Looking at this for the first time after years of running away due to the whole life tag.

I’m primarily thinking of it as a place to keep my emergency fund which is currently making a half percent interest.

I already have a term policy and other investments.

Any fans or foes?

Run, don't walk, away from whole life.

Put your emergency fund in a mutual fund.  You'll still have liquidity, and you'll actually get a decent rate of return.

No.

Avoid whole life insurance like the plague.

Term life insurance is all you need.

Make sure you have 3-6 mo emergency fund. Emergency funds don’t earn you interest, they do keep you from paying it. There are high interest mutual funds that pay 1-2%

Pay down high interest debt, 5% or higher

Max out your 401k

Then contribute to Roth IRA

Then buy low fee index funds like VTSAX.

Finally put money in undervalued stocks.

Double post

I think there is a flag for tax purposes as well to prevent you from having too much money paided into a life insurance policy.
It has been a while but apparently people used to use it as a tax dodge and so now they have to report it when you do something like that.
If I understood your plan.

Absolutele trash.  

It's an investment with a shitty return,  and when you die,  they keep the investment portion of it.  

If you don't agree.  I'll beat their terms. Pay me.  I get you same coverage in term life,  and I'll double the roi from 1 to 2%. And when you die I'll still keep the investment.

I had some.  So I'm not hating

If done correctly, it can be a powerful supplement to a retirement plan, especially in the later years. 8.5-9% tax-free  annual dividend  was nice up until the Obama years. Now it is around 4.5%.

The problem is that too few life insurance agents know how to properly structure them, and as a result people pay too much for them.

You are talking about when it gets so overfunded that it ceases to be a life insurance policy and becomes a modified endowment contract.

But at the end of the day, you're paying for the overhead of a business,  profit margin,  sales commission and roi.

Or you can invest in the market, not pay the overhead,  profit, and commission.  Mathematically it can't be a good investment vs someone doing it on their own.

Every person selling these claims that no one sets them up right,  except them.  But if you Google it,  you'll never find a review of them that's positive unless it's by someone in the industry.

And it if really was a good investment, they would push that.  But when they sell this trash, its so complicated you can't decipher what it actually does or doesn't do performance wise.  I managed a 20 million dollar a year company all of my 20s and own half a dozen successful businesses now.  I'm very much an analytical type and experienced business man. I can't decipher the data they give you on that type of insurance. Its very elusive and noncommittal. Me buying a policy was the only time in my life i can say i made a terrible decision by not doing the research and believing what a person said that i trusted.

People that sell these policies are dishonest or ignorant about investing and just trying to do their job. Im thankful that I'm not the hard up to make a living but i can't blame them for trying to survive.

I am not recommending them. I am merely saying that for people with a low risk tolerance and/or who make too much money to contribute to a Roth IRA, it can be an option — especially given that the accrued cash value doesn’t fluctuate with the market.  

“Just put it in the stock market “ brings risk of loss, and some people simply don’t have the risk tolerance for putting 100% of their investments in there.

However, I would not recommend overfunded whole life to anyone today because the dividends are so low. Last I saw, it was 4.45% and likely to be that way for a very long time.

A few details.

I already have a million in term, an IRA, Roth IRA, 529s, and a piece of commercial real estate.

Whole life as an investment or as life insurance doesn’t particularly interest me. What does interest me is the ability to buy a policy with a policy rider that is geared toward overfunding and then borrow against my own cash value whenever I want to.

What about that interests you vs normal investments? As in,  what purpose does that serve?

the cash value grows tax free inside a life insurance policy.

the cash value does not fluctuate downward or drop in value.

He can take tax-free low-interest loans against the cash value.  And if he's with a non-direct-recognition company, those loans aren't debited against the cash value. I.e., if he has $1m in cash value, and takes a $200k loan, his cash value still compounds as if it was $1M and not $800k.

if it's an indexed universal life policy, there's a cap and a floor within which his cash value gains will fluctuate annually.  If the floor is 0% or more, then his cash value won't decrease in value, but it will increase with the market index he chose, up to the cap.

