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DansDeals Forum => Credit Cards => Topic started by: helpusout on August 06, 2013, 12:49:59 PM

Title: Financial Planner
Post by: helpusout on August 06, 2013, 12:49:59 PM
Does anyone have the name of a financial planner that can help plan savings/ retirement accounts?
Someone that understands tax laws..
Thanks
Title: Re: Financial Planner
Post by: Lou Bob on August 06, 2013, 02:23:29 PM
Does anyone have the name of a financial planner that can help plan savings/ retirement accounts?
Someone that understands tax laws..
Thanks
yep
Title: Re: Financial Planner
Post by: Yeki89 on August 06, 2013, 02:55:31 PM
I think he wanted more then a poll  :P
Title: Re: Financial Planner
Post by: Lou Bob on August 06, 2013, 02:59:18 PM
I think he wanted more then a poll  :P
he's more than welcome to pm me. I figured that would've been the next normal step
Title: Re: Financial Planner
Post by: helpusout on August 07, 2013, 12:35:14 PM
I dont understand, there has got to be some DDF members that have retirement accounts?!
And Lou, do you seriously do this for a living? I dont want to be taken for a ride..
Title: Re: Financial Planner
Post by: 12HRS on August 07, 2013, 12:48:25 PM
I dont understand, there has got to be some DDF members that have retirement accounts?!

Many people have retirement accounts without utilizing a financial planner.
Title: Re: Financial Planner
Post by: gpapadop on August 07, 2013, 02:24:58 PM
I am a financial planner. And no I am not looking for new clients. People in forums with "deals" in their URL would probably not make good clients ;D

I can answer questions here or by PM.

There are lots of charlatans out there, so be careful and take  your time!
Title: Re: Financial Planner
Post by: jaywhy on August 07, 2013, 02:28:38 PM
I am a financial planner. And no I am not looking for new clients. People in forums with "deals" in their URL would probably not make good clients ;D

I can answer questions here or by PM.

There are lots of charlatans out there, so be careful and take  your time!
+1 for George :)
Title: Re: Financial Planner
Post by: LA2NYC on August 07, 2013, 04:26:18 PM
I'll jump right in:

Gpapadop and Lou Bob (or anyone else), would love your insight!

Dual-income family right now.

A) Plan to go back to grad school in a few years.  One income will fall off.  What is the best investment vehicle to protect income (ie how best to invest) so that it will not be included on a FAFSA form and eligible for paying tuition/loans?

B) Again, dual-income family.  I have always heard of importance of Roth IRA, though this is taxed at current rates.  Assuming wife and I aren't working during retirement when we would take disbursements, our tax rate should be lower in retirement than it is now.  If that's the case, wouldn't it be smarter to invest in a Traditional IRA and be taxed then as opposed to Roth with my higher tax bracket now?

TIA for anyone's insight!
Title: Re: Financial Planner
Post by: stmark on August 07, 2013, 05:26:59 PM
I'll jump right in:

Gpapadop and Lou Bob (or anyone else), would love your insight!

Dual-income family right now.

A) Plan to go back to grad school in a few years.  One income will fall off.  What is the best investment vehicle to protect income (ie how best to invest) so that it will not be included on a FAFSA form and eligible for paying tuition/loans?

B) Again, dual-income family.  I have always heard of importance of Roth IRA, though this is taxed at current rates.  Assuming wife and I aren't working during retirement when we would take disbursements, our tax rate should be lower in retirement than it is now.  If that's the case, wouldn't it be smarter to invest in a Traditional IRA and be taxed then as opposed to Roth with my higher tax bracket now?

TIA for anyone's insight!

I believe you are taxed on traditional IRAs as income when you withdraw the money.  Therefore, I believe, the benefit of Roth is that when you guys are younger (as the Mrs and I are) right now you put the money in after taxes and withdraw it at retirement tax free as opposed to regular income tax.

your accountant should be able to give you tax advise on the ira part.
for the fafsa stuff I would recommend cold calling a university student finance office and they can advise you on various options or check out the fafsa website.
Title: Re: Financial Planner
Post by: LA2NYC on August 07, 2013, 05:35:19 PM
I believe you are taxed on traditional IRAs as income when you withdraw the money.  Therefore, I believe, the benefit of Roth is that when you guys are younger (as the Mrs and I are) right now you put the money in after taxes and withdraw it at retirement tax free as opposed to regular income tax.


