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- #11
Can you tell me why its awesome? From the numbers and projections, a regular after-tax account is equal or more awesome than the best-case WLI projections.
Help me understand what you're looking at?
Tips for Buying Permanent Insurance?
- Thread starter atxeng
- Start date
Can you tell me why its awesome? From the numbers and projections, a regular after-tax account is equal or more awesome than the best-case WLI projections.
Help me understand what you're looking at?
- 11,277
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Although I must ask... why are you on here asking (insurance) strangers instead of talking with your agent/advisor?
There must be something that you aren't TRUSTING about your agent/advisor that causes you to come HERE to ask questions? OR he hasn't explained why this policy can be in your best interest in a coherent way?
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Btw, pfg1 is looking at 30-40-50 year projections and comparing them to the economic and demographic realities of today.
If you are only comparing on a 10-year or under 20 year period of time, you're not seeing the whole picture.
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- Thread starter
- #13
- 6,457
Until or unless one can think about life in addition to pure financial numbers, it is difficult to fully appreciate the awesomeness of of whole life insurance.
There is a thread called something like I am your insurance policy. Read over that and then put that, your financial thoughts, a favorite view and a favorite beverage together and chill out for awhile letting all those things tumble around and merge together in your head.
(also i'm not quite sure what the right search terms would be, but look around for combinations of DHK and life insurance. His posts over a period of time reveal a lot of good "perspective" information about life insurance.)
If you're creating a well-balanced portfolio, looking at the WL as the conservative (fixed/bond) portion might add some clarity.
WL is not designed to outperform a diversified portfolio, but it can certainly be part of one.
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- #16
I know...but that's the thing I've been saying. It seems that buying term and investing in fixed/bond is equal or better than WLI. Why do WLI as a replacement when it seems to be worse?
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- #17
This?
i-am-your-policy-t39693.html
yea yea yea. enough about the fluff. I'm interested in actual numbers and real data. Are you telling me that I should not be considering a serious financial decision based on real financial numbers? Instead, how it makes me feel inside? Is that correct?
It appears that BTID is better than buying whole life. I'm trying to find a reason to agree with my adviser/broker and sign the contract but the numbers seem to show that buying WLI is a worse decision.
- 11,277
1 - Are you comparing "like for like"? BTID is often done with BACKTESTING with past investment assumptions and business environment that is constantly changing due to demographics, economy, political influence, and monetary policy.
If you are comparing buying term and investing in a mutual fund from back in the 80's... you have WAY TOO MANY THINGS WRONG in the comparison, besides the inappropriate asset-class comparison.
Crestmont Research believes that we will NEVER see an average 10.1% rate of return in the stock market:
https://www.crestmontresearch.com/docs/Stock-Waiting-For-Avg.pdf
2 - Are you familiar with today's interest rate environment? Here's an economic update from last year - before the election:
3 - Dividends are not locked in. They are not guaranteed. They are shown based on TODAY'S dividend yield. They can increase and they could (theoretically) decrease, even in today's interest rate environment. This will probably be one of the WORST illustrations that this agent will ever have to show you.
4 - I don't know the structure of the proposed policy (MassMutual has lots of different variations) - whether it is being pumped full of cash using PUA riders (Paid up additions) or not.
Can you tell us the "break even" year - the year when your cash values exceed your cumulative premiums paid?
Generally, if it is a "pay to age 100" policy, I look for 75% or more of available cash values in year 5 and a break-even year between years 8-10.
Insurance products - like whole life and annuities - are BUILT for interest rate environments like these - providing an element of certainty in one's total portfolio.
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As far as returns go .. WLI is not necessarily BETTER than BTID .. BTID is not necessarily better than WLI. They play different roles.
I can run numbers and make WLI look better .. I can do the same with BTID. However you must understand what you're looking for. When is it appropriate to go with WLI and when it is better to go with BTID.
WLI is a steady systemic stable growth, It's greatest advantages are 2 fold, one once you reach a certain point .. for example.. let's say you're at that 5.5% point that you've reached, you are safe .. you are not exposed to a market correction.. let's say you were at 7% with BTID .. you can easily go down to 4% in one fell swoop. WLI meanwhile only goes up from there... under extreme circumstances, like an eonomic environment that would prevent the company from issuing a dividend... your principal would stay still.
The 2nd advantage to WL is it's distribution. To keep it short , because you're not exposed to the sequence of returns risk, it allows you to withdraw a larger percentage during the distribution period (i.e. retirement).
BTID 's advantage is that you can start small investing a little bit at a time. The other advnatage is its high ceiling. Put it this way ..if we're looking historical numbers.. I'm sure BTID with investment 100% in the S&P 500 will yield you better return MOST of the time ..
The problem is nobody is 100% invested in an SP500 index fund because they understand the risk.. so the numbers people run .. nobody actually gets those because nobody does it. I'm sure you've seen the Dalbar numbers where Mutual investors only get 5% return over a 30 year period.. Those are real numbers. no matter what the S&P does .. once you lose 40% of your balance .. like 2008 you might want to be a little more conservative and you don't take advantage of the 2009 recovery.
But what if you had the WLI as the conservative more predictable investment .. and when you lost your money in 2008 .. you took money out of your WLI and let your money in the market stay there and take advantage of the recovery. and guess what your asset allocation would probably be a lot more aggressive knowing that you have your safe investment in WLI.
- 4,132
To the OP
Think about RISK as you plug all this stuff in. What risks are you willing to take or accept and should you?
If you're going to buy term and invest conservatively, just buy WL. That's what WL is a conservative safe place to park money that will not suffer market losses. Can't go backwards.
If you're investing and in order to get those large returns you have to risk loss. 10% returns usually also have 10% losses along the way. That is why comparing WL to BTID is often just wrong because we toss Risk out the window and make them equal in a very unequal situation.
The thing is the best way to pay for college is encourage your child to be a great student. Between my two kids, they split about a quarter mill for college via scholarships.
The reality is the cost of college has/is climbing faster than what you can earn in the market while taking large risks on. I mean not knocking that you're doing savings wise, but insure yourself because everything revolves around you for completion of the plan. If you bite the dust the 2 million dollar policy on the kid lapses and college goes out the window Insure the money making machine.
Think about RISK as you plug all this stuff in. What risks are you willing to take or accept and should you?
If you're going to buy term and invest conservatively, just buy WL. That's what WL is a conservative safe place to park money that will not suffer market losses. Can't go backwards.
If you're investing and in order to get those large returns you have to risk loss. 10% returns usually also have 10% losses along the way. That is why comparing WL to BTID is often just wrong because we toss Risk out the window and make them equal in a very unequal situation.
The thing is the best way to pay for college is encourage your child to be a great student. Between my two kids, they split about a quarter mill for college via scholarships.
The reality is the cost of college has/is climbing faster than what you can earn in the market while taking large risks on. I mean not knocking that you're doing savings wise, but insure yourself because everything revolves around you for completion of the plan. If you bite the dust the 2 million dollar policy on the kid lapses and college goes out the window Insure the money making machine.
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