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Whole Life Insurance as Retirement Planning Investment #5283895 12/03/19 11:17 AM
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LoneRanger Offline OP
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I've always heard, read, and been told that if you need Life Insurance and want to build some cash value instead of "renting" term life insurance, then whole life may be an option to look at. And I've heard, read, and been told that if a financial planner, investment adviser, or etc tries to steer you into a whole life policy by promoting to you it's eventual cash value and the ability to borrow against it, etc., that you should walk away.

Well, I have a person whom I'm in a 501c3 fraternal organization with, a brotherhood if you will, who is an insurance agent who also offers retirement planning services through a CPA he knows. I went to an initial meet and greet get acquainted appointment at the CPA's business office. My acquaintance from the fraternal organization was also there. They pitched the LEAP program. Turns out LEAP appears to push whole life policies. I knew this going in but wanted to hear what they had to offer. I told them I'd done some initial research on LEAP and it seems that all roads lead to whole life in the LEAP model. They stated the original LEAP model, yes, it did, but what they offer is a more widely optioned version of LEAP. They want data. A lot of it. Tax returns, existing insurance policies for life, property, auto, health, personal or professional liability policies, etc. They want copies of certificates of deposit, loan obligations mortgage, auto, any credit cards. They advise they need the whole enchilada of personal financial data on wife and I in order to tailor the best fit of growing and "protecting" assets. They talked about "velocity of money" and how important it is to keep money in motion.

They displayed a particular whole life policy where you simply make one BIG lump sum payment and no premiums thereafter and it grows cash value at a defined rate, but the annual returns were dismal, looked like about 2%. But you can borrow against it and take some out and use it and replace it, etc etc, got to keep the money moving, the whole velocity of money concept or whatever.

To say I am leery at this point is accurate, but with one of the persons presenting this being a "brother" in the fraternal 501c3 we're in, has the potential to rub me the wrong way if all this is is a ploy to sell me whole life.






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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283903 12/03/19 11:24 AM
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volk06 Offline
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Life insurance should not be an investment. Buy term and invest the rest in a roth IRA. You'll be ahead long term .Doesn't matter who is selling it or if they're a "fraternal brother", their just trying to make money.

Sounds like Modern Woodsmen perhaps. Northwestern Mutual in notorious for pushing this, albeit their term life insurance is reasonably priced.

Venture over to bogle head forum and search. You'll find a lot of info about this.

Last edited by volk06; 12/03/19 11:26 AM.
Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283907 12/03/19 11:30 AM
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JeffKeryk Offline
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I suggest you talk to a Schwab advisor. They will analyze the product for you at no cost, I believe.
Please do not include your brotherhood advise you on financial matters.


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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283908 12/03/19 11:30 AM
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supton Offline
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If it walks like a duck, talks like a duck, and spashes around in puddles...

I'd just invest in a target fund. Some are better at picking stocks or real estate or other avenues of growth. I haven't had the time to try to corner the market on anything--and if I were, I bet someone else is ahead of me. Slow steady growth in a target fund is about the easiest thing for me to do.

IMO insurance companies are just like any other: they're in it to make money. I don't doubt their need nor value, but in the end, I plan on term life until the kids are out and/or until I can self insure.


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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283917 12/03/19 11:41 AM
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nickaluch Offline
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Insurance and investments are two totally different things. Don't walk ,run away there giving you bad advise.


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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283919 12/03/19 11:42 AM
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PimTac Offline
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Don’t even consider it. The idea of borrowing from retirement funds is a bad one all around.

Something to research, life insurance companies love to push annuities. You may find that this life insurance plan converts to a annuity when you retire. They do this for 401k and 403b plans as well. Their hope is that you pump money into their vehicles but when it’s time to get it back you won’t get it all. A win win for the insurance company plus they charge fees as well.


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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283934 12/03/19 11:55 AM
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69GTX Offline
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Unless you have a crystal ball on when you're going to pass away, whole life is a poor investment for most people. Use the cheaper Term Life for that. Put all that money that would have been going to whole life policy premiums into your long term investment account(s) strategy....stocks, bonds, 401K's, etc. The long term track record of long term financial investments that are properly managed totally blows whole life away. For those who can't save anything and will just blow all "savings" along the way.....then maybe Whole Life is your only option to save "something."

