WL pitched as investment

[Maynard Baxter]

Apologies in advance as same/similar discussion may already be in here, but I can't find it. Prospect has maxed out 401k, has some WL on himself, probably adequate. Is being pitched to get WL on wife (he and wife mid 50's in age--wife in excellent health) as tax free optionality for later in life (in 70's) as it builds out just like WL policy is on husband.

My view is no DB needed on wife and I'm having trouble agreeing this as a "forced savings" investment strategy even though they are maxed on other tax deferred. Also he is high earner but not feeling super secure in the job so committing to big annual prem = stress. Does this make sense at any level of funding given todays levels on interest rates etc? Thoughts?

 

[DHK]

Sure, it can make a lot of sense... depending on how you view the future of income taxation.

 

[marindependent]

Also he is high earner but not feeling super secure in the job so committing to big annual prem = stress.

I do not think this situation has much to do with Taxes. If the client does not feel secure in his/her job why consider traditional whole life insurance as an investment? Doubly so if he or she is the sole breadwinner in the family.

Besides - Just because someone is maxed out on their 401K does not mean that there are not other tax advantaged investments available to them.

 

[pfg1]

a spammer bumped it up....

 

[Life Hawk]

a spammer bumped it up....

Let's do it again in a year.

 

[pfg1]

haha, they deleted the post, and hopefully the spammer too!

 

[Steve-PA-Life-Guy]

I wouldn't pitch whole life as an investment -- simply because an investment is defined as something that may lose its entire value. Now -- can Whole Life be used to provide a source of tax free income -- yes, with the right person, the right circumstances it can. I had plenty of clients who used it as a buffer asset this Spring when their dental practices, optometry practices etc were shut down, but those are a specific type of client.

 

[Life Hawk]

I wouldn't pitch whole life as an investment -- simply because an investment is defined as something that may lose its entire value. Now -- can Whole Life be used to provide a source of tax free income -- yes, with the right person, the right circumstances it can. I had plenty of clients who used it as a buffer asset this Spring when their dental practices, optometry practices etc were shut down, but those are a specific type of client.

Whole life has two parts, the first part is a protection against the adverse financial risk of death (the known, not if but when) the second part is production. It is the production portion that allows for allocated monies to summed if need be. All of this of course is in a tax sheltered environment.

I believe one could make an argument for investment because of how the protection is mixed with the ability to provide monetary value... however; I would greatly agree on the tax shelter idea. How it is presented, should be based upon the client and their needs, both perceived and true. The investment and tax sheltering will most likely appeal to male audience, while the protective aspect will appeal more to the female audience. That has nothing more than to do with the way males vs. females think about these things.

 

[pfg1]

The real problem with folks who pitch it as an investment (which its not), they compare it to the stock market. Of course its not gonna compare to equities, its a totally different beast.
Max funded WL is much better compared to Bonds... and can be a good addition to their stock market investments. IMO its not either/or, it should be BOTH.

 

[WMSG]

It might make sense. It really depends on the details and specifics of the client situation. That said, life insurance, from a compliance-standpoint, is not an investment. However, conceptually, it can be viewed or treated as such. It is an asset. It can be viewed, planned with, for, around, etc., as an asset class.

In this case, it may not be about DB. But there is a DB and that can be valuable. Sure, in and of itself life insurance is about DB. I get that. However, if job stability is an issue, that needs to be considered. Interest rates are perhaps moot. Job security is not. Yes, there's flexibility, everyone competent gets that. But job security must be considered. Plus, the fact that the DB is not important for the wife -- that is, if she's not working, not caring for children, etc. -- that is directly related. If she is doing those things than the DB can be important, especially if she's working.

I think it's a question that needs to answered globally, not myopically. All the best.