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Cal Lester
Guest
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 Posted:
Mon Nov 07, 2005 9:01 am Post subject:
Re: Does VUL make sense? |
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"Don" <dwzimm@telus.net> wrote in message news:LMqbf.79810$y_1.43148@edtnps89...
| Quote: | "Cal Lester" <cal-lester@comcast.net> wrote in message
news:9aOdncCY394yuPPenZ2dnUVZ_v6dnZ2d@comcast.com...
\> The answer here is an ABSOLUTE NO ! ! ! ! Although you could in
all probability get more value from the mutual fund "outside" of a
VUL, the term insurance costs would not only mount over time, but
ALL Term Insurance has an EXPIRATION date, which may or
may nor be before YOUR expiration.
But the need for any form of life insurance would decline over time as the
value of the mutual fund grows. Of course, people without dependents do not
need life insurance at all, and accumulation of cash value would best be
sought purely through equities.
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Unfortunately too simple an answer. You assume (and you know what that spells)
that the equity would grow at a constant rate, and that the "OBLIGATIONS' of the
insured would DECREASE at a constant rate.
Not neccessarily true. Many families need MORE Life Insurance with the
passage of time (and I am NOT refering to Fed taxes).
Cal Lester CLU
>
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Tad Borek
Guest
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| Posted:
Tue Nov 08, 2005 1:01 am Post subject:
Re: Does VUL make sense? |
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sugargenius wrote:
| Quote: | I recently went into business for myself, and I trying to decide how to
save for retirement. I used to just max out my 401k. Now what to do?
I met with a FP, and he recommended a $500k VUL and an add'l $1 mil
term. The VUL is $1k/mo. and the term is $600/yr.
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Woody,
I'll put it this way...it's possible yours is the sort of odd special
case that makes VUL a fit, but it's not likely. VUL is by no means a
mainstream product - it's a "special circumstances" kind of thing. It's
an expensive way to accumulate wealth, and the primary pitch for it
involves potential tax advantages that very few people have a need for.
So I'd suggest throwing the question back to this FP. Ask: "What other
alternatives did you consider in coming to this VUL recommendation, and
why did you rule them out?" Then let him talk.
If he doesn't outline alternatives for retirement saving for someone who
is self-employed (such as SEP-IRA, SIMPLE IRA, 401k plan, traditional
and Roth IRAs, defined benefit plan...and perhaps a few others), I think
you can safely conclude that you're dealing with an insurance salesman
rather than a financial planner. If he has really good reasons why all
those don't make sense for you (and I can hardly imagine what they would
be) then you might spend the time to learn about & understand VUL.
But you say your goal is saving for retirement. The first cut is going
to be some kind of qualified plan for your business - you mentioned a
SEP, which allows you to defer in effect 20% of your pre-tax earnings
into an IRA, certainly look at that. And the costs have come down on
small (especially "solo") 401k plans, which allow you to defer a larger
percentage if the 20% isn't enough for you. Both of these allow a great
deal of retirement savings annually - $42,000 total in 2005, which is
probably much higher than what you maxed out as an employee. And the
cost of these plans can be extremely low - free, even.
If you have employees it's more complicated setting them up, but that
doesn't rule out doing them.
Separately: you have a wife and child so it's very likely that you want
some life insurance. Consider that point separately though. If you
decide that you want insurance that will remain in place for your entire
life, then you MIGHT consider VUL for that piece. But only AFTER getting
a retirement plan for work, and tapping out numerous other alternatives
for saving.
-Tad |
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Cal Lester
Guest
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| Posted:
Tue Nov 08, 2005 1:01 am Post subject:
Re: Does VUL make sense? |
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| Quote: | So I'd suggest throwing the question back to this FP. Ask: "What other
alternatives did you consider in coming to this VUL recommendation, and
why did you rule them out?" Then let him talk.
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The BEST answer yet.........
Cal
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jIM
Guest
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| Posted:
Tue Nov 08, 2005 5:01 pm Post subject:
Re: Does VUL make sense? |
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"Separately: you have a wife and child so it's very likely that you
want
some life insurance. Consider that point separately though. If you
decide that you want insurance that will remain in place for your
entire
life, then you MIGHT consider VUL for that piece. But only AFTER
getting
a retirement plan for work, and tapping out numerous other alternatives
for saving."
I made sure my retirement plan was well funded prior to speaking with
an insurance agent. Two possible questions to ask this individual:
1) who would they recomend you talk to about retirement savings if what
they are intially trying to sell you is an insurance product?
2) how much retirement savings and how much insurance does this agent
advice you need?
I think the quoted text was excellent advice. I followed a similar
protocol several years ago.
I have a 401k, contribute 10% and my employer matches the first 6%, I
believe.
I have a Roth IRA and contribute $500 per month. The last 4 months of
the year this money is mine because I have hit the yearly max of $4000.
My wife contributes 12% to her 401k and has no Roth IRA.
I have two insurance policies with my wife as beneficiary. First is a
$300,000 term policy. This is to cover bills and living expenses in
event I die. We know we need my income until my retirement funds have
accumulated enough money to stop working. Second policy is a $25,000
permanant policy (to cover funeral expenses) which has a cash account
which either grows at 2% per year, or is indexed to S&P 500 if market
return is greater than 2%.
My wife also has the same two policies with me as beneficiary. We both
work and recognize the need for each other's income.
I liked the strategy of using discreet products for discreet purposes
(401k for retirement, Roth IRA for further savings, term insurance for
living expenses if I die within 20 years and permanent insurance for
funeral expenses if/when I die, regardless of age. |
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carl
Joined: 30 Aug 2005
Posts: 4
Location: Dallas
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| Posted:
Sat Nov 12, 2005 1:59 am Post subject:
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| For some reason my dad bought me a variable appreciable life insurance by Prudential. I pay a premium of $540 every year and i've had it for about 9 years. My dad says its a good investment. I am 22 years old and still in college. I don't even need life insurance, should i just cash out and invest in a mutual fund?? Life insurance isn't even really an investment right? |
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