Looking For a Whole Life Policy

[scagnt83]

Hi, I'm trying to understand this and may also do something similar for my daughter, but if you take a $80K policy loan, it starts accruing interest immediately whereas the 529 there is no interest. After the 4 years, for the WL route you would start repaying the policy loan. In the 529 route wouldn't you make the same "repayment" including interest into some other investment?

The loan on the policy is not your traditional type of loan in the sense that you have to pay it back out of pocket or bad things definitely happen.

The loan is an internal loan inside the policy, policy performance sustains the loan; in the scenario I posted, that was with keeping the loan on the books, not repaying it back out of pocket.

The loan did not exhaust the cash value or death benefit, and because of policy performance the CV keeps growing, even with the loan. The interest associated with the loan on CV oriented policies is often at a rate that makes it a wash or a near wash.

And even the loaned amount isnt "gone" it still is credited interest and helps the overall growth of the policy.
With a 529 the money paid out is totally gone, it is not still working for you.

Yes, you could pay back the loan, and the policy would perform even better, but if you dont take too much out you dont have to.

I think I posted an illustration for this scenario.... you should look at it. The $ going into the premium is the only out of pocket $ in that scenario.

 

[Chuckles21]

The loan on the policy is not your traditional type of loan in the sense that you have to pay it back out of pocket or bad things definitely happen.

The loan is an internal loan inside the policy, policy performance sustains the loan; in the scenario I posted, that was with keeping the loan on the books, not repaying it back out of pocket.

The loan did not exhaust the cash value or death benefit, and because of policy performance the CV keeps growing, even with the loan. The interest associated with the loan on CV oriented policies is often at a rate that makes it a wash or a near wash.

And even the loaned amount isnt "gone" it still is credited interest and helps the overall growth of the policy.
With a 529 the money paid out is totally gone, it is not still working for you.

Yes, you could pay back the loan, and the policy would perform even better, but if you dont take too much out you dont have to.

I think I posted an illustration for this scenario.... you should look at it. The $ going into the premium is the only out of pocket $ in that scenario.

Scagnt and I completely disagree on the feasibility of what he illustrates. Now, i completely agree that it is possible and that he isn't doing anything wrong with the illustration, but basic common sense should give you a warning.

So in his mind it makes sense for a company over 4 years to let you have $320,000 (essentially all the money in the policy) then, even though they don't have this money, still credit you gains on it above what they are charging in interest. He has figured out a way for a company to pay you to take money away from it..... right. He then figures that this is sustainable for centuries to come not paying anything back, then when you die they will still pay out a substantial death benefit..... I smell something rotten here.

So to recap you give a company roughly $190,000 and they pay out roughly $3 million to you over many years.... sorry there is no way that this works in the real world.

 

[scagnt83]

Scagnt and I completely disagree on the feasibility of what he illustrates. Now, i completely agree that it is possible and that he isn't doing anything wrong with the illustration, but basic common sense should give you a warning.

So in his mind it makes sense for a company over 4 years to let you have $320,000 (essentially all the money in the policy) then, even though they don't have this money, still credit you gains on it above what they are charging in interest. He has figured out a way for a company to pay you to take money away from it..... right. He then figures that this is sustainable for centuries to come not paying anything back, then when you die they will still pay out a substantial death benefit..... I smell something rotten here.

So to recap you give a company roughly $190,000 and they pay out roughly $3 million to you over many years.... sorry there is no way that this works in the real world.

Its scary that you actually sell permanent life insurance.
And to be honest your ignorance isnt worth my time.


But if you think its BS call LFG and tell them, its their multimillion dollar software that is showing it as possible....

BTW, NWMs WL works in a very similar way.... its a pity you dont understand it.

Go educate yourself for a few years and you might know half of what I do about PI.

You have proven yourself ignorant on the subject multiple times. I even took the time to PROVE to you and to EDUCATE you on the illustration & product.

Stop wasting time and showing how much of a moron you are.
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And if its not feasible, go sue LFG; you would have one hell of a case if it were actually true, and any lawyer would take your case.... then you wouldnt have to sell a product that you know nothing about.

 

[Chuckles21]

Its scary that you actually sell permanent life insurance.
And to be honest your ignorance isnt worth my time.


But if you think its BS call LFG and tell them, its their multimillion dollar software that is showing it as possible....

BTW, NWMs WL works in a very similar way.... its a pity you dont understand it.

Go educate yourself for a few years and you might know half of what I do about PI.

You have proven yourself ignorant on the subject multiple times. I even took the time to PROVE to you and to EDUCATE you on the illustration & product.

