Best caller I’ve ever heard on the show. Guy was articulate, humble, and receptive. Came into this almost knowing he was wrong and just wanted Dave to clarify exactly why
He's not wrong though.. Dave is wrong. The insurance company gives the cash value to beneficiary along with a death benefit amount to equal the face amount of the policy. Why people don't know this is beyond me. 100k policy with 20k cash value... yeah let's keep 20k but dish out the 100k anyways. What's more logical? 100k death benefit, 20k cash value.. let's give them the 20k plus 80k and that will equal 100k. Simple math.
@@DefinitelyNotRin except they do... the math is really simple. 100k death benefit, 25k cash value. If insurance company gives you the 100k and keeps the 25k how much did they really give you? 75k. So if they let you keep the cash value and then give you 75k to make sure your beneficiary gets 100k payout. Pretty easy to understand.
@@RyanEglinton Simple question, where did you get the number 75k? Subtracting the CV from the DB? Why? According to your lying logic, it shouldn’t get subtracted.
@@astroman30 75k came from you having 25k cash value in your policy. Hypothetical policy if that wasn't clear for you. If the insurance company gives your family 100k but keeps your 25k cash value.. how much did they really give up in all? 75k. This isn't what happens because that makes literally no sense. 100k death benefit. $0 cash value your family gets 100k. $50k cash value and your family will get that PLUS $50k from insurance company to make sure the death benefit now equals 100k. Literally the easiest thing to see when you aren't up daves balloon knot.
Finally there is someone that can explain whole life insurance so clearly! Asked insurance agent so many times that how much of my premiums that I paid went to insurance and how much went to cash value investment and accumulation, they just avoided answering the question!
Most insurance agents don't literally know how insurance policies work, especially whole life policies. While that may shock you it is nonetheless the truth. If you understand how to read an insurance policy, the specifics such as cost of insurance, commissions and fees are meaningless because the only thing that really matters is how quickly the cash value and the insurance in force grows. There are only about 4 insurance companies whose whole life policies make any sense to use for cash vale growth and if the agent you are dealing with doesn't represent one or more of them then he probably wouldn't want to answer your questions.
Because he doesn’t know the exact answer. He can only tell you how much cash value you have accumulated. You need to stop looking at whole life insurance as an investment. A whole life policy is the final check you are writing to your family and it’s guaranteed to pay out as long as you make your premium payments. You obviously have living benefits like access to cash value that you do not have to pay back technically. You just need to pay back the small interest fee on the loan. If you don’t use cash value it gets added to the death benefit
@@ethanpaige9471 You are perpetuating the misinformation regarding whole life insurance. Cash value is not "added" to the death benefit if you die. Your death benefit is a stated amount and your cash value is a stated amount. When you die, your beneficiaries get ONLY the death benefit and the insurance company keeps the cash value. You don't get both. If you have an outstanding policy loan when you die, that unpaid balance is subtracted from the death benefit amount. With whole life you pay for a death benefit AND a "savings" plan that allows you to BORROW back against your cash value and pay interesttotheinsurancecompany, but if you die you are left with ONLY the death benefit. That's a great deal, right?
I like how the only responses this guy got were probably from whole life agents. Whole life is never a good idea as life or as an investment. Does auto insurance sound like a good place to store and grow your retirement/savings? Does your mortgage insurance? The answer is no and neither is life insurance. Life insurance, specifically term, is only needed for protecting your family and income. If you don't need protection, you don't need life insurance!!! Plain and simple! This from an insurance agent.
MY FRIEND!! - Dave is NOT telling the people clearly that TERM LIFE INS ONLY PAYS TO A CERTAIN AGE! DON'T BE FOOLED BY THIS MAN'S ADVICE! (He's probably selling Term Ins himself). If you are 20 yrs old, and you take out a 30 yr TERM policy, your beneficiary will only get the money if you doe before you are 50 y.o., OTHERWISE, if you live past 50 yr old and you die, they get ZERO $$. WAKE UP!!!
Thank you for that. THAT was exactly what I needed to hear. I am at a point where I have term life insurance and I want to drop it. But I've been hesitant to do so. "Just because".... House is paid off, own my cars, 0 debt, recently retired and yes, I have invested and planned for my retirement. I've been asking myself just what the life insurance is for at this point. If I die, my wife can continue to live off of our currently in place retirement plan. So, I am SOOOOO glad you said this. Thanks a million.
Once my house was paid off and kids mostly thru college and the rest covered, I dumped my term policy. I still have a 50000 whole life that I’ve had for 30 years at 600 a year. It’s cash value is about 30000 My wife has the same cost, but 100000, for about 25 years, cash little less. It has worked out ok, but I’d have more if that 600 a year been invested elsewhere
This advice changes drastically for someone like me who basically can’t get any life insurance due to preexisting medical conditions. But I was able to get a few guaranteed policies through the VA, one term and one whole life which I will absolutely be keeping.
True to an extent. Medical makes whole life understandable but while life doesn’t require cash value. It’ll still cost more then term but while life without cash value is much more affordable than whole life wirh
Also, just invest invest invest in any money that you would put into life insurance that isn’t approved. I don’t plan on seeing my pension. So I heavily invested in my 401k I have $80k in 4 years and bought while low. I can’t wait till the economy picks back up!!!
If you have a family you owe it to them to take care of them if you die and $1M only gives them a $50k/year income, it keeps them off the street but that's about it.
You say this based off of...what exactly? You have zero idea of that person's age or earning potential, the lifestyle they have or the hopes he has for his family.
@@TheDjcarter1966Depends on if the house is paid off, what the liabilities are and the scale of the lifestyle. Also what asset investments are in place and if the beneficiary is working as well. Pleanty of variables.
They go up too. My wife's grandfather is 90 years old, and his premiums are $2400/month. He never retired and is still working just to pay for the premiums. It's ruined his life from 65-90.
I hate insurance in general. Get the bare minimum, and only IF you need it. The old adage still applies, "Insurance companies are in the business of collecting premiums and denying claims." I have diligently tried to minimize insurance coverage throughout my life and I am mostly self-insured today in retirement.
Insurance companies are pretty much all crooks. With car & house insurance, they gladly accept gobs of money in premiums, but if you take out a claim, they either drop you or your premiums skyrocket.
Tell this to the family my company paid to have their house rebuilt after a fire, or the widow I handed a life insurance check to after her husband passed away. Insurance is there to protect the people you love and the things you value most.
The cash value gets added to the death benefit. If you buy a 100k WL policy and over 20 years and the cash value grows to 50k. Your beneficiaries get 150k. By the way, its tax free with no market losses.
Take $250 a month, put it in an index fund over 20 years and it grows by 4x as much as your WL policy. Don’t fall into sunk cost fallacy, you can still cancel the policy and invest!
@@jon7911 WL is not an investment, it should not be compared to investments. Of course the rate of return of WL is not going to match the stock market. The question is, after you have used all your money on expenses and maxed out 401k and IRA, is 100% of your remaining money invested into things like the stock market? If there is any amount of money that you do not want tied to the stock market then that could be considered for WL. For those that are not maxing out 401k and IRA, or do not have spare money after maxing those out, then WL is a terrible idea. What they also fail to mention in this video is that you can withdraw from the cash value and invest in the stock market or real estate or whatever as you go along. Also it is a buffer against volatility in retirement, which you can withdraw from instead of withdrawing from your money tied to stocks in a down year, which will be detrimental to the value of that account.
Yea it’ll grow 4x. However depending on what state you live and your tax bracket, Uncle Sam will get up 57% of that growth where as Whole it’s tax free. Also depending which company you go with dividends are added.
Some 45 years ago I had a friend who was an insurance agent who said his conscience would not let him sell whole life. He educated me on term insurance. As I recall, I had a whole life policy which was very expensive and provided little coverage for my family (don't remember the exact numbers but they were outrageous). I cancelled the whole life policy and from my friend bought a very inexpensive term policy that provided good protection for my wife and growing children. Stayed with term policies after that. Now 74, I can't afford even term, but don't need it, but given lower premium rates for women have kept a modest policy on my wife. Life insurance is death insurance -- it's to provide income for beneficiaries; it is not to be considered an investment.
Correct not an investment. Term tend to be more expensive as after the term you can renew but premiums go up compared to whole life where premiums are fixed but always make sure you are funding it right as some policy’s can end up to 0. Life insurance is just incase something happens to you or the bread winner. You can pay $50 into a life insurance policy and die next month and your family be paid out the initial face amount. It’s to secure your family has money pay off debt or anything like that or build an estate. Term is the same it’s for those with a mortgage and debt but recommend once the mortgage is gone to convert to a different policy since term is cheaper to start but expensive to maintain overtime.
Wouldn't know how to comment on later-in-life whole life. For me, it is unaffordable although we have a term policy on my wife that is inexpensive so we keep it. Otherwise, we're in a place in our lives where we don't perceive a need for life insurance, unlike when we were young and had children at home. That said, I bought a long-term care policy about a decade ago which includes a whole life aspect in case the health part is not used. I wasn't looking for the whole life policy, but the agent who sold it to me said it was included because some people feel cheated if the health part is not used and there's no tangible return for the premiums. Just the long-term care part seems to be at the right price point (although expensive). @@casienwhey
@@casienwhey yeah that is pretty much it. For healthy individuals, term life seems to be a better option, but for those whose health may deteriorate in their later life, whole life will be better. It's all about individual circumstances and while making decisions, we need to look at our own condition and not look at these generalizations.
Life Insurance: alternative banking Whole Life: long term payments Universal Life: middle term payments Term life: short term payments Benefitiary: Will and trust Age availability: 40 years old Similar to: high interest fixed rate alternative banking savings fund Health: based off of behaviors
When someone asks me about whole life, I tell them go see an independent financial advisor. None that I ever talked to will tell you to go out and buy whole life insurance.
Financial advisor... who sells you a plan they will make money off of you based on market downturns and upswings. Sounds like you'd get swindled real easily.
Think about it in common sense terms, would you see any company constantly trying to sell you on something, ( endless whole life insurance commercials ) if it was a great deal to the consumer, those things in life practically sell themselves
@@weirdphax5406 Correct, Term Life policies usually don't pay out, which is a big reason they are so cheap. If you follow the baby steps to get out of debt and build wealth you eventually wont need life insurance to pay your funeral expenses and take care of your family. You can instead use Life Insurance as a tool to cover estate taxes so your family can get your assets without having to fork over estate taxes when you die.
I got a WL quote and when my agent sent me the break down of cash value over the years I was thinking the exact same thing Dave is saying. I’m glad I’m not the only one who doesn’t think WL is great.
Dave doesn’t tell you that only 2% of Term policies pay out. Whole life policies are the final check you write to your family. They are guaranteed to pay out. Funerals are 15-20k you don’t want your family on. Gofund me begging for money
@@perfectsense3240 being completely honest with you thats untrue. Of course all insurance depends on coverage, the company, the state, the age and health of individuals etc. None of them are that big of a difference from experience the most I have seen is like $20 yet some man factors depend and the states are the ones who create the price. That sounds like advertising to me, just like commercial that say get up to 1 million for insurance for $10 a month, this too I marketing ad might work if someone is a baby does this make sense?
I'm 25 y/o just signed up for 20 year term $400,000 coverage, I earn about 55k/year. I pay about 35/ month until i get my health evaluated where I hope to get moved up from non smoker classification to preferred where I'll then be paying $25/mo. My company brought in this whole life agent from New York life and I almost signed up for the maximum whole life coverage I could afford until I started researching life insurance advice and found Dave Ramsey. I'm feeling good that I made the right decision and will save $2000/yr compared to whole life
Dave doesn’t tell you that only 2% of Term policies pay out. Whole life policies are the final check you write to your family. They are guaranteed to pay out. Funerals are 15-20k you don’t want your family on. Gofund me begging for money
@@ethanpaige9471But, isn’t it a good thing they don’t pay out? The purpose of term life insurance is to ensure your dependents are able to support themselves if you pass away young. Then, you should be investing the difference you would’ve been paying for whole life insurance. Assuming you invest/save well, you should have more than enough to cover funeral cost. Also, you are probably going to beat the whole life insurance return. The average whole life insurance yearly return is 1-3.5%. So, it is not hard to beat that. Does that make sense?
@@setsometv9088 you would rather throw away $11,000 or build a policy that guarantees to pay out? Makes you money? And developes a cash value. There are whole life policies that you only pay for 10-15-20 years and after that it accumulates dividends/interest and builds in value every year
@@setsometv9088 whole life policies do not pay 1-3%. Most get "dividends" and depending on your mutual insurerer the lowest rate paid in the last 20+ years is 6% and this will grow tax deferred and be available tax free. It far outperforms any fixed rate savings type account once adjusted for taxes. No one would suggest you put 40% of your investable funds into this, but it definitely has a spot for 10-20% depending on other factors. Also, only 1% of Term life insurance policies pay out, which means even though you paid a smaller premium, you get 0 for that. If you live a long time then you are likely to get past any reasonable Term policy and not be able to get insurance. The whole life policy is good until you pass away at which point your beneficiaries receive a substantial amount. Dave's example of saying you have 200k in cash value, and then you pass away and your beneficiary gets the "death benefit" of 1M and that;s it. that is incorrect as most values that have a cash value the death benefit increases as well. We won't mention the fact that 95% of people once they pay the "premium" of a term policy don't follow through to save the other $$ as suggested. We all come up with things we need, or life situations. Nor does it account for investing in something that seemed great and then went Bk (enron, wamu, etc.) A whole life policy can be looked at as a "forced" savings to make sure that at least something is going toward the future even if we mess up. Again, like other investments it should be part of a whole plan vs. the entire plan.
@@setsometv9088 in a perfect world you invest the rest, but the majority of people will not. Something ALWAYS comes up that eats away that money. I have an indexed universal life. I do annual payments and my cash value is growing at the cap rate of 12% currently. My bottom is .75% in a bad financial year. In the process of setting up a trust so it can be the beneficiary. That's how the rockerfellers did it and am just Following the strategy for me and my family. Just in case reincarnation is real l don't want to come back and be broke again. 😂😂😂
My question is how soon can you borrow from the whole life insurance policy? I understand you have to wait until you build a cash value but how long would that be and can someone give me an example please?
It depends on how you structure the policy as far as what you have access to, but 30 days after you start the policy you should have access to the cash value. And the cash value is GUARANTEED to grow each year (another thing Dave never mentions)
It depends on the individual policy. She needs to READ her policy and if in doubt, contact her Agent. If she cannot reach her Agent, then she should reach out to the company to do a review of her policy. If anything, they will have an Agent contact her. The Cash Value Policy, depending on the actual policy written up for the individual, may be available early and sometimes it is not and will take up to 2 or 3+ years after policy payments for it to be available. @@theeactivedad
Recently bought a farm, the previous owner suggested a guy that works at northwestern mutual to help make sure I don’t get taxed too harshly on the new purchase. Before I could say boo he was trying to sell my wife and I over $3 million dollars worth of life insurance
Read the book about how Rockefeller used whole life insurance to move wealth through generations and how companies life JCpenny survived the great depression by taking a low interest loan against the whole life insurance policy. Read books and learn for yourself. These tv guys also have personal interests and a platform. Dangerous combination
I think part of the whole life design is that the buildup of cash value is there so that the high actuarial premiums in old age can be funded. In other words, if this guy tried to buy $1.5 million of coverage when he was 70 years old, it would be a lot more than the level premium he's still paying on the whole life policy. It’s a little more complicated than Dave is explaining. That being said, the need for life insurance generally goes away as you get old, and the kids are gone, and you have built up an estate. Which is why I bought level premium term insurance when I needed it, and stopped when I didn’t. Also, whole life insurance carries a pretty healthy load for commissions.
We bought a very small whole life policy back in the 80's as well as term...we dropped the term, still have the whole life which pays for itself b/c of the dividends it earns...you can read my comment about how it worked well for us if you are interested...and why ...for those who are not large income earners a small whole life policy can be a godsend in later years.
