Mass Mutual 5.5% WL Gauranteed Interest ?

[URDRWHO]

I was talking to a friend today and she and her husband are getting a Mass Mutual whole life policy. The agent told them that the guaranteed interest rate is 5.5%. I have no contracts with Mass Mutual and do they have a whole life policy with a guaranteed interest rate of 5.5%?

Hm? Knowing insurance companies I'm sitting here thinking that if they do, the insurance company is making up the difference in higher mortality rates. Yes after 30 years in this business I have become jaded and know that there is no free lunch.

The husband recently attended a seminar and the MM speaker kept emphasizing tax free. Duh....yes death benefits are usually tax free but I know that the husband and wife have assets, three nice rentals and then their very nicer residence. They have other assets as well. I wonder if the agent has discussed the estate issues? Every day now I hear advertisements on the radio talking about tax free this or that and I guess it is about life insurance. The current trend may be to sell only on the "tax free" platform and forget about keeping the life insurance out of the estate.

 

[Larry Tew]

Very few families are going to have estate tax issues. Proper asset ownership will resolve almost all estate tax liabilities.

Every time an interest rate is quoted regarding WL, it's either the interest rate used in the dividend scale or the assumed interest rate used in the guaranteed actuarial pricing - neither of which means "getting 5.5%" on anything.

 

[URDRWHO]

I was never a WL sales guy, sold a lot of UL and a lot of term but not much WL. Plus my contracts with mutual companies were rare.

So they are selling dividends? In my realm assumed was never guaranteed and the wife said that the agent said...."where are you going to get a safe, guaranteed return of 5.5%?

Yes these days few people will fall into the estate trap but I do know people that will. Correct assets ownership --- true. The problem is that many people don't do it.

I still remember the time that it wasn't so hard to fall into that trap, when the exemption was only $675,000. That trap can change at the will of the political class in Washington. Ah yes Washington....they are like vultures sitting on a perch just waiting for their prey. http://www.insurance-forums.net/forum/images/smilies/laugh.gif

The issue is that if your are pushing the tax free benefit you should be making sure you aren't talking to someone that is in the estate trap. My wife worked for one of the big 8 accounting firms and I can say for a fact that some of the richest clients looked like they didn't have a dime to their name.

Washington is always whacking away at lowering the exemption. The need for money in Washington is great and getting greater by the year. If I were a betting man I would wager that in 10 years (or so) the exemption will change. Therefore to make it an exact science of tax free death benefits --- don't rely on political promises, write it "today" so that it won't be included in your estate. Very easy to do today but after death --- hard to do.

"Jim McDermott and the House Democrats introduced a bill to extend the estate tax beyond 2012. The proposal would reduce the current estate tax exemption from $5 million to just 1 million and raise the estate tax rate from 35% to a top rate of 55%.

Under McDermott's proposal, co-sponsored by Rep. Charles Rangel , the exemption for married couples would drop to $2 million from current level of $10 million. A surviving spouses could still claim the remainder of their partner's exemption if some remains unused after death. The rate and $1 million exemption would be adjusted for inflation, beginning at the 2000 level.

The bill would also unify the estate and gift taxes. That means a taxpayer would only have a single exemption of $1 million for their estate and most gifts. The legislation also includes several provisions from Obama's last budget proposal to end targeted estate tax breaks."

SO what you are saying is what I was thinking. That they do not have a "guaranteed" interest rate of 5.5%.

Very few families are going to have estate tax issues. Proper asset ownership will resolve almost all estate tax liabilities.

Every time an interest rate is quoted regarding WL, it's either the interest rate used in the dividend scale or the assumed interest rate used in the guaranteed actuarial pricing - neither of which means "getting 5.5%" on anything.

 

[scagnt83]

Its assumed Dividends, not a Guaranteed Return. Granted, Mass has not failed to pay a dividend in over 100 years... but it still is not guaranteed.

Also, the 5.5% is the Dividend Rate, not the actual Rate of Return. The Rate of Return will be slightly lower than the Dividend Rate since they have to take out Cost of Insurance and Admin expenses.

But the tax free part is correct to an extent. While living, you can withdraw to Basis and take out Loans on the rest and the cash you receive is Income Tax Free. And of course the Death Benefit is received Income Tax free by the beneficiary.... but it does not avoid Estate Taxes.

