SECOND THOUGHTS on Whole Life Insurance 1 Year in - ADVICE???

[frymiller]

THANK YOU everyone for the thoughtful input. I apologize for the delay in response to some of the questions.

It is a whole life policy through Ohio National. It pays dividends which get re-invested to buy more death benefit. It has a disability clause which would pay the premium in the event of disability.

I don't know many more specifics, but could look up any specific info in the policy if needed.

 

[Golfnut2112]

If I had the choice between 529 .. and WL .. I would chose WL for myself..

but if I had a choice of WL and IUL .. i would pick IUL as well..

however there are advantages of a WL .. mainly the fact that whole life has dividend rate ever year (though not guranteed) that is announced every year.. so I can see someone preferring WL over IUL

at the end of the day.. it doesn't have to be one way or the other .. there are many financial tools out there and the more open you are to all of them .. the more options you have.. I just disagree with the part that WL is not suitable.. if that were the case GERBER would have been sued over and over again

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the 2 major reasons why I would rather have a WL
- I want a college SAVINGs plan.. .18 years is a rather short time to have a dependable return on the stock market.. yes I can change my allocation but that can greatly diminish my return .. meanwhile I'm still exposed to more risks on a whole life..
what if my daugher is in college her freshman year.. I pay for the tuition .. and then there is a major market correction for her sophomore year.. I can't rely on the funds like I can do with WL.. WL is more predictable .. yes 4% is not mind blowing but it's dependable and way better than bank rates.. again it's a college SAVINGS plan


- Flexibility ... What if my daughter decides not to go to college.. or what if she gets scholarships... guess what I have to take money out of the 529 .. get taxed and pay a 10% penalty ..with WL .. I can pay for off campus housing .and a lto of other things that a 529 withdrawal does not qualify for...

LOL you got to love Gerber!!!

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If I had the choice between 529 .. and WL .. I would chose WL for myself..

but if I had a choice of WL and IUL .. i would pick IUL as well..

however there are advantages of a WL .. mainly the fact that whole life has dividend rate ever year (though not guranteed) that is announced every year.. so I can see someone preferring WL over IUL

at the end of the day.. it doesn't have to be one way or the other .. there are many financial tools out there and the more open you are to all of them .. the more options you have.. I just disagree with the part that WL is not suitable.. if that were the case GERBER would have been sued over and over again

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the 2 major reasons why I would rather have a WL
- I want a college SAVINGs plan.. .18 years is a rather short time to have a dependable return on the stock market.. yes I can change my allocation but that can greatly diminish my return .. meanwhile I'm still exposed to more risks on a whole life..
what if my daugher is in college her freshman year.. I pay for the tuition .. and then there is a major market correction for her sophomore year.. I can't rely on the funds like I can do with WL.. WL is more predictable .. yes 4% is not mind blowing but it's dependable and way better than bank rates.. again it's a college SAVINGS plan


- Flexibility ... What if my daughter decides not to go to college.. or what if she gets scholarships... guess what I have to take money out of the 529 .. get taxed and pay a 10% penalty ..with WL .. I can pay for off campus housing .and a lto of other things that a 529 withdrawal does not qualify for...

And that will cost less than making thousands of dollars in interest payments year after year?

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Based on what he said the premium is $6500 and a rider for $3500 which tells me it's not any type of UL policy. He said it was whole life so it's really not that complicated. Since this is a general message board all we can do is provide general help.

Once again I am not opposed to whole life I just don't like it being used when there are better options out there.

I still not heard why whole life would be an ideal funding choice for college in this instance.

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With an income of $240,000 it really does not matter where his assets are. If he uses life insurance he is going to get either a negative or a very low rate or return on his money, then if decides to use it he gets to pay loan interest year and year after year!

How does paying loan interest help their retirement?

Why not just use a very conservative bond fund or maybe a floating income fund and be able to withdrawal the money and not pay the interest?
Maybe the guy is not security licensed and cannot offer the 529 so life insurance is all he's got to offer.

What is goldnut??

 

[DHK]

And that will cost less than making thousands of dollars in interest payments year after year?

As loan interest is charged against your policy's cash values, so does your policy become 'whole' as interest payments are made to restore their values.

Now, if one doesn't want to make the payments, then I can see your point, but it's not like you'll be losing anything.

 

[Golfnut2112]

As loan interest is charged against your policy's cash values, so does your policy become 'whole' as interest payments are made to restore their values.

Now, if one doesn't want to make the payments, then I can see your point, but it's not like you'll be losing anything.

Interest payments do not restore the policy value it is paid to the company and never goes back into the policy. Loan repayments restore the policy. All loan payments do is prevent the loan interest being added to the outstanding loan.

 

[DHK]

I'm sorry - I misspoke. Paying loan interest restores policy earnings, not values.

 

[Golfnut2112]

I'm sorry - I misspoke. Paying loan interest restores policy earnings, not values.

Policy earnings? It is paid as an expense it goes to the insurance company never to be seen again. The only thing it does it prevent interest from added to the existing loan

 

[Tothetop]

Yes to your point DHK I always understood loan interest as being so minimal that dividends from a strong dividend paying company can sometimes cover the interest and still add to the policy if you start borrowing from it 20yrs in for example; especially from a non-direct recognition company.

 

[Golfnut2112]

Yes to your point DHK I always understood loan interest as being so minimal that dividends from a strong company can sometimes cover the interest and still add to the policy

Yes dividends can be applied to loan interest but the simple fact is you are still paying it.

 

[jboussea]

LOL you got to love Gerber!!!

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And that will cost less than making thousands of dollars in interest payments year after year?

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What is goldnut??

It could cost less ..it could cost more.. i can't tell you which one would come out on top. Thats not the point.. we all know anytime you're in the market.. the amount of return you make heavily depends on the timing of taking money out. The problem with saving for college is that you have no control over the time ypur kids go to college... If your kids happen to start collefe in 02/1.. you were looking at 3 straight years of down market... again being in stocks can be a great tool for the right situation... IMO its not ideal for a SAVINGS plan witha definitive sate of withdrawal..couple that eith the restrictions of a 529 plan... I'll gladly take whole life over it. .. i get a dividend rate every year .. it's more reliable and i can plan around it.

Btw .were you quoting yourself in the 2nd part ..not sure if you were responding to me

 

[Golfnut2112]

It could cost less ..it could cost more.. i can't tell you which one would come out on top. Thats not the point.. we all know anytime you're in the market.. the amount of return you make heavily depends on the timing of taking money out. The problem with saving for college is that you have no control over the time ypur kids go to college... If your kids happen to start collefe in 02/1.. you were looking at 3 straight years of down market... again being in stocks can be a great tool for the right situation... IMO its not ideal for a SAVINGS plan witha definitive sate of withdrawal..couple that eith the restrictions of a 529 plan... I'll gladly take whole life over it. .. i get a dividend rate every year .. it's more reliable and i can plan around it.

Btw .were you quoting yourself in the 2nd part ..not sure if you were responding to me

Are you security licensed?? Most 529 plans have an option that moves more into cash and bonds the closer they get to college. Even if you were doing it yourself common sense tells you to move into a conservative allocation as college approaches. If you are not security licensed don't drink the kool-aid that companies feed you. Get security licensed and learn all the different options out there.

Honestly I'm not sure what I quoted anymore. Lol