@@dinahsoar6982 Thank you for pointing that out. Most people are simply not savers. So the key to the term life strategy is you better be 100% sure that you will not need any life insurance when you're older. Good luck getting an affordable term policy in your old age if you have any health issue / which most people will have some issue.
Great video, very informative! 😊 Thank you for breaking down the pros and cons of whole life insurance. 👍 It's important to make informed decisions about our finances.
I was on a call with a rep of my brother's life insurance carrier through his Union. We talked about the policy and everything for over half an hour as though this was a benefit extended to me as his beneficiary. Then they lay down the price at the very end. Now it seemed reasonable, but then they dropped the term "Whole life" and i immediately got turned off. I remembered your teachings, Dave, and came back here to confirm my suspicions. I'm so glad i didn't enroll.
YOURE GETTING SOLD THE WRONG THING! These ppl are getting a whole life policy designed to pay out to their kids. Instead they should lower the death benefit down to 250k and set a set premium at $500. I swear to Jesus Christ that designing a policy this way is way better for your cash value. Instead of using 95% to fund the policy you’re flipping the percentages! These ppl are getting sold the wrong policy by the wrong ppl. This is why Life insurance is so dangerous as a sales agent. We need to do better. David Ramsey is correct but thats because so many of us are getting trained the wrong way or just dont understand how to tweak the system for better uses. Sorry guys.
whole life has a role in estate planning, Term does not. Depends on your situation. Dave isn't considering the capital gains on the assets a person may have, and his family may have to sell off to pay for everything
Dave doesn’t tell you that only 2% of Term policies pay out. Whole life policies are the final check you write to your family. They are guaranteed to pay out. Funerals are 15-20k you don’t want your family on. Gofund me begging for money
@@ethanpaige9471 Great point. Term is designed to be outlived. Thats why its so cheap. You invest all your money live and get none back. If you’re old you cant even qualify for it anyways. Buy whole as early as you can. I just bought mine for my 8 month old. $30 for 100k life. Not worried about the death benefit one bit. $30 a month. I choose to fund it monthly at $100 instead. By the time shes 65 it will grow to 900k cash value and 100k death benefit. And if she holds it on for 2 more years over 1 mil. And when she has a kid imma get the same one on them. Fund it myself once i die my daughter can fund it and once they’re old enough they can then fund it. Then my grandaughter has that for her and her kids. And then again and again and again. I can be broke but i refuse to let them be.
So strange to compare whole live cash value build up to investment- compare it to SAVINGS rate- that's the only guaranteed return. Paid up additions build cash value way faster than Dave states, depending on your policy. Paid up additions will certainly be there when you die, but also while you are alive. SAVINGS vs Whole Life is the appropriate comparison. And this started in the 1800s, not the 1950s.
Great video! It's always enlightening to hear Dave Ramsey's take on personal finance matters. His explanation of why Whole Life Insurance is a bad investment is very clear and makes a lot of sense. It's unfortunate that some financial planners still try to sell Whole Life Insurance as a viable option, even going so far as to rebrand it as "infinite banking." This just goes to show how important it is for consumers to educate themselves about financial products and not simply rely on advice from salespeople. My follow-up question is: What other financial products or services should consumers be wary of, and how can they protect themselves from financial scams or predatory practices?
Many concerns with your advice. First, not all policies are configured to be front loaded. Second, life insurance is not an investment, it's protection and tax deferred growth of cash value. Third, whole life policies have living benefits that can be utilized for health events. Term is immediate coverage that throws your money down a hole never to be seen again while you are alive, unless you choose the more costly option of Return of Premium. Not true, that you don't ever get both cash value and face value. You may take the cash value at anytime or best to borrow against it for a participating interest only loan. Also, life insurance is much more than one persons opinion of "you don't need life insurance for your whole life." Catastrophe, like the milk truck analogy, can happen at anytime. And few million dollars in savings is not enough for your spouse and children to live off of in todays world. Ya need to plan for income replacement. Life insurance protects our ability to support your family, trust, or business exchange from your great beyond. One plans for it and takes action towards continued support of the life they left behind. When term runs out, then what? We all pass, and last time I checked none of us come with an expiration date, but term does. Also, markets come and go. Investments need to be reviewed and realigned. There is a cost to every investment and every service. Life insurance has costs like anything else, but it has an immediate upside with protection as if you had the money waiting for the event in which it was planned. Investments do not do this on a guaranteed basis and can be a daunting task for those left behind. So, 30% of longterm savings should be allocated towards protection of principal and planned catastrophe. Ya see, when you make a simple attitudinal statement like, "I hate Whole Life Insurance" you've become myopic. Looking at one aspect of an entire life plan is short sighted. Investment advisors who are best at their profession look comprehensively at their clients financial planning. In closing, A Whole Life policy with it's benefits is not an investment at all, it's an asset protection device. No spin, simple factual, non attitudinal, and comprehensive advise is what people appreciate. We all want choices and the opportunity to make our own educated decisions. "I HATE WHOLE LIFE INSURANCE" does not respect the client and statements like, "The entire industry no longer believes that whole life insurance should be used in a clients portfolio" is quite frankly a lie.
Problem is he provides very incorrect info. Make sure your policy is was is called a paid up dividend or whatever they call it. It adds the cash value to the benefit.
Whole life is definitely a ripoff. Who cares about the living benefits when you can invest the difference and get that investment whenever you want. Furthermore, the "tax deferred growth" is peanut compare to just saving via your 401K or IRA. Plus if you die, you never see the cash money anyway. Insurance company will steal it from you.
I am 73 years old. I have 250m of whole life. I haven't had to pay a premium in over ten years due to an offset. The cash values exceed the cost basis. Right now it looks like it will go to my grandchildren if my wife decides not to spend it, assuming I predecease her. What's to hate?
They don't offer that style anymore since it wasn't making insurance companies any money. Make sure you still have the original contract - my parents have similar to you, but the insurance company tried to sneakily change it and they were saved by having the original contract.
my girlfriend is a “financial advisor” at northwestern mutual. her job is to push whole life insurance on people for 100% commission. everyone there hates dave ramsey-I wonder why. she has whole life insurance and I don’t know how she can afford it. I met with her coworker whose financial advice was to get whole life insurance, despite me being 29 with no family and an emergency fund that, things the same, would be drained by the premiums in three years. how do I rescue my girlfriend
I used to work there as well. The company has good investment services and their while life is better than most. However, it's a toxic workplace and they push insurance way too much. Tell her she NEEDS to get her series 7/66 and then quit and go work for a reputable company like fidelity. That's what I did
Whole of life insurance should be used for funeral costs or an IHT bill. It's a guaranteed pay-out so you could literally be 150 years old and will still pay out aslong as you're paying your premiums.
@@ryananderson238 YOURE GETTING SOLD THE WRONG THING! These ppl are getting a whole life policy designed to pay out to their kids. Instead they should lower the death benefit down to 250k and set a set premium at $500. I swear to Jesus Christ that designing a policy this way is way better for your cash value. Instead of using 95% to fund the policy you’re flipping the percentages! These ppl are getting sold the wrong policy by the wrong ppl. This is why Life insurance is so dangerous as a sales agent. We need to do better. David Ramsey is correct but thats because so many of us are getting trained the wrong way or just dont understand how to tweak the system for better uses. Sorry guys. You wont live to 100
...and Don't forget, if you borrow from that cash value, you got to pay it back with interest! The question you should ask is, whose money is it?!? Why are you borrowing your money and paying it back with interest!! I was taught that life insurance is to pay for any outstanding debts that you may have upon death and to provide living expenses for your spouse for about 3 to 5 years!
This is a very simplistic discussion of whole life. There are important uses for that product he never discusses. Suppose you own a business with a partner and the partner dies. How do you pay for his share? (whole life). What about if you have a key man in your business and the key man dies? How does the business recover from that loss? (whole life). If you buy whole life insurance on a young child and then gift them the policy when they are an adult, it can provide an incredible retirement nest egg. Those are just 3 reasons to consider whole life. There are more.
So glad I saw this, as one of the Gen z tik tok kids who have seen this resurgence in Whole Life agents, I was seriously struggling with this decision. I didn't think it was possible that whole life really was the better option, given the crazy difference in premiums.
Dont believe everything Dave says. he's always spewing lies about whole life since he doesnt understand it. Ill side with him a bit because many agents dont know how to structure a policy correctly.
Whole life can be on fixed premiums and if you don’t like it you can always do partial surrender tax free or get cash surrender value but it’s taxed. It’s better to start a whole life at a young age because life insurance is a lot more expensive the older you get cause you’ll have a lower grade.
Dave Ramsey gives advice for people with no money. People do your own research instead and you will see why and when whole life plans can be a good investment. A term policy is just renting coverage, what happens when you can't afford to rent beacause you become unisnurable?
I would like some more understanding why you like only term. As a young person with no health issues, term is great however the older you get and the more health issues you accumulate with age, you cannot get insurance. Isn't it better to have some whole life while you're younger and keep it?
Yes, whole life is better and more simple. It’s cheap while you’re young and healthy and the premiums will never increase. At least whole life doesn’t increase. I don’t recommend universal life insurance because that does increase, similar to term.
@@matthewrks I agree. Whenever they try to make a product more complicated (they have to "structure" an IUL) that's when I have to step back and choose something more simple that I understand better. I feel like with these IULs, you don't know you've been screwed until years later and the person who sold it to you is long gone.
This is very misleading for state, government workers w/benefits. Those life insurance policies are an 1/8th what you would pay as if you bought yourself. Is it then still a bad idea if im paying 1.80/month for 250k coverage at 37. I been paying that since i was 25.
A small part of me feels like he doesn’t actually understand the extent of what him and his wife have been paying into and how much money they’ve thrown away for the past X years…good luck to you Thomas I hope you make a good choice in the future
@@billzander2875 - Whether the caller was fake or not, doesn't change the fact that whole life is a sucker policy. You're paying about 15 times the premium for the same death benefit, but you can only collect on the death benefit if you die. Policy has sucker written all over it.
@@JohnBowl14690 you can always do partial surrenders (tax free) or cash out but it will be taxed only recommended if you’ve had it for awhile to the point where your policy has built up cash value compared to the 401k where you can touch it till 65 or 59 1/2. It’s important to read into the details of your policy to have a better understanding of the product.
@@kennyreyes7139 - Again, I still would never buy a WL sucker policy. I sacked away more money in my 401K, which is not taxed, while it stays sheltered from yearly taxes until I pull it out...unlike WL policies which taxes you first. Taxed or untaxed, you're never going to see the money anyway in most cases. As soon as you die, they steal your "untaxed" money. No thanks.
1. What Dave didn't mention here is that yeah, you don't get the 200K back that you paid in - but you get 1million. If i told you give me 200K and i'll give you a 1million. That's a no brainer. He acts like its theft. It's not - they are paying out. And whole life will pay out not taxed, face value what your policy is - no matter the circumstance. 2. You can borrow against your cash value and still have it grow as if it never left. Not a withdrawal. So for instance, IF you do have 100K of cash value built up (takes years), you could borrow that 100K, buy property, hold it for a couple years, sell it at 150K and make really close to 50K on your investment over x years. 2 years thats 25K return / yr. 5 years then its 10k / yr. But you made money without loaning from a bank or private loan where there will be insane interest to pay back. Borrowed loans from whole life interest rates are much much lower than private or bank loans. So Dave isn't wrong but he also isn't telling you the pros to whole life. It's actually very advantageous if you have the patience and discipline.
1. "but you get 1mil." YOU don't get any money back. Your beneficiaries only get the 1 mil death benefit. Tax free? Term insurance pays out tax free at a fraction of the cost. 2. Seriously, paying an insurance company to BORROW against your own money, and you think this is a good idea? Give me your money and I'll be happy to charge you interest to let borrow up to 90% of it. The true ROR is about 1.5% considering it takes about 10 years just to break even. What a scam. Try harder.
I was so lucky. I purchased a term policy, 20 year duration, when I got married. The kicker here was this policy paid a dividend. For my $13 a month I received over 5,000$$ at maturity.
my dad had a whole life policy.. he paid a dollar a month for it for 30 years and paid it off in the late 70s/early 80s..he died this spring, and my mom found her self a millionaire.. i cant speak for modern whole life, but it did her right
You're so right. People tend to purchase a whole-life policy later in life when it's too expensive. The wealthy use whole-life policies to help purchase big-ticket items, etc. I use to sell both the whole life and term. I would have people call me with term policies that were about to expire. They could not afford the new rate at 70+ years old. It was so sad. I would ALWAYS suggest someone buy a whole life policy to cover final expenses (10k-25k). Then get a term policy to cover a mortgage, bills, etc to leave for their loved ones if they pass away early. Better yet, purchase a whole life policy at a young age when the premiums are low. Premiums will always be more expensive when you're older with health issues.
The insurance itself is not bad. It is what you pay for it. He is saying that the whole builds cash value, but you never get the cash value unless you surrender the policy, or your beneficiary gets the face amount when you die, and not the money or cash value that builds the policy.
You can set up a custom whole life solution for your kid the day they are born. Pay it for 20 years. When they are 20 they can get the cash value of the insurance at that time, or they can leave it for a guaranteed 10x growth by the time they are 65. Imagine putting $50,000, over 20 years, and having your child be able to withdrawal $500,000 for retirement. I don’t know about you, but I would not mind an additional $500,000 in retirement. Plus the dollar amount scales with how much you put into it. Whole life is a long term investment similar to any other retirement vehicle.
Pay $300 to $400 monthly for a premium to a trash value policy where the Life Insurance company keeps your cash value, and you think this is a good plan?
It would be nice if Dave addressed the reason why a cash value component actually exists in terms of how it is marketed to a consumer. The cash value aspect really isn’t there as a death benefit in the sense of what life insurance is bought for but rather an amount of cash that’s accessible during someone’s living life that doesn’t exist with a term insurance product as term insurance is truly just insurance while whole life with cash value isn’t. I think that would help people grasp why the structure of these policies exists in the fashion. It does but maybe doesn’t get sddressed because it opens a cab if works in financial choices that Dave doesn’t endorse. The “e benefit” of such policies having the cash value component isn’t about death for the insured at all. It’s sold as a pile of money that is guaranteed to be there as it earns a set rate of return and for some consumers is seen as flexibility since the cash pool can be pulled from if they need emergency money or can be borrowed against if they need a loan. Someone selling it is marketing that flexibility aspect as a value add and then saying that they’re getting that flexibility and protecting their family wkth their death benefit at no added costs by not mentioning the steep difference of term insurance. So when he focus’s on how that cash value doesn’t pay to you in death he’s being accurate but it doesn’t help somebody understand why that component exists in the first place or why it can be attractive to somebody buying a policy. In the end the benefit it provides is to the insurer and not the consumer since the cash value offsets the death benefit they’ll eventually get forced to pay. The guaranteed rate is obviously very low as the profits for the insurer fall on spread business in the sense of the value grows by investing the money and the insurer profits on the spread but also must factor down markets and that they’ll still have to pay the guarantee. For some people having a guarantee versus market risk will be appealing. And of course for an insurer it lightens their load on reserving to cover death benefits since they keep the cash value at death which offsets the death benefit. But when discussing why it’s a bad financial product it’s fair to address exactly what the product is designed to do rather than brushing it aside by focusing on the death benefit. I imagine Dave worries about giving somebody ideas about the cash value pool but to truly discuss it and why it isn’t good in sense of insuring you in a cost effective way I think one must actually address the function of the product and the why if the product to help someone understand. And if somebody is truly focused on leaving debr behind they won’t be swayed by the marketed features of cash value and it’s intended use.
George has that look like there’s no way in hades he could answer it Daves way. Daves wisdom will never be the same with the personalities going forward.
Do Not Purchase Prudential Life Insurance. My Dad passed away June 2023 and all paperwork submitted online. Customer Service said all docs received and takes 30 business days ( to be settled by mid Dec 2023). Its now Feb 2024 and Life Insurance check still not sent.