Correct.  Though know let's assume tax rate is 25% and retirement will be 10%.  It would make sense to invest in Traditional IRA and be taxed at 10% in retirement than putting in Roth IRA now and taxed at 25%.

Is this correct?
Title: Re: Financial Planner
Post by: churnbabychurn on August 07, 2013, 05:44:21 PM
Correct.  Though know let's assume tax rate is 25% and retirement will be 10%.  It would make sense to invest in Traditional IRA and be taxed at 10% in retirement than putting in Roth IRA now and taxed at 25%.

Is this correct?
Correct. This is the standard argument for the traditional IRA.
Title: Re: Financial Planner
Post by: LA2NYC on August 07, 2013, 05:48:44 PM
Correct.  Though know let's assume tax rate is 25% and retirement will be 10%.  It would make sense to invest in Traditional IRA and be taxed at 10% in retirement than putting in Roth IRA now and taxed at 25%.

Is this correct?

Correct. This is the standard argument for the traditional IRA.

So the only argument for Roth is when your present tax rate is less than expected tax rate retirement? Roth is so hyped, but it seems that if you're working/making money, Traditional will be a smarter option most of the time.

Is the difference in how earnings are treated at retirement? Roth has tax-free principal & earnings while Traditional is taxed on both principal and earnings.  Is this correct?
Title: Re: Financial Planner
Post by: michael on August 07, 2013, 09:01:46 PM
So the only argument for Roth is when your present tax rate is less than expected tax rate retirement? Roth is so hyped, but it seems that if you're working/making money, Traditional will be a smarter option most of the time.

Is the difference in how earnings are treated at retirement? Roth has tax-free principal & earnings while Traditional is taxed on both principal and earnings.  Is this correct?

Correct.

There is also the ever so slight possibility, at least according to tax policy professors, that congress may decide at some point to tax Roth distributions. Not likely though.
Title: Re: Financial Planner
Post by: churnbabychurn on August 07, 2013, 09:17:34 PM
There is also the ever so slight possibility, at least according to tax policy professors, that congress may decide at some point to tax Roth distributions. Not likely though.
+1
Can't trust the Feds.
 I personally believe its always best to hold onto your money for as long as possible...   
Title: Re: Financial Planner
Post by: 12HRS on August 07, 2013, 09:28:08 PM
I personally believe its always best to hold onto your money for as long as possible...

Till you die?
Title: Re: Financial Planner
Post by: george on August 07, 2013, 09:33:44 PM
Till you die?
he means that instead of paying taxes upfront, he'd rather "hold onto his money" longer and pay taxes upon distribution in retirement.
Title: Re: Financial Planner
Post by: churnbabychurn on August 07, 2013, 09:36:01 PM
he means that instead of paying taxes upfront, he'd rather "hold onto his money" longer and pay taxes upon distribution in retirement.
+1
Title: Re: Financial Planner
Post by: 12HRS on August 07, 2013, 10:17:39 PM
he means that instead of paying taxes upfront, he'd rather "hold onto his money" longer and pay taxes upon distribution in retirement.

Sorry I forgot to ;) in my previous comment.
Title: Re: Financial Planner
Post by: PlatinumGuy on August 07, 2013, 10:31:20 PM
Can't trust the Feds.
Can't trust anyone with a 15 trillion dollar hole in their pocket.
Title: Re: Financial Planner
Post by: gpapadop on August 08, 2013, 09:35:55 AM
Everyone is different. These decisions must be made from a wholistic point of view. And before giving proper advice the advisor must/should have a better understanding of the person he/she advises!

