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History has taught us time and time again that people who have liquidity in times of crisis tend to do well.
Looking For a Whole Life Policy
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History has taught us time and time again that people who have liquidity in times of crisis tend to do well.
i just had chinese for dinner and it did come with a fortune cookie that says ill have good luck. i think i was very clear about when/how it could work and when it really is a stretch at best and im sure there are agents who agree with me. there is a risk of having too conservative an investment where your dollars become worthless or that you dont get anything more than the guaranteed values. You dont seem to think that is as big a problem or risk as the stock market repeating itself but i do. i could easily be wrong and so could you. neither of us knows what will happen.
i am here to learn. by the way i have a 2 million whole life policy so i could easily do what is being asked but i wont be eligible for financial aide.
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No, unless I'm reading this wrong you have outlay confused with rate of return. Outlay simply means how much you spent on the plan (i.e. the money put into the plan). I'm saying the amount of money that you are putting into either the WL policy or the 529 are the same. Results on the stock market are immaterial for this part of the conversation.
Now, if you want to talk about returns on the stock market.
A decade like the last one would mean the WL policy wins the rate of return fight (last decade was negative as far as most stocks are concerned). Let's forget about that completely for a minute and remember that we are comparing 529's to WL and not indexes like the S&P (where I get that magical 8%). The 529 is much MUCH more conservative than the S&P index, so the conventional wisdom would be a much lower rate of return would be anticipated, and this, empirically speaking, has played out for many years.
I'm a really big stats guy (did a lot of work in econometrics prior to entering the insurance industry, still do some consulting work on the side) so the numbers and the analysis tend to be very important to me. I've brought this up a lot in the past, and I'll hammer on it again. Nothing ranks higher for risk adjusted rate of return than WL insurance. It has been this way for a very long time. So, when we look at best return for unit of risk exposure, WL trumps them all. Remember this is only a piece of the puzzle, it's not the whole puzzle.
Again, there is a point that I'm trying to make less subtle, but it looks like I'm failing to hit it home. Remember, when you spend the 529 money, it's gone. The WL loan is simply a loan from the insurance company. Yes, you pay interest, but the money in the WL policy remains untouched and continues to grow. Let's forget about financial aid for a minute. Let's assume that if you have enough money to fully fund a 529 to pay for a tier one private research university with a big price tag--and I personally went to one so I know what they cost--then you too have too much money to qualify for financial aid--my experience studying this on a couple of different occasions would make me immediately refute this claim, but that's a conversation for a different day at this point. N% of 0 is still 0, the 529 money is gone. Maybe it can produce a better rate of return (doubtful), that higher rate of return means what exactly? Remember, it has to be spent on educational expenses if you want to avoid paying taxes on it. There's a cost, a cost associated with the risk (the 529 can go negative), a cost associated with the lack of liquidity (what if Jr. decides he likes drugs and women more than learning calculus?), a cost associated with the fact that you'll give up all future wealth you could have made off this money the day the college or university cashes the check, etc. And your only come back on this is, maybe I can get a slightly better rate of return. I can't see any other benefit. That's a lot to give up, just to hope for more money returned on an asset you can't do anything else with but pay college expenses.
Show me what 529 plan is doing a good job pulling something like an 8% rate of return. I'll make it even easier, show me a 529 plan with fundamentals that even give us the glimmer of hope that it's going to pull off 8+% in rate of return. You'll have my interest.
Let me ask you this additional question about rate of return. What rate of return are you expecting from investing in products like stocks? Why? And what's the probability you'll actually get that rate of return?
i dont have those confused. i realize u said the outlay was important but im not sure that it is the most important part. maybe you truely believe it is or maybe you are saying it is bc it helps your argument. i think how much you have on hand to pay for college is the most important part.
At about 13-14 years or so, the cash value of a vanilla whole life will equal the outlay and that seems like a fair number to use in regards of years of investing for college. several decades is not but if someone wants to use 17 years than that could be okay. it likely is a higher number of years than what most people do since having a kid has a lot of start up costs. if your primary goal is paying for college then what you put in is the max you could immediately get out at 13 years. of course then you no longer have insurance if u completely cash surrender it but i realize you are going for loans. sure you got 13 years of the equivalent of term as well and that does have some value but we all know the chance of it paying off is very low and the face value for most folks would be poor compared to what they might buy if they died prematurely (and im not saying it needs to be term vs whole life). this could be useful if you would like to put some money towards college but really want to have a death benefit.
the last decade was poor. the question is what will the next decade bring. it is negative if u cherry pick the dates. nobody knows if it will repeat itself. nobody knows if insurance companies will go out of business and we have to rely on guarty assoc. i dont have any thoughts this will happen but i also dont see a good reason to be doom and gloom about the stock market. i have utah 529 and upromise 529 plans for my kids and have had them for about 8 years and they are all above water as we speak. i dont know the exact return but currently they are going to have more cash available and a higher return as a percentage of what i put in then my whole life when my kids go to college. if one kid doesnt go to college then ill spill it over to another but im glad none can use the money inappropriately for drugs.