I'm curious though. If I purchase term life and know that I'm going to live past the life of the term, why would I invest in term to get absolutely nothing in the end? Are you saying we shouldn't purchase life insurance at all? I feel like I'm giving away money with term, at least with whole life, I feel like I paid to have a certain amount passed on to my family...and I've likely put less in than what family will get when I die.
He says when you die they keep your money? I guess he forgets the whole purpose of life insurance. Dave says that if you have $200,000 of cash in a whole life policy that has $1,000,000 in death benefit, you lose that $200,000. No, you won't lose that money. Your beneficiary will receive $1,000,000 tax free. If you put that money into a savings account like he says, it will be subject to taxes and who ever inherits that money will only receive $200,000 minus taxes.
What a lot of people, including Dave, don’t seem to realize is that, at least in my experience, WL is never considered an “investment,” but rather a long-term savings vehicle. I understand the “buy term, invest the rest” philosophy, but having a WL policy in place forces policyowners to set aside money every month, that otherwise likely would’ve gotten spent on random junk by the majority of Americans. Also, there are very few WL policies that actually have good returns, so do your research and take the financial strength of the institution into consideration. Also, make sure it’s a mutual company, as they won’t have stockholders whose interests they put above yours.
"a long-term savings vehicle?" So, how do I get my money out of this "savings vehicle" without having to borrow, cancel or defer it out of my death benefit?
Fact: in the financial services industry, if you put money into a product with the expectation of getting more money back than you put into it, that is an investment, and specific securities licenses are needed to sell those products. A securities licenses is NOT needed to sell a whole life policy, only an insurance license. This means that whole life insurance is NOT an investment product, and if it is sold as such... >>>YOUR AGENT COMMITTED FRAUD!
Life insurance is NOT an investment because an investment requires risk. Even a dividend paying whole life insurance policy is not an investment because there are no risks and all guarantees.
@@ZachPriday If a person doesn’t want to be taxed above their cost basis then they need to take a policy loan out because loans aren’t taxable and what they do is deduct it from your death benefit. Now once your life insurance has been classified as a MEC dividend withdrawals under age 59.5 have a 10% penalty plus its taxes. If you take a policy loan out your fine as long as it doesn’t exceed your cost basis and loans above that line are taxed.
@@jimcrowley1709 I'm with you and totally understand. I have IBC style policies and take loans. I was just pointing out the flaw in the other guy's statements saying anything that grows in value must be a security. Obviously is that were true whole life woildjt have MEC rules or needs for loans.
@@jimcrowley1709 You're not telling the truth. The IRS prohibits the insurance companies calling whole life insurance an investment because YOU DON'T GET YOUR MONEY BACK. The insurance company keeps your cash value.
Soooo, as a licensed insurance agent, heres what I see. You put $200k into an insurance policy and your beneficiary gets $1M? Seems like a good return to me based on the numbers. Anyone else think like this or is everyone just letting Dave think for them? Curious
In a $500G DB example, the premium is $430 a month from age 40. Nick lives to age of 90. So with whole life insurance, Nick pays $430 a month for 600 months (50 years) total $258G. Dividend is $130 a year best case for 50 years on the premium paid, or $6500, for a cash value of $264,500. The alternative is to buy term life insurance with extended duration and invest the rest .. a $500G death benefit policy for a 30 year term would be about $60 a month leaving $370 available to save .. $370 monthly in the market at 7% (stock market lifetime average) in a tax deferred account gives me $432G after 30 years. I won’t need a $500G policy if I’ve got $432G cash in my account, so I cancel it, And for the next 20 years my account keeps growing at the full $430 a month. Thus, when I’m 90 the account is worth $1.9 million. Conclusion is clear, do I want $264.5G (whole) or do I want $1.9 M (term and invest) for the same premium output. I choose term and invest.
Why do you have to pay interest on the money you borrow from yourself in a whole life policy; on that same money you already paid in? I get borrowing money that isn't yours, but borrowing your own money you have paid in at a cost, doesn't make sense. Can anyone explain this to me?
As long as you borrow no more than 90% than the policy can keep going. The interest is put back into the built up value. You can even decide to not pay the borrow money back and when you pass away they will just use the death benefit to minus whatever amount you borrow and give the rest to your family.
It is a risk management tool. If you pour that much money into it to make it an "asset," you could have had a much better asset had you invested that money instead. But salesmen like to call WL cash value an "asset" to make you feel better about all the money it is costing you.
@@markf.2050, actually it can be both "risk management tool" AND "an asset." How's that you say? Let's say you get to the ripe old age of 92 and need long term care. If you have a WL policy with a LTC rider you can get $ from the policy to pay for your care. That income is not taxable in most cases and it is not tied to market returns. Should you reach a ripe old age of 92 and never need long term care, you can do other things with the money (such as take out cash during down markets so you don't have to sell when securiites are low. These are only two cases of how WL is an asset AND a risk management tool.
@simontschinkel8301 Sure, a cash value may be useful if you have financial needs at the age of 92 and that's all you have. I don't think anyone disputes that. The argument is that all the money that went into creating that cash value (perhaps over 62 years) could have been poured into an actual investment and turned into a far greater asset. That asset will likely also far exceed the value of the life insurance and it won't go "poof" if you die. You also have no need to surrender an investment to get your money back. It's already your money and always was your money. Considering that about 80% of WL policy holders surrender their policies early, that makes an investment a far better choice over a WL policy.
@@markf.2050 there are many ways to work the calculations and many assumptions that one has to make in figuring out if what you say is true or false. However, if I use a 23 year old male, in good health and put him into a whole life policy which has a $5k/year premium he would own, after 30 years, assuming he paid all of his annual premiums and never had to borrow against the policy, a death benefit of approximatly $800k. If you took the same $5k/year and invested it in a balanced well diversified portfolio (say 75 stocks/25 bonds) which yielded a 7% growth rate and let that grow for 30 years, the result would be $505,365. The former has zero market volitility and assumes all dividends are reinvested into the policy. The latter assumes the person never sells in a moment of panic nor take money out for an emergency. The former assumes a 4% growth rate. The latter assumes the person does not pay any fees or taxes at any point. You simply have to increase the growth rate of the securities to an annualized 9.4% to get something equal ($803,554) to the death benefit of the insurance policy. You also have to live in an imaginary world where one does not pay fees and taxes.
Just a heads up in case you guys happen to see this comment. Your smart vestor pros absolutely offer whole life. I have only 2 smart vestors in my area. One of them turned me away because he said I had to start with $75k and he does a lot of individual stocks etc so "I'm not a good fit." lol The other one told me it's cool if I buy a brand new camper and take out a car loan so I basically just do my own investing with index funds. Makes more sense to me anyway. I agree with like 95% of what you guys teach on this show, but just wanted to give you the heads up to vet those smart vestors b/c the only 2 I've talked to don't align with your teachings at all.
The 4 Funny Rules 1. No growth in the first 1-4 years for your cash value (My husband has even seen a policy that said the growth started at 8 years 🫣) 2. When it does start to grow, grows between 1%-4% (Inflation goes up every year 3%-4%. How are you keeping up with cost-of-living?) 3. If you borrow money from your cash value, they charge you between 6%-8% until you pay them back (But isn’t the cash value your money in the first place?) 4. When you die, you only get one or the other. You do not get both (So you’re paying for two things, but only receiving one)
FYI all whole life policies are not put together the same and are different from company to company, but how a REAL IBC policy is put together 1. the dividend growth is small the first few years but your cash value will grow because of interest that is being paid out each year. 2. most interest paid to you is right around 3- 4% just to keep up with inflation 3. you are not borrowing your money you are borrowing the insurance companies money while your money is still sitting there growing. Yes they do charge you interest because you are borrowing money. That allows you not to be taxed on it because loans aren't taxed. Depending on the company the interest will come back to you as well. 4. yes you dont get both because your cash value is technically buying more death benefit. So when you take out a loan its collateralize against the death benefit that the insurance company is providing.
@@terrelltyrance8610 "you are not borrowing your money you are borrowing the insurance companies." So how did that cash value accumulate? It's as if someone put money in that policy.
@@terrelltyrance8610 Every dollar that went into it was already post tax dollars so how are you selling the idea of "tax free" when you get your money loaned back to you?
@@astroman30Cash value doesn't exist in whole life policies in other places around the world. It is just something that is tracked so the firm can pay out less than what they earned on the invested premiums and remove liabilities from their books. Default on a premium, policy cancelled all profit. Surrender policy due to cashflow being to tight to cover premiums and loan repayments, insurer wins, die and pay out. It's ok, most policy holders are still alive and paying in, between premiums and ROI the company keeps going. The 'cash value' may track with what you paid in, but they made more off it every year than will be in the 'cash value' pot. It is an illustration of what the policy is to the company when presenting the accounts. Assets minus liabilities= Equity
I have a whole life policy for 500k. I pay $122 a month for it. I was quoted 80 bucks for a 30 year 500k term policy that will expire when im 65. For 42 extra bucks a month i think ill take the 500k whole life policy that will pay out when i die. Sorry Ramsey... just can't justify paying 80 bucks a month on a temporary policy that will, statistically speaking, probably not pay out as I am likely to outlive my term policy. In my opinion term policies are just a waste of money.
You're policy isn't a whole life. They don't go that high. Unless you have a iul or they tricked you and got you an accidental. Might want to look it over with someone else. Also Ramsey is a dinosaur and doesn't follow the updates to insurance. I'm an agent in Florida he talks about things from 20+ years ago.
@@seanmayo5130 it's definitely a whole life. The policy is a MassMutual Legacy 100 WL. It's design isn't traditional. The agent I worked with didn't understand how to design a blended policy. I told him I wanted a 500k blended policy and he illustrated a 500k traditional. I had to walk him through adding the term rider and PUA. It cut his commission substantially. It's not an IUL for sure. My next policy will be an IUL designed similarly to keep my net cost of insurance low to replace my 401k. The problem with IULs is they tended to collapse on themselves as you reach the age of 65+ because of the annual renewable term rider. The cost of insurance sky rockets. You can mitigate these cost by starting a policy with a minimal inital base face amount of 100k... make it a option B (Increasing death benefit) and adding a term rider to allow you front load cash valve. The policy charges remain low throughout the policy because your net cost of insurance is reduced based on the amount of cash you over fund your policy with. I'll add a video explaining this process... let me know what you think.
@Eric Gilliland interesting... why not roll it into an annuity. I'm going to assume you're young though so that would be one of the reasons. Are you going to over fund it?
We are in the process of cashing in ours however: Love to hear Dave’s comments on this aspect of it. Bought our policy’s when we first got married and I was just starting my career. Two little kids -mortgage-two cars etc; The premium of $41.39 / month for the first 10 years of our marriage was our total savings. There is no way in those days that I would saved that money every month and invested it. It surely would have been tapped for some expenses! The amount we are cashing in has grown ( tax differed ) to a substantial part of our net worth! There is no way I would have that money without the policy!!!
So, what made you make those payments every month? If you're discipline enough to make those premiums, you're disciplined enough to invest that money. Sorry for your loss.
@@mjcruiser4238 Do you not know about all the fees attached with trash value insurance? Did you not know that the first 5 years of your policy, you have close to ZERO build up in your CV? Did you not know the average rate of return on CV is about 1.5%? Ever heard of opportunity costs? Yes, sorry for your loss.
Dave doesn’t tell you that only 2% of Term policies pay out. Whole life policies are the final check you write to your family. They are guaranteed to pay out. Funerals are 15-20k you don’t want your family on. Gofund me begging for money
The advantage of term insurance is, it's much cheaper for the same level of protection, and it helps your beneficiaries if you die whilst they're still your beneficiaries and you don't have enough money in investments to support them. Whereas with whole life, you pay more so you'll still be covered when you're older, when you don't really need it because all your beneficiaries will have jobs of their own and your investments will have grown significantly. In short - term life is cheaper but stops covering you after a set period of time (when you no longer need it) Whole life is more expensive and keeps covering you for the rest of your life, but that benefit is not worth the money.
I wonder what he thinks of the policies that pay you back what you pay into it at the end of 20 yrs or the whole life that you stop paying in 20 yrs but you keep the coverage plus interest?
Generally he’s very careful about products that aren’t established and about ones that sound too good to be true. If you don’t understand how the person you are paying makes their money, either they will go out of business or they will have some clause or questionable feature that will pull one over on you.
One consideration not discussed here is wealth transfer. Life insurance Cash Value cannot be touched by nursing homes should the holder(s) need that and which can easily wipe out the rest of the accumulated assets. The cash value is therefore irrelevant...at the death of the holder, the beneficiaries get all of the proceeds although in some states, the beneficiaries need to be named at least five years before the holder enters the nursing home. It's not the main part of my investment plan but it plays a role in legacy planning. I wonder if Dave would discuss this aspect of whole life policies. Writing term policies at age 70 and beyond gets VERY expensive as well and most companies limit the terms to 10 years at that point.
Why do you need life insurance at 70? You're kind of missing the point of insurance - the point is to leave your heirs financially taken care of in case you die unexpectedly. Once the kids are grown and the mortgage is paid for, the need for insurance drops dramatically. If the goal is to leave an inheritance, you're much better off buying term and investing the difference.
@@ghjong001 Nursing home placement can and would eat up my investments. They cannot touch life insurance CV or DB. If the worst happens to both of us and we rot away in a SNF then they at least get the DB when we check out. Even our house and property aren't off limits when Medicaid is involved. I plan to leave them a part of my investments (Roth-IRA's at the least) and the house. But Whole Life is the backup in a worst case scenario. I've worked in long term care for 45 years and have seen it repeatedly happen, or worse yet, folks gift away their lifetime of savings to hide them from the State and in the end, the State usually gets them anyway.
@@elreytriton Your worse-than-useless response leaves me wondering if your judgment affects your entire life as it does with this. Calling people you don't even know names is a PreK3 child's response. I do not hear what you say and it is unimportant.
@@craigborgardt6396 Thank you Craig for giving true to life examples. Dave unfortunately misleads people by bashing instead of teaching real life situations. Yes, he teaches some truth based on Scripture, and his own experience of success in real estate, which is good for him and those who choose real estate etc. and learn to be savvy in business/investing. Most of us aren't as smart in these areas, nor have a desire to own real estate/business ventures, but we still desire to control our own money and leave some for an aire/ministry etc.
I am a a big believer in term life insurance combined with a quality disability insurance policy (If you can qualify). I sell this combination all the time, but Dave's comments regarding whole life and financial planners is not entirely correct. For estate planning and other purposes, whole life (permanent insurance) is the only way you can go - and Financial Planners use and recommend it all the time. Dave needs to get away from this one-size-fits all advice model. I generally agree with the use of term insurance and yes, the IRR on a properly structured WL contract is only 2-4% at best, but there are times where lifetime coverage is needed. Additionally, when you tell a 50+ year old male that his term insurance is going to cost $4,000+ a year, sometimes they would rather pay into something that accumulates some value for that kind of expense. It's all about suitability...
Thank you for explaining… you saved me from stepping into it. I had seen an advertisement for this very thing but, wanted to know more before giving the company my contact information 😮
For point of comparison, my wife and I have a $1.5 million term life policy. Our monthly rate is $80 bucks compared to this guy's $600+ for the same face amount.
Thanks for saying this. My wife and I are in our early 60s and at the end of a 20 year term and in looking to reup on another term have found premiums (obviously more than our current expiring term) 1/5 the cost of the permanent insurance our current insurance company is trying to get us to go into.
Yeah except he’s gonna be able to access it incase of an emergency. Or to purchase other investments while still earning a higher ROI than any normal bank account. You can access the cash value for whatever reason you’d like. He’s talking about “loss of money for the first three years”, but yet when you have term, it’s a loss of money for 10, 15, or 20 years. And insurance companies won’t insure you with term life unless the probability of you dying is low (hence the more exhaustive health checks).
@@4_3_2 If you buy term and invest the difference, then you are not losing money but gaining money. Especially if your ROI is in the index of 6% or greater due to the compound interest rate and the investment company that is working for you to attain your goals. It's all based upon your personal choices of plans to grow your money and provide an income replacement in the event of your demise. Life insurance is Income Replacement. Savings is your side growth for your future.
