How to reduce these expenses

[scagnt83]

Mine is level DB. Will the surrender charge be triggered if change it to increasing DB?

No. But it would increase expenses, require new underwriting, & require higher premiums.

And it would actually increase surrender charges slightly, but not trigger them. Surrender Charges are based on the amount of DB. You have agreed to a set amount already, this is why it is triggered for a reduction.

 

[jboussea]

I am not comfortable sharing sensitive information in a public forum. Also, it's bulky. Perhaps, I can post full information of 1 or 2 pages. What info would be helpful?

you can just post the numbers part of the illustration... and cross out your personal info. .. one way to do this is to pull it up and use the snipping tool to show the table as an image. or print screen and use microsoft paint to cross out your personal info.

 

[mespinosa]

Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. Warren Buffett

Life insurance industry is the only place where people with advanced degrees take advice from high school dropout agents masquerading as financial advisors.

If you don't have a CFA, then you are not a financial advisor period. Just because someone has radiology technician license does not give them the authority to pose as a doctor, similarly having a series 65 and a life insurance license does not make you a financial advisor, just makes you armed and dangerous.

I am buying term and building my CV outside of permanent life insurance and staying the hell out of this. It's actually better to pay uncle sam 15% income tax when you take distributions from retirement accounts than to pay insurance companies 5% compounding loan interest.

This may be good for wealthy people who want to evade tax on the pretext of "borrowing" because they are investing that money and not consuming (and their tax bracket may be a lot higher than 15%) but this is not for middle class people who are just looking to withdraw 50k per year.

 

[DHK]

Your opinion is acknowledged and noted. It's wrong, but you are entitled to it.

First, there is no such thing as a "financial advisor". It has become an industry accepted term, but it is not a regulated term. There are investment advisors (subject to Investment Advisers Act of 1940), there are Registered Representatives, and there are Insurance Agents.

If you want a technician to analyze your investment portfolio, then you want a CFA. Otherwise, the CFA is not much of a "client-facing" designation. Many/most CFAs are portfolio managers. It's still a rare combination to find a CFP/CFA, although it is climbing.

To all the financial advisors: why CFA? why not CFP? | AnalystForum

As you stated, just having licensing doesn't make you competent. It makes you liable for your recommendations. I've been saying this for years.

I am buying term and building my CV outside of permanent life insurance and staying the hell out of this. It's actually better to pay uncle sam 15% income tax when you take distributions from retirement accounts than to pay insurance companies 5% compounding loan interest.

This may be good for wealthy people who want to evade tax on the pretext of "borrowing" because they are investing that money and not consuming (and their tax bracket may be a lot higher than 15%) but this is not for middle class people who are just looking to withdraw 50k per year.

There are a few aspects that are missing from your analysis - PARTICULARLY for middle class people.

1) Taxation of social security retirement benefits. Did you factor this into your decision? Did you know that based on taxable income, your social security benefits will be included into your taxable income in retirement? Did you know that those limits of includable income haven't changed since 1993? Do you think there is any incentive to adjust these limits for inflation?

Benefits Planner | Income Taxes And Your Social Security Benefit | Social Security Administration

Social Security History

Note: Loans and tax-free distributions from life insurance do not count as "income" for IRS purposes. Because they are a loan or return of principal, therefore not "income subject to taxation". This can help with the retirement income scenario... with a properly funded and structured policy.

2) Life insurance is NOT an investment and should not be compared to one as such. No one retires on only life insurance. However, cash value life insurance is a great liquid SAVINGS vehicle - where you can make other investments FROM that cash value. Particularly short-term investing. Borrow from the policy for a couple of years and pay it all back. In the meantime, pay the interest on the loan so you satisfy the loan & illustration requirements so the policy will perform to the illustration.

3) For using life insurance as a retirement asset, it's all about the VOLUME of interest, not the rates of interest.

Let's say that you have $500k of cash values in a policy. And that $500k can earn 10% and you have an up-market, so you earn $50k to the policy.

Let's suppose that you take a loan from the policy of 5% of the total value or $25k at a 5% loan.

And assuming (I hate that word) that the policy was structured as lowest death benefit and highest cash values, that you have a reasonable cost of insurance (let's just say $10,000 for a year).

$500k - MINUS $10,000 life insurance cost = $490,000 + assuming a 10% market increase or $49,000 = $539,000. Then you borrow AGAINST the policy for $25,000 (5% of the value + 5% loan cost for only $1,250). The difference about this distribution is that you borrow AGAINST not FROM. Your original $539k continues to grow, but with a SMALL volume of loan interest ($1,250) for that given year.