Stop wasting time and showing how much of a moron you are.
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And if its not feasible, go sue LFG; you would have one hell of a case if it were actually true, and any lawyer would take your case.... then you wouldnt have to sell a product that you know nothing about.

Scagnt, what is scary is your lack of understanding basic math. You can promise the moon, it's the delivery that concerns me.

From the first paragraph of my previous post: "Now, i completely agree that it is possible and that he isn't doing anything wrong with the illustration"

Half your reply is arguing I think the software is wrong, when i acknowledge right away it is not. What is wrong is actually believing that what you are showing is plausible. Your illustrations assume a straight 6% rate of return. What happens when you have all that money loaned out and it only returns the guaranteed 1% for a few years? Or LFG starts to get killed by the product and they lower the maximums way down? Your illustration assumes something that fluctuates drastically up and down A LOT and makes it always positive and happy with rainbows and unicorns and smiles.

Don't lecture me about products as your lack of basic math comprehension is the scary part.
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BTW, NWMs WL works in a very similar way.... its a pity you dont understand it.

Ummmmm no it doesn't. Wow, your lack of knowledge on this subject isn't even worth my time.

By the way, the difference between you and me is that you blindly believe whatever the software tells you and accept it as what will happen. I actually look at the math behind it all. Learn to dig a little deeper buddy.

 

[scagnt83]

Your illustrations assume a straight 6% rate of return. What happens when you have all that money loaned out and it only returns the guaranteed 1% for a few years?


I actually look at the math behind it all. Learn to dig a little deeper buddy.

If you have looked at the math behind it you would know that a 20 year historical with LFG comes out to an 8% average return... (the 40 year is even higher) so based upon the past 20 years (including two of the worst years in market history) an average of 6% per year would be considered very conservative; and lets not forget the 20% allocation in the fixed account.

By almost any financial professionals standards using 6% when the historical average is 8% is very conservative; especially in a product that only yields positive rates.




They way loaned funds still generate returns is through Non-Direct Recognition; this is where loaned funds are still credited with the credited interest rate of the policy; in LFGs case in the illustration it is credited with the fixed rate, so (with LFGs 5% fixed loan rate) it reduces the Loan Interest Rate to approximately 1%.
This is how the loaned values are still working for you and helping your policy grow and not be nearly as adversely affected vs. a DR policy which would not have the reduced interest rate.
(this is where LFG/Penn & NWM do differ)

And if I illustrated loans being taken from the indexed account (which I did not) it would show how the loan would have an arbitrage 3/4 of the time (assuming 20 year historical values); this is how it has the opportunity to help your account grow even more if you want to (although I am not a huge fan of indexed loans).



So if you have ran all the numbers and know them so well; what would you say is a suitable number to run the indexed returns as?

Have you ever seen a 20 or 40 year historical for a good quality overfunded IUL??

Have you ever seen a 20 or 40 year historical for an overfunded WL from NWM??

Are you aware that NWM has consistently lowered their dividend over the past 20 years?

Do you know the difference between CVAT & GPT?
Do you know which one WL uses?

Do you know what the historical average Ap2p cap is?
Do you know how many times it has been less than 10%?
Do you know how many times it has been at the minimum?
Do you know any specifics about LFGs financials or market position?


I honestly doubt you have gone over all of what I just mentioned... like I said; go educate yourself and get back to me.

 

[Chuckles21]

If you have looked at the math behind it you would know that a 20 year historical with LFG comes out to an 8% average return... (the 40 year is even higher) so based upon the past 20 years (including two of the worst years in market history) an average of 6% per year would be considered very conservative; and lets not forget the 20% allocation in the fixed account.

How long have LFG's IUL policies been around? I truthfully don't know the answer but as far as I know IUL's were first introduced in 1997 and I bet LFG didn't introduce it until even later. So i'm really not sure how you have come up with these historicals..... when there is no actual history. Sure all they did is use the historical S&P500 returns for those years, but that doesn't mean a thing to me. It's like Dave Ramsey saying you can easily look back and find mutual funds that return 12% average historically. He's right it is, but good luck going back in time and investing in those funds. It's future performance that we have to worry about.

By almost any financial professionals standards using 6% when the historical average is 8% is very conservative; especially in a product that only yields positive rates.

