Mass Mutual vs Penn mutual

[Blacklabs]

I am looking at opening a policy to partially use for the IBC method as well as the death benefit. I have come across something I am not able to fine clear answers on and few insurance guys are contradicting each other.

Mass mutual salesman keep touting a 4% guaranteed plus dividends and the Penn appears to be 2% guaranteed plus dividends. That 2% over the life of a contract could really add up, but Im not getting very straight answers. Anyone here mind helping a consumer out that is new to this?

 

[DHK]

Your agents... are all going to hate me right now because I'm going to expose the fallacies of their narratives.

Both are now misrepresenting how dividends work.

It's not 4% anymore. MassMutual has introduced new products in line with the new 7702 policy guidelines passed at the end of 2020. Companies have been putting out new editions of their products all through 2021. Mass was one of the first to do this.

Plus, 4% (or rather the 2%+) is not a rate of return.

For whole life policies, they will eventually endow at the face amount. That means that the cash values need to equal the face amount at the age of endowment - typically age 121.

So, let's say that for a $1 million policy... with a 2% reserve rate, what would the base policy premium be for a 50 year old?

Age 50 (age 121 - 50 = 71 years of premiums).

FV (Future Value) = $1 million
i (interest rate) = 2%
n (years) = 71
PV (present value) = $0
Solve for annual PMT = $6,495 for the base policy alone.

This includes no PUA riders to borrow against nor any additional non-guaranteed dividends. Also doesn't include costs of insurance within the base policy either.


"Infinite Banking" is all about borrowing against your policy and repaying it back to restore your ability to get a loan when you want it.

Policy loans are advantageous to the consumer because:
- They are simple interest vs amortized loans
- Not reportable to credit bureaus
- Unstructured payment plans (as long as the policy stays in-force)

https://www.dynamicadvancedwealth.com/post/2018/09/21/infinite-banking-explained

I hope you found this helpful.

 

[Blacklabs]

Well the one agent I am working with is the one representing the 2% plus dividends. Its is a YouTube style agent touting the 4 plus dividends as recent as feb 2021. Being a newb in this world I am fact checking every little thing 10 times over so that was sticking out to me. Its a lot of searching to see if something like this is beneficial for me or not! Im not as interested in the true IBC world as much as I am it being a savings account so to say with perks

 

[DHK]

If you really want to study this out, then there's a series of books I recommend by Bryan Bloom, CPA:

Amazon product ASIN B09N79GFMD
Amazon product ASIN B00IAAPUYI
Amazon product ASIN B0842YHBT6

 

[DHK]

Its is a YouTube style agent touting the 4 plus dividends as recent as feb 2021.

Things usually don't change quickly in the insurance world... but this law that passed at the end of 2020 is one that the industry needs to adjust to because of the low interest rate environment we're in.

So while that's a year ago... it's outdated.

 

[scagnt83]

I am looking at opening a policy to partially use for the IBC method as well as the death benefit. I have come across something I am not able to fine clear answers on and few insurance guys are contradicting each other.

Mass mutual salesman keep touting a 4% guaranteed plus dividends and the Penn appears to be 2% guaranteed plus dividends. That 2% over the life of a contract could really add up, but Im not getting very straight answers. Anyone here mind helping a consumer out that is new to this?

As of 2022, they both have a 2% guaranteed interest rate. The Guaranteed Ledger of the illustration shows the policy with just the 2% guaranteed interest rate.

2% is not the return you get on Premiums, its the internal return before policy expenses. So the NET on the Guaranteed Ledger is not 2%.

Same with Dividends, they get policy expenses deducted.
Penn has a 5.75% Dividend.
Mass has a 6% Dividend.

So your actual rate of return on premiums is going to be in the 4%-5% range for both products.

Both carriers have some of the highest and most consistent dividends in the WL market. Both are excellent companies. Either option is a great option to choose.

Whats more important than comparing the policies, is comparing the agents. This type of policy is HIGHLY dependent on being designed correctly, and serviced correctly. If the policy is not max funded (max premium with minimum DB) then it will perform poorly and not do what you want it to. If you borrow too much and dont service it correctly, it will Lapse. There are TONS of potential pitfalls in this scenario if the agent screws up or omits something. And it seems each agent is just pitching a single product to you... not showing you a comparison of multiple options like a true independent agent does (like I do with all clients). So comparing the two is essential in this situation.

The products are almost exactly the same. Biggest difference is that Penn has an OverLoan Rider and Mass does not (nice safety net for infinite banking). Mass has slightly better financial ratings than Penn. Past that, the policies are essentially equal. Its like trying to compare a Mercedes to a BMW. Both carriers are my "go to" carriers for accumulation focused WL.

* Penn has slightly more liberal underwriting, so you are more likely to get a better health rating with Penn. If you are on any medications or have any ongoing health conditions (diabetes, high bp, etc.) Penn is most likely your best option. But if you have any of those conditions, the agent should pre-screen you, even do an informal app, before officially applying.

The biggest risk you run in this scenario is the agent not knowing what they are doing. If the Mass agent is telling you the policy gets 4%, then they are not up to date on the current regulatory changes in the market. That could possibly be a red flag.

Be sure to have the agents include the "Rate of Return" report in the illustration. It lets you easily compare the CV performance of each product.

And if either agent bad mouths the other product, they are full of sh*t and are just trying to make a sale regardless of facts.

 

[Lloyds of Lubbock]

You should use an agent familiar with this strategy.
Putting large amounts of PUA's in a policy and withdrawing early on can cause a MEC or trigger a recapture ceiling.
Trying to pick which company will be better twenty years from now will be an exercise in futility.
Pick the agent you feel is the most trustworthy and will provide you with the service that you will need.

 

[Allen Trent]

withdrawing early on can cause a MEC or trigger a recapture ceiling.

@Lloyds of Lubbock Just caught this post from last week. Can you explain a bit on this? I have not seen a policy retroactively become a MEC when PUAR surrendered as the face goes down by the amount the cash bought, correct? Also, can you elaborate on recapture ceiling..

Worried I am missing something I have not paid attention to or have forgotten.......quite possibly because I have never had a conversation with an Agent or client about taking money out for decades, if ever. I never got into showing max money coming out or coming out early. Mostly pointed to potential values that could be there decades down the road for emergencies or supplementing some income years when trying to stay in tax brackets

 

[Lloyds of Lubbock]

When you put a substantial amount of PUA in a policy you may create a material change.
That would subject the policy to a 7 pay test.
If you take a large withdrawal you will also create a material change and the policy will look at the lowest db in relation to premium...this may create a mec.
A recapture ceiling is a money money out regulation to detect money laundering.
If you trigger this your distribution is taxable

 

[Tahoe Ray]

When you put a substantial amount of PUA in a policy you may create a material change.
That would subject the policy to a 7 pay test.
If you take a large withdrawal you will also create a material change and the policy will look at the lowest db in relation to premium...this may create a mec.
A recapture ceiling is a money money out regulation to detect money laundering.
If you trigger this your distribution is taxable

Excellent info. Thank you.