Having said that, here are some simple guidelines:

The younger you are, the more the Roth IRA makes sense!
If you can deduct a Traditional IRA contribution it is probably better that you take it for the instant tax savings!
Same for 401k tax contributions, max them if you can!
The guarantee of tax free treatment on Roth IRAs may be there decades later...maybe not. Stuff happens. My mother lives in Greece and her "guaranteed" pension was cut 25%. Like I said, grab what you are given now...I do!

Regarding the FAFSA thing: I am really not that familiar about it as my clients definitely do not qualify for any need based aid at all! You need to be careful with them as scams in this area are very common. People get so hung up on being "fancy" with the goal of maximizing financial aid that jackases/thieves out there will "help" you maximize that angle by conveniently selling you crappy investment products like annuities or (heaven forbid) universal life or whole life insurance policies! Run away from this crap!

Hope this helps.
Title: Re: Financial Planner
Post by: Barryg on August 08, 2013, 11:08:21 AM
The reasons to get the Roth IRA even though...
Correct.  Though know let's assume tax rate is 25% and retirement will be 10%.  It would make sense to invest in Traditional IRA and be taxed at 10% in retirement than putting in Roth IRA now and taxed at 25%.

Is this correct?
Tax brackets may be higher in the future especially seeing the national debt and everything else that's going on, like the fact that long term care/medicaid medicare expense is skyrocketing. You may very well have income during retirement, even though you don't know for sure now. The biggest factor is how much your IRA will make... For example if you put in $100k and it grows to $1MM the Roth is clearly better as it will all be tax free. If it grows to $200k by retirement then reg IRA prob better...
Title: Re: Financial Planner
Post by: Dan on August 08, 2013, 11:46:34 AM
Or the IRS can be eliminated one day and there will be a 20% consumption tax with exemptions for the poor...
Title: Re: Financial Planner
Post by: LA2NYC on August 08, 2013, 12:20:02 PM
The reasons to get the Roth IRA even though...Tax brackets may be higher in the future especially seeing the national debt and everything else that's going on, like the fact that long term care/medicaid medicare expense is skyrocketing. You may very well have income during retirement, even though you don't know for sure now. The biggest factor is how much your IRA will make... For example if you put in $100k and it grows to $1MM the Roth is clearly better as it will all be tax free. If it grows to $200k by retirement then reg IRA prob better...

Any reason to be worried that Roth will be taxed down the line (when we take on the money in 30 years)?
Title: Re: Financial Planner
Post by: mordyl19 on August 08, 2013, 12:24:42 PM
I am a financial planner. And no I am not looking for new clients. People in forums with "deals" in their URL would probably not make good clients ;D

I can answer questions here or by PM.

There are lots of charlatans out there, so be careful and take  your time!
Who do you work for and how long have you had your CFP Designation?
Title: Re: Financial Planner
Post by: Barryg on August 08, 2013, 12:29:19 PM
Any reason to be worried that Roth will be taxed down the line (when we take on the money in 30 years)?
According to the post before yours... apparently, yes.
There is also a change the IRA/Roth IRA loses money or breaks even...
We can only plan for what makes sense now or else you'll drive yourself crazy. That's why I always go by Hishtadlus to do what makes sense. If you think market will average 8% from now and there's over 30 years till you retire, it's about the equivalent of $100k ----> $1MM and then Roth would make more sense with factors we know of now. Not saying that I think it will avg 8%...
Title: Re: Financial Planner
Post by: mordyl19 on August 08, 2013, 12:34:29 PM
Regarding the FAFSA thing: I am really not that familiar about it as my clients definitely do not qualify for any need based aid at all! You need to be careful with them as scams in this area are very common. People get so hung up on being "fancy" with the goal of maximizing financial aid that jackases/thieves out there will "help" you maximize that angle by conveniently selling you crappy investment products like annuities or (heaven forbid) universal life or whole life insurance policies! Run away from this crap!
Why would you say that annuities and whole life insurance policies are "crappy"? As I financial planner with clients who definitely do not qualify for any need based aid at all, I find it interesting that you have not come to utilize either an annuity tradtional/immediate or an insurance policy to help anyone. 
Title: Re: Financial Planner
Post by: magnus on August 08, 2013, 12:37:02 PM
So the only argument for Roth is when your present tax rate is less than expected tax rate retirement? Roth is so hyped, but it seems that if you're working/making money, Traditional will be a smarter option most of the time.

