actually works. COLI? Key-man coverage? Cost-recovery? "Spend" recovery? Cost "recapture" and replacement? Even opportunity cost (read the Stern Stewart study on EVA). So, in setting, these vehicles are being used as a hedge -- to hedge the risk, eliminate the risk; of what? Longevity, consumption, and more. In a sense it is proving options, flexibility, and freedom. There are countless white papers and studies out there that show that cash value of whole life insurance actually increases the return, and reduces the risk, of any (asset allocation) portfolio. These studies and others also shows that whole life insurance makes the cash flow off the portfolio, better. The facts do not have to change emotion, headtrash, preconceived thoughts, prejudices, etc. However, that doesn't change the fact...that they are still facts. Thank you very much.
Last edited:
- Thread starter
- #17
tippingpoint
Super Genius
- 109
It took reading this twice slowly, but I have a basic understanding of what you said now, and it's a very interesting way to look at whole life insurance.
Lloyds of Lubbock
Guru
- 714
You may want to google these names
Wade Pfau [EXTERNAL LINK] - Whole Life Insurance In A Lifetime Financial Plan
Ed Slott
Bobby Samuelson
Dick Weber
You can find many free articles by Wade Pfau, the others have websites you may have to pay to join but there is free info there.
Ed Slott you can find on Youtube and he may be the easiest to digest.
The others are very technical.
I am sure there are many more that will give you insights.
Wade Pfau [EXTERNAL LINK] - Whole Life Insurance In A Lifetime Financial Plan
Ed Slott
Bobby Samuelson
Dick Weber
You can find many free articles by Wade Pfau, the others have websites you may have to pay to join but there is free info there.
Ed Slott you can find on Youtube and he may be the easiest to digest.
The others are very technical.
I am sure there are many more that will give you insights.
PrivClientSG
Guru
- 325
This is not an indictment of any professionals, the professionals listed above, or any person for that matter. It is more an indictment of the industry -- the carriers, compliance, training, etc. Look, it's the carriers that produce products for sale and it's products sold that can be problematic. Are products sold incorrectly, unethically, etc? Absolutely. But that's not what I am talking about.
While I know each of these individuals personally, some better than others, and I've worked with some of them -- and each may be very well qualified in certain specific areas -- I would not say that each of them would be a blanket statement, good candidate to read about the type of planning, and more importantly, the "methodology" about whole life insurance as an asset, an asset class, etc., or the planning that I was speaking to.
I feel there are two groups here per se, in this type of discussion. One group is where the kind of planning I spoke about above, as a topic, is often talked about, referred to, etc. Many people, many segments of the marketplace -- carriers and producers -- talk about the living benefits of life insurance, even life insurance as an asset. There are a lot of concepts, potential strategies, possibilities, and more -- and I think that's great! There's even studies which shows numbers and data. But it's all market-driven, not client or case-driven! However, the more people who talk about this, the more carriers start to speak to these ideas, the better it will be for our clients and the general public at large. It's an education and I am all for it. But, there is another side of the coin, where the above strategies and techniques are utilized, substantiated, quantified, where the planning incorporates these strategies, and shows them being integrated and coordinated with the client's other assets, showing how the life insurance is being utilized with other assets. This is a small group of professionals who specialize in this type of planning, they use software that is designed for this specific type of planning, there is real meat around the bone, and it's "real" so to speak. It's where clients not just hear, but they see, feel, touch, all of this type of planning. You can read a lot about this -- but you have to dive in and go learn it first-hand. Look at the planning, the software, look at the planning strategies and techniques.
That said, just because Richard Weber writes a paper entitled "Life Insurance As An Asset" -- it doesn't mean that paper speaks to that specific type of planning in a substantial, meaningful, practical application way. It won't. It might show life insurance portrayed as an asset during lifetime, vis a vis cash value with a ROR, or even the death benefit quantified in certain ways. But it's a white paper, it's not part of a client-specific planning session. However, what is the context of the paper? I like Richard, and I've actually brought him into a couple of cases, however, he was given very specific parameters and marching orders, and his focus was assessing the current portfolio of life insurance policies. He was not brought in as a planner or to make planning recommendations on strategies and techniques. He will make recommendations on specific policies -- not the strategies that use them. Now, while he's an independent consultant, you have to know his background, and of course who he is working for. He's been retained by the big mutuals in the past, and he's published (white) papers for them. That's great. But Richard is a consultant. He's not a professional planner.
