Objective information about retirement, financial planning and investments



  1. I worked in the life insurance industry for five years and would always cringe when I would see reps sell these as retirement vehicles when that’s really not what they’re meant for. There are so many other options available out there, but I think many times (not always though) the rep is just selling something to someone that is not as informed as they should be.

    • Roger Wohlner says

      John thanks for the comment. I am a fan of life insurance, but like most other products it has a core usage and that is to provide a death benefit. When reps start to invent “new and better” ways to sell more of it often this is not in the best interests of those being sold to.

  2. Good post, I thinking sharing examples like yours will help people understand that there is a dark side to what the sales people are saying! I have a life “rule” to not combine financial products that serve completely different purposes, because typically one if not both of them do a poor job. So I avoid permanent insurances in favor of a separate term policy and a separate investment. This way I can pick the best policy and best investment to suit my needs and then not have to change both when my life changes!

    • Roger Wohlner says

      Thanks Andrea well said. I totally agree about not combining financial products. Many folks need life insurance for a death benefit, but I’ve rarely seen an example of life insurance being a good investment.

  3. Yes agree with you guys. I also find the post very valuable. It will really help people to understand the value of insurance. Well its not all about some particular insurance I think all insurance is plays very important role in our life. People should know about the major and important parts of insurance. It is the one of the must thing to buy life insurance.

  4. I agree with you that life insurance should not be used as a retirement savings vehicle in most situations. But with high income earners who aren’t eligible for Roth IRA’s and are already maxing out their employers retirement plan I think life insurance can be a solid addition to their retirement savings. I too have seen the “familiar song” you mentioned above, as a matter of fact, I see it all too often but that doesn’t mean it cannot be a good “investment” in certain situations. In general I am a buy term and invest the difference type but I would encourage all planners to look at over-funding(up to the MEC limits) Univeral Life Insurance for high-income clients.

    • Roger Wohlner says

      Ryan thanks for your comment, I agree. No solution or product is right or wrong all of the time, that’s where a qualified advisor can add value.

  5. this is a great article. i wish more people would talk the truth about this type of life insurance. always best to buy term insurance and invest the rest in a tax sheltered vehicle.

  6. Mr. Wohlner attempted to answer the question: “Is life insurance a good idea as a retirement saving vehicle?” I was very excited to read this article, but was equally disappointed by the was roger prove his point. I am relative new to this industry and do respect anyone who has a CFP designation. However, the case study he used to prove his case was bad, and more a reflection of a bad advisor not a bad strategy.

    For example, anyone who is using insurance as a retirement plan should not focus on the death benefit. A DB of 2 million was the wrong place to start. Also this client is in his late 40s, probably 49, so the mortality cost would be very high and therefore consume premium needed for cash accumulation. If that client needed that level of protection he should have taken a policy designed for that.

    The fact that the policy did not deliver should not be a reason to disparage the strategy. Insurance agents use suitability standards and so like any other investment, the product has to be suitable.

    One of the basic questions a financial advisor should ask a client is ” what are you trying to achieve?”

    • Roger Wohlner says

      Thank you for your comment Orland. In my opinion the client (who as I indicated purchased this policy before he was a client) would have been far better served in trying to meet his objectives by looking at other retirement savings vehicles as opposed to the life insurance policy. While the level of the death benefit was appropriate given his situation, there are better vehicles to have provided for this. As a financial advisor, life and other types of insurance are valid planning tools, I am just opposed to life insurance sales people who feel that selling a policy is the solution for all financial problems. Sadly In encounter this situation far too often.

  7. Roger (and everyone else),

    What do you think about using Index Universal Life for retirement. From my understanding it is a great product. Not for everyone but great for some. From what I’ve read the biggest benefit is maintaining control of the retirement funds. The idea being that all access to the policy would be through loans (wash, or cost near .1 percent) with no penalties or taxes. Apparently the product uses options on an index so the client either gets nothing, or they get what the index produces, up to a cap.

    • Roger Wohlner says

      Bobby thanks for your comment. In general my answer would be that I’m not a fan of this approach, but as with anything I’d have to take a look at the particular policy and the situation to which it is being applied. In general I’ve found that using life insurance as a retirement savings vehicle is not a sound approach.

  8. A very good article with a very interesting heading- Life insurance as a retirement saving vehicle- a good idea ? Well, pretty good. When one is in service he/she should plan his financial planning, investments and retirement plans. And its a wise decision indeed. These policies provide very optimistic investment assumptions.