i dont have a number that i must have for a return on investment. insurance companies cant invest in anything that i cant so i could make the same return as them if desired without the cost but of course also without the death benefit.
again if u want to have a death benefit as your primary goal then if u are rich you can also use it to fund your kids education but some of whether or not you would want to do this would depend on the interest rate of the loan and direct vs non direct recognition. im planning on looking at the market when the need arises and making a guess about which if any of my kids who are different ages will i take the money out from their 529 or move it to another kid and which if any ill take money from my whole life. the idea that u can hide money so u can get aide and have a substantial amount for college is not likely and that is what i have said repeatedly. please stop moving the goal posts. there is a very high percentage of whole life policies which are surrendered before 5 years and some of this is bc of wrong reasons to have one in the first place. the correct reason is almost always for a permanent death benefit.
At about 13-14 years or so, the cash value of a vanilla whole life will equal the outlay and that seems like a fair number to use in regards of years of investing for college. several decades is not but if someone wants to use 17 years than that could be okay. it likely is a higher number of years than what most people do since having a kid has a lot of start up costs. if your primary goal is paying for college then what you put in is the max you could immediately get out at 13 years. of course then you no longer have insurance if u completely cash surrender it but i realize you are going for loans. sure you got 13 years of the equivalent of term as well and that does have some value but we all know the chance of it paying off is very low and the face value for most folks would be poor compared to what they might buy if they died prematurely (and im not saying it needs to be term vs whole life). this could be useful if you would like to put some money towards college but really want to have a death benefit.
the last decade was poor. the question is what will the next decade bring. it is negative if u cherry pick the dates. nobody knows if it will repeat itself. nobody knows if insurance companies will go out of business and we have to rely on guarty assoc. i dont have any thoughts this will happen but i also dont see a good reason to be doom and gloom about the stock market. i have utah 529 and upromise 529 plans for my kids and have had them for about 8 years and they are all above water as we speak. i dont know the exact return but currently they are going to have more cash available and a higher return as a percentage of what i put in then my whole life when my kids go to college. if one kid doesnt go to college then ill spill it over to another but im glad none can use the money inappropriately for drugs.
i dont have a number that i must have for a return on investment. insurance companies cant invest in anything that i cant so i could make the same return as them if desired without the cost but of course also without the death benefit.
again if u want to have a death benefit as your primary goal then if u are rich you can also use it to fund your kids education but some of whether or not you would want to do this would depend on the interest rate of the loan and direct vs non direct recognition. im planning on looking at the market when the need arises and making a guess about which if any of my kids who are different ages will i take the money out from their 529 or move it to another kid and which if any ill take money from my whole life. the idea that u can hide money so u can get aide and have a substantial amount for college is not likely and that is what i have said repeatedly. please stop moving the goal posts. there is a very high percentage of whole life policies which are surrendered before 5 years and some of this is bc of wrong reasons to have one in the first place. the correct reason is almost always for a permanent death benefit.
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"glad you are acting in a professional manner."
Sorry I think I am being as professional as the situation calls for. I wished you good luck and that's about it. I am not going to go into a long USELESS debate with you as you are seeking confirmation of YOUR ideas, not somebody elses.
So it's useless. I am reading other posters go over and over the concepts with you and it's not sinking in. And I think it's because you don't want it to.
" i especially like your move the goal posts mentality. i think i was very clear about when/how it could work and when it really is a stretch at best and im sure there are agents who agree with me."
No goals to move, not playing your game. There will always be agents who agree with you, doesn't mean you or they are right. Just means somebody agrees with you.
" there is a risk of having too conservative an investment where your dollars become worthless or that you dont get anything more than the guaranteed values. You dont seem to think that is as big a problem or risk as the stock market repeating itself but i do."
Simple question for you Can you go backwards in the stock market? Can you go backwards in Cash values in a whole life?
I have both, one took a 50% beat down the last few years, the other still moved forward 6%. Guess which one was which?
Besides it's not one over the other, it's both. There's a ton of different types of investment risks out there. Worry too much about one and the others kick you in the a ss.
" i could easily be wrong and so could you. neither of us knows what will happen."
So have you considered your ideas and what happens if they fail? What are you out of? I have. but again I do several different things as well as life insurance.
"i am here to learn."
I don't know about that, you got poor guys like Bntr spending a ton of time trying to teach you concepts that you aren't even trying to understand. You keep focusing back to your points without really considering what the other pros here have offered up. Me? I just kinda figure you're a waste of time. You're the horse to water.
What is it again you do for a living?
