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2013-07-10 11:21 AM

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West Henrietta, NY
Subject: Dividend-paying whole life insurance

Would like to get some thoughts on a purchase of Dividend-paying whole life insurance.  Currently we (my wife and I) sock a ton of money into 403b's (though it's not the max we could) and get the most match that we can from our companies.  We currently have about $50k in savings, $65k in stocks, and about $625k in retirement accounts (the 403b's and some roll overs) and about $25k in a roth account.

A friend of ours is training to be a rep with New York Life and as friends we offered to be some of his test subjects.  He and his trainer came back with a recommendation to take our 'property tax payments' which currently sit in that $50k in savings and purchase a Dividend-paying whole life insurance policy and then take a 'loan' back out to pay the taxes when they're due.

Please provide any thoughts and insights on this.  I'm looking for second opinions from those that aren't going to make any money off the decision.

Chris.



2013-07-10 11:25 AM
in reply to: tolefanjh

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Oliver, BC, "Wine Capital of Canada"
Subject: RE: Dividend-paying whole life insurance
Originally posted by tolefanjh

Would like to get some thoughts on a purchase of Dividend-paying whole life insurance.  Currently we (my wife and I) sock a ton of money into 403b's (though it's not the max we could) and get the most match that we can from our companies.  We currently have about $50k in savings, $65k in stocks, and about $625k in retirement accounts (the 403b's and some roll overs) and about $25k in a roth account.

A friend of ours is training to be a rep with New York Life and as friends we offered to be some of his test subjects.  He and his trainer came back with a recommendation to take our 'property tax payments' which currently sit in that $50k in savings and purchase a Dividend-paying whole life insurance policy and then take a 'loan' back out to pay the taxes when they're due.

Please provide any thoughts and insights on this.  I'm looking for second opinions from those that aren't going to make any money off the decision.

Chris.

Never could see the logic in borrowing my own money.

2013-07-10 11:30 AM
in reply to: peby

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Veteran
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West Henrietta, NY
Subject: RE: Dividend-paying whole life insurance

I'm thinking the same thing, perhaps I just need to find an investment that will yield about 5% or so (after tax) that if really needed I could cash out at some point.  That way I could put half of our savings in that to get a decent/safe return.

Chris.

2013-07-10 12:50 PM
in reply to: tolefanjh

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St. Paul
Subject: RE: Dividend-paying whole life insurance
The standard advice from financial advisors (Dave Ramsey included) is that those kind of life insurance policies are a rip off. Your better off buying term and investing the premium difference on you own.

Of course, all insurance salesmen will disagree.

2013-07-11 12:36 PM
in reply to: Nathanm74

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Extreme Veteran
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Not Quite DFL
Subject: RE: Dividend-paying whole life insurance
I agree with peby - but I am not a financial advisor or anything like that. I don't understand what you gain by that.
2013-07-11 12:45 PM
in reply to: crimefighter2

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Champion
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Subject: RE: Dividend-paying whole life insurance
Buy term and invest the difference


2013-07-11 7:33 PM
in reply to: 0

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Master
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Gastonia NC
Subject: RE: Dividend-paying whole life insurance
Run, don't walk, away from this.

Edited by tri42 2013-07-11 7:34 PM
2013-07-12 9:26 AM
in reply to: tri42

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Veteran
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West Henrietta, NY
Subject: RE: Dividend-paying whole life insurance

Guess my thoughts are confirmed, didn't seem like a great way to invest money, especially after looking at the plan and seeing that it changes to a "MEC" in 10 years.  Reading up on that they have big tax implications when you start taking money out.

Chris.

2013-07-12 10:02 AM
in reply to: tolefanjh

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Omaha, NE
Subject: RE: Dividend-paying whole life insurance

I concur with the others.  I've always heard to run from whole life for the simple fact that it's a bad investment versus buying term and investing the rest.

Here's a quote from Dave Ramsey on Whole Life:

It's simple. Whole life is about ten times more expensive than good level term insurance. That alone should be enough to make you walk away. You also realize ZERO returns on whole life policies for the first three years, even though these policies are pitched as a vehicle to build up savings for retirement. After that, your "savings" still only grow at about two or three percent.

Want more? The savings you've finally built up after being ripped off with high premiums for years won't go to your family when you die. They'll still only get the face value amount of the policy.

