Permanent life insurance (2 Viewers)

[UncleTrvlingJim]

I'll look into the Vanguard S&P 500 Index Fund. Have you guys ever considered P2P lending websites such as Lending Club or Prosper?

I like Prosper, but I'd look at that after you've saturated other investments, as a diversification strategy.

My general financial rules to live by:

1. Pay off revolving debt first - everything but house debt, and maybe car loan
2. Establish emergency fund - at least enough savings to live on for 6 months if you lost your job
3. 401K or other retirement fund -- you can do this before step 2 if your field is stable or have highly marketable skills, the sooner you start maxing out the 401K, the better you'll be in the long run.
4. Then you can either pay off your house debt or start investing in mutual funds.. this depends on your risk profile. If you're risk averse, pay off your house, if you are risk tolerant invest in mutual funds - the rate of return should be higher than your loan interest, but you have to be willing to ride the waves.
5. Diversify with other investment instruments -- peer to peer lending, buy rental properties, direct investment in companies, etc.

 

[dtc]

What's your intention for getting insurance? You can get a much higher coverage for less monthly payment with term... so from a standpoint of protecting your family if you die, term is "better". Of course, if you don't die you never get any money.

However, as a savings plan, whole life insurance is terrible for a rate of return. You'd be better off, saving your money in a mutual fund.

I went the direction of getting term life insurance and saving money in a mutual fund.

I bought half a million in term when I was 23. It cost about $87 per month and within 8 or 9 years had gotten up in value enough that I didn't need to make the payments anymore. I had it set up on automatic withdrawal and still do.

The cash value after 23 years is quite substantial and the coverage is still in place.

I think if you're young it's a good deal. If you're older, then whole life is too expensive for the insurance and the return is marginal.

Of course, I may just be rationalizing a sort of good choice as a great choice because I did it, but I will say that between my wife and I we could continue to make our premiums for another few years and then retire off that one source alone at 65.

 

[SystemShock]

Life insurance (or death insurance, really) to me is a racket. It only makes sense to me if your death will put someone at a great financial disadvantage when you are in a situation of negative or very low net worth, family, one income, substantial mortgage, etc...

 

[dtc]

Life insurance (or death insurance, really) to me is a racket. It only makes sense to me if your death will put someone at a great financial disadvantage when you are in a situation of negative or very low net worth, family, one income, substantial mortgage, etc...

I don't know about all the low net worth, but it's certainly a hedge against death. The way I figured it was I needed it to provide for my wife if we had had a kid and something happened. Oh, and the investments within the policy are under your control so I'm not sure how the returns are any lower than any other retail investment vehicle except that some of your payment is the cost of insurance.

 

[FullMonte]

Well, initially my goal was to protect my family in case I die. But once I learned about permanent life insurance, I thought why not get some sort of return while at the same time protecting them.

Well, the real question is this...Do you ACTUALLY get a return?

Typically, if you die, your policy pays the value of the policy to your beneficiary, and the savings component is kept by the insurance company.

If you want to withdraw the funds from your savings component, you either have to borrow against it, or cancel the policy and then you get the funds minus a ridiculous "surrender charge." My wife recently cancelled a policy her parents had taken out for her when she was a child. The policy was over 30 years old. The "cash value" was in the neighborhood of $8,000, and the surrender charge was just over $3,000. That means that the insurance company charge her around 40% of the cash value just to send it to her.

 

[superchuck500]

I'm looking to purchase life insurance for my fiance and I. A financial advisor we just started working with tells me it's a no brainer to go with permanent life insurance vs term. From what I understand, it makes sense too, but seems too good to be true. Anybody have this or know about it? What are the drawbacks?

At your age, you should probably go with term policies - you could get a 20 year policy for fairly inexpensive premiums if you don't have any particular health issues.

Whole life isn't really insurance as much as it is a financial investment instrument. And there's just better options out there for long-term investment.

 

[brandon8283]

I'm looking to purchase life insurance for my fiance and I. A financial advisor we just started working with tells me it's a no brainer to go with permanent life insurance vs term. From what I understand, it makes sense too, but seems too good to be true. Anybody have this or know about it? What are the drawbacks?

Is the financial advisor the one selling you the insurance policy? Because his commission is gonna be a ton higher on whole life than term. Why? Because they make way more money on it than term.

And conversely, you make way less.

Get a new financial advisor.

 

[St.Fury]

I sent you a PM.

 

[St.Fury]

Is the financial advisor the one selling you the insurance policy? Because his commission is gonna be a ton higher on whole life than term. Why? Because they make way more money on it than term.

And conversely, you make way less.

Get a new financial advisor.

Not necessarily. Depends on the carrier and other factors, like age and other risk factors. I've seen WL policies pay slightly less than TL. But I always suggest shopping around for life insurance, anyway. Buying from your financial advisor isn't necessarily the best idea.

 

[JOMFA]

Looking for feedback on a viewpoint I'm having. Starting to believe my monthly premium in life insurance is unnecessary. I have viewed life insurance in the past as a solid protection for my family in the event I die. My children are in college now, my house is just about paid off, and I have no debt (beyond that mortgage). I have built up a retirement nest egg and feel this would provide enough should I die and no longer need to spend the large amount of premium spend every month. I'll be 52 this summer - just feeling like I'm over-insured. Thoughts???

 

[brandon8283]

Looking for feedback on a viewpoint I'm having. Starting to believe my monthly premium in life insurance is unnecessary. I have viewed life insurance in the past as a solid protection for my family in the event I die. My children are in college now, my house is just about paid off, and I have no debt (beyond that mortgage). I have built up a retirement nest egg and feel this would provide enough should I die and no longer need to spend the large amount of premium spend every month. I'll be 52 this summer - just feeling like I'm over-insured. Thoughts???

If the goal of life insurance is to protect those who depend on you for income in case you die, then at some point in your life, hopefully, you will no longer need that protection.

If your kids are out of college and have good jobs, and your house is paid off, and your spouse is able to support him/herself without your income and maintain a reasonably similar standard of living, then it's hard to justify needing life insurance, especially if you have a solid nest egg that will continue to support your spouse and/or become an inheritance when you die for your kids.

If I were in your shoes, I would wait until the house is paid off and the kids are out of college and then probably pull the plug on my life insurance policy. That money can be redirected to investments.

 

[FullMonte]

Looking for feedback on a viewpoint I'm having. Starting to believe my monthly premium in life insurance is unnecessary. I have viewed life insurance in the past as a solid protection for my family in the event I die. My children are in college now, my house is just about paid off, and I have no debt (beyond that mortgage). I have built up a retirement nest egg and feel this would provide enough should I die and no longer need to spend the large amount of premium spend every month. I'll be 52 this summer - just feeling like I'm over-insured. Thoughts???

I would say that if your children are grown and moved out, and your home is paid off, and you've got a decent nest egg....then, yeah...you might not need insurance (or as much insurance).
The one question that comes to mind is about your retirement nest egg. If you were to pass away next week, would your spouse be able to access that nest egg? Would there be any kind of financial hit?

 

[donato]

Make sure you've watched at least 40% of the Forensic Files catalog before making any major spousal life insurance decisions.

 

[JOMFA]

I would say that if your children are grown and moved out, and your home is paid off, and you've got a decent nest egg....then, yeah...you might not need insurance (or as much insurance).
The one question that comes to mind is about your retirement nest egg. If you were to pass away next week, would your spouse be able to access that nest egg? Would there be any kind of financial hit?

Yes - I've made sure everything would lined up.
I've been thinking, the money spent on that premium would just be better if instead it was directed in to a Roth IRA. That would then do it's own part in serving as "life insurance".