Whole Life Insurance vs. Investing

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commissionfree
Posts: 11
Joined: Wed Oct 02, 2019 11:50 am

Whole Life Insurance vs. Investing

Post by commissionfree »

I have been presented with a plan to supplement long-term savings by utilizing a whole life insurance policy. I know Bogleheads are against whole life, but I would like someone to run the actual numbers and compare pros and cons of going the whole life route vs. investing in an equity/bond portfolio.

Can anyone recommend an advisor who can run the numbers on the Boglehead investment route to fairly compare it to the whole life route? I know Bogleheads do not like advisors either, but I would like to be able to show on a piece of paper how the two strategies line up.
ef11
Posts: 292
Joined: Sat Mar 10, 2012 10:39 pm

Re: Whole Life Insurance vs. Investing

Post by ef11 »

I'm sure someone on this forum can put a great comparison together for you, but you need to provide more data.

How old are you?
What is the death benefit on the WL policy?
What is your monthly premium being quoted at?
Did they provide you an illustration?
Did the illustration include Paid Up Additions (PUAs)?
How many years does the illustration show you paying premiums? Is it a 10 pay, 20 pay, or pay to age 90 for example?

This should help members have numbers to run a scenario for you.
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Stinky
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Re: Whole Life Insurance vs. Investing

Post by Stinky »

If you can provide an illustration, plus your targeted asset mix and your thoughts on returns on your asset mix, a comparison can be prepared.

To the extent that you include equities in your asset mix, and that you assume that equities outperform fixed income over time, the “buy term and invest the difference” will outperform the whole life. Big time.
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Rex66
Posts: 101
Joined: Tue Aug 04, 2020 5:13 pm

Re: Whole Life Insurance vs. Investing

Post by Rex66 »

Only way WL works out better is if you compare it to a crappy plan like high cost investments or die very premature to rated health

Search whitecoatinvestor.com for his blog on WL returns
livesoft
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Re: Whole Life Insurance vs. Investing

Post by livesoft »

Perhaps read some of the articles by Wade Pfau and listen to interview with him by Rick Ferri? Here's the long contentious discussion about the podcast:
https://bogleheads.org/forum/viewtopic. ... 0&t=321648
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petulant
Posts: 1866
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Re: Whole Life Insurance vs. Investing

Post by petulant »

Stinky wrote: Tue Sep 15, 2020 1:31 pm If you can provide an illustration, plus your targeted asset mix and your thoughts on returns on your asset mix, a comparison can be prepared.

To the extent that you include equities in your asset mix, and that you assume that equities outperform fixed income over time, the “buy term and invest the difference” will outperform the whole life. Big time.
This is correct--a redacted illustration is necessary to evaluate a comparison. We would also need information about the marginal tax rate and any other opportunities like whether 401(k) contributions have already been maximized.
NotWhoYouThink
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Joined: Fri Dec 26, 2014 4:19 pm

Re: Whole Life Insurance vs. Investing

Post by NotWhoYouThink »

Do you understand why bogleheads are generally against whole life? Do you believe you are a special case that would be an exception?

You say you want to show it on a piece of paper - is there someone besides yourself you are trying to convince?
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Nate79
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Location: Delaware

Re: Whole Life Insurance vs. Investing

Post by Nate79 »

Whole life should be compared to the return of a bond fund - that's effectively what the insurance company is investing in. Whether or not the return will be a little more or a little less than typical bond returns is semantics. And Whole life comes with a lot of negatives and a few minor positives.

Regardless when comparing WL vs investing you need to understand you will FAR FAR outperform WL if you invest in your typical stock/bond asset allocation. There are long debates about using WL as a substitute for your bond allocation after you have maxed out all retirement accounts.
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