  9. If you are a corporate employee in mid to upper management you might have access to supplement non-qualified plans. These allow you to defer extra amounts over and above the limits of the 401(k).

    • Roger Wohlner says

      Thanks for your comment. Non-qualified plans can be a viable option but employees must be careful not to over do it due to the fact that these plans can be subject to the claims of creditors should the company experience financial trouble.

  10. Florida Investor says

    I’m getting invitations to buy a “Retirement Insurance Contract” The selling point is you never lose principal – if the S&P goes up, your investment grows with it. If the S&P goes down, your investment does not go down at all. It is presented as a safer retirement alternative than an IRA or 401K. Is this just a new “gotcha” scheme?

    • Roger Wohlner says

      Thanks for your comment. Sounds like some sort of cash value policy or perhaps even an Equity Indexed Annuity where you receive a portion of the gain of the S&P 500. These can seem attractive and are often sold by agents playing the “fear card.” I can’t say they are all bad or scams, but suffice it to say there are no free lunches and the agent likely makes a bundle selling them. A qualified financial advisor could likely help you set things up to get the income stream you are looking for with an appropriate amount of risk. ALWAYS dig into any financial product pitch. Frankly planning should be the first concern long before implementation via any financial or investment product is discussed.

  11. Florida Investor says

    In your article, you suggested a “LOW COST, NO SURRENDER variable annuity such as those offered by Vanguard” Would that be an immediate variable annuity or a deferred variable annuity?

    • Roger Wohlner says

      I don’t do much with annuities, typically I get involved if a client has an annuity that I feel should moved to a lower cost vehicle. I have not really investigated what Vanguard offers in terms of their immediate annuities so by default my comment was directed to their deferred VAs. If you are not working with any advisor take a look at their site and if you have questions call their 800 number I’ve generally found the folks on the other end of the phone at Vanguard to be knowledgeable and helpful. Good luck.

  12. John Lawrence says


    While Life Insurance is a “Great Evil” amount financial planners, I believe the critique of the article is not totally unfounded. I am in the life insurance industry and have seen many people with poor life insurance planning. However; these were not all caused by bad agents. Many were not working based upon a number of issues, one being the clients saw cash value in their policies and stopped paying premium as scheduled and thus the policy got into the trouble. Not all fault with the the Life Insurance or Life Insurance planning.

    You are correct, there are a lot of way one can save money for retirement, however there is a large segment of the population that do not have access to all the available tools due to IRS guidelines. Also, a lot of these current options do nothing but create a bigger tax bill in the future.

    Life Insurance is a tool much like the other options you mentioned, but beyond the death benefit, life insurance offers unique tax advantages and when done properly can help client reach their retirement goals.


    • Roger Wohlner says

      John thanks for your comment. First of all I don’t at all view life insurance as evil, quite the contrary I view it as an essential part of the financial planning process for many clients. The death benefit can be used to cover the financial loss when a client dies before being able to accumulate sufficient resources for college, to allow for the continuation of a family’s lifestyle, to facilitate the orderly transition and continuation of a business, to cover estate taxes, and many other uses.

      There are even a few cases where the tax benefits can be useful as you describe.

      However, in my experience, all too many life insurance agents and registered reps try to sell cash value policies of various stripes for a variety of uses that might be better served with a different and far cheaper vehicle. In the case that inspired this post it was the fault of both the agent and my client that this didn’t work. This occurred prior to my involvement. However, in reality, life insurance was not the best vehicle to fund this client’s need for additional retirement income.

      Life insurance is a often useful financial planning tool. Quite often all that is needed is a term policy with a sufficient death benefit. What irks me is when a less than professional agent tries to use life insurance where it really doesn’t belong as a means to enrich their bottom line at the expense of a client who doesn’t really understand the full implications of what they are buying.

  13. Permanent insurance is needed in more places than it isn’t. People are living longer now than ever before, more and more term policies are coming due with people unable to renew for financial reasons. Now, this is ok in the scenario where it comes due and the family has met or exceeded their financial goals and are now in ideal financial condition. the problem, however, is that scenario has not in my experience been the most common. Its impossible to predict exactly what our future is going to look like. For this reason, I believe it is important to always have at least a small base of permanent insurance (so final expenses will always be covered) and supplement that with enough term to cover “economic loss” which should also include loss of income.

