Whole Life Policy Analysis

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Location: New York

Re: Whole Life Policy Analysis

Post by NYC_Guy » Wed Oct 25, 2017 7:13 pm

simas wrote:
Wed Oct 25, 2017 6:32 pm
all of the scambags selling mutual funds with front loads are saints compare to losers to sell this as "investment"
Here we are in absolute agreement. Buying the policy in the first place was a big mistake by OP’s parents.

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Re: Whole Life Policy Analysis

Post by pintail07 » Wed Oct 25, 2017 7:46 pm

The big mutual, Northwestern, New York Life and others are the ones flooding the market with these agents.

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Re: Whole Life Policy Analysis

Post by inbox788 » Wed Oct 25, 2017 8:38 pm

NYC_Guy wrote:
Wed Oct 25, 2017 7:10 pm
Here’s the correct “investment” calc:

Surrender value in 2017 minus surrender value in 2016 minus premium paid in that policy year.

Then take that number and divide by the 2016 surrender value. That’s what is growing at ~2.7% tax deferred. As long as that exceeds other equivalent risk alternatives, keep the policy. It really is that simple. Guaranteed returns are useful when deciding whether to acquire a policy. Once you have it, actual returns are what matter. When other similar risk investment choices provide a greater after-tax return, cash it in and reinvest.

By the way, this assumes no value in the tax avoidance (not just tax deferral) of the death benefit to your beneficiaries and the fact that the death benefit may be higher than the surrender value. I’m putting zero value on those characteristics.

I count the cash value as bonds in my AA and increase my stock holdings.

That's how I've been doing the calculations for a while, and getting a low but acceptable return, so keep putting off cashing out. This is a lower bound for the value, and on a recent thread, someone calculated return on death benefit, with the intent no keeping the policy for the entire insured life, which was a higher value. I think the return decreased the longer the insured lived, but net-net a good thing.

Many older policies have current cash values equal to guaranteed values. They have railed against the minimum guaranteed values, and are nowhere near the more optimistic estimates. FWIW, my dividends are going towards PUA, and my calculations are that they're returning a little higher than the guaranteed cash values.

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Re: Whole Life Policy Analysis

Post by Rashen » Wed Oct 25, 2017 8:41 pm

as a former life insurance agent, I would get a 30yr fixed for 100k and cash this out once you get a new policy.

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