LIFE INSURANCE

[Yehuda57]

The convectional wisdom is...

...blowing smoke...

[CountValentine]

That's probably a 1099 on the interest generated by the dividends, not the dividends themselves. What rate are they paying that it's worth letting the dividends sit with them?

Yes it is on the interest. 5.5% but I have many different policies  (kids insured).
I no longer need insurance. So on my main policy the premiums are paid from cash value/dividends. Insured and cash value goes up each year. Does it get any better? 
I did talk to a member here about it and he suggested to just leave that policy as it is.

[Lurker]

What turns these young people off is the snake oil insurance salesmen pushing WL and other funds which is not explained properly or in the customers best interest.

IMHO, rhetoric like this does just as much damage. It erodes trust in the establishment as a whole. As always, nuance is important.

You have a valid point in that it is in the best interest of our communities for salesmen to start focusing on getting someone insured with term before even thinking about pushing other products. Hopefully agents who use this approach will gain the trust of the community and people will use them for other products, as well.

We also have to stop turning every call for people to get term into a full-blown investment strategy debate. Get life insurance. Full stop. People needing to speak to a financial advisor is a different conversation.

[ExGingi]

On my Metlife yes I did, because dividends are left to accumulate with interest. They do not buy paid up insurance. Am I understanding that right?

Yes. So why not switch the dividend option to buying Paid-Up Insurance and avoid the 1099?

[ExGingi]

Additionally @ExGingi what about Roth for avoiding tax ? And you can borrow agains it as well. Injecting money market accounts in the discussion is deflecting from the options mentioned here.

In which universe can you borrow against a ROTH IRA?

A ROTH 401k might allow limited borrowing against the value of the account. I don't know many people that have them.

[JMHO]

IMHO, rhetoric like this does just as much damage. It erodes trust in the establishment as a whole. As always, nuance is important.

You have a valid point in that it is in the best interest of our communities for salesmen to start focusing on getting someone insured with term before even thinking about pushing other products. Hopefully agents who use this approach will gain the trust of the community and people will use them for other products, as well.

We also have to stop turning every call for people to get term into a full-blown investment strategy debate. Get life insurance. Full stop. People needing to speak to a financial advisor is a different conversation.

Agree 1000%

Get everyone 21 y/o who gets married a term plan. Then all the brokers and financial planners can push their businesses after.

We can't turn our young people off by overcomplicating the need and availability of basic term.

[whacked1]

Get everyone 21 y/0 who gets married a term plan. Then all the brokers and financial planners can push their businesses after.

Why wouldn't criteria be children?

[ExGingi]

Agree 1000%

Get everyone 21 y/0 who gets married a term plan. Then all the brokers and financial planners can push their businesses after.

We can't turn out young people off by overcomplicating the need and availability of basic term.

And can't get those 20 something y/o go to sleep at the wheel by having them buy a long-term term plan. Let it be a 10 year term, so they know this is something they need to review again before it gets more complicated.

[skyguy918]

In which universe can you borrow against a ROTH IRA?

A ROTH 401k might allow limited borrowing against the value of the account. I don't know many people that have them.

I have both. You don't need to borrow against the Roth IRA - you can withdraw contributions. And while Roth 401k has the complication that any withdrawal is considered to be part contribution and part gain (based on the proportion of the account total), it does have the ability to borrow in plan/account.

[CountValentine]

Yes. So why not switch the dividend option to buying Paid-Up Insurance and avoid the 1099?

I like cash and don't need the insurance. Other option would be to cash out the policy but I don't need the cash now either.

[ExGingi]

I have both. You don't need to borrow against the Roth IRA - you can withdraw contributions. And while Roth 401k has the complication that any withdrawal is considered to be part contribution and part gain (based on the proportion of the account total), it does have the ability to borrow in plan/account.

Once you withdraw contributions, you can't put them back in (except in rare situations like we had with the special provisions passed in 2020 due to COVID-19).

[Lurker]

And can't get those 20 something y/o go to sleep at the wheel by having them buy a long-term term plan. Let it be a 10 year term, so they know this is something they need to review again before it gets more complicated.

In your opinion, at what age do things start to get more complicated in terms of getting LI?

[ExGingi]

I like cash and don't need the insurance. Other option would be to cash out the policy but I don't need the cash now either.

How is Paid-Up Insurance any less "cash". It's fully liquid, you just avoid the 1099 (for newly paid dividends, whatever dividends are already there on deposit will generate a 1099).

[Abey]

In which universe can you borrow against a ROTH IRA?

A ROTH 401k might allow limited borrowing against the value of the account. I don't know many people that have them.

Your right I once heard of something like that but I guess it was for 401K not Roth. You haven’t answered to my other points though…
I’m my view all these benefits are great but not worth it when giving up higher gains elsewhere.

[CountValentine]

How is Paid-Up Insurance any less "cash". It's fully liquid, you just avoid the 1099 (for newly paid dividends, whatever dividends are already there on deposit will generate a 1099).

True but cash value of the paid up earned was less than the interest earned. Will have to revisit it to see if that still holds true.

[ExGingi]

In your opinion, at what age do things start to get more complicated in terms of getting LI?

It's impossible to know. Some people experience something at age 70, some at 50, some at 40, some at 30 and some at 3. If one isn't ready or able to purchase some permanent insurance with a rider that will guarantee the ability to increase it in the future, I don't think they should be buying a long-term term plan that is likely to expire at the time when the insurance is most needed (and risk of having insurability change is greater, along with higher rates just due to age).

The point is that one's financial (and insurance) situation needs periodic review.

[ExGingi]

True but cash value of the paid up earned was less than the interest earned. Will have to revisit it to see if that still holds true.

That might be referring to the Guaranteed growth of the PUAs, those PUAs would also earn dividends. In any event your individual circumstances might be different. Also it is worth noting that MetLife demutualized in the 90s and stopped selling individual life insurance (at least under the MetLife brand) last decade. So their WL is mostly a closed block, and not their main focus.

It is possible that your old policy has some guaranteed interest rate that is paid for Dividends on Deposit making that an attractive alternative.

[gozalim]

It's impossible to know. Some people experience something at age 70, some at 50, some at 40, some at 30 and some at 3. If one isn't ready or able to purchase some permanent insurance with a rider that will guarantee the ability to increase it in the future, I don't think they should be buying a long-term term plan that is likely to expire at the time when the insurance is most needed (and risk of having insurability change is greater, along with higher rates just due to age).

The point is that one's financial (and insurance) situation needs periodic review.

I think the rider mentioned above is relatively common today

[gozalim]

@mods can you merge with proper thread?

No. This is not a discussion. This is a PSA to bring new awareness

leave the WL discussion in its proper thread

[skyguy918]

That might be referring to the Guaranteed growth of the PUAs, those PUAs would also earn dividends. In any event your individual circumstances might be different. Also it is worth noting that MetLife demutualized in the 90s and stopped selling individual life insurance (at least under the MetLife brand) last decade. So their WL is mostly a closed block, and not their main focus.

It is possible that your old policy has some guaranteed interest rate that is paid for Dividends on Deposit making that an attractive alternative.

High guaranteed interest for dividends on deposit? That seems very unlikely. 5.5% is very unlikely. I'm assuming there's some confusion here between dividend interest rate and dividends on deposit.