Roth IRA on steroids

[Golfnut2112]

The good thing is at least he's got a solid policy that is now efficient and will grow substantially over time. Assuming he has the money to fund investments, obviously he should and likely heavier to make up some lost ground.

Your right he made it this far he can’t stop now, he has since got married and has two kids. The good thing is he may have gotten the life insurance a little cheaper since he had his first kid when he was 35. It just gets frustrating when people are sold life insurance as a retirement plan before exhausting other options.

 

[Abrasax]

I had a guy come into my office last Friday with a Guardian policy that was supposed to be better than an IRA. He paid in $683 per month for a total of $106,000 and his cash value was $94,000. Wonder what he would have had if he bought term and a small DI policy to pay the premiums if he become disabled. BTW the guy who sold this is out of the business

So he's paid in for 13 years. Isn't that a little behind the curve on an IUL anyways? If he retires at 65 or 67, giving it a full 30+ years to accumulate, what does it look like then? An IUL is supposed to be a marathon. I don't think any of them would look particularly great after just a few years.

 

[Golfnut2112]

So he's paid in for 13 years. Isn't that a little behind the curve on an IUL anyways? If he retires at 65 or 67, giving it a full 30+ years to accumulate, what does it look like then? An IUL is supposed to be a marathon.

The fact is a guy sold him a life insurance policy as a retirement plan instead of a Roth. He is already short $100,000 in retirement funds do you really think giving a life insurance policy 30 years will make a difference? BTW it’s a whole life policy not an IUL.

 

[pfg1]

So he's paid in for 13 years. Isn't that a little behind the curve on an IUL anyways? If he retires at 65 or 67, giving it a full 30+ years to accumulate, what does it look like then? An IUL is supposed to be a marathon. I don't think any of them would look particularly great after just a few years.

Most of these type of policies if designed properly whether IUL or WL will break even and have a positive cash balance (meaning CV is more than premiums paid in) by year 10. Sometimes earlier. Yes, they are typically long term plans. For a 30yr, when they get out to 60 they are amazingly efficient, not as much in the early years.

 

[Golfnut2112]

Most of these type of policies if designed properly whether IUL or WL will break even and have a positive cash balance (meaning CV is more than premiums paid in) by year 10. Sometimes earlier. Yes, they are typically long term plans. For a 30yr, when they get out to 60 they are amazingly efficient, not as much in the early years.

But they should not be used instead of a Roth

 

[Abrasax]

But they should not be used instead of a Roth

Why not? Many illustrations are intended to show how these outperform a 401k or a Roth IRA. If that's true, wouldn't it be better to max fund?

 

[Golfnut2112]

Why not? Many illustrations are intended to show how these outperform a 401k or a Roth IRA. If that's true, wouldn't it be better to max fund?

All I can say is you have faulty illustrations. At what interest rate are you showing the Roth Growing at? Please look at the historical performance of the S&P 500 and T-Bills I’ve posted. What 20, 25 or 30 year period did life insurance outperform a Roth?
Just curious are you security licensed?

 

[scagnt83]

Why not? Many illustrations are intended to show how these outperform a 401k or a Roth IRA. If that's true, wouldn't it be better to max fund?

The carriers sure do not intend for the illustration to "outperform" any type of security.

In fact, if any of the reputable carriers find out an agent is selling IUL as a replacement for a 401k or IRA, they will usually cancel the agents contract. If the agent is lucky, they get a cease and desist order first as a warning.

You will not find a single place in the illustration comparing it to any type of security.

You will not find a single marketing piece saying an IUL is a replacement for a 401k/IRA/ROTH.

The ones who spew that BS are agents.

 

[pfg1]

Why not? Many illustrations are intended to show how these outperform a 401k or a Roth IRA. If that's true, wouldn't it be better to max fund?

You shouldn't compare them. The max funded insurance is NOT invested in the market and not supposed to outperform the market. It can't give an accurate comparison. Its actually better compared to the bond portfolio, and can be used as a hedge for equity risk.
Yes, they can perform quite well long term and usually do. No way to know what the exact numbers will be for the insurance or the investments in the future.

IMO, fully fund the ROTH, then set up max funded insurance.
We only know historicals, and while we can't predict the future there is a high likelihood that equities will continue to do well long term. Insurance has done well long term and will likely do so in the future, but its a low or no risk product, thus the returns will be lower (typically) due to the nature of risk/reward.

The thing I've found... whatever side of the isle you sit on, there is enough information that you can use to make your side look better and the other not so much (or even awful). IMO, it shouldn't be Insurance VS. Investments.... it should be Insurance AND Investments. Most take one side and bash the other, unfortunately.

 

[pfg1]

But they should not be used instead of a Roth

Agree. In addition to Roth