    I’m am an insurance broker, and I have seen an increasing amount of requests to insure 70-80 years who are insurance-less and have medical problems. Trust me, that is not the time to be buying life insurance.

    • Roger Wohlner says

      Thomas thanks for your comment. As you noticed from the reading the post my issue was not with the potential need for some insurance as you describe, but rather with over zealous agents who sell policies to high earning professionals as a supplemental retirement savings vehicle. Rarely in my experience is the best way to go here.

  14. Well, I would say that most accounts invested in stocks didn’t perform like they were illustrated. However, a VUL invested with the same allocation as a diversified investment portfolio undoubtedly did worse than the average managed account even if the managed account had a 1-2% ongoing commission levied against it that a fee based advisor charges. VUL fees are much higher. VUL’s place the risk management burden that insurance companies would other wise retain in a traditional cash value policy back onto the owner. That is to say the “assurance” portion of an insurance policy is removed with a Variable Life Insurance Product.

    Life Insurance should be treated as fixed income investment that needs to be funded correctly over time in order for the owner to receive the benefit. There isn’t a reason for an investor to pay an ongoing commission (fee based) to have bonds added to a portfolio in order to reduce volatility if steps are put in place through the proper funding of a fixed cash value life policy.

    As for the opportunity cost of tying up a large portion of ones money in the slow growth of a fixed life insurance policy – buy call options on the market. They cost $5 each in commissions and the eanings of the fixed income in life insurance pays for the “time premium” the options have. Now an investor get maximum value from the fees they are charged (through risk management), have maximum upside potential and an absolute worse case scenario spelled out if the market goes to hell (both if interest rates rise and if the market plummets) because of the way options and life insurance work together, while having liquidity to buy assets that fully committed investors wouldn’t have.

    Of course, there isn’t much money to be made by fee based advisors using this strategy when an insurance company invests 85-95% of a person’s portfolio. There isn’t any “alpha” in this strategy…then again, is there anywhere?

  15. Max Rooney says

    I am a CFP practitioner. As part of my personal financial security plan I use carefully designed (and over-funded to the MEC limit) dividend paying whole life insurance from a top rated mutual company. I use this as a unique asset on my balance sheet to provide supplemental retirement benefits and other living benefits (access to capital) along the way. Carefully designed permanent life insurance can be an excellent addition to a person’s retirement (and overall financial security) plan. The common problem, which you have described in your article, is that most policies (such as variable life, variable universal life, equity indexed universal life) illustrate overly optimistic assumptions based upon hypothetical scenarios that are not grounded or backed-up by a real track record. Furthermore, many of those policies have high expenses and are sold by stock companies who solely exist to turn a profit for stockholders, not the policyowner. A carefully designed (and potentially over-funded) whole life insurance policy from a top-rated and dividend paying mutual company is completely different. The policyowner is a direct owner of the company (versus a stock company) and as a result the expenses are lower and the policyowner directly shares in the gains of the company (via dividends). The assumptions and illustrations of these policies are based on actual (current) performance which includes expense, mortality, and investment experience. They are not overly optimistic, rather, they are reasonable. Manyof these policies, with the best carriers, have lived up to their expectations and illustrated values. Your framework does not apply to the right type of policy from the right company. Unfortunately, much of the life insurance industry (and many companies) are not up to snuff and most of the carriers exist as stock companies versus a client-owned entity which exists preeminently for the benefit of the policyowners (versus stockholders). I partly agree with your comment, “In general I’ve found that using life insurance as a retirement savings vehicle is not a sound approach,” however there are some serious exceptions to this statement. Insurance expert James H. Hunt, CFA (former insurance commissioner of VT, http://www.evaluatelifeinsurance.org/) also knows the value of carefully designed whole life insurance from a top carrier as I have described. Properly structured life insurance is a niche and unfortunately many substandard carriers and products give life insurance a bad reputation.

    • Roger Wohlner says

      Max thanks for your comment. Your usage for both retirement and living benefits seems sound and well-executed and certainly in your case this seems appropriate. As you mentioned too often the wrong type of policy is used and the agent may not be as knowledgeable as you are and this solution may not applied and/or executed properly.

  16. Great, in-depth article Roger. You make great alternative recommendations that are likely much more favorable than using life insurance as a savings vehicle. Would you recommend term life insurance for the 38-year old dentist to protect his family, business etc and invest his money separately in annuities and IRA’S? Anything else for someone who is that young and has extra money that wants to be aggressive with their investments? If interest rates start to inch back up again, would you then recommend whole life?

