Whole Life Vs Term Life

Someone posted a question on the lifetime versus futures and nobody said they could be any life had equal or better performance than buy term and invest the difference in the stock market, but the question closed before the response has been completed. Here's another chance for the apologists whole life. My thesis is that high fees and commissions on whole life will overwhelm investment benefit. I would also like to see this evidence for the middle class people, not multi-millionaires who have huge advantages in tax shelters.

Assumed

20% marginal rate of income tax (15% federal, state 5%)
The purchase of insurance at the age of 30 and the off / collection to 65
Back in stock is 10% per year and profits are taxed each year at the rate of tax on long-term capital gains.
Difference premium invested at the beginning of each year.
reasonable amount of insurance coverage - $ 100,000 or $ 250,000 or more, not millions.

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lifetime: one of my clients have owned it since 1978. It is now 2006 and there are only 20,000 of the cash value. The client is now 58 years old and will retire soon. Do you think $ 20,000 is enough for retirement? This will not last even 1 year old. Thus, the average yield is less than 2%. Remember: To access a value, you need to borrow (this is stated in all policy cash value). If you want to take it all, you have to make politics possible redemption fee (depends on how long you've had). I think you do not need life insurance during the years of retirement because you have little or no financial obligations.

Eventually, premiums are lower than life because he has no cash value. Thus, the customer must invest the difference in mutual funds. Over the past 25 years, mutual funds has made an average of 14%. However, investors rate of return is only 2.9%. Why? stock market crashes, people tend to withdraw. And when the stock market rebounds, people start to put money in. If they were to leave their money where there is no question how the market performs, they could gain an average of 14%. (This is one of the managers of Legg Mason, said the portfolio and show a graphical illustration).

My client has also invested in mutual funds in 1993. She made a small deposit of $ 5,000. She now has over $ 40,000 in it.

Then a basis for comparison, here is what my client had:
Life: Took over 25 years to accumulate $ 20,000 (i roll over variable annuities using Exchange 1035)
Mutual Funds: Took a little over 10 years to accumulate $ 40,000.

Which do you think is better? Point proved, the cash value of policies suck and that's why financial experts say you should always keep separate investments of life insurance. This is not done by buying term and invest the difference. When its time to renew your mandate, you do not need proof of insurability and you can choose to reduce your benefit amount. In case of death, your beneficiary will receive the death benefit of term and your property. Compare the cash value policy, your beneficiary only one of the foregoing.

(Incidentally, after showing my client the truth, she now owns futures and storing more money to retire).

Learn about life here: http://finance1o1.blogspot.com "The truth is that insurance agents do not want you to know!" Report Abuse

I teach a class that has this subject as a component. In fact, students have to do this analysis.

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