Whole life is a horrible savings plan attached to expensive insurance. Stay away from it!

- Dave

2013-07-12 10:15 AM
in reply to: tolefanjh

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Master
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Minnetonka, Minnesota
Subject: RE: Dividend-paying whole life insurance
Agree with most of the comments here regarding whole life. In your case, I would say that you should cover any life insurance needs with term and max out 403(b) accounts and then extra monies set aside for retirement should probably go into a roth account before looking at other vehicles like annuties or various life insurance policies (whole-life, universal life, variable life and variable universal life plus maybe others?).
2013-07-14 9:30 PM
in reply to: ejshowers

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Not Quite DFL
Subject: RE: Dividend-paying whole life insurance
Can I ask a question of the OP? Why do you have 50 thousand in a savings account? Aren't the rates on savings accounts ridiculously low, like .25%? Perhaps I've misread that, but I've been a bit confused on that the whole time.


2013-07-15 7:24 AM
in reply to: 0

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Subject: RE: Dividend-paying whole life insurance

Originally posted by crimefighter2 Can I ask a question of the OP? Why do you have 50 thousand in a savings account? Aren't the rates on savings accounts ridiculously low, like .25%? Perhaps I've misread that, but I've been a bit confused on that the whole time.

Where would you have your emergency fund and funds needed in the short term (e.g., the OP's property tax payments)? We're talking about <10% of the OP's financial assets,, without any information about the composition of his other investments, and very little about his goals.

You can find savings that pay more than 0.25%.

 

2013-07-15 8:25 AM
in reply to: crimefighter2

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Veteran
298
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West Henrietta, NY
Subject: RE: Dividend-paying whole life insurance

The main reason the $50k sits in a savings account is because my wife is afraid of other investments at this point.  Yes we get crappy interest on it, but it's money that if for emergency.  I'm trying to convince her to put some more into our Roth's each year and to try and do some staggered CD's which will at least get a better rate and we'd still have access to the cash in time if we needed it.

Most retirement investments right now are mostly in stocks, US for the most part.  We're still at least 10 years from retirement, though it's more likely 15-20 before we really retire.  Based on my projections one of us could retire at 55, maybe even both of us, though we both really love our jobs so if that's the case there is no need to retire at that age and we could go for another 5-10 years.

Chris.

2013-07-15 8:42 AM
in reply to: tolefanjh

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Pro
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Omaha, NE
Subject: RE: Dividend-paying whole life insurance
Originally posted by tolefanjh

The main reason the $50k sits in a savings account is because my wife is afraid of other investments at this point.  Yes we get crappy interest on it, but it's money that if for emergency.  I'm trying to convince her to put some more into our Roth's each year and to try and do some staggered CD's which will at least get a better rate and we'd still have access to the cash in time if we needed it.

Most retirement investments right now are mostly in stocks, US for the most part.  We're still at least 10 years from retirement, though it's more likely 15-20 before we really retire.  Based on my projections one of us could retire at 55, maybe even both of us, though we both really love our jobs so if that's the case there is no need to retire at that age and we could go for another 5-10 years.

Chris.

One thing to always be said about savings is it will give you a > 0% return.  The same can't be said about most other investments. 

2013-07-15 10:27 AM
in reply to: 0

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Tejas
Subject: RE: Dividend-paying whole life insurance
Originally posted by tolefanjh

The main reason the $50k sits in a savings account is because my wife is afraid of other investments at this point.  Yes we get crappy interest on it, but it's money that if for emergency.  I'm trying to convince her to put some more into our Roth's each year and to try and do some staggered CD's which will at least get a better rate and we'd still have access to the cash in time if we needed it.

Most retirement investments right now are mostly in stocks, US for the most part.  We're still at least 10 years from retirement, though it's more likely 15-20 before we really retire.  Based on my projections one of us could retire at 55, maybe even both of us, though we both really love our jobs so if that's the case there is no need to retire at that age and we could go for another 5-10 years.

Chris.




Look at munis. Should get you in the 4-6% return that is tax free (federal, not sure if NY state tax would apply in your case). The muni market is hot and unloading them would not be a problem if you needed the cash. Unloading them is easy, even when the muni market isn't as hot as now. Nice to get that tax free coupon payment every six months. Buy several different issues and if staggered right, you can get paid every month.

Edited by mdg2003 2013-07-15 10:28 AM
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