If your current income is too high to qualify you for a deductible Traditional IRA, then Roth IRAs (backdoor) would be better, I believe.
Title: Re: Financial Planner
Post by: mordyl19 on August 08, 2013, 12:38:38 PM
If your current income is too high to qualify you for a deductible Traditional IRA, then Roth IRAs (backdoor) would be better, I believe.
You can also use a Whole Life insurance policy as a Roth Ira.
Title: Re: Financial Planner
Post by: Ergel on August 08, 2013, 12:42:46 PM
Or the IRS can be eliminated one day and there will be a 20% consumption tax with exemptions for the poor...
In your wildest dreams
Title: Re: Financial Planner
Post by: churnbabychurn on August 08, 2013, 03:17:40 PM
The reasons to get the Roth IRA even though...Tax brackets may be higher in the future especially seeing the national debt and everything else that's going on, like the fact that long term care/medicaid medicare expense is skyrocketing. You may very well have income during retirement, even though you don't know for sure now. The biggest factor is how much your IRA will make... For example if you put in $100k and it grows to $1MM the Roth is clearly better as it will all be tax free. If it grows to $200k by retirement then reg IRA prob better...
-1
If you predict such a healthy return, its best to do a traditional and invest the money as opposed to having a lower basis with the Roth.
Title: Re: Financial Planner
Post by: Lou Bob on August 08, 2013, 03:24:21 PM
You can also use a Whole Life insurance policy as a Roth Ira.
+1
Title: Re: Financial Planner
Post by: DMYD on August 08, 2013, 11:13:47 PM
A regular Whole Life policy can be a little difficult if used as retirement, A Custom Whole Life would work much better for retirement, you can choose how much you want to contribute and for how many years! 
Title: Re: Financial Planner
Post by: Barryg on August 09, 2013, 12:38:20 AM
-1
If you predict such a healthy return, its best to do a traditional and invest the money as opposed to having a lower basis with the Roth.

I don't predict a healthy return, but I'm not the one deciding between reg and Roth IRA... It would be up to them to predict...
Using the originally discussed 24% tax bracket and my $100k example... If (the Roth of) $100k would grow to $1M then (the reg IRA) $133.33334k would grow to $1.33333334M. With the unknown future tax bracket, I'd pick $1M tax free over $1and 1/3 M taxed... Any advantages that you can think of in picking traditional, or is my math flawed??
Title: Re: Financial Planner
Post by: Barryg on August 09, 2013, 12:42:32 AM
A regular Whole Life policy can be a little difficult if used as retirement, A Custom Whole Life would work much better for retirement, you can choose how much you want to contribute and for how many years!
AFAIK Custom WL is a NY life product, unless you're referring to something else... Why would a reg WL be difficult to use as retirement? I'm pretty certain that if someone wanted to, for example, put exactly $5000/year for 35 years, into a reg WL, they may come out with a random amount of face value in ins. plan, but how difficult could this possibly be??
Title: Re: Financial Planner
Post by: churnbabychurn on August 09, 2013, 07:42:23 AM
I don't predict a healthy return, but I'm not the one deciding between reg and Roth IRA... It would be up to them to predict...
Using the originally discussed 24% tax bracket and my $100k example... If (the Roth of) $100k would grow to $1M then (the reg IRA) $133.33334k would grow to $1.33333334M. With the unknown future tax bracket, I'd pick $1M tax free over $1and 1/3 M taxed... Any advantages that you can think of in picking traditional, or is my math flawed??
Its the math! :)
FV of 100k at 10% over 20 years is 672,500 FV of 124k is 833.900
Factor in a reasonable future tax bracket and your still ahead with the traditional IRA.
Title: Re: Financial Planner
Post by: gpapadop on August 09, 2013, 10:42:39 AM
>>>>>>>>>>>>>I find it interesting that you have not come to utilize either an annuity tradtional/immediate or an insurance policy to help anyone.