@@okayninjazero Point is to self-fund life insurance before the policy expires. By that time, my wife and I won't need the policy and will just cancel it.
The difference is the premium paid for term life will probably goes down the drain since the chance that the insured will die in 15 years is very very low. But whole life is almost certain than the death benefit will be paid out!!
Same reason I hate any life insurance with "cash value". Not to mention other stuff too. I've seen my parents pay their whole life for this product go well into their years and their premiums gets jacked up or they get dropped. Upon breaking down their policies, I saw how crappy these kind of product is.
The Internal Rate of Return (IRR) on a Whole Life policy, like most investments diminishes over time. My policy is pay in 95k over a ten year span at 9500/year. After the Pay in period, the policy payout is 1M. The IRR after year 10 (if payout became necessary) is 41% annual return, not bad. After 65 total years, IRR drops to 4% annually. I'm still not complaining. The only real risk is that I pass away during the Pay In period.
I am a life insurance agent and I agree with Dave. Whole life is a vastly inferior product to term in most cases, and, in the cases where whole or universal life might make some sense, there are usually more appropriate solutions to the problems the client wants to solve. For example, someone with a high net worth may want to use life insurance policies as tax-sheltered store of value, but an S & P 500 index fund, even when in a taxable brokerage, will almost certainly yield better returns in the long term. So, buy term and invest the difference. Don't let people use vain sophistry to talk you into inferior and expensive life insurance products. The fact that we get the biggest commissions on plans that typically involve giving someone a deal that is not as good as what they could have gotten is one of the biggest problems with the life insurance industry.
Those words almost certainly doesn't exude a lot of confidence. There is a risk that it doesn't perform and certainly a risk that it performs negatively. Ultimately life insurance is not an investment, but a replace of a loss.The loss of life is inevitable, do I want to have a guaranteed payout of more than I place in or to only hope to have coverage if something happens before we are ready. Add to the fact that you can still get returns from investments by using some of the value in the life insurance I can have both the guarantees and investment returns. It seems like a much superior product to me. But then again I think differently.
@@opsisone The problem is the guaranteed returns are paltry and I have never, ever, seen a universal life policy or whole life policy outperform the S & P 500 in the long term (even after tax). Heck, even a good municipal bond fund will provide better returns. Also, as you pointed out, life insurance protects against indemnity. A term life policy offers much more protection per dollar than whole life does and it is significantly cheaper (often less than 30% of the cost of whole life).
@@irenaeusofpensacola But what about the fact that I can still use the Value in the Life insurance as an option to still invest in all the other investments that I wish to invest in. The Life insurance will always have to pay out more than what is put in if I keep the policy in force. This is why they are willing to buy your policy from you while alive (Cash Value), as it reduces their future liabilities. With a proper structure of the policy I can leverage the available value into the market or any other investment and maintain the insurance at natural mortality, while still making the gains you think you'll get.
If you put the policy in a trust, the trust never dies it just gets passed on. So the money goes in tax deferred and just continues to get passed to the next beneficiary?
It's normally geared towards the wealthy that are looking to leave guaranteed tax-free inheritances. Life insurance isn't really an investment, it's a contract
What I will say about whole life is if it’s the difference between the person saving or not saving. Honestly, I would rather them save money into a whole life insurance policy
I thought it was hilarious how Ramsey called it Tik Tak. 😂😂😂. Great information for those that don't know about insurance. I already knew this working in financial service bussiness. It's terrible how they are robbing people with these policies 😵😵😔
I DONT have any life insurance or anything built for financial future. While I try to figure it all out my main concern is leaving something for my daughter and nephews when I’m gone.. my parents did nothing and I don’t want to leave my daughter& family in the sane situation I’m in now with tryn to take care of my dad as he gets elderly.. can you give some advice
I have a whole life for myself and my daughter, I pay about $200 total for both of our policies...kind of irritated because it was sold as if I will be able to pull cash from it...it barely has $100 in cash value...I have had for about a year, I feel I should just buy stock for that amount monthly
But you need major Capital to put down on commercial property when your first getting into the door. Unless you have some handed down or know someone in the loop. Investing the difference is a tiny fragment of what it takes to be free. I’m speaking for my experience. Being debt free is cool, but being able to go on your own time is true freedom to me. And if so many Bible thumpers really believed in GOD they would realize your worship only go as far as your boss allows you. My wife and I doesn’t 90 straight in Jerusalem. It was because we bought those doors with that policy. All I’m saying is it’s possible to maximize both! 🙏🏾
But you need major Capital to put down on commercial property when your first getting into the door. Unless you have some handed down or know someone in the loop. Investing the difference is a tiny fragment of what it takes to be free. I’m speaking for my experience. Being debt free is cool, but being able to go on your own time is true freedom to me. And if so many Bible thumpers really believed in GOD they would realize your worship only go as far as your boss allows you. My wife and I doesn’t 90 straight in Jerusalem. It was because we bought those doors with that policy. All I’m saying is it’s possible to maximize both! 🙏🏾
She outlived her term policy. Is that necessarily a bad concept? I buy homeowners insurance every year and never made a claim. Does that mean it's a bad purchase? NO!!! Insurance is a risk management purchase not an investment. She should've bought term and invested the difference (between term and whole life) in 401k, mutual funds and/or ROTH IRA and have waaaayyyyyyy more money than any trash value insurance can give you.
That's right! Term is such a waste of money. That's why you should pay 15x to 20x more in premiums for the same death benefit with a whole life policy. But wait... About 80% of those with whole life policies end up surrendering their policies early. Ah, but the remaining 20% will still have that death benefit even if they die at the age of 90 to take care of their dependant 60-year old children. It is worth it after all!
Whole life is still in business because of legacy. When you run the analytics, life insurance is the most efficient transfer of wealth. When people are well-off and establish it makes a lot of sense for them to consider putting some money into a whole life insurance policy this way their children will have significantly more income than a taxed brokerage or 401(k) account.
There are taxes on the cash value growth. And, until then it’s a loan. There is no “Income.” It’s debt or loss (if the policy owner dies). There is no benefit to whole life. But term and invest in a tax-free Roth IRA. It’s a winning combination.
Adrian - Totally false. Paying for a whole life policy is post-taxed dollars, so you already got taken to the cleaners by the IRS. 401K is better because it compounds are taxed deferred, so the amount of monies coming into the 401K is MUCH greater.
I really want to know what makes term life insurance worth it and whether it's smart for somebody who struggles to make ends meet every month to even have even if it's as low as 20 bucks
If you have financial obligations (dependants) that count on your income for housing, food, education, etc., then you owe it to them to have life insurance to meet those obligations in the event you should die. Term insurance is designed to cover that risk at the lowest cost. Whole life also covers that risk, but at a cost that is 15x to 20x higher and you pay for it your whole life. Your dependants will not always be dependants. It is expected that at some point, they will be independent. So you don't need life insurance your whole life.
For those of us for whatever reason find ourselves in a massive shortfall later on in life or living paycheck to paycheck etc. a whole life policy can still be utilized as a generational building tool to leave behind a substantial amount of money. You have to structure the policy with an emphasis on cash value accrual with paid-up election. That is at some point in the future, once the cash value has hit a certain milestone, it can then essentially cover the premium for years to come. You are basically using house money as you won't have to pay it anymore out of your own pocket. For anyone who is younger with the ability to max out 401K, HSA, put money away monthly in an investment account etc. and can stack that against some dirt cheap term, of course there are more efficient pathways for these folks. Not everything will suit everyone.
In a $500G DB example, the premium is $430 a month from age 40. Nick lives to age of 90. So with whole life insurance, Nick pays $430 a month for 600 months (50 years) total $258G. Dividend is $130 a year best case for 50 years on the premium paid, or $6500, for a cash value of $264,500. The alternative is to buy term life insurance with extended duration and invest the rest .. a $500G death benefit policy for a 30 year term would be about $60 a month leaving $370 available to save .. $370 monthly in the market at 7% (stock market lifetime average) in a tax deferred account gives me $432G after 30 years. I won’t need a $500G policy if I’ve got $432G cash in my account, so I cancel it, And for the next 20 years my account keeps growing at the full $430 a month. when I’m 90 the account is worth $1.9 million. Conclusion is clear .:. Do I want $264.5G (whole) or do I want $1.9 M (term and invest) for the same premium output .. I choose term and invest!
@@astroman30 Age 40 way too young for scenario I was thinking; more like 55ish. A $500K 30 year term is gonna run anywhere from $300-$400 a month. And if you live past 85, policy pays out nothing. Also coming off the greatest bull market in the history of capitalism that has lasted now 15 years skews allot of data and illustrations. A go forward assumption of 7% annualized for someone well into their 50s is too much. Not to mention is that a net % number after taxes? You would need gross annualized RORs of 10%+ then. Other variable is with permanent insurance, you don't have to make all those payments in perpetuity not take dividends. You can structure a 20 year pay fixed premium schedule and save allot of aggregate cost. But to your point, a 40 year old has allot more options and runway for sure and can still take a more bullish/aggressive approach.
@@dr.henryjones616 1. "I was thinking; more like 55ish." Nice of you to try and skew the data. Ok, even at 55 with BTID, he could walk away with WELL over 1 million. 2. "And if you live past 85, policy pays out nothing." You outlive your policy....is that necessarily a bad concept? I pay homeowners insurance every year and never made a claim. Does that mean it's a bad purchase? NO!!! Insurance is a RISK MANAGEMENT tool, not an investment. 3. "Also coming off the greatest bull market in the history of capitalism that has lasted now 15 years." Even more of a reason to BTID instead buying trash value insurance. 4. "A go forward assumption of 7% annualized for someone well into their 50s is too much." Not really, the stock market has been around since the 1700s. 7% ROR is a very conservative assumption. Some say 10% is the norm. Even if I'm half wrong, the person walks away with (at least) 1 mil. 5. "...you don't have to make all those payments in perpetuity not take dividends." According to the IRS, "Dividends" are nothing more than refunds from a deliberate overcharge. Hence, you pay for a lot of front loaded charges getting some of it back. What a stupid concept thinking it's a "dividend." 6. "allot" = a lot. 7. I'm not sure what your doctorate degree merits, but it sure isn't financing. Look, I get it, you sell this garbage. I worked for a major LI company for 11 years. I've seen you agents come and go over talking clients/victims by appearing that you're smart. It's laughable and you're no different. You have to be an agent, because I won't believe you're stupid enough to think this is some sort of good financing tool.
Gee, I wonder what could cause a shortfall later in life??? Could it be all those massive whole life monthly premiums? At least your heirs won't have a shortfall (maybe a windfall), then again, maybe not, since about 80% of WL policy holders surrender their policies early.
Best caller I’ve ever heard on the show. Guy was articulate, humble, and receptive. Came into this almost knowing he was wrong and just wanted Dave to clarify exactly why
He's not wrong though.. Dave is wrong. The insurance company gives the cash value to beneficiary along with a death benefit amount to equal the face amount of the policy. Why people don't know this is beyond me. 100k policy with 20k cash value... yeah let's keep 20k but dish out the 100k anyways. What's more logical? 100k death benefit, 20k cash value.. let's give them the 20k plus 80k and that will equal 100k. Simple math.
@@RyanEglinton Except they don't
@@DefinitelyNotRin except they do... the math is really simple. 100k death benefit, 25k cash value. If insurance company gives you the 100k and keeps the 25k how much did they really give you? 75k. So if they let you keep the cash value and then give you 75k to make sure your beneficiary gets 100k payout. Pretty easy to understand.
@@RyanEglinton Simple question, where did you get the number 75k? Subtracting the CV from the DB? Why? According to your lying logic, it shouldn’t get subtracted.
@@astroman30 75k came from you having 25k cash value in your policy. Hypothetical policy if that wasn't clear for you. If the insurance company gives your family 100k but keeps your 25k cash value.. how much did they really give up in all? 75k.
This isn't what happens because that makes literally no sense. 100k death benefit. $0 cash value your family gets 100k. $50k cash value and your family will get that PLUS $50k from insurance company to make sure the death benefit now equals 100k. Literally the easiest thing to see when you aren't up daves balloon knot.
Finally there is someone that can explain whole life insurance so clearly! Asked insurance agent so many times that how much of my premiums that I paid went to insurance and how much went to cash value investment and accumulation, they just avoided answering the question!
Most insurance agents don't literally know how insurance policies work, especially whole life policies. While that may shock you it is nonetheless the truth. If you understand how to read an insurance policy, the specifics such as cost of insurance, commissions and fees are meaningless because the only thing that really matters is how quickly the cash value and the insurance in force grows. There are only about 4 insurance companies whose whole life policies make any sense to use for cash vale growth and if the agent you are dealing with doesn't represent one or more of them then he probably wouldn't want to answer your questions.
Because he doesn’t know the exact answer. He can only tell you how much cash value you have accumulated. You need to stop looking at whole life insurance as an investment. A whole life policy is the final check you are writing to your family and it’s guaranteed to pay out as long as you make your premium payments. You obviously have living benefits like access to cash value that you do not have to pay back technically. You just need to pay back the small interest fee on the loan. If you don’t use cash value it gets added to the death benefit
@@ethanpaige9471
You are perpetuating the misinformation regarding whole life insurance. Cash value is not "added" to the death benefit if you die. Your death benefit is a stated amount and your cash value is a stated amount. When you die, your beneficiaries get ONLY the death benefit and the insurance company keeps the cash value. You don't get both. If you have an outstanding policy loan when you die, that unpaid balance is subtracted from the death benefit amount. With whole life you pay for a death benefit AND a "savings" plan that allows you to BORROW back against your cash value and pay interesttotheinsurancecompany, but if you die you are left with ONLY the death benefit. That's a great deal, right?
I like how the only responses this guy got were probably from whole life agents. Whole life is never a good idea as life or as an investment. Does auto insurance sound like a good place to store and grow your retirement/savings? Does your mortgage insurance? The answer is no and neither is life insurance. Life insurance, specifically term, is only needed for protecting your family and income. If you don't need protection, you don't need life insurance!!! Plain and simple! This from an insurance agent.
MY FRIEND!! - Dave is NOT telling the people clearly that TERM LIFE INS ONLY PAYS TO A CERTAIN AGE! DON'T BE FOOLED BY THIS MAN'S ADVICE! (He's probably selling Term Ins himself).
If you are 20 yrs old, and you take out a 30 yr TERM policy, your beneficiary will only get the money if you doe before you are 50 y.o., OTHERWISE, if you live past 50 yr old and you die, they get ZERO $$.
WAKE UP!!!
Need more callers like this guy.
Thank you for that. THAT was exactly what I needed to hear. I am at a point where I have term life insurance and I want to drop it. But I've been hesitant to do so. "Just because".... House is paid off, own my cars, 0 debt, recently retired and yes, I have invested and planned for my retirement. I've been asking myself just what the life insurance is for at this point. If I die, my wife can continue to live off of our currently in place retirement plan. So, I am SOOOOO glad you said this. Thanks a million.
Once my house was paid off and kids mostly thru college and the rest covered, I dumped my term policy.
I still have a 50000 whole life that I’ve had for 30 years at 600 a year.
It’s cash value is about 30000
My wife has the same cost, but 100000, for about 25 years, cash little less.
It has worked out ok, but I’d have more if that 600 a year been invested elsewhere
This advice changes drastically for someone like me who basically can’t get any life insurance due to preexisting medical conditions. But I was able to get a few guaranteed policies through the VA, one term and one whole life which I will absolutely be keeping.
True to an extent. Medical makes whole life understandable but while life doesn’t require cash value. It’ll still cost more then term but while life without cash value is much more affordable than whole life wirh
Also, just invest invest invest in any money that you would put into life insurance that isn’t approved.
I don’t plan on seeing my pension. So I heavily invested in my 401k I have $80k in 4 years and bought while low. I can’t wait till the economy picks back up!!!