Now, you can easily add more to both columns each year for gains to the policy and increasing loan costs. 2nd year with an additional loan would cost $1,250 + $1,250 = $2,500 total 2nd year loan cost, but look at your potential of growth. Or even with a 0% credited, you still have the shot with IUL for a policy gain even after policy costs.

I may have grossly over-estimated the insurance cost, but you get the idea. Even after all that, you still have a policy gain.

So, you're wrong because you are comparing rates, rather than volume of interest.

Oh yeah, I'm no CFA... and I did not graduate high school with my class... but I know my $#!*. (Although I do humbly admit that I am far more analytical than those you are accusing of not being too smart. I had undiagnosed ADD/ADHD and was a horrible student over 20 years ago.)

 

[DHK]

Oh, and let's talk about how borrowing from a policy is NOT reported to credit bureaus. Imagine how well that can preserve one's credit scores in the event of unemployment! With non-structured payment plans - or even SKIP payments because they only want annual interest paid each year, but it's still optional to pay. (Can't go too long on that because the policy will implode with compounding loan interest with little to no payments to both the loan and the policy.) That's a way to "hide loans" from a credit report!

 

[mespinosa]

Your opinion is acknowledged and noted. It's wrong, but you are entitled to it.

Right back at ya

If you want a technician to analyze your investment portfolio, then you want a CFA.

Portfolio can encompass RE, Alternative investments, life insurance etc etc NOT just Stocks. It's geared towards truly managing client's wealth. Something life agents can't fathom with their lack of school education and 1 day training licenses

2nd year with an additional loan would cost $1,250 + $1,250 = $2,500 total 2nd year loan cost, but look at your potential of growth. Or even with a 0% credited, you still have the shot with IUL for a policy gain even after policy costs.

Ahem, this is still compounding interest you are describing You can sell this crap to a wide eyed 20 year old but please don't do it to 80 year old as a final expenses policy. He/She does not want a shot at S&P at that age with a guaranteed compound interest working against them

If you have million in CV and you borrow a few thousands, maybe you will be ok but you will always have to be watchful. Debt is a double edged sword and the funny thing here is, it's your money and you still live in fear of it when you think about it as debt.

This only works IF your ROR on this borrowed money is more than the interest rate charged by the insurance company and you pay the interest every year. If you borrow to consume, the compound interest will eat your policy alive.

and let's talk about how borrowing from a policy is NOT reported to credit bureaus.

This is even more dangerous. If you borrow from credit card companies and things don't work out, you file for bankruptcy protection. What you are preaching will make some poor middle class guy lose his shirt. AGAIN, this is for wealthy people who want to borrow.

Oh yeah, I'm no CFA... and I did not graduate high school with my class... but I know my $#!*.

haha, maybe my quote will becomes as popular as Warren Buffet's quote now

 

[DHK]

If you have million in CV and you borrow a few thousands, maybe you will be ok but you will always have to be watchful.

Somehow, the word "duh" comes to mind. You have to be watchful ANYWAY.

How about a 2.8% portfolio withdrawal rate, with a 60/40 portfolio blend... to have a 90% chance of making it through retirement? Better watch that portfolio too.
Time for the 3% Withdrawal Rule?

 

[DHK]

This is even more dangerous. If you borrow from credit card companies and things don't work out, you file for bankruptcy protection. What you are preaching will make some poor middle class guy lose his shirt. AGAIN, this is for wealthy people who want to borrow.

And most employers that do employment background/credit checks will ensure that this person may not be HIRED. BK is good for the right situation, but employment is better.

 

[DHK]

Ahem, this is still compounding interest you are describing You can sell this crap to a wide eyed 20 year old but please don't do it to 80 year old as a final expenses policy. He/She does not want a shot at S&P at that age with a guaranteed compound interest working against them

Final expense policies are not designed to do this.

Your opinion and advice on how I conduct my business and make my recommendations... was not solicited.

 

[mespinosa]

Using Debt to consume is fastest way to financial ruin. You don't live off your credit card debt and think it's great way to live, Right? But you can use your credit card debt to start a business and live off that.

Unless the interest thrown off by your CV in the later years is a lot higher and you borrow a little, This is not for poor and middle class. You are way better in having that CV outside where there are not that many moving parts and everything is not controlled by the counter party(they can reduce caps, they can increase expenses to levels that is sure to lapse the policy the next year).