Do they make life insurance complicated for a reason?

T

teey

New member
Can someone explain in laymen’s terms to me what would be a good fit for someone like me. Please see the following pertaining details.

35F, 1 year old daughter, just closed on 350k home. Healthy, none smoker no history of illness, cancer, surgeries, psych/neuro issues

Fit and active. Work from home, solid career

Interested in a policy that compounds interest , death pay out, living benefits, retirement, tax advantages and low premium.
 
@teey You’re going to have to choose between some of those descriptions you’re looking for!

Cheapest option:
You could either do term to make sure your daughter would be covered if anything were to happen in the next 30 years(if you do this make sure it’s convertible to whole life so you don’t lose coverage entirely down the road). Legal & General would prob be the best carrier for this.

Tax Free Retirement Option:
IUL - could make sense as supplemental retirement option but you don’t want to have all your retirement eggs in one basket. Has all the things you listed but will be more expensive.
F&G would be the carrier I recommend for fastest cash growth.
 
@teey I don’t mean to be condescending but what you are asking is equivalent to a car that has a large bed room and kitchen that has a backyard and available for 20 grand.

Someone will sell you a product that will likely meet those requirements. The main question is whether it’s beneficial to you.

You’re trying to mix up too many things into life insurance. Greedy agents will be happy to have a customer like you.

What you probably need is a pure term life insurance cover for 20X your annual compensation for a term of 30 years.

For reference, I pay $100 for 1 mn coverage for 30 years. I bought it when I was 40. So you should be able to get a similar policy for $70 per month.

For investing and retirement, you can spend some time learning about various options on r/bogleheads
 
@genebgto Thank you!! This is exactly what I needed! As I mentioned before I have no idea about life insurance and this was super appreciated! Can you tell me what company I can go to for this?
 
@teey Get a term policy - super uncomplex and inexpensive. 10ish times your income. It’ll be cheap. Work other financial goals, debt pay down, Ira/roth, college, etc.

Then, if you’ve done all of that AND make 250k+ then, not before, you can consider a life policy that has a return. Good luck and kudos for thinking about life insurance.
 
@teey Yes!! That is a great question. The more complicated it is the more you will pay & more likely to be taken advantage of. Easiest, safest & best investment option is to buy as much TERM for as long as you can (35yrs) & invest the difference in a real investment. Life Ins is NOT an investment - look at rates, sales charges, cash surrender charges, etc.
 
@teey Many of the responses you received are correct, however it seems no one answered your central question: Can someone please explain this to me simply like I am 5. I am happy to do so in some spare time in the coming weeks. Sending you a DM now.
 
@teey Depends on what your income is and ability to save. Are you maxing out your retirement options through your employer? If so, I would recommend a whole life policy that you pay into and don’t think about for the next 30 yrs or so. This will accumulate cash value that can be used as a cash reserve in retirement (ie. living benefit) with no tax impact upon withdrawal. This compliments other qualified retirement accounts like 401(k)s that will force you to take minimum distributions in retirement and are tied to the performance of the stock market at set times. Having a cash reserve like permanent life insurance, and taking strategic distributions from it can help to preserve your other accounts during years the market performs poorly.

Also it gives the added benefit of offering some protection for your daughter in terms of a death benefit should you pass away while she is still under your care.
 
@teey Research infinite banking and it will all become clear. Don’t get sold on infinite banking with an IUL though. Cant work that way
 
@teey Everything you’re asking for is possible with permanent life insurance. However, the low premium should be looked at differently. If you are looking for meaningful growth you’ll want to assess how much you can contribute to a plan like this to benefit from the other features you mentioned. Sometimes low premium cash value life insurance planning never really has enough juice to go far as a retirement benefit but you’ll always have a DB to leave your heirs something when you hopefully outlive term policies. If you want low premium then term is what you need, really a blend of term and permanent is the answer

Whole life can accomplish it all but is slow/steady and premium can be a decent chunk depending on your desired death benefit. WL can be a great addition to a portfolio that needs conservative/safe growth to allow for more aggressive growth elsewhere

Variable universal life (VUL) might be a better option at your age. You can get more DB for less money than WL and you’ll be invested in the stock market so long term potential for growth versus WL earning interest/dividends. VUL premiums are flexible whereas WL are fixed

VUL is a great vehicle for those who make too much money to contribute to a ROTH IRA as well as those looking to possibly retire before 59.5 as funds can be accessed without fees unlike 401k, IRA, etc.

Some prudent planning will say get 20-30 year term to cover risk (this is where low premium comes into play). Max out ROTH IRA ($7k/year) and get the maximum match for a 401k. Investable assets after those two are meet, VUL can grow long term and ensure a permanent tax free death benefit for heirs and be used as a supplemental retirement fund

All that being said, if you’re looking for one policy to accomplish it all. VUL is a great option to explore
 
@teey Contact new york life agent for a 5-pay policy of its dividend paying whole life where you only have to rotate money in over 5 year period. Calculate how much you want for your fixed income needs through out your life, ideally at least 5+ years of living expenses by retirement age to ride out market volatility. If you prefund, there's a promo going on where entire prefund amount gets 12% for year 1 and 6% every year after in form of premium discount.
 
@cj This is exactly what you should not do.
You said you are interested in a policy that builds interest. Are your 401k/solok/simple maxed out? How about your Roth IRA? Putting $7000 a year to that? HSA?

Buy a term policy. Take care of your mortgage. Take care if your daughters education. Have enough income that would contribute to take care if bills.
Take the savings and built up your interest in all of those other areas!
 
@resjudicata Haha, yes I know about those too. She didn't come to ask for complete financial analysis and I didn't tell her to put all her money in the policy.

But even then, it's arguable whether people should be putting money in retirement accounts with restrictions for access and volatility before they do so in one without and no volatility. My view is people should save (no volatility) before they invest (yes volatility), and perhaps even do both.

Just saw your post about how life insurance dividend is not a real dividend but a mere refund. Go look at a 5-pay policy illustration from new york life and tell me how getting back multiple times the money one puts in as premium is mere refund. Its a legal fiction.

Let me guess, you fiduch people for a living by swindling them into the second highest fee in life after taxes. At least have proper knowledge to give them when you do.
 
@cj I am a fiduciary. But very few of my clients are in managed accounts. But funny you use swindle. Do you know how an SMA works? Do you also know that returns include fees. And don’t try to tell me permanent life insurance fees are less than .75%. Plus some clients have need and ability for alternative and creative investing. And I never said they should all of their eggs in those baskets. And I could go in to much deeper depth.

“Didnt come to ask for complete financial advice”. That’s very disingenuous. All finance is connected. So you ask for one part it means something different in another. And yes they should have no volatility. I actually teach my clients of the money they are saving to put 50% of it to fixed and no volatile products. Including savings, money markets, CDs, etc. 25% to conservative investing and non-qualified accounts, and 25% long term investing. And not all retirement is locked up as you wanted to point out. That’s one of the beautiful things about Roth IRAs. Or did you not know that?

I actually looked at one of those 6 months ago. It was not more than the client paid in when it was calculated out.
 
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