A $1MM policy sounds insane to me. One of my finance professors once told us you don't want your family to be too happy you're dead.
😂😂
If you have a family you owe it to them to take care of them if you die and $1M only gives them a $50k/year income, it keeps them off the street but that's about it.
@@TheDjcarter1966 $1m should give them about $100,000/yr. About $72,500/yr if you adjust it for inflation (leaving $27,500 to let the $1m grow)
You say this based off of...what exactly? You have zero idea of that person's age or earning potential, the lifestyle they have or the hopes he has for his family.
@@TheDjcarter1966Depends on if the house is paid off, what the liabilities are and the scale of the lifestyle. Also what asset investments are in place and if the beneficiary is working as well. Pleanty of variables.
$685 per month for insurance???? yikes.
Thats my house payment!
@@ws775 When he turns 125 years old houses will be worth millions
I'm listening to this while working and gasped out loud! Coworkers came over to check on me.
Wow that’s crazy !!!!
They go up too. My wife's grandfather is 90 years old, and his premiums are $2400/month. He never retired and is still working just to pay for the premiums. It's ruined his life from 65-90.
I hate insurance in general. Get the bare minimum, and only IF you need it. The old adage still applies, "Insurance companies are in the business of collecting premiums and denying claims." I have diligently tried to minimize insurance coverage throughout my life and I am mostly self-insured today in retirement.
Insurance companies are pretty much all crooks. With car & house insurance, they gladly accept gobs of money in premiums, but if you take out a claim, they either drop you or your premiums skyrocket.
yeah you have insurance on your stuff nothing.on.yourself
Tell this to the family my company paid to have their house rebuilt after a fire, or the widow I handed a life insurance check to after her husband passed away. Insurance is there to protect the people you love and the things you value most.
@@madchevy121382 Why would I need insurance on myself when I am independently wealthy? Geez.
@@es2056 what do you do when. that money's gone?
Great advice on avoiding a whole life policy and sticking with a term life insurance policy.
It depends but generally whole is only for specific situations. It's an exception not a rule
The cash value gets added to the death benefit. If you buy a 100k WL policy and over 20 years and the cash value grows to 50k. Your beneficiaries get 150k. By the way, its tax free with no market losses.
I have the same set up for me and my 2 girls and I’m paying $250 a month for 20 years not a bad deal
Take $250 a month, put it in an index fund over 20 years and it grows by 4x as much as your WL policy. Don’t fall into sunk cost fallacy, you can still cancel the policy and invest!
@@jon7911 WL is not an investment, it should not be compared to investments. Of course the rate of return of WL is not going to match the stock market. The question is, after you have used all your money on expenses and maxed out 401k and IRA, is 100% of your remaining money invested into things like the stock market? If there is any amount of money that you do not want tied to the stock market then that could be considered for WL. For those that are not maxing out 401k and IRA, or do not have spare money after maxing those out, then WL is a terrible idea. What they also fail to mention in this video is that you can withdraw from the cash value and invest in the stock market or real estate or whatever as you go along. Also it is a buffer against volatility in retirement, which you can withdraw from instead of withdrawing from your money tied to stocks in a down year, which will be detrimental to the value of that account.
Yea it’ll grow 4x. However depending on what state you live and your tax bracket, Uncle Sam will get up 57% of that growth where as Whole it’s tax free. Also depending which company you go with dividends are added.
Nope. You are actually buying $50k more insurance with dividends paid on first $100k
Some 45 years ago I had a friend who was an insurance agent who said his conscience would not let him sell whole life. He educated me on term insurance. As I recall, I had a whole life policy which was very expensive and provided little coverage for my family (don't remember the exact numbers but they were outrageous). I cancelled the whole life policy and from my friend bought a very inexpensive term policy that provided good protection for my wife and growing children. Stayed with term policies after that. Now 74, I can't afford even term, but don't need it, but given lower premium rates for women have kept a modest policy on my wife. Life insurance is death insurance -- it's to provide income for beneficiaries; it is not to be considered an investment.
Correct not an investment. Term tend to be more expensive as after the term you can renew but premiums go up compared to whole life where premiums are fixed but always make sure you are funding it right as some policy’s can end up to 0. Life insurance is just incase something happens to you or the bread winner. You can pay $50 into a life insurance policy and die next month and your family be paid out the initial face amount. It’s to secure your family has money pay off debt or anything like that or build an estate. Term is the same it’s for those with a mortgage and debt but recommend once the mortgage is gone to convert to a different policy since term is cheaper to start but expensive to maintain overtime.
What about if you need insurance latter in life? Term would be unaffordable and in that case whole life would not look expensive.
Wouldn't know how to comment on later-in-life whole life. For me, it is unaffordable although we have a term policy on my wife that is inexpensive so we keep it. Otherwise, we're in a place in our lives where we don't perceive a need for life insurance, unlike when we were young and had children at home. That said, I bought a long-term care policy about a decade ago which includes a whole life aspect in case the health part is not used. I wasn't looking for the whole life policy, but the agent who sold it to me said it was included because some people feel cheated if the health part is not used and there's no tangible return for the premiums. Just the long-term care part seems to be at the right price point (although expensive). @@casienwhey
@@casienwhey - Why would you need life insurance later in life? Did you spend all of your investment money that you saved from buying term insurance?
@@casienwhey yeah that is pretty much it. For healthy individuals, term life seems to be a better option, but for those whose health may deteriorate in their later life, whole life will be better. It's all about individual circumstances and while making decisions, we need to look at our own condition and not look at these generalizations.
Life Insurance: alternative banking
Whole Life: long term payments
Universal Life: middle term payments
Term life: short term payments
Benefitiary: Will and trust
Age availability: 40 years old
Similar to: high interest fixed rate alternative banking savings fund
Health: based off of behaviors
Dave has several videos explaining why whole life isn't good
Including an epic screaming match with a whole life agent. I really like this breakdown though.
When someone asks me about whole life, I tell them go see an independent financial advisor. None that I ever talked to will tell you to go out and buy whole life insurance.
Financial advisor... who sells you a plan they will make money off of you based on market downturns and upswings. Sounds like you'd get swindled real easily.
Think about it in common sense terms, would you see any company constantly trying to sell you on something, ( endless whole life insurance commercials ) if it was a great deal to the consumer, those things in life practically sell themselves
That guy could get the same coverage in term for about $150 and use the other $535 in his debt snowball.
Most term policies don't pay out bc people out live it
@@weirdphax5406 Correct, Term Life policies usually don't pay out, which is a big reason they are so cheap. If you follow the baby steps to get out of debt and build wealth you eventually wont need life insurance to pay your funeral expenses and take care of your family. You can instead use Life Insurance as a tool to cover estate taxes so your family can get your assets without having to fork over estate taxes when you die.
@@weirdphax5406 Not true. My dad was a death claim on a TERM policy.
I got a WL quote and when my agent sent me the break down of cash value over the years I was thinking the exact same thing Dave is saying. I’m glad I’m not the only one who doesn’t think WL is great.
Dave doesn’t tell you that only 2% of Term policies pay out. Whole life policies are the final check you write to your family. They are guaranteed to pay out. Funerals are 15-20k you don’t want your family on. Gofund me begging for money
I'm smiling today because Dave Ramsey's advice helped me avoid whole life insurance! 🙏💰 Thank you for teaching financial literacy!
I highly advise you to look up the statistics of whole life and term life insurance. Learning 94% of ppl out live term which is a waste of money
@@Njuguna-ze7dwbut term is only like $50 per month as opposed to $700
@@perfectsense3240 being completely honest with you thats untrue. Of course all insurance depends on coverage, the company, the state, the age and health of individuals etc. None of them are that big of a difference from experience the most I have seen is like $20 yet some man factors depend and the states are the ones who create the price. That sounds like advertising to me, just like commercial that say get up to 1 million for insurance for $10 a month, this too I marketing ad might work if someone is a baby does this make sense?
@@perfectsense3240term has no cash value. So you outlived your 20 yr term accumulating no cash.
Dave owns 2 whole life policies
I'm 25 y/o just signed up for 20 year term $400,000 coverage, I earn about 55k/year. I pay about 35/ month until i get my health evaluated where I hope to get moved up from non smoker classification to preferred where I'll then be paying $25/mo. My company brought in this whole life agent from New York life and I almost signed up for the maximum whole life coverage I could afford until I started researching life insurance advice and found Dave Ramsey. I'm feeling good that I made the right decision and will save $2000/yr compared to whole life
Dave doesn’t tell you that only 2% of Term policies pay out. Whole life policies are the final check you write to your family. They are guaranteed to pay out. Funerals are 15-20k you don’t want your family on. Gofund me begging for money
@@ethanpaige9471But, isn’t it a good thing they don’t pay out? The purpose of term life insurance is to ensure your dependents are able to support themselves if you pass away young. Then, you should be investing the difference you would’ve been paying for whole life insurance. Assuming you invest/save well, you should have more than enough to cover funeral cost. Also, you are probably going to beat the whole life insurance return. The average whole life insurance yearly return is 1-3.5%. So, it is not hard to beat that.
Does that make sense?
@@setsometv9088 you would rather throw away $11,000 or build a policy that guarantees to pay out? Makes you money? And developes a cash value. There are whole life policies that you only pay for 10-15-20 years and after that it accumulates dividends/interest and builds in value every year
@@setsometv9088 whole life policies do not pay 1-3%. Most get "dividends" and depending on your mutual insurerer the lowest rate paid in the last 20+ years is 6% and this will grow tax deferred and be available tax free. It far outperforms any fixed rate savings type account once adjusted for taxes. No one would suggest you put 40% of your investable funds into this, but it definitely has a spot for 10-20% depending on other factors. Also, only 1% of Term life insurance policies pay out, which means even though you paid a smaller premium, you get 0 for that. If you live a long time then you are likely to get past any reasonable Term policy and not be able to get insurance. The whole life policy is good until you pass away at which point your beneficiaries receive a substantial amount. Dave's example of saying you have 200k in cash value, and then you pass away and your beneficiary gets the "death benefit" of 1M and that;s it. that is incorrect as most values that have a cash value the death benefit increases as well. We won't mention the fact that 95% of people once they pay the "premium" of a term policy don't follow through to save the other $$ as suggested. We all come up with things we need, or life situations. Nor does it account for investing in something that seemed great and then went Bk (enron, wamu, etc.) A whole life policy can be looked at as a "forced" savings to make sure that at least something is going toward the future even if we mess up. Again, like other investments it should be part of a whole plan vs. the entire plan.
@@setsometv9088 in a perfect world you invest the rest, but the majority of people will not. Something ALWAYS comes up that eats away that money. I have an indexed universal life. I do annual payments and my cash value is growing at the cap rate of 12% currently. My bottom is .75% in a bad financial year. In the process of setting up a trust so it can be the beneficiary. That's how the rockerfellers did it and am just Following the strategy for me and my family.
Just in case reincarnation is real l don't want to come back and be broke again. 😂😂😂
Callers caffeine kicked in real good just before the call
I thought the video was playing in fast forward.
My question is how soon can you borrow from the whole life insurance policy? I understand you have to wait until you build a cash value but how long would that be and can someone give me an example please?
It depends on how you structure the policy as far as what you have access to, but 30 days after you start the policy you should have access to the cash value.
And the cash value is GUARANTEED to grow each year (another thing Dave never mentions)
It depends on the individual policy. She needs to READ her policy and if in doubt, contact her Agent. If she cannot reach her Agent, then she should reach out to the company to do a review of her policy. If anything, they will have an Agent contact her. The Cash Value Policy, depending on the actual policy written up for the individual, may be available early and sometimes it is not and will take up to 2 or 3+ years after policy payments for it to be available. @@theeactivedad
@@theeactivedad yeah i also noticed that. The returns he is mentioning for alternative investments are not guaranteed.
Recently bought a farm, the previous owner suggested a guy that works at northwestern mutual to help make sure I don’t get taxed too harshly on the new purchase. Before I could say boo he was trying to sell my wife and I over $3 million dollars worth of life insurance
What a crook!!!
Yeah snd you should buy it
Read the book about how Rockefeller used whole life insurance to move wealth through generations and how companies life JCpenny survived the great depression by taking a low interest loan against the whole life insurance policy.
Read books and learn for yourself. These tv guys also have personal interests and a platform. Dangerous combination
I think part of the whole life design is that the buildup of cash value is there so that the high actuarial premiums in old age can be funded. In other words, if this guy tried to buy $1.5 million of coverage when he was 70 years old, it would be a lot more than the level premium he's still paying on the whole life policy. It’s a little more complicated than Dave is explaining. That being said, the need for life insurance generally goes away as you get old, and the kids are gone, and you have built up an estate. Which is why I bought level premium term insurance when I needed it, and stopped when I didn’t. Also, whole life insurance carries a pretty healthy load for commissions.
Yup, a rip off
We bought a very small whole life policy back in the 80's as well as term...we dropped the term, still have the whole life which pays for itself b/c of the dividends it earns...you can read my comment about how it worked well for us if you are interested...and why ...for those who are not large income earners a small whole life policy can be a godsend in later years.
@@dinahsoar6982 that's good to know
@@dinahsoar6982 Thank you for pointing that out. Most people are simply not savers. So the key to the term life strategy is you better be 100% sure that you will not need any life insurance when you're older. Good luck getting an affordable term policy in your old age if you have any health issue / which most people will have some issue.
@@dinahsoar6982 who'd you buy the policy from and is that company still around ?
"Infinite banking is being made cool on Tic Tac" @8:55 "Tic Tac 🤣
Dave can be funny😂
I bet the boomers dropped dead from that one. Dave does good business :D
Great video, very informative! 😊 Thank you for breaking down the pros and cons of whole life insurance. 👍 It's important to make informed decisions about our finances.
I was on a call with a rep of my brother's life insurance carrier through his Union. We talked about the policy and everything for over half an hour as though this was a benefit extended to me as his beneficiary. Then they lay down the price at the very end. Now it seemed reasonable, but then they dropped the term "Whole life" and i immediately got turned off. I remembered your teachings, Dave, and came back here to confirm my suspicions. I'm so glad i didn't enroll.
YOURE GETTING SOLD THE WRONG THING! These ppl are getting a whole life policy designed to pay out to their kids. Instead they should lower the death benefit down to 250k and set a set premium at $500. I swear to Jesus Christ that designing a policy this way is way better for your cash value. Instead of using 95% to fund the policy you’re flipping the percentages! These ppl are getting sold the wrong policy by the wrong ppl. This is why Life insurance is so dangerous as a sales agent. We need to do better. David Ramsey is correct but thats because so many of us are getting trained the wrong way or just dont understand how to tweak the system for better uses. Sorry guys.
whole life has a role in estate planning, Term does not. Depends on your situation. Dave isn't considering the capital gains on the assets a person may have, and his family may have to sell off to pay for everything
Dave doesn’t tell you that only 2% of Term policies pay out. Whole life policies are the final check you write to your family. They are guaranteed to pay out. Funerals are 15-20k you don’t want your family on. Gofund me begging for money
@@ethanpaige9471 Great point. Term is designed to be outlived. Thats why its so cheap. You invest all your money live and get none back. If you’re old you cant even qualify for it anyways. Buy whole as early as you can. I just bought mine for my 8 month old. $30 for 100k life. Not worried about the death benefit one bit. $30 a month. I choose to fund it monthly at $100 instead. By the time shes 65 it will grow to 900k cash value and 100k death benefit. And if she holds it on for 2 more years over 1 mil. And when she has a kid imma get the same one on them. Fund it myself once i die my daughter can fund it and once they’re old enough they can then fund it. Then my grandaughter has that for her and her kids. And then again and again and again. I can be broke but i refuse to let them be.
they won't have to be GoFunding me if they did their finances right and have 2 pennies to rub together @@ethanpaige9471
So strange to compare whole live cash value build up to investment- compare it to SAVINGS rate- that's the only guaranteed return. Paid up additions build cash value way faster than Dave states, depending on your policy. Paid up additions will certainly be there when you die, but also while you are alive. SAVINGS vs Whole Life is the appropriate comparison. And this started in the 1800s, not the 1950s.
