Mass Mutual vs Penn - WL policy

[SParker]

Hi All,

I have been reviewing MM and Penn for WL policies that aim at maximizing tax free lifetime income via policy loans.

Penn's numbers (both guaranteed and non-guaranteed) are far better than MM on every illustration - with all things (premiums and premiums funding period etc) being equal or similar.

So the question is whether MM is really that much better a company that is worth the extra premiums in order to accomplish the same objective?

Would appreciate any feedback...Thanks

 

[LGilmore]

Show your illustrations and how or what you compared.. thanks.

 

[Allen Trent]

Hi All,

I have been reviewing MM and Penn for WL policies that aim at maximizing tax free lifetime income via policy loans.

Penn's numbers (both guaranteed and non-guaranteed) are far better than MM on every illustration - with all things (premiums and premiums funding period etc) being equal or similar.

So the question is whether MM is really that much better a company that is worth the extra premiums in order to accomplish the same objective?

Would appreciate any feedback...Thanks

Only time will tell. 30 years from now we will know which one was more accurate on their non guaranteed projected side. If you are that torn about it, split your planned contributions in half and buy both

 

[pfg1]

Nobody has a crystal ball. I feel like you've been kicking this every which way with many companies and for months. Bite the bullet and get something going. Most solid companies will do great, especially if you fund it properly.

 

[SParker]

Nobody has a crystal ball. I feel like you've been kicking this every which way with many companies and for months. Bite the bullet and get something going. Most solid companies will do great, especially if you fund it properly.

Thanks. Big lifetime commitment, need to know what I am purchasing. Also, this process is a good learning experience for me on many levels.

 

[Allen Trent]

Big lifetime commitment

if you design it properly, it is an optional beneficial lifetime commitment. Meaning, if you buy the smallest base WL policy with the maximum planned modal PUAR overfunding, the PUAR component should have flexibility in it to sometimes fund it, sometimes partially fund it & some years not fund the PUAR. not a lifetime handcuffed commitment

The base policy will always have the contractual/legal right to elect a reduced paid up policy if you ever decide to walk away from all premiums. However, you would be better if you cant pay the base policy premium to 1st direct the annual dividend to pay part or all of the base premium & then use the old PUAR values you put in from overfunding or PUAR values that were placed in when dividends credited to pay the base policy balance of premium.

Most contracts also have a payout annuity/supplemental contract provision that would let you annuitize your cash value to receive a lifetime income if you wanted to completely walk away from the contract rather than elect a reduced paid up face amount.

Obviously, funding to the max you can for as long as you can without making changes or taking money out is the ideal plan, but I wouldn't overthink it that it is a "lifetime commitment"

Ask both carriers for their PUAR parameters. meaning, if you don't fund it fully 1 year, is there a consequence to how much you can put in the PUAR the following year. And, if you don't fund anything to the PUAR for X years, when will that PUAR optional payment expire. to me, this optional PUAR is all that matters as both are very good carriers

 

[SParker]

THANKS Allen, very helpful.

Ask both carriers for their PUAR parameters. meaning, if you don't fund it fully 1 year, is there a consequence to how much you can put in the PUAR the following year. And, if you don't fund anything to the PUAR for X years, when will that PUAR optional payment expire. to me, this optional PUAR is all that matters as both are very good carriers

THANK YOU ! I didn't even think about that, will check it out for sure.

Most contracts also have a payout annuity/supplemental contract provision that would let you annuitize your cash value to receive a lifetime income if you wanted to completely walk away from the contract rather than elect a reduced paid up face amount.

I think there will be TAX consequences with this option, no?

 

[Allen Trent]

THANKS Allen, very helpful.

I think there will be TAX consequences with this option, no?

some, but way better than cashing it out & being taxed on all the deferred gains. If a person is insisting on cashing in any WL contract for emergency needs, divorce, credit issues or they hate you & WL because they have a man crush on Dave Ramsey, there are couple ideas on how to minimize being taxed all at once on the gains in a cash surrender.

1. Take a withdrawal of PUAR values up to the cost basis. if the contract is not a MEC, it would mean the client can pull out all adjusted cost basis first tax free. they could then leave the balance in the contract & annuitize the cash value to receive the cash value over a specified number of years or their lifetime. the annuitization would then spread out any taxable gains over the length of the payments, following the exclusion ratio just like Non- Qualified annuities do when someone annuitizes the money into Payout/SPIA/Supplementary contract (whatever that carrier calls it).

2.same as #1 in terms of surrendering PUAR up to cost basis, but leave the taxable gain in the policy & elect a reduced paid up policy. Basically, get your cost basis back out tax free (if not a MEC) & leave taxable gain in policy to provide a forever death benefit in a paid up policy. the RPU policy will still grow in cash value & death benefit as it receives dividends & the client always retains the right to cash it out if needed or annuitize it to spread taxes out as permitted in the contract language.

3. they can 1035 the cash value to an Annuity. IRS permits a 1035 to defer taxation for Life to Life, Annuity to Annuity, Life to Annuity because these are all 3 lateral or negative moves tax wise. they don't allow NQ Annuity to Life insurance as that would be taking a product that is taxable gains at death to a tax free at death product, but they surely will let something go from tax free at death to taxable gains at death (Life to Annuity)

here is the problem. most agents don't know any of this & don't make a commission on helping people do this. so, when a client calls saying they want to get rid of their policy, the staff or agent don't ask any questions. In most cases, the client wanted to get rid of some or all of the premiums, not the entire policy

 

[rickieb65]

The place where they play games is expected mortality- best approach is to analyze assumed mortality in each illustration at later ages and compare to a Mortality table The probability is Mass Mutual has lower lapse which would give better actual claims rate but not always My email is [email protected]-- Former NML agent 45 years taught ClU president Boston Estate council and have written many articles on subject Love to help

 

[SParker]

1. Take a withdrawal of PUAR values up to the cost basis. if the contract is not a MEC, it would mean the client can pull out all adjusted cost basis first tax free. they could then leave the balance in the contract & annuitize the cash value to receive the cash value over a specified number of years or their lifetime. the annuitization would then spread out any taxable gains over the length of the payments, following the exclusion ratio just like Non- Qualified annuities do when someone annuitizes the money into Payout/SPIA/Supplementary contract (whatever that carrier calls it).

2.same as #1 in terms of surrendering PUAR up to cost basis, but leave the taxable gain in the policy & elect a reduced paid up policy. Basically, get your cost basis back out tax free (if not a MEC) & leave taxable gain in policy to provide a forever death benefit in a paid up policy. the RPU policy will still grow in cash value & death benefit as it receives dividends & the client always retains the right to cash it out if needed or annuitize it to spread taxes out as permitted in the contract language.

3. they can 1035 the cash value to an Annuity. IRS permits a 1035 to defer taxation for Life to Life, Annuity to Annuity, Life to Annuity because these are all 3 lateral or negative moves tax wise. they don't allow NQ Annuity to Life insurance as that would be taking a product that is taxable gains at death to a tax free at death product, but they surely will let something go from tax free at death to taxable gains at death (Life to Annuity)

THANK YOU so much, this is very helpful. I would never know about these options just by looking at the illustrations alone, and product support specialist at the carriers would never bother to get into these details unless you know what questions to ask.