Roth IRA on steroids

May 11, 2019

  1. boomshack
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    boomshack New Member

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    I had an interview with a captive company. I was asking about insurance and retirement for 20-40 year olds. I asked this while near the end of the interview when I found out they most definitely do the Project 200 thing.

    The agency manager said that an IUL policy was superior--said it was "a Roth IRA on steroids." I couldn't get specifics out of him though when I asked how so.

    I don't think he meant having the policy within a Roth IRA, if that is even possible.

    So lets say one is putting in maximum contributions to a Roth every year ($6,000) from starting from age 25 into Vanguard Total Stock Market ETF (avg 7.31% since 2001 inception, 0.03% expense ratio).

    What makes a IUL better than a Roth with the above investment selection? As opposed to said individual buying a term policy and investing most into a Roth?
     
  2. Golfnut2112
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    Golfnut2112 Guru

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    A Roth IRA on steroids???? Your manager is nuts!!! Your are saying Vanguard had a return of 7.31% since 2001 which is very impressive considering 2001-2002 and 2008 and part of 2009. Ask your manager what his life insurance policy returned during the same period maybe 1%. If you talking to a 30 year old go back 30 to 35 years and get the history of returns for Vanguard and have your manager try to explain the steroid part. Is your manager even securites licensed? I’ve heard agents in the 80’s and 90’s say the same thing about VUL, I wonder how that worked out?
    Back to your question what you do is based on individual circumstances but in the majority of the cases for middle income people I would recommend the term and a Roth
     
    Last edited: May 11, 2019
  3. boomshack
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    boomshack New Member

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    He isn't my manager. I had an interview with the guy. Since he was talking about working my warm market I figured I'd ask what would be a good insurance product that would cover retirement for people 20-30s.

    Honestly, I don't know if he was securities licensed.

    I chose that particular ETF because it originated in 2001 and has the fluctuations from the market from that year onward, and because it's a large well known fund.

    I'm newly licensed in life and health and don't know much about the details of an IUL. His claim was interesting to say the least.
     
  4. Golfnut2112
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    Golfnut2112 Guru

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    What part of WV you from?
     
  5. boomshack
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    boomshack New Member

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    Eastern Panhandle, you?
     
  6. Golfnut2112
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    Golfnut2112 Guru

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    Northern panhandle near Pittsburgh
     
  7. pfg1
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    pfg1 Guru

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    You shouldn't compare an investment to an insurance product. However a Roth on steroids is often used to explain max funded life insurance due to it has all the features of a Roth plus some. IMO, having both is a solid strategy. Both get the money into a tax free environment.
    Most max funded WL products can generate an IRR of 4.5 or maybe more over time, and max funded IUL probably 6% maybe a little more long term. I don't know why so many folks pit investments against insurance, it should be both... not either/or, imho.
     
    pfg1, May 11, 2019
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  8. PA Bill
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    PA Bill Guru

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    This is so true. Stress that it is life insurance with some great money and savings features. Very unique, one of the last great tax shelters. So when the wise guys challenge you and say it's a lousy investment, you can say, "You're right!. But it's not an investment, it's life insurance."
    Really puts their dukes down and opens up their ears and minds. Now you got a shot, not a fight.:idea:
     
    PA Bill, May 11, 2019
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  9. Golfnut2112
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    Golfnut2112 Guru

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    I completely agree, the problem occurs when you have a middle income earner with no roth getting pitched life insurance as a alternative which to me is plain silly and it’s usually some guy without a security license. Believe me if max funded life insurance was better than a roth people would know about it, the problem is it’s not and it needs to be sold
     
    Last edited: May 11, 2019
  10. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    An IUL with a disability waiver of premium will still be self-completing in the event of disability. A Roth IRA will not.

    An IUL does not lose value when the market does down in value. A Roth IRA invested in securities generally will.

    You can borrow against the cash values of an IUL so that the cash values can still grow as though you didn't touch it (subject to loan interest charges). You cannot borrow against a Roth IRA.

    (Neat idea: Which means that, after the economy goes down... and you have more money because you didn't lose... you can borrow against your cash values and invest in securities right before the government says they want to "stimulate the economy".)

    There are numerous advantages and benefits... but it's still life insurance. If your comparison is too short, then "Buy term and invest the difference" will win on a rate of return basis.
     
    DHK, May 11, 2019
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