EXACTLY David! Thank You Sir. Ramsey is a good pitchman and misleads unsuspecting and misinformed folk regarding Whole Life.
By all means, give me your money and I'll be happy to let you BORROW against it.
Why do people trust someone they never met?
Great video! It's always enlightening to hear Dave Ramsey's take on personal finance matters. His explanation of why Whole Life Insurance is a bad investment is very clear and makes a lot of sense. It's unfortunate that some financial planners still try to sell Whole Life Insurance as a viable option, even going so far as to rebrand it as "infinite banking." This just goes to show how important it is for consumers to educate themselves about financial products and not simply rely on advice from salespeople.
My follow-up question is: What other financial products or services should consumers be wary of, and how can they protect themselves from financial scams or predatory practices?
You should read the book Becoming your own banker by nelson Nash
Many concerns with your advice. First, not all policies are configured to be front loaded. Second, life insurance is not an investment, it's protection and tax deferred growth of cash value. Third, whole life policies have living benefits that can be utilized for health events. Term is immediate coverage that throws your money down a hole never to be seen again while you are alive, unless you choose the more costly option of Return of Premium. Not true, that you don't ever get both cash value and face value. You may take the cash value at anytime or best to borrow against it for a participating interest only loan. Also, life insurance is much more than one persons opinion of "you don't need life insurance for your whole life." Catastrophe, like the milk truck analogy, can happen at anytime. And few million dollars in savings is not enough for your spouse and children to live off of in todays world. Ya need to plan for income replacement. Life insurance protects our ability to support your family, trust, or business exchange from your great beyond. One plans for it and takes action towards continued support of the life they left behind. When term runs out, then what? We all pass, and last time I checked none of us come with an expiration date, but term does. Also, markets come and go. Investments need to be reviewed and realigned. There is a cost to every investment and every service. Life insurance has costs like anything else, but it has an immediate upside with protection as if you had the money waiting for the event in which it was planned. Investments do not do this on a guaranteed basis and can be a daunting task for those left behind. So, 30% of longterm savings should be allocated towards protection of principal and planned catastrophe. Ya see, when you make a simple attitudinal statement like, "I hate Whole Life Insurance" you've become myopic. Looking at one aspect of an entire life plan is short sighted. Investment advisors who are best at their profession look comprehensively at their clients financial planning. In closing, A Whole Life policy with it's benefits is not an investment at all, it's an asset protection device. No spin, simple factual, non attitudinal, and comprehensive advise is what people appreciate. We all want choices and the opportunity to make our own educated decisions. "I HATE WHOLE LIFE INSURANCE" does not respect the client and statements like, "The entire industry no longer believes that whole life insurance should be used in a clients portfolio" is quite frankly a lie.
Problem is he provides very incorrect info. Make sure your policy is was is called a paid up dividend or whatever they call it. It adds the cash value to the benefit.
Whole life is definitely a ripoff. Who cares about the living benefits when you can invest the difference and get that investment whenever you want. Furthermore, the "tax deferred growth" is peanut compare to just saving via your 401K or IRA. Plus if you die, you never see the cash money anyway. Insurance company will steal it from you.
Adding the book 'What would the Rockefellers do' would do him a huge good. @@theeactivedad
That "Tic Tac" line killed me! Hahahaha! I love it!
😂😂😂
You kids on that Tic tack and Face tube.
Freshens your breath while eroding your brain?
$680 per month is a lot for that amount of insurance
I am 73 years old. I have 250m of whole life. I haven't had to pay a premium in over ten years due to an offset. The cash values exceed the cost basis. Right now it looks like it will go to my grandchildren if my wife decides not to spend it, assuming I predecease her. What's to hate?
Doubt a product like this exists anymore. You’re talking about a relic
They don't offer that style anymore since it wasn't making insurance companies any money. Make sure you still have the original contract - my parents have similar to you, but the insurance company tried to sneakily change it and they were saved by having the original contract.
@@elreytriton oh yes it does
Better check your contract. Those relics are being put to the wayside.
@@astroman30 ohio natl, guardian
my girlfriend is a “financial advisor” at northwestern mutual. her job is to push whole life insurance on people for 100% commission. everyone there hates dave ramsey-I wonder why. she has whole life insurance and I don’t know how she can afford it. I met with her coworker whose financial advice was to get whole life insurance, despite me being 29 with no family and an emergency fund that, things the same, would be drained by the premiums in three years. how do I rescue my girlfriend
I used to work there as well. The company has good investment services and their while life is better than most. However, it's a toxic workplace and they push insurance way too much. Tell her she NEEDS to get her series 7/66 and then quit and go work for a reputable company like fidelity. That's what I did
NWM has a horrible reputation. NYL is better.
Whole of life insurance should be used for funeral costs or an IHT bill. It's a guaranteed pay-out so you could literally be 150 years old and will still pay out aslong as you're paying your premiums.
That's literally wrong. Most whole life policies mature at 100.
@@ryananderson238 YOURE GETTING SOLD THE WRONG THING! These ppl are getting a whole life policy designed to pay out to their kids. Instead they should lower the death benefit down to 250k and set a set premium at $500. I swear to Jesus Christ that designing a policy this way is way better for your cash value. Instead of using 95% to fund the policy you’re flipping the percentages! These ppl are getting sold the wrong policy by the wrong ppl. This is why Life insurance is so dangerous as a sales agent. We need to do better. David Ramsey is correct but thats because so many of us are getting trained the wrong way or just dont understand how to tweak the system for better uses. Sorry guys. You wont live to 100
The policy cancels itself out before it reaches that... and you could have way more in investments if you bought term and invested the difference.
This is going off how it works in the UK I should I have clarified before.
...and Don't forget, if you borrow from that cash value, you got to pay it back with interest! The question you should ask is, whose money is it?!? Why are you borrowing your money and paying it back with interest!!
I was taught that life insurance is to pay for any outstanding debts that you may have upon death and to provide living expenses for your spouse for about 3 to 5 years!
Great comment. Most don't think about that
This is a very simplistic discussion of whole life. There are important uses for that product he never discusses. Suppose you own a business with a partner and the partner dies. How do you pay for his share? (whole life). What about if you have a key man in your business and the key man dies? How does the business recover from that loss? (whole life). If you buy whole life insurance on a young child and then gift them the policy when they are an adult, it can provide an incredible retirement nest egg. Those are just 3 reasons to consider whole life. There are more.
Amazing advice!! Perfectly said. Buy Term & Invest the Difference!! This is exactly how I help people!!
It doesn't always work out.
So glad I saw this, as one of the Gen z tik tok kids who have seen this resurgence in Whole Life agents, I was seriously struggling with this decision. I didn't think it was possible that whole life really was the better option, given the crazy difference in premiums.
Dont believe everything Dave says. he's always spewing lies about whole life since he doesnt understand it. Ill side with him a bit because many agents dont know how to structure a policy correctly.
keep doing research... take what he says with a huge grain of salt
@@WealthInsurance Says the lying insurance salesmen.
Whole life can be on fixed premiums and if you don’t like it you can always do partial surrender tax free or get cash surrender value but it’s taxed. It’s better to start a whole life at a young age because life insurance is a lot more expensive the older you get cause you’ll have a lower grade.
@@kennyreyes7139 yet, a young age, whole life is way more expensive than term and investing the difference. Trash value insurance is a scam
Dave Ramsey gives advice for people with no money. People do your own research instead and you will see why and when whole life plans can be a good investment. A term policy is just renting coverage, what happens when you can't afford to rent beacause you become unisnurable?
So, your answer is to pay on a premium that cost (at least) 20 times more than term? That's stupid.
LMAO there's no such thing as "a good investment" honey.
Dave throwing me off without the headset on 😂 🎧
I've been wondering why he looks so different LOLOL
I would like some more understanding why you like only term. As a young person with no health issues, term is great however the older you get and the more health issues you accumulate with age, you cannot get insurance. Isn't it better to have some whole life while you're younger and keep it?
Yes, whole life is better and more simple. It’s cheap while you’re young and healthy and the premiums will never increase. At least whole life doesn’t increase.
I don’t recommend universal life insurance because that does increase, similar to term.
@@matthewrks I agree. Whenever they try to make a product more complicated (they have to "structure" an IUL) that's when I have to step back and choose something more simple that I understand better. I feel like with these IULs, you don't know you've been screwed until years later and the person who sold it to you is long gone.
I come to read all the salty whole life insurance agents in the comments
This is very misleading for state, government workers w/benefits. Those life insurance policies are an 1/8th what you would pay as if you bought yourself. Is it then still a bad idea if im paying 1.80/month for 250k coverage at 37. I been paying that since i was 25.
A small part of me feels like he doesn’t actually understand the extent of what him and his wife have been paying into and how much money they’ve thrown away for the past X years…good luck to you Thomas I hope you make a good choice in the future
A small part of me believes that this isn't a real caller but someone paid by the show so that Dave can explain his hatred of whole life
@@billzander2875 - Whether the caller was fake or not, doesn't change the fact that whole life is a sucker policy. You're paying about 15 times the premium for the same death benefit, but you can only collect on the death benefit if you die. Policy has sucker written all over it.
@@JohnBowl14690 you can always do partial surrenders (tax free) or cash out but it will be taxed only recommended if you’ve had it for awhile to the point where your policy has built up cash value compared to the 401k where you can touch it till 65 or 59 1/2. It’s important to read into the details of your policy to have a better understanding of the product.
@@kennyreyes7139 - Again, I still would never buy a WL sucker policy. I sacked away more money in my 401K, which is not taxed, while it stays sheltered from yearly taxes until I pull it out...unlike WL policies which taxes you first. Taxed or untaxed, you're never going to see the money anyway in most cases. As soon as you die, they steal your "untaxed" money. No thanks.
A bucket with a hole in it will never fill up no matter how much water you put in it. Better to cut your losses and just get a new bucket.
Scams are like zombies. They get burried but eventually drag themselves back out of the dirt to find new victims.
1. What Dave didn't mention here is that yeah, you don't get the 200K back that you paid in - but you get 1million. If i told you give me 200K and i'll give you a 1million. That's a no brainer. He acts like its theft. It's not - they are paying out. And whole life will pay out not taxed, face value what your policy is - no matter the circumstance.
2. You can borrow against your cash value and still have it grow as if it never left. Not a withdrawal. So for instance, IF you do have 100K of cash value built up (takes years), you could borrow that 100K, buy property, hold it for a couple years, sell it at 150K and make really close to 50K on your investment over x years. 2 years thats 25K return / yr. 5 years then its 10k / yr. But you made money without loaning from a bank or private loan where there will be insane interest to pay back. Borrowed loans from whole life interest rates are much much lower than private or bank loans.
So Dave isn't wrong but he also isn't telling you the pros to whole life. It's actually very advantageous if you have the patience and discipline.
1. "but you get 1mil." YOU don't get any money back. Your beneficiaries only get the 1 mil death benefit. Tax free? Term insurance pays out tax free at a fraction of the cost.
2. Seriously, paying an insurance company to BORROW against your own money, and you think this is a good idea? Give me your money and I'll be happy to charge you interest to let borrow up to 90% of it. The true ROR is about 1.5% considering it takes about 10 years just to break even. What a scam. Try harder.
Bros energy levels are off the charts
Bros the definition of sugar in coffee
He’s very anxious
It’s cuz he’s from NY, they’re weird out there
@@bobbythomas6520 he’s going to crash later then ?
@@Wickedtingzz id be suprised id he didn’t crash right after that call ended
I was so lucky. I purchased a term policy, 20 year duration, when I got married. The kicker here was this policy paid a dividend. For my $13 a month I received over 5,000$$ at maturity.
If you received any amount at maturity, that is not term policy sir. It is endowment policy.
my dad had a whole life policy.. he paid a dollar a month for it for 30 years and paid it off in the late 70s/early 80s..he died this spring,
and my mom found her self a millionaire.. i cant speak for modern whole life, but it did her right
Did she ever gotten paid from the whole life insurance? My parents had one back in 1980’s and when my mom passed, my father got ripped off.
P
You're so right. People tend to purchase a whole-life policy later in life when it's too expensive. The wealthy use whole-life policies to help purchase big-ticket items, etc. I use to sell both the whole life and term. I would have people call me with term policies that were about to expire. They could not afford the new rate at 70+ years old. It was so sad. I would ALWAYS suggest someone buy a whole life policy to cover final expenses (10k-25k). Then get a term policy to cover a mortgage, bills, etc to leave for their loved ones if they pass away early. Better yet, purchase a whole life policy at a young age when the premiums are low. Premiums will always be more expensive when you're older with health issues.
Whole life sucks, until you get the benefits. Happy for your mom
The insurance itself is not bad. It is what you pay for it. He is saying that the whole builds cash value, but you never get the cash value unless you surrender the policy, or your beneficiary gets the face amount when you die, and not the money or cash value that builds the policy.
You can set up a custom whole life solution for your kid the day they are born. Pay it for 20 years. When they are 20 they can get the cash value of the insurance at that time, or they can leave it for a guaranteed 10x growth by the time they are 65. Imagine putting $50,000, over 20 years, and having your child be able to withdrawal $500,000 for retirement.
I don’t know about you, but I would not mind an additional $500,000 in retirement.
Plus the dollar amount scales with how much you put into it. Whole life is a long term investment similar to any other retirement vehicle.
Pay $300 to $400 monthly for a premium to a trash value policy where the Life Insurance company keeps your cash value, and you think this is a good plan?
It would be nice if Dave addressed the reason why a cash value component actually exists in terms of how it is marketed to a consumer. The cash value aspect really isn’t there as a death benefit in the sense of what life insurance is bought for but rather an amount of cash that’s accessible during someone’s living life that doesn’t exist with a term insurance product as term insurance is truly just insurance while whole life with cash value isn’t. I think that would help people grasp why the structure of these policies exists in the fashion. It does but maybe doesn’t get sddressed because it opens a cab if works in financial choices that Dave doesn’t endorse.
The “e benefit” of such policies having the cash value component isn’t about death for the insured at all. It’s sold as a pile of money that is guaranteed to be there as it earns a set rate of return and for some consumers is seen as flexibility since the cash pool can be pulled from if they need emergency money or can be borrowed against if they need a loan. Someone selling it is marketing that flexibility aspect as a value add and then saying that they’re getting that flexibility and protecting their family wkth their death benefit at no added costs by not mentioning the steep difference of term insurance. So when he focus’s on how that cash value doesn’t pay to you in death he’s being accurate but it doesn’t help somebody understand why that component exists in the first place or why it can be attractive to somebody buying a policy.
In the end the benefit it provides is to the insurer and not the consumer since the cash value offsets the death benefit they’ll eventually get forced to pay. The guaranteed rate is obviously very low as the profits for the insurer fall on spread business in the sense of the value grows by investing the money and the insurer profits on the spread but also must factor down markets and that they’ll still have to pay the guarantee. For some people having a guarantee versus market risk will be appealing. And of course for an insurer it lightens their load on reserving to cover death benefits since they keep the cash value at death which offsets the death benefit. But when discussing why it’s a bad financial product it’s fair to address exactly what the product is designed to do rather than brushing it aside by focusing on the death benefit. I imagine Dave worries about giving somebody ideas about the cash value pool but to truly discuss it and why it isn’t good in sense of insuring you in a cost effective way I think one must actually address the function of the product and the why if the product to help someone understand. And if somebody is truly focused on leaving debr behind they won’t be swayed by the marketed features of cash value and it’s intended use.
George has that look like there’s no way in hades he could answer it Daves way. Daves wisdom will never be the same with the personalities going forward.
I'm a cpa and I've spoken to 100s of financial planners and cpa's about whole life and none of them recommend whole life.
The only ones that recommend whole life are those who earn commissions selling whole life.
Preach!!
If anyone doesn't like the idea of cash value, why don't you look up how Disney, JC Penny, and McDonalds were originally funded.