    • Roger Wohlner says

      Thank you for your comment. Obviously every case and situation is different but term life would likely be a great alternative to provide a robust death benefit for the cost to protect his family. Ideally the dentist would have access to a 401(k) or other workplace retirement plan, including perhaps a pension if the business was throwing off enough cash. Whole life can have its uses in certain situations again I wouldn’t say yes or no on a blanket basis. Overall I will admit I’m not a fan of cash value life insurance as an investment vehicle.

  17. Good article thank you guys !!

  18. Acknowledging that most articles such as this must be generic, this one pretty much sets up a ‘straw man’. Of COURSE insurance–or any other vehicle–can be ‘bad’ if not appropriate. However, frankly, there are solutions (almost always tax driven) for the higher net worth client that can only be solved by insurance, it being the tax-advantaged vehicle that it is. In fact, some code-driven strategies require-by statute–that they be funded by whole life policies. If anyone wants to discuss, click on my site and email me.

    • Roger Wohlner says

      Thanks for your comment, but I fail to see the “straw man.” Certainly insurance can be an ideal solution in certain cases as you correctly mention. My point was that often insurance is sold as the “wonder drug” for all that ails folks financially. I suggest that people trying to solve an issue like supplemental retirement savings ask a lot of questions and that they fully understand what the agent is trying to sell them. The case in point that discussed was not the first or the last time that I’ve seen a cash value policy misused.

  19. You can’t blanket your advice for everyone…that’s just not good advice. Also you must know nothing about insurance cause if you did you would know the wealthiest family’s in the world use this product as place they save a large amount of their money. Quite interesting that the financial planner says not to use insurance… Your funny and uneducated. I’m 75 years old with 40 years in the insurance buiness and your article has so many holes in it it should be Swiss cheese…

  20. By the way stop saying “in your opinion ” because your opinion is not gospel. All agents aren’t as you say. I know a lot of financial planners and brokers who lose families 529 accounts and life savings because they think they know what they are doing with their money. Your not warren buffet so the next time you write an article try putting in the pros and cons and not just what some guy from the middle of Chicago think he might know about insurance….educate yourself before you hurt a lot of people by the spewing of nonsense you wrote.

  21. That’s funny how we posted a comment that you didn’t like because it is completely against everything you believe and then you erased it….stopping a coward and actually try to answer the questions

    • Roger Wohlner says

      Steve thanks for your comment. I have no idea which comment you think I erased but generally I only delete comments that are obvious spam. I welcome comments that disagree with my point of view.

  22. Thanks a lot for sharing this amazing post! Hope to hear more from you!

  23. I have just been approached to buy a life insurance policy for retirement when I found your article. It’s looking like it is not a good idea since I probably will not max out on traditional retirement investments like IRA’s or 401K’s. I was told that all of the wealthy people are buying LIRP’s and I assume that is because they max out on traditional retirement investments? What is your best advice for a small business owner, S corp, early 40’s married to early 50’s with no retirement set up yet?

    • Roger Wohlner says

      Thanks for the comment. The answer will depend on a number of factors but you could consider a Solo 401(k) if no employees or even a small business 401(k) if you do have employees. A pension might also be a good idea. Feel free to contact me via contact form if you’d like.

  24. Hi Roger!

    Wow incredible action you’ve gotten on this post. It does prove both how important and how misunderstood life insurance, retirement, and investments are. I came into this industry in the late 80s as a third-generation life insurance agent, overtime and migrated to being independent registered investment advisor and shortly there after the fee only investment advisor. Over that time I have trained many groups of financial planners on the uses of lifeInsurance, and many agents on the value of financial planning. I have for years attempted to change conversation among life insurance agents about the potentially valuable uses of investment related life insurance, but I’ve come to realize that so long as life insurance is sold by commission the conversation is not likely to change. The conversation will remain misleading, and will create expectations of certainty what only expectations of possibility should exist.

    It is possible today for individuals in for fee-only advisers to choose life insurance product for their clients and make the distinction between product types based upon the client’s financial needs, and not for the cost of the insurance. What I’m saying is is that it is not necessary to pay premium deductions, commissions, or endure surrender charges in order for an individual to purchase from an insurance company, a term policy, a universal life policy, or a variable universal life policy, and either a single life or survivorship life structure. It is also not necessary to pay a different cost of insurance in order to own a different type of policy. And while this is been true for more than five years, very few know it, and among many of those who do know it, they still don’t get it as they are so blinded by the commission light.