Fixed annuities have their place in the marketplace.
Variable annuities and insurance policies marketed as investments are a giant load of crap for the people who buy them (and super lucrative for the ones who sell them).

Title: Re: Financial Planner
Post by: skyguy918 on August 09, 2013, 11:24:42 AM
>>>>>>>>>>>>>I find it interesting that you have not come to utilize either an annuity tradtional/immediate or an insurance policy to help anyone.

Fixed annuities have their place in the marketplace.
Variable annuities and insurance policies marketed as investments are a giant load of crap for the people who buy them (and super lucrative for the ones who sell them).

By the ones who sell them are you referring to the agent/broker or to the insurance company? The fact is that for most companies that offer multiple types of permanent life insurance, the highest commissions will be on whole life, not on VUL. On the annuities side the highest will be on income annuities, not on FDA's and VDA's.
Title: Re: Financial Planner
Post by: Barryg on August 09, 2013, 11:35:21 AM
Its the math! :)
FV of 100k at 10% over 20 years is 672,500 FV of 124k is 833.900
Factor in a reasonable future tax bracket and your still ahead with the traditional IRA.
First of all don't short change the Traditional, we were assuming a 25% tax bracket which would compare investing $100k Roth vs $133.33334k traditional.
Second of all you took an unreasonably high assumption of 8% that I threw out there, bashed it and took it to 10%, I would have lowered it to 6 or 7 and instead increase the amount of time until retirement to 35 or 40 years...
But why redo the numbers? I already had the $100k Roth investment at $1M and the Traditional at $1.33M. I'd guess you'd pick the traditional at $1 and 1/3 Mil taxes, I'd pick the Roth. One can also split if unsure.
Just thinking out loud here, if someone was 65 and was presented with a safe/lucrative investment and wanted to cash out let's say $500k from retirement fund in one tax year, it prob would suck if he picked the traditional IRA, no?
Title: Re: Financial Planner
Post by: 12HRS on August 09, 2013, 11:52:20 AM
Why would the standard assumption be looking at it from when you are 25 years old that at 65 you would want to take out 500k in one year?
Title: Re: Financial Planner
Post by: Barryg on August 09, 2013, 12:18:10 PM
I was looking at $1M not taxable (Roth) vs. $1.3333M taxable (traditional) with a big ? as to what the tax rate would be at that time. I was just trying to add a pro or con as it would seem that neither would have a large advantage.
The way most people look at it is what if I took out (for example) $50k a year to supplement retirement income? What tax bracket will I be in (at age 65)?
However, I think it would be very relevant and wise not to be STUCK at not being able to access my own money if there is a lucrative investment. Ldaati the HaChacham Einav Brosho approach would be to be liquid and have easy access to my money if needed...
Title: Re: Financial Planner
Post by: yos9694 on August 09, 2013, 12:58:19 PM
AFAIK Custom WL is a NY life product, unless you're referring to something else... Why would a reg WL be difficult to use as retirement? I'm pretty certain that if someone wanted to, for example, put exactly $5000/year for 35 years, into a reg WL, they may come out with a random amount of face value in ins. plan, but how difficult could this possibly be??

I think he means that a Limited Pay WL product is easier to deal with for this purpose than a Lifetime Pay, regardless of the company of issue. If you have premiums due during your draw-down phase, it can be messy and/or hard to understand.
Title: Re: Financial Planner
Post by: yos9694 on August 09, 2013, 01:03:54 PM
>>>>>>>>>>>>>I find it interesting that you have not come to utilize either an annuity tradtional/immediate or an insurance policy to help anyone.

Fixed annuities have their place in the marketplace.
Variable annuities and insurance policies marketed as investments are a giant load of crap for the people who buy them (and super lucrative for the ones who sell them).