Moving Money or "Money Velocity" is another way of saying your Fraternal will be skimming premiums off all that "velocity" and trading in and out of products....at your expense....and their profits. Run Forrest Run.

Last edited by 69GTX; 12/03/19 11:58 AM.

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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283939 12/03/19 12:02 PM
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Donald Offline
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Most people need a lot of term life then when kids are out of college no so much. Term is pretty cheap when you need it most but becomes very expensive as you age. Many people get some term for free from their employer.

Whole life is where the money is for the agent and the insurance company. Not much money in term.

Get what you need in term and setup appropriate investments for retirement.

Forget the whole life.


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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283943 12/03/19 12:08 PM
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Fotoflame Offline
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Whole life is only worth considering if you have maxed out all 401k contributions, Roth IRA, and/or IRA. Even then it's only a way to accrue a little interest year over year without paying taxes every year. You only pay taxes on the interest/dividends you make and take out. The cash you put in, you can take out tax free. The death benefit is tax free (unless you have an $11M estate), but you won't be around to enjoy it smile

401k/Roth IRA/IRA are much better for earning return and tax deferring.

Re: Whole Life Insurance as Retirement Planning Investment [Re: nickaluch] #5283945 12/03/19 12:08 PM
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Oro_O Offline
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Originally Posted by nickaluch
Insurance and investments are two totally different things. Don't walk ,run away there giving you bad advise.


There's some very bad advice in this thread so far, like this.

Genuine "whole life" insurance is a fantastic investment vehicle, capable of impressive returns through tax advantages. It can also have substantial flexibility for anticipated expenses, like a child's education, for example.

The scenario you described is a bit over the top; I bought a policy from Northwestern Mutual decades ago and it's not so invasive like that. That is just a ruse to get your whole data so they can target more pitches at you. I would suggest reading real articles about what and how "whole life" insurance works (basically, it's a limit-free IRA funded by post tax dollars for retirement funds). Then talk to pros like at Northwestern Mutual, MassMutual, Prudential, etc.

Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283959 12/03/19 12:26 PM
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ecotourist Offline
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I agree with the previous posters. I too think that Whole Life Insurance is a poor investment. If you need life insurance (and people who have financial obligations do) I'd suggest you buy "die to win" (Term) Life Insurance.

I've had term life insurance for almost 50 years. It's getting really expensive at my age and I'm about to walk away from my policy. Am I sorry I "wasted" all that money and have ended up with nothing? Nope. I paid low premiums for a meaningful amount of insurance when I was young and invested my money and now have my own pot of money. And because of that, I don't need Life Insurance anymore.

And be sure you buy a meaningful amount of life insurance. What would your family need to re-establish themselves in the event of your death? It's not $20,000 or $50,000.

Insurance companies aren't in business to do anyone a favour. Their best product is insurance. Buy their insurance, and invest the rest.


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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283964 12/03/19 12:29 PM
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I appreciate this is coming from a fraternal brother, but with all the information readily available that whole life insurance is a bad investment, I think you are just looking at a different sales model for the same bad product. Since insurance salesmen can't sell that bad product through normal channels, they join fraternal organizations and develop their sales leads through their brothers.
I agree with a lot of comments above. Read the Bogglehead forums. Stay away from whole life and annuities. If a financial advisor uses terms more complex than "compound interest" he is probably trying to confuse you into buying a product that benefits him and not you.
I had to look up what the LEAP program was. A review of it on Whitecoatinvestor.com indicates it could be renamed "All roads lead to whole life". A book trying to sell the program derides the value of compound investing. From everything I've seen, your "brother" and the CPA (note, he isn't even qualified in the investing field, or he would be a CFA or CFP) are not people you want any financial dealings with. Please do not provide them the information they have requested.
If you accidentally run over this brother in the parking lot while leaving a meeting you will have done your other brothers a favor. Or you could just do what I do after many years of mistakes. Never buy something from a salesman trying to sell something you haven't solicited.