They got rich off their products, not from investing in trash value insurance. Try harder.
George's face when caller says 685 per month...lol...0:57
I imagine that in a good growth mutual fund vs a Whole life product. Wow missing out on a cool Million at retirement.
Do Not Purchase Prudential Life Insurance. My Dad passed away June 2023 and all paperwork submitted online. Customer Service said all docs received and takes 30 business days ( to be settled by mid Dec 2023). Its now Feb 2024 and Life Insurance check still not sent.
Did u hear from them yet
"I Hate it.. Not a MILD Dislike" - Dave ramsey.. cracked me up.. LOL
I'm curious though. If I purchase term life and know that I'm going to live past the life of the term, why would I invest in term to get absolutely nothing in the end? Are you saying we shouldn't purchase life insurance at all? I feel like I'm giving away money with term, at least with whole life, I feel like I paid to have a certain amount passed on to my family...and I've likely put less in than what family will get when I die.
He says when you die they keep your money? I guess he forgets the whole purpose of life insurance. Dave says that if you have $200,000 of cash in a whole life policy that has $1,000,000 in death benefit, you lose that $200,000. No, you won't lose that money. Your beneficiary will receive $1,000,000 tax free. If you put that money into a savings account like he says, it will be subject to taxes and who ever inherits that money will only receive $200,000 minus taxes.
He's referring to versus a Term life. You pay a small monthly (not $200K) and then your beneficiary still gets the 1million.
Actually they receive 1,200,000 or more. In a good policy, death benefit rises in accordance with the cash value.
I’m so glad you had the transcription really needed the information that was given at the end that’s what I waited for thank you
What a lot of people, including Dave, don’t seem to realize is that, at least in my experience, WL is never considered an “investment,” but rather a long-term savings vehicle. I understand the “buy term, invest the rest” philosophy, but having a WL policy in place forces policyowners to set aside money every month, that otherwise likely would’ve gotten spent on random junk by the majority of Americans. Also, there are very few WL policies that actually have good returns, so do your research and take the financial strength of the institution into consideration. Also, make sure it’s a mutual company, as they won’t have stockholders whose interests they put above yours.
"a long-term savings vehicle?" So, how do I get my money out of this "savings vehicle" without having to borrow, cancel or defer it out of my death benefit?
This is what i said in my mind when a insurance agent trying to sell whole life to me.. i knew i wasnt the only one. Thanks
Fact: in the financial services industry, if you put money into a product with the expectation of getting more money back than you put into it, that is an investment, and specific securities licenses are needed to sell those products. A securities licenses is NOT needed to sell a whole life policy, only an insurance license. This means that whole life insurance is NOT an investment product, and if it is sold as such...
>>>YOUR AGENT COMMITTED FRAUD!
Life insurance is NOT an investment because an investment requires risk. Even a dividend paying whole life insurance policy is not an investment because there are no risks and all guarantees.
Then how come Whole Life can be taxed when you withdraw your cash value in excess of your basis? Why are there MEC rules?
@@ZachPriday
If a person doesn’t want to be taxed above their cost basis then they need to take a policy loan out because loans aren’t taxable and what they do is deduct it from your death benefit.
Now once your life insurance has been classified as a MEC dividend withdrawals under age 59.5 have a 10% penalty plus its taxes. If you take a policy loan out your fine as long as it doesn’t exceed your cost basis and loans above that line are taxed.
@@jimcrowley1709 I'm with you and totally understand. I have IBC style policies and take loans. I was just pointing out the flaw in the other guy's statements saying anything that grows in value must be a security. Obviously is that were true whole life woildjt have MEC rules or needs for loans.
@@jimcrowley1709 You're not telling the truth. The IRS prohibits the insurance companies calling whole life insurance an investment because YOU DON'T GET YOUR MONEY BACK. The insurance company keeps your cash value.
Soooo, as a licensed insurance agent, heres what I see. You put $200k into an insurance policy and your beneficiary gets $1M? Seems like a good return to me based on the numbers. Anyone else think like this or is everyone just letting Dave think for them? Curious
In a $500G DB example, the premium is $430 a month from age 40. Nick lives to age of 90. So with whole life insurance, Nick pays $430 a month for 600 months (50 years) total $258G. Dividend is $130 a year best case for 50 years on the premium paid, or $6500, for a cash value of $264,500. The alternative is to buy term life insurance with extended duration and invest the rest .. a $500G death benefit policy for a 30 year term would be about $60 a month leaving $370 available to save .. $370 monthly in the market at 7% (stock market lifetime average) in a tax deferred account gives me $432G after 30 years. I won’t need a $500G policy if I’ve got $432G cash in my account, so I cancel it, And for the next 20 years my account keeps growing at the full $430 a month. Thus, when I’m 90 the account is worth $1.9 million. Conclusion is clear, do I want $264.5G (whole) or do I want $1.9 M (term and invest) for the same premium output. I choose term and invest.
I just noticed that Dave isn't wearing those big earmuffs anymore 😁 I like this set up better 👍🏼
New mics, new haircuts. Must have had their company Christmas party over the weekend.
Why do you have to pay interest on the money you borrow from yourself in a whole life policy; on that same money you already paid in? I get borrowing money that isn't yours, but borrowing your own money you have paid in at a cost, doesn't make sense. Can anyone explain this to me?
As long as you borrow no more than 90% than the policy can keep going. The interest is put back into the built up value. You can even decide to not pay the borrow money back and when you pass away they will just use the death benefit to minus whatever amount you borrow and give the rest to your family.
Insurance is not investment.
Correct. But it can be an asset.
It is a risk management tool. If you pour that much money into it to make it an "asset," you could have had a much better asset had you invested that money instead. But salesmen like to call WL cash value an "asset" to make you feel better about all the money it is costing you.
@@markf.2050, actually it can be both "risk management tool" AND "an asset." How's that you say? Let's say you get to the ripe old age of 92 and need long term care. If you have a WL policy with a LTC rider you can get $ from the policy to pay for your care. That income is not taxable in most cases and it is not tied to market returns. Should you reach a ripe old age of 92 and never need long term care, you can do other things with the money (such as take out cash during down markets so you don't have to sell when securiites are low. These are only two cases of how WL is an asset AND a risk management tool.
@simontschinkel8301
Sure, a cash value may be useful if you have financial needs at the age of 92 and that's all you have. I don't think anyone disputes that. The argument is that all the money that went into creating that cash value (perhaps over 62 years) could have been poured into an actual investment and turned into a far greater asset. That asset will likely also far exceed the value of the life insurance and it won't go "poof" if you die. You also have no need to surrender an investment to get your money back. It's already your money and always was your money. Considering that about 80% of WL policy holders surrender their policies early, that makes an investment a far better choice over a WL policy.
@@markf.2050 there are many ways to work the calculations and many assumptions that one has to make in figuring out if what you say is true or false. However, if I use a 23 year old male, in good health and put him into a whole life policy which has a $5k/year premium he would own, after 30 years, assuming he paid all of his annual premiums and never had to borrow against the policy, a death benefit of approximatly $800k. If you took the same $5k/year and invested it in a balanced well diversified portfolio (say 75 stocks/25 bonds) which yielded a 7% growth rate and let that grow for 30 years, the result would be $505,365. The former has zero market volitility and assumes all dividends are reinvested into the policy. The latter assumes the person never sells in a moment of panic nor take money out for an emergency. The former assumes a 4% growth rate. The latter assumes the person does not pay any fees or taxes at any point. You simply have to increase the growth rate of the securities to an annualized 9.4% to get something equal ($803,554) to the death benefit of the insurance policy. You also have to live in an imaginary world where one does not pay fees and taxes.
Just a heads up in case you guys happen to see this comment. Your smart vestor pros absolutely offer whole life. I have only 2 smart vestors in my area. One of them turned me away because he said I had to start with $75k and he does a lot of individual stocks etc so "I'm not a good fit." lol The other one told me it's cool if I buy a brand new camper and take out a car loan so I basically just do my own investing with index funds. Makes more sense to me anyway. I agree with like 95% of what you guys teach on this show, but just wanted to give you the heads up to vet those smart vestors b/c the only 2 I've talked to don't align with your teachings at all.
The 4 Funny Rules
1. No growth in the first 1-4 years for your cash value (My husband has even seen a policy that said the growth started at 8 years 🫣)
2. When it does start to grow, grows between 1%-4% (Inflation goes up every year 3%-4%. How are you keeping up with cost-of-living?)
3. If you borrow money from your cash value, they charge you between 6%-8% until you pay them back (But isn’t the cash value your money in the first place?)
4. When you die, you only get one or the other. You do not get both (So you’re paying for two things, but only receiving one)
FYI all whole life policies are not put together the same and are different from company to company, but how a REAL IBC policy is put together
1. the dividend growth is small the first few years but your cash value will grow because of interest that is being paid out each year.
2. most interest paid to you is right around 3- 4% just to keep up with inflation
3. you are not borrowing your money you are borrowing the insurance companies money while your money is still sitting there growing. Yes they do charge you interest because you are borrowing money. That allows you not to be taxed on it because loans aren't taxed. Depending on the company the interest will come back to you as well.
4. yes you dont get both because your cash value is technically buying more death benefit. So when you take out a loan its collateralize against the death benefit that the insurance company is providing.
All whole life policies don’t bring value to clients
@@terrelltyrance8610 "you are not borrowing your money you are borrowing the insurance companies." So how did that cash value accumulate? It's as if someone put money in that policy.
@@terrelltyrance8610 Every dollar that went into it was already post tax dollars so how are you selling the idea of "tax free" when you get your money loaned back to you?
@@astroman30Cash value doesn't exist in whole life policies in other places around the world. It is just something that is tracked so the firm can pay out less than what they earned on the invested premiums and remove liabilities from their books. Default on a premium, policy cancelled all profit. Surrender policy due to cashflow being to tight to cover premiums and loan repayments, insurer wins, die and pay out. It's ok, most policy holders are still alive and paying in, between premiums and ROI the company keeps going.
The 'cash value' may track with what you paid in, but they made more off it every year than will be in the 'cash value' pot. It is an illustration of what the policy is to the company when presenting the accounts.
Assets minus liabilities= Equity
I have a whole life policy for 500k. I pay $122 a month for it. I was quoted 80 bucks for a 30 year 500k term policy that will expire when im 65. For 42 extra bucks a month i think ill take the 500k whole life policy that will pay out when i die. Sorry Ramsey... just can't justify paying 80 bucks a month on a temporary policy that will, statistically speaking, probably not pay out as I am likely to outlive my term policy. In my opinion term policies are just a waste of money.
Who is your carrier offering this 500k at $122 a month? Is it traditional? Any PUAs? Mutual or stock company?
You're policy isn't a whole life. They don't go that high. Unless you have a iul or they tricked you and got you an accidental. Might want to look it over with someone else. Also Ramsey is a dinosaur and doesn't follow the updates to insurance. I'm an agent in Florida he talks about things from 20+ years ago.
@@seanmayo5130 it's definitely a whole life. The policy is a MassMutual Legacy 100 WL. It's design isn't traditional. The agent I worked with didn't understand how to design a blended policy. I told him I wanted a 500k blended policy and he illustrated a 500k traditional. I had to walk him through adding the term rider and PUA. It cut his commission substantially. It's not an IUL for sure. My next policy will be an IUL designed similarly to keep my net cost of insurance low to replace my 401k. The problem with IULs is they tended to collapse on themselves as you reach the age of 65+ because of the annual renewable term rider. The cost of insurance sky rockets. You can mitigate these cost by starting a policy with a minimal inital base face amount of 100k... make it a option B (Increasing death benefit) and adding a term rider to allow you front load cash valve. The policy charges remain low throughout the policy because your net cost of insurance is reduced based on the amount of cash you over fund your policy with. I'll add a video explaining this process... let me know what you think.
@Eric Gilliland interesting... why not roll it into an annuity. I'm going to assume you're young though so that would be one of the reasons. Are you going to over fund it?
Statistically outlive ? You have no idea when you’re going to die
We are in the process of cashing in ours however:
Love to hear Dave’s comments on this aspect of it.
Bought our policy’s when we first got married and I was just starting my career. Two little kids -mortgage-two cars etc; The premium of $41.39 / month for the first 10 years of our marriage was our total savings.
There is no way in those days that I would saved that money every month and invested it. It surely would have been tapped for some expenses!
The amount we are cashing in has grown ( tax differed ) to a substantial part of our net worth!
There is no way I would have that money without the policy!!!
So, what made you make those payments every month? If you're discipline enough to make those premiums, you're disciplined enough to invest that money. Sorry for your loss.
What loss -I got serious about saving when I hit 40 ( all IRA) my point was even though it technically is a bad deal -it actually worked for us!
@@mjcruiser4238 Do you not know about all the fees attached with trash value insurance? Did you not know that the first 5 years of your policy, you have close to ZERO build up in your CV? Did you not know the average rate of return on CV is about 1.5%? Ever heard of opportunity costs? Yes, sorry for your loss.
@@astroman30I did not know -I was stupid -I was in my twenties 😅
Dave doesn’t tell you that only 2% of Term policies pay out. Whole life policies are the final check you write to your family. They are guaranteed to pay out. Funerals are 15-20k you don’t want your family on. Gofund me begging for money
This is the best explanation I've heard Dave on this subject...or I've just had enough coffee to understand it better.
Maybe a little of each? Lol.
The advantage of term insurance is, it's much cheaper for the same level of protection, and it helps your beneficiaries if you die whilst they're still your beneficiaries and you don't have enough money in investments to support them.
Whereas with whole life, you pay more so you'll still be covered when you're older, when you don't really need it because all your beneficiaries will have jobs of their own and your investments will have grown significantly.
In short - term life is cheaper but stops covering you after a set period of time (when you no longer need it)
Whole life is more expensive and keeps covering you for the rest of your life, but that benefit is not worth the money.
I wonder what he thinks of the policies that pay you back what you pay into it at the end of 20 yrs or the whole life that you stop paying in 20 yrs but you keep the coverage plus interest?
Generally he’s very careful about products that aren’t established and about ones that sound too good to be true. If you don’t understand how the person you are paying makes their money, either they will go out of business or they will have some clause or questionable feature that will pull one over on you.
my mom just collected a million dollars from one..my dad paid a dollar a month since the 60s
Oh wow really what whole life insurance that let's you keep the money after stop paying after 20 years and interest ?
@@charlesjohnson2475 it's called 20 pay. It's not cheap but if you start at a "youngish" age it's not horribly expensive.
Dave sells term insurance for a living. Of course he hates the complex life insurances...he cant sell them wholesale the way he can with term
They invest with your money, pay out the face value, but take the investment gains they made with your money?? Is that what he means?
Yes
One consideration not discussed here is wealth transfer. Life insurance Cash Value cannot be touched by nursing homes should the holder(s) need that and which can easily wipe out the rest of the accumulated assets. The cash value is therefore irrelevant...at the death of the holder, the beneficiaries get all of the proceeds although in some states, the beneficiaries need to be named at least five years before the holder enters the nursing home. It's not the main part of my investment plan but it plays a role in legacy planning. I wonder if Dave would discuss this aspect of whole life policies. Writing term policies at age 70 and beyond gets VERY expensive as well and most companies limit the terms to 10 years at that point.
Why do you need life insurance at 70? You're kind of missing the point of insurance - the point is to leave your heirs financially taken care of in case you die unexpectedly. Once the kids are grown and the mortgage is paid for, the need for insurance drops dramatically. If the goal is to leave an inheritance, you're much better off buying term and investing the difference.
That’s a dumb way to think of generational wealth. This is broke people thinking
@@ghjong001 Nursing home placement can and would eat up my investments. They cannot touch life insurance CV or DB. If the worst happens to both of us and we rot away in a SNF then they at least get the DB when we check out. Even our house and property aren't off limits when Medicaid is involved. I plan to leave them a part of my investments (Roth-IRA's at the least) and the house. But Whole Life is the backup in a worst case scenario. I've worked in long term care for 45 years and have seen it repeatedly happen, or worse yet, folks gift away their lifetime of savings to hide them from the State and in the end, the State usually gets them anyway.
