Roth IRA on steroids

[Golfnut2112]

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.

Very well stated!!

 

[ls015]

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

It should have showed up in the guaranteed column of the illustration right from the beginning, shouldn't it? That the CV will go down in the coming years because of higher DB.

 

[Golfnut2112]

It should have showed up in the guarantees column of the illustrations right from the beginning, shouldn't it? That the CV will go down in the coming years because of higher DB.

Not sure what your saying. The CV did not go down and we don’t have any illustrations, We are ordering some tomorrow morning

 

[ls015]

Not sure what your saying. The CV did not go down and we don’t have any illustrations, We ordered some tomorrow morning

I am buying guardian policy now and this thread caught my attention and caused some concern. If he paid $8196 per year for 12 years, and Guardian's guaranteed interest is 4% and cannot be credited anything less than that, then he should have $141,200 after 12 years but he has $94,000. Was this deliberately set up this way to have higher DB or whole life policies are scam? I am trying to figure this out.

 

[Allen Trent]

I am buying guardian policy now and this thread caught my attention and caused some concern. If he paid $8196 per year for 12 years, and Guardian's guaranteed interest is 4% and cannot be credited anything less than that, then he should have $141,200 after 12 years but he has $94,000. Was this deliberately set up this way to have higher DB or whole life policies are scam? I am trying to figure this out.

#1- simple interest is how a savings account or investment works, not a life insurance policy (IE: If I put $100 in a bank account earning 4%, I would have $104 at end of the year. With a life policy, I may have zero in my cash value at the end of the 1st year on the guaranteed cash value columns)
#2- even if #1 was true for a WL policy, 4% for 12 years on annual $8196 deposits is I believe closer to $128k, not $142k.

in a life insurance policy, whether WL, UL, VUL, etc, not all of those $8196 payments make it to the interest crediting cash value component of the policy. if those premiums earned interest like you mention, the insurance carrier would bear 100% of the risk of you dying with no tradeoff from you for potentially having your family receive hundreds of thousands of dollars after you may have made only a few payments.

I am not sure Guardian guarantees a minimum 4% in their base policy interest crediting. but even if they do, it is only credited on the cash value, not all your premium deposits. the interest rate guarantee is only 1 of several items built into the guaranteed columns & the other items come out of the premiums/cash value before the interest rate is credited in the guaranteed columns of the policy

WL is not a scam, but misunderstood by many consumers & even agents. Some agents overly simplify the conversation that can lead to a belief that it is a pure interest bearing or investment account.

How Cash Value Builds in a Life Insurance Policy

 

[Abrasax]

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?

No, I'm not. And I don't sell IUL this way. But it's marketed that way so I was looking for a clear answer. And I got it, so thanks.

 

[Abrasax]

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.

I've seen some Insmark illustrations that compare IUL to 401K which seems to imply your money is better put in the IUL.

 

[pfg1]

I am buying guardian policy now and this thread caught my attention and caused some concern. If he paid $8196 per year for 12 years, and Guardian's guaranteed interest is 4% and cannot be credited anything less than that, then he should have $141,200 after 12 years but he has $94,000. Was this deliberately set up this way to have higher DB or whole life policies are scam? I am trying to figure this out.

Guaranteed CV growth on WL policies isn't a multiplication factor of the premium paid in and/or CV. Doesn't work that way exactly which creates alot of confusion - just as dividends do. Typically, long term most max funded WL policies will do 4% or more, IRR on the CV. Some might push 5% if max funded with a good dividend history.

 

[pfg1]

I've seen some Insmark illustrations that compare IUL to 401K which seems to imply your money is better put in the IUL.

Exactly - what I mentioned earlier. Agents spin insurance to show what they want, just as Money Managers spin investments to show what they want. They shouldn't be directly compared. IMO, they should both be explained for what they are - a compliment to each other.
A max funded insurance policy COULD end up doing better during some periods due to the floor limiting losses, but long term it likely won't. Granted...its life insurance, so it also has other benefits beyond just ROR/Growth.

 

[ls015]

WL is not a scam, but misunderstood by many consumers & even agents.

What's there to misunderstand? If the illustration shows a higher CV under the guaranteed column and it's way less than that, it's a scam. Talking heads can rationalize it all you want.

Simple interest? I thought the selling point of these insurance policies was the compound interest? Here, the CV compounded itself to less than what was put in and you are justifying that?