That may be true for clients of modest means or the slightly affluent, who are able to satisfy their tax advantaged savings goals with 401k, IRA, 529, etc. When you start to work with the extremely affluent or wealthier, maxing out the usual tax advantaged savings vehicles doesn't even come close to meeting their needs, and VA/LI becomes very logical.
Title: Re: Financial Planner
Post by: Dan on August 09, 2013, 04:48:16 PM
That may be true for clients of modest means or the slightly affluent, who are able to satisfy their tax advantaged savings goals with 401k, IRA, 529, etc. When you start to work with the extremely affluent or wealthier, maxing out the usual tax advantaged savings vehicles doesn't even come close to meeting their needs, and VA/LI becomes very logical.
Logical for the broker, no doubt ;)
I've heard the commissions paid are just insane.
Title: Re: Financial Planner
Post by: LAXtraveler on August 09, 2013, 04:54:42 PM
That may be true for clients of modest means or the slightly affluent, who are able to satisfy their tax advantaged savings goals with 401k, IRA, 529, etc. When you start to work with the extremely affluent or wealthier, maxing out the usual tax advantaged savings vehicles doesn't even come close to meeting their needs, and VA/LI becomes very logical.

I think your sentiments are correct here.  LI can have its place among other tax/estate planning mechanisms if the person/family is in need of such an investment vehicle. I think you will find many estate planning attorneys who agree with this too.
Title: Re: Financial Planner
Post by: Super Speed on August 09, 2013, 05:15:11 PM
I have money just sitting in my savings account doing nothing for me, any ideas how or where to invest it?
Title: Re: Financial Planner
Post by: yos9694 on August 09, 2013, 07:34:32 PM
Logical for the broker, no doubt ;)
I've heard the commissions paid are just insane.

Commissions for VA are 3% of the deposit, same as any front loaded mutual fund. Not insane at all. While you may personally prefer no load funds, front load funds make sense to other people.

Commissions on life insurance could be up to the full first year premium, but thats between the insurance company and the broker. The insurance product still has to perform for the client and it does, as long as you have anything but a short horizon for investing.

Again, I wouldnt recommend either of these as investments unless the client already is fully funding other tax advantaged vehicles first.
Title: Re: Financial Planner
Post by: yos9694 on August 09, 2013, 07:37:21 PM
I think your sentiments are correct here.  LI can have its place among other tax/estate planning mechanisms if the person/family is in need of such an investment vehicle. I think you will find many estate planning attorneys who agree with this too.

Estate planning is a completely different topic and far more complex. We're discussing tax planning for retirement, which is focused on the cash value of the policy, not the death benefit.
Title: Re: Financial Planner
Post by: Dan on August 09, 2013, 07:39:00 PM
Commissions on life insurance could be up to the full first year premium, but thats between the insurance company and the broker. The insurance product still has to perform for the client and it does, as long as you have anything but a short horizon for investing.
Let me take a wild guess, you sell/broker WL insurance?
Title: Re: Financial Planner
Post by: gpapadop on August 10, 2013, 04:12:23 PM
If I had a Vanilla Reload card for every time I have seen or heard life insurance with investment in the same sentence ::)
Title: Re: Financial Planner
Post by: yos9694 on August 10, 2013, 09:19:08 PM
Let me take a wild guess, you sell/broker WL insurance?

I don't.
Title: Re: Financial Planner
Post by: Barryg on August 10, 2013, 11:28:17 PM
I think he means that a Limited Pay WL product is easier to deal with for this purpose than a Lifetime Pay, regardless of the company of issue. If you have premiums due during your draw-down phase, it can be messy and/or hard to understand.
Or he could just answer for himself...
Title: Re: Financial Planner
Post by: mordyl19 on August 12, 2013, 11:30:44 AM
>>>>>>>>>>>>>I find it interesting that you have not come to utilize either an annuity tradtional/immediate or an insurance policy to help anyone.