It sounds like the guy doing that seminar is just begging for an E&O claim. Also, if Mass would send him a cease and desist order in a heartbeat if they knew he was telling people the Dividends are guaranteed!!!

 

[Justin Bilyj]

I do believe the 5.5 he's talking about is IRR. I have heard my own upline use that before. So after all the expenses of having a policy the cash value may grow at a rate of 5.5.
The agent is supposed to tell you the growth is NOT guaranteed, and should also highlight the fact that they are talking about IRR and not just a return on your premium dollar.

Attached is a piece that shows IRR.

 

[URDRWHO]

You have solidified everything that I already considered.

In my State the DOI has a very strict rule against selling dividends as guaranteed. That doesn't stop the agents from going into the speech of how such and such company has never missed paying a dividend. In fact if memory serves me, my State DOI has even come down on what they call selling dividends. I've read that the DOI would like to make it a rule that you to inform consumers exactly what an insurance company dividend is and what it is not. We all know the definition of a dividend. Perhaps we have forgotten and I'll get out my legal dictionary ---

Dividend -- "A partial return of premium to the insured on the insurer's financial performance or on the insured's own loss experience. Insurers can not legally guarantee the payment of dividends."

Never been a fan of the old AL Williams play book but they did have a point about selling the dividend.

Oh well, I am not sure if I want to get involved. I have enough positive business on my plate.

Its assumed Dividends, not a Guaranteed Return. Granted, Mass has not failed to pay a dividend in over 100 years... but it still is not guaranteed.

Also, the 5.5% is the Dividend Rate, not the actual Rate of Return. The Rate of Return will be slightly lower than the Dividend Rate since they have to take out Cost of Insurance and Admin expenses.

But the tax free part is correct to an extent. While living, you can withdraw to Basis and take out Loans on the rest and the cash you receive is Income Tax Free. And of course the Death Benefit is received Income Tax free by the beneficiary.... but it does not avoid Estate Taxes.

It sounds like the guy doing that seminar is just begging for an E&O claim. Also, if Mass would send him a cease and desist order in a heartbeat if they knew he was telling people the Dividends are guaranteed!!!

 

[BNTRS]

The current MassMutual dividend rate is 7.1% not 5.5%

 

[Justin Bilyj]

The current MassMutual dividend rate is 7.1% not 5.5%

Which is why I think they are talking IRR..

 

[DHK]

You have solidified everything that I already considered.

In my State the DOI has a very strict rule against selling dividends as guaranteed. That doesn't stop the agents from going into the speech of how such and such company has never missed paying a dividend. In fact if memory serves me, my State DOI has even come down on what they call selling dividends. I've read that the DOI would like to make it a rule that you to inform consumers exactly what an insurance company dividend is and what it is not. We all know the definition of a dividend. Perhaps we have forgotten and I'll get out my legal dictionary ---

Dividend -- "A partial return of premium to the insured on the insurer's financial performance or on the insured's own loss experience. Insurers can not legally guarantee the payment of dividends."

Never been a fan of the old AL Williams play book but they did have a point about selling the dividend.

Oh well, I am not sure if I want to get involved. I have enough positive business on my plate.

ROFL!!!!!!!

Your training is the same that everyone gets.

Let's do a little critical thinking here: If all dividends are a "return of unused premium"... wouldn't that mean that the guaranteed premiums for the policy are a 'rip-off'? Shouldn't they be charging less?

Why do you think the insurance companies WANTED the IRS to classify dividends as a 'return of unused premium'? To keep it classified as a 'return of your basis' and therefore NOT SUBJECT to income taxation!

So, if we reframe our thoughts on this: the premiums for permanent plans are NOT a ripoff... and dividends are classified by the IRS for IRS purposes as a 'return of unused premium'... so that we can enjoy the benefits of dividend performance on a tax-free basis. (Tax free until dividends received are greater than premiums paid into the policy.)

 

[pfg1]

I do believe the 5.5 he's talking about is IRR. I have heard my own upline use that before. So after all the expenses of having a policy the cash value may grow at a rate of 5.5.
The agent is supposed to tell you the growth is NOT guaranteed, and should also highlight the fact that they are talking about IRR and not just a return on your premium dollar.

Attached is a piece that shows IRR.

Do you have that piece as a pdf? I can't really read it on my pc unfortunately.


You should be able to run a IRR report in the software, I would think. 5.5 still seems a smidge high to me, even though they have real strong dividends.