@@elreytriton Your worse-than-useless response leaves me wondering if your judgment affects your entire life as it does with this. Calling people you don't even know names is a PreK3 child's response. I do not hear what you say and it is unimportant.
@@craigborgardt6396 Thank you Craig for giving true to life examples. Dave unfortunately misleads people by bashing instead of teaching real life situations. Yes, he teaches some truth based on Scripture, and his own experience of success in real estate, which is good for him and those who choose real estate etc. and learn to be savvy in business/investing. Most of us aren't as smart in these areas, nor have a desire to own real estate/business ventures, but we still desire to control our own money and leave some for an aire/ministry etc.
What is the best life insurance policy for someone who is 58 years old with a dependent?
Depending on health, you can still get term at a reasonable price.
I am a a big believer in term life insurance combined with a quality disability insurance policy (If you can qualify). I sell this combination all the time, but Dave's comments regarding whole life and financial planners is not entirely correct. For estate planning and other purposes, whole life (permanent insurance) is the only way you can go - and Financial Planners use and recommend it all the time. Dave needs to get away from this one-size-fits all advice model. I generally agree with the use of term insurance and yes, the IRR on a properly structured WL contract is only 2-4% at best, but there are times where lifetime coverage is needed. Additionally, when you tell a 50+ year old male that his term insurance is going to cost $4,000+ a year, sometimes they would rather pay into something that accumulates some value for that kind of expense. It's all about suitability...
You lost me at "I sell."
Thank you for mentioning "suitability". Can always tell a good agent from a bad one by how much they focus on suitability. Good job 👍
Thank you for explaining… you saved me from stepping into it. I had seen an advertisement for this very thing but, wanted to know more before giving the company my contact information 😮
For point of comparison, my wife and I have a $1.5 million term life policy. Our monthly rate is $80 bucks compared to this guy's $600+ for the same face amount.
Thanks for saying this. My wife and I are in our early 60s and at the end of a 20 year term and in looking to reup on another term have found premiums (obviously more than our current expiring term) 1/5 the cost of the permanent insurance our current insurance company is trying to get us to go into.
Yeah except he’s gonna be able to access it incase of an emergency. Or to purchase other investments while still earning a higher ROI than any normal bank account. You can access the cash value for whatever reason you’d like.
He’s talking about “loss of money for the first three years”, but yet when you have term, it’s a loss of money for 10, 15, or 20 years. And insurance companies won’t insure you with term life unless the probability of you dying is low (hence the more exhaustive health checks).
@@4_3_2 If you buy term and invest the difference, then you are not losing money but gaining money. Especially if your ROI is in the index of 6% or greater due to the compound interest rate and the investment company that is working for you to attain your goals. It's all based upon your personal choices of plans to grow your money and provide an income replacement in the event of your demise. Life insurance is Income Replacement. Savings is your side growth for your future.
That renewal is going to wreck you
@@okayninjazero Point is to self-fund life insurance before the policy expires. By that time, my wife and I won't need the policy and will just cancel it.
Cash value: how much you have saved with interest
Abilities: withdrawal funds at any time
And remember: Return on investment
@theramseyshow --- How does life assurance compare to whole life insurance or just investing and saving?
685$ a month omg
That's outrageous
The difference is the premium paid for term life will probably goes down the drain since the chance that the insured will die in 15 years is very very low. But whole life is almost certain than the death benefit will be paid out!!
Buy term and invest the difference and you won't need trash value insurance.
Same reason I hate any life insurance with "cash value". Not to mention other stuff too. I've seen my parents pay their whole life for this product go well into their years and their premiums gets jacked up or they get dropped.
Upon breaking down their policies, I saw how crappy these kind of product is.
The premiums never increase in whole life policies. They also can never drop their policy holders. You are wrong on both counts.
The Internal Rate of Return (IRR) on a Whole Life policy, like most investments diminishes over time. My policy is pay in 95k over a ten year span at 9500/year. After the Pay in period, the policy payout is 1M. The IRR after year 10 (if payout became necessary) is 41% annual return, not bad. After 65 total years, IRR drops to 4% annually. I'm still not complaining. The only real risk is that I pass away during the Pay In period.
I am a life insurance agent and I agree with Dave. Whole life is a vastly inferior product to term in most cases, and, in the cases where whole or universal life might make some sense, there are usually more appropriate solutions to the problems the client wants to solve.
For example, someone with a high net worth may want to use life insurance policies as tax-sheltered store of value, but an S & P 500 index fund, even when in a taxable brokerage, will almost certainly yield better returns in the long term.
So, buy term and invest the difference. Don't let people use vain sophistry to talk you into inferior and expensive life insurance products. The fact that we get the biggest commissions on plans that typically involve giving someone a deal that is not as good as what they could have gotten is one of the biggest problems with the life insurance industry.
Those words almost certainly doesn't exude a lot of confidence. There is a risk that it doesn't perform and certainly a risk that it performs negatively. Ultimately life insurance is not an investment, but a replace of a loss.The loss of life is inevitable, do I want to have a guaranteed payout of more than I place in or to only hope to have coverage if something happens before we are ready. Add to the fact that you can still get returns from investments by using some of the value in the life insurance I can have both the guarantees and investment returns. It seems like a much superior product to me. But then again I think differently.
@@opsisone The problem is the guaranteed returns are paltry and I have never, ever, seen a universal life policy or whole life policy outperform the S & P 500 in the long term (even after tax). Heck, even a good municipal bond fund will provide better returns.
Also, as you pointed out, life insurance protects against indemnity. A term life policy offers much more protection per dollar than whole life does and it is significantly cheaper (often less than 30% of the cost of whole life).
@@irenaeusofpensacola But what about the fact that I can still use the Value in the Life insurance as an option to still invest in all the other investments that I wish to invest in. The Life insurance will always have to pay out more than what is put in if I keep the policy in force. This is why they are willing to buy your policy from you while alive (Cash Value), as it reduces their future liabilities. With a proper structure of the policy I can leverage the available value into the market or any other investment and maintain the insurance at natural mortality, while still making the gains you think you'll get.
what is the difference I no longer work so will that be an cd or high yield saving account? It won't be 401k ira
If you put the policy in a trust, the trust never dies it just gets passed on. So the money goes in tax deferred and just continues to get passed to the next beneficiary?
Don't need a trash value policy to do that
After 10 years with northwestern mutual we are very happy with our whole life. It isn't for everyone, max ira first.
It's normally geared towards the wealthy that are looking to leave guaranteed tax-free inheritances. Life insurance isn't really an investment, it's a contract
@@olivermiller3720 Term can do the same.
@@astroman30 term eventually expires. I wouldnt exactly count on it as an inheritance
@@olivermiller3720 That's why you buy term and invest the difference and leave a big inheritance. Trash value insurance is never a good purchase.
@@astroman30 I think this is going over your head. Cash value is not the main purpose of permanent insurance
Also, there are WL policies that you can fully fund in 10 years.
Overpay a bunch of premiums only to get a "dividend" (refund) back. What a scam.
@@astroman30 you have no clue of what you are talking about.
Dave said Tic Tac. I don't care, that's what I'm calling it now!
😂That’s a gen X or older talking there, lol!! 🙋🏼♀️😆
What I will say about whole life is if it’s the difference between the person saving or not saving. Honestly, I would rather them save money into a whole life insurance policy
I thought it was hilarious how Ramsey called it Tik Tak. 😂😂😂. Great information for those that don't know about insurance. I already knew this working in financial service bussiness. It's terrible how they are robbing people with these policies 😵😵😔
how are they robbing people?
I DONT have any life insurance or anything built for financial future. While I try to figure it all out my main concern is leaving something for my daughter and nephews when I’m gone.. my parents did nothing and I don’t want to leave my daughter& family in the sane situation I’m in now with tryn to take care of my dad as he gets elderly.. can you give some advice
I have a whole life for myself and my daughter, I pay about $200 total for both of our policies...kind of irritated because it was sold as if I will be able to pull cash from it...it barely has $100 in cash value...I have had for about a year, I feel I should just buy stock for that amount monthly
Oof. I had cash available from the first month in mine.
@@multimeter2859 Okay, do you feel Whole Life is worth it? Seems like a slow trickle for what it cost monthly
@@JooIsOnPlants It requires a great deal of patience imo. I got mine for real estate reasons. I plan to use CV loans to buy rental properties.
I had whole life for me and my wife for nearly two years. I bit the bullet, got a term policy and haven’t looked back. No regrets.
and you can get a cap of 13 percent pretty easily
Just got a loan on my whole life policy and bought 40 doors and 27 acres. I say get both. The goal is build wealth isn’t it
Well if u had bought term and invested the differen e, you could of afford 54 acres
But you need major Capital to put down on commercial property when your first getting into the door. Unless you have some handed down or know someone in the loop. Investing the difference is a tiny fragment of what it takes to be free. I’m speaking for my experience. Being debt free is cool, but being able to go on your own time is true freedom to me. And if so many Bible thumpers really believed in GOD they would realize your worship only go as far as your boss allows you. My wife and I doesn’t 90 straight in Jerusalem. It was because we bought those doors with that policy. All I’m saying is it’s possible to maximize both! 🙏🏾
But you need major Capital to put down on commercial property when your first getting into the door. Unless you have some handed down or know someone in the loop. Investing the difference is a tiny fragment of what it takes to be free. I’m speaking for my experience. Being debt free is cool, but being able to go on your own time is true freedom to me. And if so many Bible thumpers really believed in GOD they would realize your worship only go as far as your boss allows you. My wife and I doesn’t 90 straight in Jerusalem. It was because we bought those doors with that policy. All I’m saying is it’s possible to maximize both! 🙏🏾
🙌 Thank you, Dave Ramsey 🙏 for educating us on the pitfalls of whole life insurance! Your honesty and expertise are truly invaluable 😊.
Dave is a Dummy on the subject of insurance
Dave sells Term Insurance only. Why do you think he bashes Whole Life? Hes a clown for anything not related to debt reduction
Well what about term life insurance? My mother had a policy, out lived it and got nothing that she put in when it expired.
She outlived her term policy. Is that necessarily a bad concept? I buy homeowners insurance every year and never made a claim. Does that mean it's a bad purchase? NO!!! Insurance is a risk management purchase not an investment. She should've bought term and invested the difference (between term and whole life) in 401k, mutual funds and/or ROTH IRA and have waaaayyyyyyy more money than any trash value insurance can give you.
That's right! Term is such a waste of money. That's why you should pay 15x to 20x more in premiums for the same death benefit with a whole life policy. But wait... About 80% of those with whole life policies end up surrendering their policies early. Ah, but the remaining 20% will still have that death benefit even if they die at the age of 90 to take care of their dependant 60-year old children. It is worth it after all!
Whole life is still in business because of legacy. When you run the analytics, life insurance is the most efficient transfer of wealth. When people are well-off and establish it makes a lot of sense for them to consider putting some money into a whole life insurance policy this way their children will have significantly more income than a taxed brokerage or 401(k) account.
There are taxes on the cash value growth. And, until then it’s a loan. There is no “Income.” It’s debt or loss (if the policy owner dies). There is no benefit to whole life. But term and invest in a tax-free Roth IRA. It’s a winning combination.
@@aThinkingChristian Preach!!
Adrian - Totally false. Paying for a whole life policy is post-taxed dollars, so you already got taken to the cleaners by the IRS. 401K is better because it compounds are taxed deferred, so the amount of monies coming into the 401K is MUCH greater.
@@JohnBowl14690cash value growth in a WL are also tax deferred and aren’t not taxed once withdrawn. Maybe do some homework next time.
I really want to know what makes term life insurance worth it and whether it's smart for somebody who struggles to make ends meet every month to even have even if it's as low as 20 bucks
If you have financial obligations (dependants) that count on your income for housing, food, education, etc., then you owe it to them to have life insurance to meet those obligations in the event you should die. Term insurance is designed to cover that risk at the lowest cost. Whole life also covers that risk, but at a cost that is 15x to 20x higher and you pay for it your whole life. Your dependants will not always be dependants. It is expected that at some point, they will be independent. So you don't need life insurance your whole life.
For those of us for whatever reason find ourselves in a massive shortfall later on in life or living paycheck to paycheck etc. a whole life policy can still be utilized as a generational building tool to leave behind a substantial amount of money. You have to structure the policy with an emphasis on cash value accrual with paid-up election. That is at some point in the future, once the cash value has hit a certain milestone, it can then essentially cover the premium for years to come. You are basically using house money as you won't have to pay it anymore out of your own pocket. For anyone who is younger with the ability to max out 401K, HSA, put money away monthly in an investment account etc. and can stack that against some dirt cheap term, of course there are more efficient pathways for these folks. Not everything will suit everyone.
In a $500G DB example, the premium is $430 a month from age 40. Nick lives to age of 90. So with whole life insurance, Nick pays $430 a month for 600 months (50 years) total $258G. Dividend is $130 a year best case for 50 years on the premium paid, or $6500, for a cash value of $264,500. The alternative is to buy term life insurance with extended duration and invest the rest .. a $500G death benefit policy for a 30 year term would be about $60 a month leaving $370 available to save .. $370 monthly in the market at 7% (stock market lifetime average) in a tax deferred account gives me $432G after 30 years. I won’t need a $500G policy if I’ve got $432G cash in my account, so I cancel it, And for the next 20 years my account keeps growing at the full $430 a month. when I’m 90 the account is worth $1.9 million. Conclusion is clear .:. Do I want $264.5G (whole) or do I want $1.9 M (term and invest) for the same premium output .. I choose term and invest!
@@astroman30 Age 40 way too young for scenario I was thinking; more like 55ish. A $500K 30 year term is gonna run anywhere from $300-$400 a month. And if you live past 85, policy pays out nothing.
Also coming off the greatest bull market in the history of capitalism that has lasted now 15 years skews allot of data and illustrations. A go forward assumption of 7% annualized for someone well into their 50s is too much. Not to mention is that a net % number after taxes? You would need gross annualized RORs of 10%+ then.
Other variable is with permanent insurance, you don't have to make all those payments in perpetuity not take dividends. You can structure a 20 year pay fixed premium schedule and save allot of aggregate cost.
But to your point, a 40 year old has allot more options and runway for sure and can still take a more bullish/aggressive approach.
@@dr.henryjones616
1. "I was thinking; more like 55ish." Nice of you to try and skew the data. Ok, even at 55 with BTID, he could walk away with WELL over 1 million.
2. "And if you live past 85, policy pays out nothing." You outlive your policy....is that necessarily a bad concept? I pay homeowners insurance every year and never made a claim. Does that mean it's a bad purchase? NO!!! Insurance is a RISK MANAGEMENT tool, not an investment.
3. "Also coming off the greatest bull market in the history of capitalism that has lasted now 15 years." Even more of a reason to BTID instead buying trash value insurance.
4. "A go forward assumption of 7% annualized for someone well into their 50s is too much." Not really, the stock market has been around since the 1700s. 7% ROR is a very conservative assumption. Some say 10% is the norm. Even if I'm half wrong, the person walks away with (at least) 1 mil.
5. "...you don't have to make all those payments in perpetuity not take dividends." According to the IRS, "Dividends" are nothing more than refunds from a deliberate overcharge. Hence, you pay for a lot of front loaded charges getting some of it back. What a stupid concept thinking it's a "dividend."
6. "allot" = a lot.
7. I'm not sure what your doctorate degree merits, but it sure isn't financing. Look, I get it, you sell this garbage. I worked for a major LI company for 11 years. I've seen you agents come and go over talking clients/victims by appearing that you're smart. It's laughable and you're no different. You have to be an agent, because I won't believe you're stupid enough to think this is some sort of good financing tool.
Gee, I wonder what could cause a shortfall later in life??? Could it be all those massive whole life monthly premiums? At least your heirs won't have a shortfall (maybe a windfall), then again, maybe not, since about 80% of WL policy holders surrender their policies early.