    Roger, if you would like I can send you a presentation that I give to fiduciary advisors interested in learning about how to use life insurance when it does not pay commissions, make premium deductions, for the insurance company, impose surrender charges, or change the cost of coverage by policy type. In a geeky, insurance, financial planning sense it’s really very interesting.


    • Roger Wohlner says

      Ben thanks for the comment. This is actually the most viewed post of all-time on this blog. I don’t think we’ve ever met but your dad is a respected name in the industry. Also if I recall you and my former Rotary club mate John Bonnett used to work together.

      Life insurance is an integral part of a financial plan, but it is all too often sold to clients for the wrong reasons.

      Please send me a copy of the presentation I’d love to review it. Thank you.

  25. For some reason it seems like every advisor recommends against “investing” in whole life, yet still 63% of all new individual life insurance sales in America are whole life. Shocking.

    • Roger Wohlner says

      Thanks for your comment. Perhaps an indication of the sales abilities of life insurance agents. Whole life can have its place as a product but I’m guessing a key reason behind the statistic you cited is that whole life policies generally carry a hefty commission for the selling agent.

  26. Hey Roger,
    I completely agree with your assessment (and I’m a life ins agent). I would never sell whole life. At least with UL, the premiums are flexible, but even then, taking the money out is really tricky. Like you said, take out too much, and you’re in danger of lapsing the whole thing (and losing the so-called “tax benefits”).

    What kind of “investment” vehicle FORCES you to contribute every year, and then only allows you partial distributions or 100% of the tax benefits disappear?

    I think Kym’s # is true because LIMRA estimates that over half of Americans want to do business face-to-face. If Americans were all using the online agencies (who mostly sell term) we wouldn’t have this epidemic on our hands.

    I think it’s time for a movement. What do you think?

    • Roger Wohlner says

      Chris thanks for the comment. Whole or cash value life can have its place, but sadly it is too often sold by agents with far less ethics or knowledge than you have. In the situation I used as a basis for the article the attorney would have been far better served by starting a pension plan or some other qualified plan.

  27. Great post, very informative, thanks!

  28. I believe the investment goals would also affect the decision to purchase WL/UL, not just age/income/family size/profession. In my case, I was approached by an insurance agent for WL, with a relatively low death benefit, to help fund our retirement and help out with the college tuitions that will come up in about 12 years (I am a 38yo w/two kids). If you are not sure what the tax rates will be like in the future, you may choose to NOT max out your pre-tax contributions, and put some in the after-tax basket. If that is the route, then you would not be maxing out on your 401ks at this point in time. Who knows if this is a sound investment, but if your income is over the Roth IRA limits, then you might be looking at a short term (10yr?) whole life policy that may provide a safe return for the next 10 years for the cash that you have now, and/or you may use it to fund some of the college costs. I am not an insurance broker, or have any kind of financial background, expect reading what’s on the web about 401ks etc. I wonder if this approach may work for some.

    • Roger Wohlner says

      Bill thanks for your comment. You sound like an intelligent guy, does this really make sense or is it some ultra-slick sales pitch by a life insurance agent? Investing inside of any type of whole life product is rarely (in my experience) a good deal for anyone but the agent who sold you the policy and the insurance company. If you want to invest in an after-tax bucket to diversify your tax position done the road, why not just use some low cost index funds or ETFs in the appropriate asset allocation? If you are convinced the route suggested by the agent does make sense at least do some comparison shopping between policies and companies.

  29. No, I am not an insurance broker and this was not a sales pitch… I actually did not purchase the policy because I need to do a lot more research. The more articles I read like yours, the more I am convinced that this requires more research, or hiring a certified financial planner. I’d rather pay for the CFP fees uprfront than getting stuck with a policy that an insurance broker has sold with high fees and low returns, which would eat more into our retirement/college money.

    The other policy that was presented was a 20 yr life with supplemental retirement income. I am assuming that’s what an annuity policy is called in general. I could not see myself paying into this for the next 20 years.

    Like I said, my knowledge in this area is currently pretty limited, so I did not want to make a blanket statement that WL insurance is a bad choice for everyone, since I was not sure if it would work for some other folks that have a much different situation than I have.