Fixed annuities have their place in the marketplace.
Variable annuities and insurance policies marketed as investments are a giant load of crap for the people who buy them (and super lucrative for the ones who sell them).
I did not say that Whole Life Insurance and Annuities are investments. I was questioning your statement when you said that they are "crap" products.
Title: Re: Financial Planner
Post by: mordyl19 on August 12, 2013, 11:33:01 AM
Logical for the broker, no doubt ;)
I've heard the commissions paid are just insane.
Yes logical and lucky to have the chance to do something like that. Commisions on anything really are insane but you hear about the insurance side more often than basic trades.
Title: Re: Financial Planner
Post by: mordyl19 on August 12, 2013, 11:36:24 AM
With all of this fancy investment, tax planning, estate planning, and return talk using Insurance, has anyone just bought insurance to protect their family or to use the product for the actual use of the product? Or is that just a crazy idea?
Title: Re: Financial Planner
Post by: yos9694 on August 13, 2013, 12:33:04 PM
With all of this fancy investment, tax planning, estate planning, and return talk using Insurance, has anyone just bought insurance to protect their family or to use the product for the actual use of the product? Or is that just a crazy idea?

Term?
Title: Re: Financial Planner
Post by: mordyl19 on August 14, 2013, 02:26:42 PM
Term or Whole Life, but you bought it not for the "investment" or tax aspect but rather, you wanted life insurance for insurance.
Title: Re: Financial Planner
Post by: skyguy918 on August 14, 2013, 02:50:42 PM
Term or Whole Life, but you bought it not for the "investment" or tax aspect but rather, you wanted life insurance for insurance.

If your only goal is the insurance aspect, then you want term. There may be some UL products out there that are essentially term for life, but even that is not usually a good option for pure insurance needs because the need decreases after a certain age. By its very definition WL has an investment component to it.
Title: Re: Financial Planner
Post by: mordyl19 on August 14, 2013, 03:10:25 PM
If your only goal is the insurance aspect, then you want term. There may be some UL products out there that are essentially term for life, but even that is not usually a good option for pure insurance needs because the need decreases after a certain age. By its very definition WL has an investment component to it.
That is true by its very definition whole life has an investment aspect. One might say they want insurance but do not want to contribute to a rental. He might like to buy it.  I use the example with your house, You could rent your house (Term) or buy your house (WL). Within purchasing and not renting the house you build equity (investment aspect) but you live there and its not being flipped. (used for the insurance not the investment) 
Title: Re: Financial Planner
Post by: skyguy918 on August 14, 2013, 03:52:59 PM
That is true by its very definition whole life has an investment aspect. One might say they want insurance but do not want to contribute to a rental. He might like to buy it.  I use the example with your house, You could rent your house (Term) or buy your house (WL). Within purchasing and not renting the house you build equity (investment aspect) but you live there and its not being flipped. (used for the insurance not the investment)

Not a very good analogy, always hated it. Generally speaking, the investment/equity aspect is only worthwhile if you're truly in need of/taking advantage of the tax vehicle aspect.

Most people just need the insurance aspect, and 'renting' makes a lot more sense.
Title: Re: Financial Planner
Post by: mordyl19 on August 14, 2013, 04:20:41 PM
Not a very good analogy, always hated it. Generally speaking, the investment/equity aspect is only worthwhile if you're truly in need of/taking advantage of the tax vehicle aspect.

Most people just need the insurance aspect, and 'renting' makes a lot more sense.
why does renting make more sense? The equity can be used for beneficial things other than being truly in need.
Title: Re: Financial Planner
Post by: skyguy918 on August 14, 2013, 07:05:24 PM
why does renting make more sense? The equity can be used for beneficial things other than being truly in need.

Because on the whole it's not as efficient (and ultimately as lucrative) as other investments, the exception being when you're fully funded in all your other tax-advantaged options. Additionally, term is the only market where competition has really brought prices down and reduced profit margins.

If they were to do away with the tax advantages, most likely the only market that would survive is term.
Title: Re: Financial Planner
Post by: mordyl19 on August 15, 2013, 11:55:33 AM
Because on the whole it's not as efficient (and ultimately as lucrative) as other investments, the exception being when you're fully funded in all your other tax-advantaged options. Additionally, term is the only market where competition has really brought prices down and reduced profit margins.