So you're a surgeon? I just reviewed some of your past comments and did you ever purchase DI? It seemed in that post you were more interested in pushing your point than listening as well.
Kinda hard to understand why you're worried about how finanical aide works on this one, income alone Doctor should make most of your options disappear. Right?
So why are you having this discussion?
Sorry I think I am being as professional as the situation calls for. I wished you good luck and that's about it. I am not going to go into a long USELESS debate with you as you are seeking confirmation of YOUR ideas, not somebody elses.
So it's useless. I am reading other posters go over and over the concepts with you and it's not sinking in. And I think it's because you don't want it to.
" i especially like your move the goal posts mentality. i think i was very clear about when/how it could work and when it really is a stretch at best and im sure there are agents who agree with me."
No goals to move, not playing your game. There will always be agents who agree with you, doesn't mean you or they are right. Just means somebody agrees with you.
" there is a risk of having too conservative an investment where your dollars become worthless or that you dont get anything more than the guaranteed values. You dont seem to think that is as big a problem or risk as the stock market repeating itself but i do."
Simple question for you Can you go backwards in the stock market? Can you go backwards in Cash values in a whole life?
I have both, one took a 50% beat down the last few years, the other still moved forward 6%. Guess which one was which?
Besides it's not one over the other, it's both. There's a ton of different types of investment risks out there. Worry too much about one and the others kick you in the a ss.
" i could easily be wrong and so could you. neither of us knows what will happen."
So have you considered your ideas and what happens if they fail? What are you out of? I have. but again I do several different things as well as life insurance.
"i am here to learn."
I don't know about that, you got poor guys like Bntr spending a ton of time trying to teach you concepts that you aren't even trying to understand. You keep focusing back to your points without really considering what the other pros here have offered up. Me? I just kinda figure you're a waste of time. You're the horse to water.
What is it again you do for a living?
So you're a surgeon? I just reviewed some of your past comments and did you ever purchase DI? It seemed in that post you were more interested in pushing your point than listening as well.
Kinda hard to understand why you're worried about how finanical aide works on this one, income alone Doctor should make most of your options disappear. Right?
So why are you having this discussion?
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here is the utah page. i provide it for any discussion you wish to have.
my kids who have this are in diversified A and from inception have avg returns of 9.86 and 7.77. bc i started both theirs right after i returned from iraq and about a month after inception, i consider that a useful time period. now that isnt actually the real return for a variety of reasons including that i didnt just put all the money in there at once and those are average rates of return instead of actual rates of return but im guessing this return will improve with time and still beat my whole life. the purpose of that money is strictly to grow for education purposes.
http://www.uesp.org/pdfs/returns/2011/2011_03UESPReturns.aspx
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thanks for that wish of luck since the fortune cookie seems to be wrong
my kids who have this are in diversified A and from inception have avg returns of 9.86 and 7.77. bc i started both theirs right after i returned from iraq and about a month after inception, i consider that a useful time period. now that isnt actually the real return for a variety of reasons including that i didnt just put all the money in there at once and those are average rates of return instead of actual rates of return but im guessing this return will improve with time and still beat my whole life. the purpose of that money is strictly to grow for education purposes.
http://www.uesp.org/pdfs/returns/2011/2011_03UESPReturns.aspx
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thanks for that wish of luck since the fortune cookie seems to be wrong
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"you didnt wish me luck and you know it. you are not professional at all. "
Actually, I honestly meant good luck. We're just not a combination that would work. Doesn't mean I hate or dislike you, just trying to figure out why you're here?
What is it you're looking for affirmation about what you've chosen? You're committed to your plan, I hope it works for you, I can't figure out why you're here at this point? Would you really change horses at this point?
Actually, I honestly meant good luck. We're just not a combination that would work. Doesn't mean I hate or dislike you, just trying to figure out why you're here?
What is it you're looking for affirmation about what you've chosen? You're committed to your plan, I hope it works for you, I can't figure out why you're here at this point? Would you really change horses at this point?
- 10,369
While I am a fan of PI for college funding; Im only going to comment on this one statement.
Insurance companies can most definitely invest in things that you cant.
John Hancock is a major investor in Cranberry Farms and Timber Farms in the North East/Canada/& Australia (they receive very nice returns off of this apparently... in the double digits many years)
And when Insurers say they are invested in "Bonds", it is not always the Bond Market that you are thinking of.
They also underwrite bonds to State and Local governments, and even public/private developments.
"A Bond is nothing more than a loan..... its just a very large loan usually" (or lots of small ones... think treasuries)
Yes Insurance companies do invest in things that the average joe can invest in too.
But to think that you or your stock broker can replicate the consistency that the armies of anylists under the Insurance Companies roof have been doing for over 100 years (Im refering to the major Mutuals and a few stock companies) and to do it with the same leverage (more money equals more leverage, especially when it comes to the Fixed Income Market (think buying power)) ; is a pipe dream.