Last edited by ArrestMeRedZ; 12/03/19 12:53 PM.
Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283985 12/03/19 12:59 PM
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redbone3 Offline
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Life insurance is designed to create an "instant estate." It is meant to replace your income and protect your family in the event of your death. It is useful to provide a lump sum to settle your final expenses. For most people a small whole life policy combined with a larger term policy is appropriate. The whole life when bought young will provide the lump sum to settle your final expenses, the term insurance can replace your income if you die young. For savings the stock market or real estate is more lucrative.


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Re: Whole Life Insurance as Retirement Planning Investment [Re: LoneRanger] #5283991 12/03/19 01:02 PM
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Here's how Whole Life policies work.

Basically the insurer has figured out a fixed monthly premium which allows the policyholder to buy a 1YR term policy while simultaneously offsetting the increased year-over-year risk of a payout by reducing the payout amount of the policy and supplementing that reduction with "savings" which is, iirc, a combination of the excess premium and the return on the investments from that excess premium. Insurance companies are interest rate sensitive which is why these policies have such a low rate of return and are generally a bad idea for anyone but the wealthy (They can buy single premium whole life) who need to take advantage of various estate and tax laws.

Example: $7,000/yr annual premium for a $100,000 policy.

YR 1: $100,000 policy, $0 savings.
YR 2: $95,0000 policy, $5k savings.
YR 3: $90,0000 policy, $10k savings.
YR 4: $85,0000 policy, $15k savings.

So in this example. $5k year is invested in "savings" aka "Cash Value" and the remaining $2k/yr buys a 1 yr term policy with a reduced payout amount however the total payout is still $100,000.

Last edited by BMWTurboDzl; 12/03/19 01:14 PM.

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Re: Whole Life Insurance as Retirement Planning Investment [Re: BMWTurboDzl] #5284006 12/03/19 01:43 PM
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LoneRanger Offline OP
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Originally Posted by BMWTurboDzl
Here's how Whole Life policies work.

Basically the insurer has figured out a fixed monthly premium which allows the policyholder to buy a 1YR term policy while simultaneously offsetting the increased year-over-year risk of a payout by reducing the payout amount of the policy and supplementing that reduction with "savings" which is, iirc, a combination of the excess premium and the return on the investments from that excess premium. Insurance companies are interest rate sensitive which is why these policies have such a low rate of return and are generally a bad idea for anyone but the wealthy (They can buy single premium whole life) who need to take advantage of various estate and tax laws.

Example: $7,000/yr annual premium for a $100,000 policy.

YR 1: $100,000 policy, $0 savings.
YR 2: $95,0000 policy, $5k savings.
YR 3: $90,0000 policy, $10k savings.
YR 4: $85,0000 policy, $15k savings.

So in this example. $5k year is invested in "savings" aka "Cash Value" and the remaining $2k/yr buys a 1 yr term policy with a reduced payout amount however the total payout is still $100,000.



The whole life thing they showed me was a single premium policy. One lump sum premium payment, death benefit of mid six figures in 30 yrs or something. It was only growing by like $2000 - 3000 the first year, small incrementals down the line. I have money parked in a jumbo CD until I find a decent investment for it, this is what they suggested I do with it. Buy that single premium whole life with it. I'm 56. Sounded sketchy. They said I could withdraw from it to buy properties to flip, or other short term investments. "You're the bank, and you're your own banker" I think they said. And some tax advantages. I'm in a fair position for retirement defined benefits pension plan at work, a fairly healthy 457b at work, no mortgage or rent payments ,and that CD, hence when the 2019 fraternal survey landed in my postal mail I returned it checking the box for interest in supplemental retirement planning for the short term. So I did request the info. Just not sure my best financial position is contained in what they're showing me. It was interesting though.

if there's one thing I've learned in life, it's that money trumps everything with a lot of people. You can have a person you think is someone you can trust or rely on and then if large sums of money enter the picture you can learn, sometimes the hard way, that they weren't as trust worthy as you thought.

ArrestMeRedZ, you cracked me up with the parking lot comment. LOL



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