Cash Value Life Insurance Education

[Brandon Sterneker]

Thanks for the input so far. As mentioned above I have ran into the problem of company specific just wants to teach about how their product is superior to others. Not many take it purely from an unbiased educational standpoint.

Thank you for the videos DHK. That is the type of stuff I've been looking for.

 

[Life Hawk]

As DHK already mentioned I'm not the original poster. I'm talking specifically about usage strategies in company material. Most of their material is built around product specifics. I do believe that permanent insurance can play a part in someone's financial strategy but I also believe that it is not a good fit for most people.

Answering on my phone... also ADD... that's my excuse and I'm sticking to it.

 

[pfg1]

I do believe that permanent insurance can play a part in someone's financial strategy but I also believe that it is not a good fit for most people.

Why do you feel its not a good fit for most?
Just curious...

 

[ConradG]

Why do you feel its not a good fit for most?
Just curious...

To clarify I'm talking about whole/universal/variable type policies. When it comes to those types of policies they don't make a ton of sense unless you can fund retirement accounts as well. Even if it would fill a need, if it interferes with retirement funding than it's not a great fit. I don't do FE and FE doesn't make sense with my client base, so I don't have enough experience to comment on that.

Social Media Graphic: Median Household Income

 

[Golfnut2112]

I AGREE!! just replaced a whole life on a 34 year old paying 270 a month for a $500,000 blended policy. Cash value at age 65 $165,000. He also has a Roth IRA that he's putting in $50 per month. He bought the whole life a few months ago so I replaced it with a 30 year term for $51 and put the $230 into his Roth. Based on past performance which is not guaranteed the value of the American Fund putting in $230 was worth $537,000 over the last 30 years. Considering 2000-2002 and 2008-2009 that’s pretty good. I really believe people should max out ALL retirement plans before using insurance as a savings. Whole life when used properly is a great planning tool, but in this case he was using it as a retirement income source before using real tax free retirement plans available to him.

 

[pfg1]

To clarify I'm talking about whole/universal/variable type policies. When it comes to those types of policies they don't make a ton of sense unless you can fund retirement accounts as well. Even if it would fill a need, if it interferes with retirement funding than it's not a great fit. I don't do FE and FE doesn't make sense with my client base, so I don't have enough experience to comment on that.

Social Media Graphic: Median Household Income

I agree. Fund 401k to match, max fund Roth, AND fund PLI w max funded design.
I personally think it SHOULD be a part of the plan... but after they have funded the other investments. The max funded PLI is a great tool in many ways. It shouldn't be used in lieu of investments, imo...but rather in addition to them.

 

[DHK]

I will share a differing perspective. Golfnut2112 and I have been round and round on this, so no need to rehash all that.

If you are planning for net worth and there is plenty of other savings in place, then yes, you keep funding the 401(k) to the max match (if it's a good match) and you can use PLI as another tax-deferred savings option.

If you are planning for long-term savings (knowing that you can borrow against the cash values as they grow for investing purposes), a decent but safe rate of return (IUL/WL), and a decent death benefit... then I would place IUL/WL before saving in IRS regulated retirement plans.

Now, I'm not going to tell you what your planning values should be or how to advise clients. In my opinion, many financial advisors have their planning pyramids upside-down. Depending on the client, an upside down planning pyramid can cause greater credit card debt because of the lack of liquidity and access to capital when needed.

New Report Shows Credit Card Debt Is Hindering 401(k) Savings

Here's my version of an upside down pyramid:



Here's my version of a proper planning pyramid:



Why do I have debt elimination AFTER PLI? First, it depends on the client's situation and overall interest rates, types of debt, etc. Can the debt be restructured into either lower-interest credit cards or perhaps a HELOC? However, because cash values can be accessed from the PLI policy via policy loans, you can use that to "absorb" your debts over time while maintaining life insurance coverage and growing a long-term asset with uninterrupted compound interest (or "reap the upside of the market without the downside risk").

Yes, depending on the structure of the policy, it can take a while for there to be sufficient cash values in the policy to make this work, as long as you have set proper expectations with the client in advance.

Here's a recent video with Steve Savant talking about this concept:


Again, I'm just sharing a differing perspective and client situations (and comfort levels) will vary.

 

[ConradG]

Again, I'm just sharing a differing perspective and client situations (and comfort levels) will vary.

Thanks for sharing, you do bring up some interesting points. As you said client comfort levels will vary. Full disclosure I've had situations where I recommended permanent insurance before other retirement funding and I've had situations where I haven't recommended permanent insurance at all. I typically don't recommend permanent until they are meeting their 401k match (if it's good). Before that I typically stick to convertible term options. I think permanent insurance is a fantastic asset to have in retirement to draw from in bad market years. It is all up to what the client is comfortable with and what they will be most likely to stick to in the long term, the most efficient plan in the world won't work if the client won't stick to it.

 

[DHK]

In my opinion, the comfort levels have to work for the agent FIRST, before the client may have the right comfort level. If the agent doesn't believe in it, the client won't.