First of all the 20 year average return is 7.34% not 8%... big difference there. Second of all in 5 of those 20 years the rate of return would have been the minimum 1%

They way loaned funds still generate returns is through Non-Direct Recognition; this is where loaned funds are still credited with the credited interest rate of the policy; in LFGs case in the illustration it is credited with the fixed rate, so (with LFGs 5% fixed loan rate) it reduces the Loan Interest Rate to approximately 1%.
This is how the loaned values are still working for you and helping your policy grow and not be nearly as adversely affected vs. a DR policy which would not have the reduced interest rate.
(this is where LFG/Penn & NWM do differ)

Good job telling me something I already know. Again let me ask you as I did in my previous post what happens when you have that huge loan out and you are only getting the 1% minimum the policy guarantees? Now all of a sudden a heavily leveraged policy doesn't play along so nice with your illustration. By the way in 8 out of the last 20 years returns were below 5%... and 5 of those would have been 1%. It's pretty easy to show a policy performing like you do when you never have the rate of return lower than the loan rate. Real life is not so kind.

And if I illustrated loans being taken from the indexed account (which I did not) it would show how the loan would have an arbitrage 3/4 of the time (assuming 20 year historical values); this is how it has the opportunity to help your account grow even more if you want to (although I am not a huge fan of indexed loans).

Maybe I'm not understanding what you mean here. So you put in $192,000 total 20% of which goes into the fixed fund, $38,400. This fund grows a little but not all that much. Then you start taking out $80,000 a year for 4 years. Now unless my math is off there is no where near this amount in the fixed portion of the policy. Please explain?

So if you have ran all the numbers and know them so well; what would you say is a suitable number to run the indexed returns as?

6 is fine for an average, but averages are very deceiving. Your average always shows the loan cost being less than the loaned dollars credited return. We know this is not how the real world works.

Have you ever seen a 20 or 40 year historical for a good quality overfunded IUL??

Again, how long has this product been around. Can't go back in time to get those #'s.

Have you ever seen a 20 or 40 year historical for an overfunded WL from NWM??

Yes, and for this we can actually find in force policies to show the results, not just hypothetical.

Are you aware that NWM has consistently lowered their dividend over the past 20 years?

Show me one company that hasn't. I mean it, name me one company that has as high a dividend now as back in 1991. Unless you can answer that one this is a moot point. Oh also at least our dividend rate is net expenses unlike many other companies out there. Did you know that one? This is how our policies can outperform others that have a "higher" dividend scale.

Do you know the difference between CVAT & GPT?
Do you know which one WL uses?

Yes, WL uses CVAT

Do you know what the historical average Ap2p cap is?
Do you know how many times it has been less than 10%?
Do you know how many times it has been at the minimum?
Do you know any specifics about LFGs financials or market position?

All these are pretty silly when you compare how long this product has been around. You can't get a good feeling of what this product will do 50-60 years down the line when it has only been around on average less than 10.

I honestly doubt you have gone over all of what I just mentioned... like I said; go educate yourself and get back to me.

So please show me a policy averaging say 4% with all those loans. I know this is also unrealistic but unless you can show me varying rates of return I want to see a rate of return less than what the loan costs.

 

[Chuckles21]

I honestly doubt you have gone over all of what I just mentioned... like I said; go educate yourself and get back to me.

I take it from your silence that you are not going to show the illustration I requested? Or answer my rebuttal?

 

[BNTRS]

Oh dear, we have an IUL die hard facing off against something much much worse than a WL junkie, an NML agent *shudders*




Nothing substantive was added to this thread just now...oh wait, looks like was just following suit with the last few pages.

 

[tim01]

The loan on the policy is not your traditional type of loan in the sense that you have to pay it back out of pocket or bad things definitely happen.

The loan is an internal loan inside the policy, policy performance sustains the loan; in the scenario I posted, that was with keeping the loan on the books, not repaying it back out of pocket.

The loan did not exhaust the cash value or death benefit, and because of policy performance the CV keeps growing, even with the loan. The interest associated with the loan on CV oriented policies is often at a rate that makes it a wash or a near wash.

And even the loaned amount isnt "gone" it still is credited interest and helps the overall growth of the policy.
With a 529 the money paid out is totally gone, it is not still working for you.

Yes, you could pay back the loan, and the policy would perform even better, but if you dont take too much out you dont have to.

I think I posted an illustration for this scenario.... you should look at it. The $ going into the premium is the only out of pocket $ in that scenario.

Hi Scagnt83,

Are you talking about the 39yr_iul illustrations? If so, the policy looks like it's only growing at an ROR of 4.5% for 16 years. The CV is only $280K. If I start taking a $80K loan at 5% and CV gets 6% the policy collapses when I take the 4th $80K loan. From what I've seen, most loan rates are equal to earning rate of CV. That would cause it to be even worst. Perhaps the $80K is just too large. If it's only $40K/yr then it may be sustainable.

Then one need to worry like Chuckles mentioned about the earning rate. Most likely it won't always be 6%.

 

[Chuckles21]

oops replied to the wrong forum post...