So I guess for some people planning for poverty is a financial plan (it is definitely a Medicaid planning technique used for long-term-care purposes).
Thanks, I understand this is a new product from MassMutual, is it much better than other products?To your comment, can you elaborate a bit more? Do you mean lower cap on potential to buy more insurance in the future? @farmbochur @Mordyk as I don't have access to IRA, what alternative do I have besides WL for a tax free financial security vehicle?
מ'נעמט גארנישט מיט!!
What is your goal with this policy? Growing money tax free? You understand that taxes you only pay on the growth. So you would sacrifice growth because it would be taxable? If your tax rate is 30% yet the growth portion is more than 30% larger than what you would get in a WL, then you are better off having more gains and paying taxes. You would be ahead. Or do you have a different reason for this policy? Sorry it's not articulated clearly as it's been a long day. If you don't understand what I'm trying to say then I will try to re-write it tomorrow
Growing money in a safe place that provides financial security
Then our that same amount in a regular account gaining 5% interest now
Growing tax free?
No. But with the additional growth, you can afford to pay the taxes and still be left with extra. Do you understand that a WL policy loses money the first few years due to "policy expenses" And if you can't afford to pay in year three or four for whatever reason it starts costing you.Many people think they can pull cash from a WL policy. They give you 3% return, and when you borrow against it you pay more interest than that. They charge you interest to lend you your own money.
Have you seen the illustration screenshot I posted above?
Why are you asking such a question in response to a post that seems to just regurgitate arguments with zero understanding of how a policy actually works, or examining the illustration?
Because @Mordyk talks about upfront costs, 3% earn and loans that carry a cost greater than the earnings.What I posted has almost no upfront costs, has a tiny premium commitment, over funded so policy won't lapse even if you stop early, you can surrender your deposits with FIFO, and that's besides for the fact that the loan rate is not necessarily more expensive than the earnings
This is exactly what I said. He obviously didn't bother. And doesn't even understand the costs. I'm not sure if he understands the term "lost opportunity cost" which is the real cost of insurance premiums* (regardless of type), in any given year that a policy benefit isn't paid. *) I deliberately wrote cost of premiums rather than cost of insurance.
The insurance company charges you interest on the loan, but they also pay interest into your policy on the loaned amount. So the effective cost to borrow your own money is only the spread, which is usually small and can sometimes be negative.
Yes, I'm calculating a negative return through year 4 and a 4.4% return as of year 20. Attaching my work because I welcome feedback on my approach here. It's hard to evaluate the appropriateness of this policy without knowing the full financial picture. Does this policy sits alongside a portfolio of well-diversified, risky assets? If not, you may find yourself exposed to undue longevity risk as you approach retirement.
