Author Topic: LIFE INSURANCE  (Read 140035 times)

Offline Alexsei

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Re: LIFE INSURANCE
« Reply #1020 on: April 04, 2024, 10:54:52 PM »
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).
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Offline Mordyk

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Re: LIFE INSURANCE
« Reply #1021 on: April 04, 2024, 11:07:09 PM »
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?

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
#TYH

Offline ExGingi

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Re: LIFE INSURANCE
« Reply #1022 on: April 04, 2024, 11:35:32 PM »
מ'נעמט גארנישט מיט!!

Obviously. Which is why life insurance is a great tool. Spend everything during lifetime. Life insurance is tax free liquidity for survivors, the absolute best material asset to leave to the next generation. The question is what tax bracket one has during lifetime/retirement. Or in other words, it's not how much money you make, it's how much you get to use or keep.
« Last Edit: April 05, 2024, 12:32:00 AM by ExGingi »
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Offline Alexsei

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Re: LIFE INSURANCE
« Reply #1023 on: April 05, 2024, 12:23:41 AM »
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
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Offline ExGingi

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Re: LIFE INSURANCE
« Reply #1024 on: April 05, 2024, 12:33:11 AM »
I guess muni bonds might be an option.
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Offline Mordyk

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Re: LIFE INSURANCE
« Reply #1025 on: April 05, 2024, 06:46:19 AM »
Growing money in a safe place that provides financial security
Then our that same amount in a regular account gaining 5% interest now
#TYH

Offline Alexsei

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Re: LIFE INSURANCE
« Reply #1026 on: April 05, 2024, 07:36:29 AM »
Then our that same amount in a regular account gaining 5% interest now
Growing tax free?
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Offline ExGingi

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Re: LIFE INSURANCE
« Reply #1027 on: April 05, 2024, 08:03:36 AM »
Then our that same amount in a regular account gaining 5% interest now

And how much does it grow when interest rates go to 0% or thereabout?
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Offline Mordyk

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Re: LIFE INSURANCE
« Reply #1028 on: April 05, 2024, 08:12:46 AM »
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.
#TYH

Offline Alexsei

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Re: LIFE INSURANCE
« Reply #1029 on: April 05, 2024, 08:17:39 AM »
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?
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Offline ExGingi

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Re: LIFE INSURANCE
« Reply #1030 on: April 05, 2024, 08:49:33 AM »
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?
I've been waiting over 5 years with bated breath for someone to say that!
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Offline Alexsei

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Re: LIFE INSURANCE
« Reply #1031 on: April 05, 2024, 09:02:38 AM »
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
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Offline ExGingi

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Re: LIFE INSURANCE
« Reply #1032 on: April 05, 2024, 09:11:21 AM »
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.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline Alexsei

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Re: LIFE INSURANCE
« Reply #1033 on: April 05, 2024, 09:16:07 AM »
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.
Can you elaborate please? I don't think I understand that either
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Offline yos9694

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Re: LIFE INSURANCE
« Reply #1034 on: April 05, 2024, 11:09:20 AM »
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.

Offline ExGingi

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Re: LIFE INSURANCE
« Reply #1035 on: April 05, 2024, 11:19:36 AM »
The bottom line is that the true cost is the "lost opportunity cost". What funds are unavailable for other purposes. [Cumulative Premiums] - (Loan Value + borrowing cost).  And as one gets into later years that cost goes down or negative with WL.

That's a little simplified, but good enough for the purpose of the current discussion.
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Offline ExGingi

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Re: LIFE INSURANCE
« Reply #1036 on: April 05, 2024, 11:24:12 AM »
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.

Also, since WL is EXCELLENT collateral, more and more lenders are offering insurance backed lending. I currently have a line at 6% guaranteed for one year. When interest rates were low I had a line at under 3%, with cash values growing at around 4%.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline farmbochur

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Re: LIFE INSURANCE
« Reply #1037 on: April 05, 2024, 11:35:05 AM »
Have you seen the illustration screenshot I posted above?
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.
Risk is opportunity

Offline Mordyk

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Re: LIFE INSURANCE
« Reply #1038 on: April 05, 2024, 01:05:51 PM »
Have you seen the illustration screenshot I posted above?
Yes.  What is the cash value after year two? And after you put in about 18,500.?

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.

Exactly. They end up with a spread on your own money. 
#TYH

Offline skyguy918

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Re: LIFE INSURANCE
« Reply #1039 on: April 05, 2024, 01:08:28 PM »
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.
Gonna preempt Exgingi and tell you to add the value of the underlying coverage to the IRR.