Whole Life has an element of investment built into it.
And the percentage of investment increase in whole life is low compared with the return from a S&P Index fund.
So when you are trying to get protection for your family, buy the cheaper term life insurance.
And when your kids grow up and you have enough for you and your wife (hopefully), you can cancel all life insurance, and with the difference between term and whole life, to invest, you will have built up a nice nest egg.
Others may have a different life situation. The above worked well for me. I have no life insurance today.
Bonds have an inverse relationship to interest rates so not safe – that is where the balanced portfolios put their balance – along with blue chip stocks.
Real estate is just as “aggressive” as a stock. Rides a market etc.
Business is a good place to invest.
I like reading about what people think so I appreciate the feedback. There is a lot of bad whole life out there so much of the criticism is fair. I just find that it is the best place to store medium and long terms assets in a safe, guaranteed environment. Tax free growth and distribution plus 5% growth is nice. It just sucks early in the contract.
Thanks for the feedback tho! Certainly a lot of fair criticism of it out there.
Of course. A market dip allows you to buy at a discount. I’m referring to people past the asset accumulation phase… when you’re retired you are realizing your gains and losses… so if you aren’t reinvesting you need to let your aggressive dollars recover
Also IB, as we’ve discussed before most investors are passive investors as opposed to active like you… which means they are doing cheap indexing or they have someone professional manage their holdings.
So for most people their performance is out of their hands… then it is more of a function of dollar cost averaging and avoiding fear/greed – sell low, buy high
Schiano, everything is time horizon. The longer the window, the lower the risk.
Real estate is hardly “aggressive” if purchased well and if the strategy is to buy and hold. For example, if I buy a $4 million commercial property hoping to flip it a few year down the road, that is risky, but what if I but an undervalued commercial building planning to hold it for 20 year, with tenants paying the mortgage the whole time? Hypothetically, I put $800K down, essentially pay nothing going forward because of rent, sell it in 20 years for $9.5 million. I probably made income along the way because the mortgage was paid down so the rent became income, but even leaving that out, you tell me what the return was? 10-11%? Secured by real estate?
Most of the best investments are thing that are not sold by people selling investment. Start a small business, have it buy and pay for the real estate. You dont need a stock broker and you dont need to be a day trader to make good returns in the market with only modest risk. You could put money in a low cost fund (Vangaurd etc) or even follow a simple Dogs of the Dow strategy (as one of many) and make 7-9%, with added benefits of low transaction costs and long term cap gains.
In other words, its not rocket science if your patient and have a long horizon (and you’re not just rationalizing your gamble addiction as “investing” lol). And as my first boss said to me once “you are your best mutual fund,” meaning nothing tops individual earning power so invest in yourself
All good points. And I’m all about real estate and rentals too. Those are tough dollars to replicate. There is still volatility there – that logic would assume that nothing is aggressive if you wait long enough – to your point on time horizon.
I see whole life as a pocket where you stuff 5-10% of retirement dollars. It helps to make your aggressive assets last longer and allows investors to be aggressive longer – meaning it essentially lengthens your time horizon.
Plus the added benefits of legacy planning and estate tax offsets.
One can make contributions to a Roth IRA and this grows tax free and is also
tax free when taken out at 59.5 or later.
Thing is, the IRA can grow at a much faster rate than a whole life insurance policy.
A 20 year old puts $5000 in a Roth for 10 years and then stops. Assume 8% interest.
At age 65 he has about $1,070,944 Tax Free.
Also, the principal or contributions can be taken out at ANY time, tax free.
The earnings can be taken out tax free at 59.5 and there is some rule about holding for 5 years that allows withdrawal of earnings tax free, prior to 59.5, for special reasons, buying a house or become disabled, etc.
Yeah… it’s too late to do it for 2018 unfortunately but you can obviously do it got 2019.
Back to safe assets… a ROTH is considered aggressive, even if you use bond funds… bonds are not safe. If interest rates rise (which they will) the value of your bond fund will go down.
Plus bonds have shitty return… notes and bills are even worse.
Talk to your CPA about whole life. It gets a bad rap because of so many shitty companies… but if you pick a good one like New York Life, Northewestern Mutual, or Mass Mutual… these companies are AAA rated and the internal rate of return in somewhere between 4 and 6% in the policies. Plus the benefits or the permanent life insurance.
Seriously, look into it yourself. Universal Life is typically for high income earners with variable income but it can also be a good safe asset.
Remember, aggressive assets is how your grow your wealth. Diversification is how your preserve and sustain that wealth.
I’m up 18.33% thru today (a lousy day) year to date.
I wouldn’t consider giving my money to someone else, much less someone who paid agents a large commission to get my money and has beautiful office buildings paid for by making money off the premiums paid.
Insurance companies do have the advantage of their paid out benefits being tax free.
But the ability to step up your cost basis to current market value at death in a private account does somewhat negate that advantage.
But the big thing is the comparison of the rate of return. It just doesn’t compare.
Regarding my comment of using bonds for a conservative Roth IRA, I am talking about holding the actual bonds in the account (not a bond fund). There is very little risk.
You are right about bond funds. The principal goes down during periods of rising interest rates.
Following the actions of David Tepper, famous hedge fund operator, now owner of the Carolina Panthers, I went totally into the market in 2009.
The S&P had gone to around 1500 in Aug of 2007. From there it dropped to a low close around 678 (today it stands at 2905) I rode the recovery up.
In 2015, at about 2050, the S&P plateaued. In fact the S&P lost around about 2%. in 2015. In 2016, for the first 10 months, the S&P was up about 2%.
At that time (2nd half of 2016), two or three times a week, I heard Corporate CEO’s talk about how the many executive orders from Obama was hindering their business. Also because the bull market was then 7 years old, many floor traders were predicting a recession.
When Trump campaigned on the promise of terminating many of the Obama Executive orders that were curtailing business, it was pretty easy to guess that the market and the economy would pick up from the plateau of the last 22 months, if Trump won the election.
Trump kept his promise, in the early days of 2017, Trump terminated more Executive Orders than any other president had ever done, regardless of the length of time a particular president had spent in office, and the market took off.
Yes, I certainly made a lot of money as the market recovered from a 50+% drop ending in March, 2009.
Yes also, I don’t think the market and economy would have done as well, since Nov 2016, as it has, without Trump.
I think it’s a good idea if you start it early in your life and you are not overdoing it with the red lines of the insurance companies.I started 10 years ago and I got some good rates or at least that’s what I thought when I was choosing my provider. Unfortunately you need to be more thorough when you choose your plan. Of course it’s a great investment for your future security both in financial and mental relation. I would hate for my family to be left in unknown waters if something happened to me one day. It’s just that I’m regretting that when I chose my plan sources like https://www.lifeinsuranceblog.net/life-insurance-rates-by-age exist in order for me to investigate better all the requirements for my age bracket.
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