I would not include Ed Slott on this type of list. He is more a retirement planning (and distribution) expert and while I think he's a good speaker, entertaining, etc., I don't view him as a leading professional planner. He could be extremely successful at what he does, but I don't see what he does as that type of planning. He's got some very good ideas and portrays them well -- but he's more for professionals than clients. Bobby Samuelson is without question one of the leading product experts in the country. I had hoped he would take over some of the work that Steve Leimberg had done throughout his career. I think Bobby is extremely bright, and while people pick and choose what they use him for -- as a resource, for product due diligence, design, analysis, etc. -- I think he sits at the top of the pyramid.
Regardless, read everything you can. Even knowing it will help. But if you want to jump into this and do this type of planning, go do the research, learn, and look at and get the tools, learn how to use them, look at the software, and become educated. I think that can potentially take a professional and their practice to an entirely different level. It did for me. Thanks and all the best!
While I know each of these individuals personally, some better than others, and I've worked with some of them -- and each may be very well qualified in certain specific areas -- I would not say that each of them would be a blanket statement, good candidate to read about the type of planning, and more importantly, the "methodology" about whole life insurance as an asset, an asset class, etc., or the planning that I was speaking to.
I feel there are two groups here per se, in this type of discussion. One group is where the kind of planning I spoke about above, as a topic, is often talked about, referred to, etc. Many people, many segments of the marketplace -- carriers and producers -- talk about the living benefits of life insurance, even life insurance as an asset. There are a lot of concepts, potential strategies, possibilities, and more -- and I think that's great! There's even studies which shows numbers and data. But it's all market-driven, not client or case-driven! However, the more people who talk about this, the more carriers start to speak to these ideas, the better it will be for our clients and the general public at large. It's an education and I am all for it. But, there is another side of the coin, where the above strategies and techniques are utilized, substantiated, quantified, where the planning incorporates these strategies, and shows them being integrated and coordinated with the client's other assets, showing how the life insurance is being utilized with other assets. This is a small group of professionals who specialize in this type of planning, they use software that is designed for this specific type of planning, there is real meat around the bone, and it's "real" so to speak. It's where clients not just hear, but they see, feel, touch, all of this type of planning. You can read a lot about this -- but you have to dive in and go learn it first-hand. Look at the planning, the software, look at the planning strategies and techniques.
That said, just because Richard Weber writes a paper entitled "Life Insurance As An Asset" -- it doesn't mean that paper speaks to that specific type of planning in a substantial, meaningful, practical application way. It won't. It might show life insurance portrayed as an asset during lifetime, vis a vis cash value with a ROR, or even the death benefit quantified in certain ways. But it's a white paper, it's not part of a client-specific planning session. However, what is the context of the paper? I like Richard, and I've actually brought him into a couple of cases, however, he was given very specific parameters and marching orders, and his focus was assessing the current portfolio of life insurance policies. He was not brought in as a planner or to make planning recommendations on strategies and techniques. He will make recommendations on specific policies -- not the strategies that use them. Now, while he's an independent consultant, you have to know his background, and of course who he is working for. He's been retained by the big mutuals in the past, and he's published (white) papers for them. That's great. But Richard is a consultant. He's not a professional planner.
I would not include Ed Slott on this type of list. He is more a retirement planning (and distribution) expert and while I think he's a good speaker, entertaining, etc., I don't view him as a leading professional planner. He could be extremely successful at what he does, but I don't see what he does as that type of planning. He's got some very good ideas and portrays them well -- but he's more for professionals than clients. Bobby Samuelson is without question one of the leading product experts in the country. I had hoped he would take over some of the work that Steve Leimberg had done throughout his career. I think Bobby is extremely bright, and while people pick and choose what they use him for -- as a resource, for product due diligence, design, analysis, etc. -- I think he sits at the top of the pyramid.
Regardless, read everything you can. Even knowing it will help. But if you want to jump into this and do this type of planning, go do the research, learn, and look at and get the tools, learn how to use them, look at the software, and become educated. I think that can potentially take a professional and their practice to an entirely different level. It did for me. Thanks and all the best!
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