If they were to do away with the tax advantages, most likely the only market that would survive is term.
So there is no one or very few people who want it as the insurance for more than say 20-30 years? and would you not care which company sold you the insurance if it was term?
Title: Re: Financial Planner
Post by: yos9694 on August 15, 2013, 12:26:06 PM
If they were to do away with the tax advantages, most likely the only market that would survive is term.

+1. Or at the very least, the other life insurance products would need to be redesigned to survive.

And to correct a misconception, Whole Life is not by definition an investment as some has suggested. It is by definition a pre-funding of your annual insurance costs- because you pay a level premium in every year but your insurance costs increase every year. That pre-funding belongs to the policy owner by law, so you end up with a de-facto investment.
Title: Re: Financial Planner
Post by: yos9694 on August 15, 2013, 12:34:17 PM
So there is no one or very few people who want it as the insurance for more than say 20-30 years? and would you not care which company sold you the insurance if it was term?

It depends on what you consider an "insurance need". The most obvious example is income replacement for a family - if the breadwinner dies then the family needs to get money to make up for the loss of income or they end up taking charity. That is a temporary need because families go through stages and chances are that in 20+ years the dependents will be grown up enough to fend for themselves and the income replacement need is gone. Term fits this need, whole life would be a waste of money.

Why would you not care about the company that sold you the insurance if it was term? 20 years is a long time and you want to be as certain as possible that the company you bought from will be around to pay if you need them to.
Title: Re: Financial Planner
Post by: skyguy918 on August 15, 2013, 12:38:02 PM
So there is no one or very few people who want it as the insurance for more than say 20-30 years? and would you not care which company sold you the insurance if it was term?

Well, first of all, you have to think about what your insurance need is. If you're married with kids and a house, you want to make sure that those that survive you can afford to keep the house, pay for education, weddings, etc in the event that you and your stream of future income are gone. But once you're 60-70, your kids may all be out of school and married, your house may be paid off, and there's not much left to insure for. Not to mention the fact that at that point your passing may not mean the cessation of an income stream because it may come from sources that don't cease (at least not entirely) with your passing. There are of course other considerations, like using insurance as an estate vehicle, but for the most part you don't need life insurance once you're older and retired.

Even if you did want lifetime (ie permanent) insurance at a fixed premium, there are Universal Life products that are designed to fill this need relatively cheaply. As far as buying term, this is a tough question. You can definitely save some money going with just any company. The chief concern would be the financial strength of the company, which will play a role in whether they'll be around to pay the claim down the road. Some people will tell you this is a minute risk, especially with the guarantee associations backing, others will say it's a real factor that you have to account for. Another concern is the issue of convertibility.  Almost everyone will agree that which company you choose matters more for permanent insurance. If you're buying term thinking, worst case if I get sick (which would cause your premiums to skyrocket at the end of the term and possibly prevent you from getting a new policy) I can always convert to permanent, you might want to buy term with a company that you'd feel comfortable owning permanent insurance with.
Title: Re: Financial Planner
Post by: skyguy918 on August 15, 2013, 12:39:11 PM
It depends on what you consider an "insurance need". The most obvious example is income replacement for a family - if the breadwinner dies then the family needs to get money to make up for the loss of income or they end up taking charity. That is a temporary need because families go through stages and chances are that in 20+ years the dependents will be grown up enough to fend for themselves and the income replacement need is gone. Term fits this need, whole life would be a waste of money.

Why would you not care about the company that sold you the insurance if it was term? 20 years is a long time and you want to be as certain as possible that the company you bought from will be around to pay if you need them to.

The warning popped up when I was replying to mordyl, but I was to lazy to go back and edit out the parts of my post you already mentioned.
Title: Re: Financial Planner
Post by: yos9694 on August 15, 2013, 02:44:06 PM
Some people will tell you this is a minute risk, especially with the guaranty associations backing, others will say it's a real factor that you have to account for.

IFYP