There's no income limit on how much he can overfund the policy.  He has to be careful not to exceed the Modified Endowment Contract limits, but if he and his agent structure the policy face value correctly then he could put in potentially $100k a year or more to compound tax-free and take loans against tax-free.  This is why overfunded whole life and overfunded IUL policies are called Rich Man's Roth.

I've run these illustrations and crafted these policies before.  It's quite possible in the later years (20+) to have the annual compounded growth in the cash value significantly exceed the annual premium payment for that year.  Imagine putting $80,000 in year 21 and having the growth be $120,000, tax free.

I understand the sales tactic.  

I was asking him what he's trying the accomplish before he gets sold something.

To be nice and within the rules of the forum. You are dishonest and should be ashamed of what you say. Ive never blocked anyone on this forum but I'm blocking you.  

Op. Do what you want. Here's my recommendation. Before you do this,  find 1 person who is happy with having one of these policies. And Google reviews. You won't find a good one that isn't by an industry site.

You'll find a bunch of scoundrels posing as customers that say exactly what he just said above, and unhappy people where the policy never hit the projections. If they come up even slightly under projections, they eat themselves.  And every agent says that's true, but the policy wasn't done right.  They do policies right so they don't do that.

I made this mistake, i was told exactly what he said.  Maybe you need to dump 50k in one to learn what I'm telling you.  I was told not to by this forum and did anyway.  Whatever you decide, good luck.

show us on the doll where the insurance policy touched you.

You asked a question, I answered it, now you're pissy that you don't like the answer, LOL

Reading is Fundamental.  As I said in this thread, I am NOT advocating for these policies. Nor am I telling OP or anyone else "You should do this!" I am merely explaining WHY some people find them attractive, as you asked, and I'm explaining the nuts and bolts of how an overfunded life insurance policy works.  

I actually used to be in the life insurance business and know how to structure these policies correctly and how to structure them to screw the policyholder and maximize the saleman's commission -- which I refrained from doing when I was in the business.

Kinda like you said..there is a group of people who will find these attractive for tax and wealth reasons. I am one of those people hahaha

I appreciate the replies and I am not looking for a scheme.  I am attracted to the idea of preserving capital that I can borrow against and at the tax advantages.

This strategy is not for nor recommended to everyone.  I’ll report back after doing additional research.

I do know a few folks personally who have implemented this strategy to great effect.

If you do it, don't deal with some young insurance agent who's in his first 10 years and has a sales manager breathing down his neck to sell you something you don't need.

Find a PGA (producing general agent) who is experienced in setting these up.

Look for a PGA from a life insurance company that is not owned by external shareholders but instead is a mutual company owned by the policyholders.  And look for a non-direct-recognition company.  Ohio National is one of the big players in this field, they even have policies specifically designed for overfunding like their 10-pay policy (paid up in 10 years).  I think I heard they were introducing a 20-pay as well.

@-Sabot42-
@intheburbs
@fella


Wow - simply amazing what we all think we know,  How would you like to place a lump sum of cash in whole life, get 3.5% NET growth on that cash, the growth is tax sheltered of course, the lump sum you put there is leveraged up to a higher death benefit.  IF a death should occur you now have a higher amount than what you just put in that will go to your beneficiary.  Did I mention the death benefit is tax free?  Did I mention the benefit avoids probate?   I wouldn't bother with this except the cash value is 100% liquid at any time, no surrender charges!   Cash out 2 months later with your principle and 2 mos interest.

By the way this is NOT an investment so we can simplify things and  set aside all of those who use this as their only reason for chiming in to bash it.  There is an interest component that exists in order to support and grow the cash value and therefore to support and guarantee that the death benefit is permanent.  

I skipped over the gnashing of teeth in this thread when whole life is mentioned because I've been hearing it from people that don't know anything about it for far too long and it gets tiresome