CANCELLED OUR IUL THAT WAS SOLD BY A FRIEND

[jane3322]

my friend sold us an IUL, then after months when i was looking at our policy, i saw that most of the charges goes towards somewhere else and when i asked my friend she doesn't know how to answer.

after reading tons and tons of resources, we've finally decided to cancel our IUL and just maxing our ROTH IRA and Traditional accounts. got a term insurance instead.

 

[aatif]

@jane3322 IUL can be great, genuinely really really great if...

If is important

1) your agent needs to be competent. They have to overfund the heck out of the policy without messing up the tax advantages. This is tricky to do, but there is software to help. It also helps if your agent is ethical enough to have set your target premium (what the agent gets paid on) as low as possible.

2) it isn't your only investment vehicle. On a long enough time line a Roth will always out perform an IUL. You should have one maxed out before you get a IUL. The advantage of the IUL is the guaranteed floor. If you need the money and the market is a bad down market 30 years from now, it sucks to only have the Roth. People who retired in 2007 and had to live off their fully invested stock portfolio got very very screwed. IUL is a hedge. But it also should not be the only.

3) if you actually need the life insurance part and will keep up with the payments for a minimum of 20 years in (almost) all cases. There are exceptions, but almost always you need to have a need for the insurance and a 20 year + time horizon.

If all three are not true, IULs are terrible.

 

[stewart2014]

@aatif So if I have 40k going in the first year, they get paid 40k?

 

[aatif]

@stewart2014 Not necessarily. It depends on how they built it.

If they built it correctly most of what yoh are paying isn't actually insurance premium and they don't get paid on that bit. It's called overfunding and it's good for you to do it up to a point. Too much and you lose the tax advantage of the funding.

They probably made 80% comission on the target premium, which, again, should be a lot less than what you are actually paying. It's decent money, but less than would be expected.

And, if you are putting in 40k in the first year, odds are high it was built correctly. Unless it's an 8 figure death benefit.

 

[caitlynlovesjesus]

@aatif You can have investments in your Roth that have little to no risk if that's what someone wants. You don't have to buy ripoff IUL.

 

[evanburnside12]

@jane3322 Whole life is a better deal than IUL and term.

 

[twolfe]

@evanburnside12 Well ofc long term

 

[cinnamoroll]

@evanburnside12 absolutely not - never mix insurance and investing products. Whole Life Insurance for Doctors | White Coat Investor

 

[evanburnside12]

@cinnamoroll Whole life insurance isn't an investment.

 

[caitlynlovesjesus]

@jane3322 Perfect! Max the Roth, have emergency fund, pay off debt, then pay off mortgage. Live free!!! Just get level term if you need protection!!!

 

[jane3322]

@caitlynlovesjesus thank you!

 

[drwoodrowak]

@caitlynlovesjesus New to the finance, what is Roth and how do we enroll or manage this?

 

[twolfe]

@drwoodrowak Did you manage to get this figured out ?

 

[mykell]

@jane3322 Good!!!!!

 

[daniel]

@jane3322 I don't think that's a bad idea at all. One thing to think about that the IUL offered inexpensively was long-term care. Long-term care can decimate a family's savings and make life more difficult for those relying on you daily. Reach out to a local independent agent and ask them to go over what may be needed if you need long-term care one day annd what they are able to do for you on a policy.

 

[jane3322]

@daniel they put a high death benefit, when i requested for the lowest possible death benefit and set it as increasing (which they hate, because her commission will be lessen), dumb of me that i trusted her and sign the policy without the actual details of policy. also the stock allocation, she couldn't even explain it. ugh, we wasted almost $1,000 for those 3 months.

 

[jeshurun1111]

@jane3322 Wow. Some "friend". Honestly, I would report all of this to their company at least. Worst case scenario is they get fired and don't fuck over anyone else.

 

[daniel]

@jane3322 The death benefit affects the commision very little it's the target premium and the annual premium that affects compensation. At any rate, you may be able to have that premium returned to you. But again, I would look into an LTC policy. I don't think she intentionally did anything wrong she was most likely excited to start selling insurance, and whoever she is with was pushing these types of policies. IUL can be a great addition to an already solid retirement plan if all other accounts are being maxed out and you can afford to max fund a minimum death benefit policy.

 

[qity]

@daniel

The death benefit affects the commision very little it's the target premium and the annual premium that affects compensation

The death benefit directly affects the target.

 

[daniel]

@qity See my other comment. You both attacked me at the same time.