Yes you can beat the returns of WL playing the stock market.
But the risk you take is much more extreme than you realize.
No, I am not being negative about the market, I am a huge fan of the stock market when utilized correctly.
But to get what is maybe 3 percent more from the market (maybe 4 or 5 if you do well (I doubt it would be that much with the limited and often poor fund choices within 529s)) you will be taking on over double the risk.
And is the possibility of a few more percentage points worth double the risk when it comes to your kids education?
I am a parent myself, I can sell myself both 529s and WL, for me double the risk is not worth the possibility of a few more percent.... I have seen way too many 529 statements that were under 7 & 8 percent..
With WL neither you nor the insurance company are taking on anywhere near the amount of risk that you are when you are in 100% securities.
For the amount of risk you would take on, it would have a risk adjusted RR of about half of WL, especially when you throw in fund expenses inside the 529.
But I digress.
Back to my original comment; the Insurance companies can and do invest in things that you cant (unless you are a multi-millionaire)
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yes i would change horses if i felt it was better. i already told you i am here to learn. it doesnt make any sense not to continue to look at it. dont u get mad at clients who just buy a UL policy and dont read the statements as they get closer to going bust? i bet you do but again i could be wrong. i am not looking for affirmation but as u can see i no longer take just any sales pitch and believe me ive been pitched it 100s of times many times inappropriately. but as a for instance of change i could consider, i could put less into the 529s and buy a whole life on my wife or i could buy more PUAs. now i dont really plan to do that bc i dont really think that is the best thing to do for my primary goal of paying for college. for me whole life loans are really a decent idea in retirement once the returns are greater and u have plenty of cash in the policy such that it wont go bust on your loans. i dont feel they are a super plan for more moderate income folks to pay for college and hoping to sneak under the aide bar.
i doubt anyone who read your post thinks u meant good luck. if that is an apology then ill accept and just move on.
No, I'm not suggesting the outlay is important, merely pointing out that they are set equal to illustrate the point that dollar for dollar there is more benefit from one plan (WL) than from the other (529).
That statement, on it's own, doesn't mean anything. You could elaborate more, and I'll dig a bit, to say that rate of return is imperative, that's absolutely fine.
Who besides you said anything about plain vanilla WL? When did I mention plain vanilla WL? How many times on this web site in general have I said anything about plain vanilla WL?
I really don't want to be a dick, because there's a part of me that sincerely believes you want to learn something here, but man you really don't understand this stuff. It's like we're having two parallel conversations. You've not once challenged anything I've said in a materially substantial way, you simply revert to numbers of years to save and some hypothetical pontificating about where the stock market will go.
There's a point being discussed here that you continuously ignore, and it's hugely important. We're talking about interest rate arbitrage, which gives WL a significant upper hand. If I could get you off the rate of return pedestal for five minutes, or at least acknowledge this point, there's a huge insight that could be made.
I don't want to sound like some LEAP sales pitch, but you're acting like these things occur independently (e.g. I'll save for college over here, and then save for retirement over here, and then take care of my life insurance over here). It rarely works out well under that approach. It's like trying to keep all the plates spinning. Why one earth would you want to endure the stress if you don't have to?
Not even kind of correct. Insurance companies have an amazing amount of leverage you'll never have (unless you're going to tell me that Warren Buffet plans on leaving most of his estate to you). The way you go about investing a multi-billion dollar asset pool is crazy different from how you go about investing a couple hundred thousand dollars, even a million or two. And if you think you do have the same access, call up your broker and tell him you want to borrow 50,000 shares of (pick your favorite large cap company you think might not have a great quarter) so you can short it. Tell me what he/she says. Or better yet, how many CDS's did you have an opportunity to buy back before the meltdown? And I'm not talking mutual funds heavily placed in CDS's or indexed funds, I'm talking the swaps themselves.
Look, I'm offering up an alternative way to look at this. Trying to point out that the way in which you are viewing some of this might be a tad screwed, and not to your benefit. However you keep talking about moving the goal posts. Not trying to do that, just trying to get you to acknowledge there's a different way of approaching this that might be super beneficial. Perhaps you're at a point where you're set off down a road that wouldn't make a lot of sense to change, that's fine--if you already have lung cancer there's likely not a whole lot quitting smoking is going to do for you, now. And why deprive yourself?
But at the very least if you're going to post a contrarian view, at least take the time to challenge this stuff on it's merits and not with superficial nonesense like plain vanilla WL will probably not have as much cash value as my 529 balance, or there's start up costs to having kids so, blah blah whatever. I'm suggesting there's is definitely a way to get your WL cash balance near equal to your 529 balance and in that situation WL brings a lot of powerful stuff to the table that makes it quite attractive, and you've yet you touch that point.
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