Never and i mean never purchase WL as an investment. Now if you already have WL for several years and want to make the most of it as a bond like product then thats a different question. So do not buy a new WL product. What to do with your current product is a different question.
Unfortunately agents like to mislead people for sales. For instance there are parts of what you wrote which are frankly incomplete. For instance it is true that many people fail to invest properly. What wasnt told to you is that WL has been around for about 150 years and is well studied especially by LIMRA and the society of Actuaries and over 85% lapse before death. So less than 15% complete WL policies. What also wasnt mentioned is that your taxable account also gets a step up in basis to be federal income tax free just like WL. Neither is immune from estate taxes by the way. You seem to imply loans dont have a negative effect on performance. That is completely false. Loans eat away at cash value and they do so by much more than the guaranteed returns and also more than illustrated returns unless using unrealistic assumptions. If you ever lapse a WL policy like most people do then you will pay income tax rates not only on the cash value over premiums paid but also on the interest you paid to the insurance company. You dont get to pay the better LTCG rates and its very easy to invest tax efficiently such that the tax drag is small in taxable account. You can also take loans against your taxable account (although not guaranteed) and guess what that interest is tax free and wont become taxable if you fail in your plan.
Now to determine what to do with what was already purchased. Get an inforce illustration under current assumptions doing exactly as you are now and with the agents recommendations and post them taking out identifying information. We need to be sure you have WL and not a version of a UL since unless you have PUA rider, it isnt common that you can add more to your policy and WL and UL are different in how you manage them going forward. Assuming it is WL and you want a death benefit and you are okay with the policy being bond like in returns even over very long time periods then you might want to keep it and you might want to overfund it as the agent suggests but you definitely dont want to buy a new policy.
Unfortunately agents like to mislead people for sales. For instance there are parts of what you wrote which are frankly incomplete. For instance it is true that many people fail to invest properly. What wasnt told to you is that WL has been around for about 150 years and is well studied especially by LIMRA and the society of Actuaries and over 85% lapse before death. So less than 15% complete WL policies. What also wasnt mentioned is that your taxable account also gets a step up in basis to be federal income tax free just like WL. Neither is immune from estate taxes by the way. You seem to imply loans dont have a negative effect on performance. That is completely false. Loans eat away at cash value and they do so by much more than the guaranteed returns and also more than illustrated returns unless using unrealistic assumptions. If you ever lapse a WL policy like most people do then you will pay income tax rates not only on the cash value over premiums paid but also on the interest you paid to the insurance company. You dont get to pay the better LTCG rates and its very easy to invest tax efficiently such that the tax drag is small in taxable account. You can also take loans against your taxable account (although not guaranteed) and guess what that interest is tax free and wont become taxable if you fail in your plan.
Now to determine what to do with what was already purchased. Get an inforce illustration under current assumptions doing exactly as you are now and with the agents recommendations and post them taking out identifying information. We need to be sure you have WL and not a version of a UL since unless you have PUA rider, it isnt common that you can add more to your policy and WL and UL are different in how you manage them going forward. Assuming it is WL and you want a death benefit and you are okay with the policy being bond like in returns even over very long time periods then you might want to keep it and you might want to overfund it as the agent suggests but you definitely dont want to buy a new policy.
Statistics: Posted by Rex66 — Sat Feb 24, 2024 3:57 pm — Replies 9 — Views 409