    I will research the index funds and ETFs. The WL policy was showing 4-6% return rates, and I am assuming the index rates would be similar (since you are suggesting those)?

    • Roger Wohlner says

      I never assumed that you were an insurance agent, but rather someone who has perhaps listened to too many of their sales pitches and either needs an Alleve or a good stiff drink (LOL). You are way over-thinking this in my humble opinion. I’m not trying to put money in the pocket of a financial advisor, but I really think that you need to find a fee-only advisor that you are comfortable with and have them review your situation and offer some suggestions. They can help put goals like college savings (as the father of three college grads it is not cheap), retirement, etc in the proper prospective and offer a look at several alternative solutions. Like many insurance agents, your guy seems to be leading with a product rather than with a financial plan. Good luck.

  30. I do not see Life Insurance as a retirement savings option. For me it is more like an emergency fund governed by strict terms and conditions.

  31. Lilia Manibo says

    Great post! For me, life insurance and retirement savings are two different things. As, life insurance is for your beneficiaries and retirement savings is for you. Thanks for sharing this, hoping for more. It helps a lot 🙂

  32. Carl Flarity says

    I am 65 and about to retire and have a large amount of money in a savings account. My financial advisor has found a life insurance policy that, after the cost of insurance, will pay 1.9 percent during the first year and has no surrender charges. He is suggesting I purchase this policy as a place to park the money in the short term. He claims I will be able to withdraw any or all of the money at any time without any penalty. Said funds would be available within a week. This is considered a MEC (Modified Endowment Contract). The death benefit is double the initial premium. I’ve carefully read the fine print and can’t find any holes in the logic. But my gut tells me there’s a hidden catch somewhere that will bite me. Any thoughts?

    • Roger Wohlner says

      Carl thanks for the comment. Without the ability to do an in-depth review of the policy my short answer is to listen to your gut. What’s in this for the financial advisor?

      The better question is what is the ultimate purpose of this money? When he says withdraw the money at any time, what does that mean? Is this a policy loan? If you withdraw the money do you still have to keep paying premiums? Do you need the death benefit? These are just a few of the questions I would ask.

      I’m not necessarily saying this is a bad idea or that the advisor is providing bad advice, but there are many questions to be asked which hopefully he won’t object to answering.

    • Max Rooney says

      Hi Carl,

      Roger raises a good point by asking what the ultimate purpose of the money is. Are you so well-funded for retirement that you don’t expect to need the money? Do you have a desire to potentially increase (or protect) the legacy you may leave behind to loved ones (in a tax efficient way)? If so, this avenue may be helpful. Often times life insurance vehicles may have a hefty load or commission on the front-end and/or the back-end (surrender charges) unless it is designed properly and with an appropriate company of good standing. There are exceptions to the conventional wisdom that permanent life insurance isn’t a good option. TIAA, for example, provides no-load/surrender-free low-cost life insurance vehicles that operate like description you provided. For the right situation, these type of avenues can be really helpful as a compliment to an overall financial plan. A conservative investor with excess cash, who values legacy, and is well-funded for their own retirement may benefit from a properly structured life insurance policy. In my own case, I max out the conventional retirement plans (Roth 401k and Roth IRA) so I dump some additional money into “overfunded” permanent life insurance policies with a top-rated mutual company to compliment the other areas of my plan that are market-based. It will be important for you to consider the illustration that your Advisor provided, guaranteed (“worst case”) values and non-guaranteed (“current”) values as well is the company providing the policy, their track record, and their solvency. It is also important to consider how this tool may fit (or not fit) in the context of your own goals and situation. It sounds like you may be considering a lump-sum (“one and done”) MEC versus a non-MEC with ongoing premiums. Keep in mind that if you access the cash value from a MEC the gain will be tax first as ordinary income like a non-qualified annuity but any death proceeds are generally income tax-free. Policy ownership is important to consider if your estate value may be nearing or above (or projected to be above) state or federal limits. This is where an ILIT may be worth exploring. James Hunt (evaluatelifeinsurance.org) provides fee-only analysis of policy situations like yours. I’m a life insurance enthusiast and feel comfortable with the topic as well. Feel free to let me know if you had questions/concerns, I wouldn’t mind weighing in. Wishing you well in your life insurance endeavors! -Max Rooney, CFP, CLU, ChFC, CASL

      • Max Rooney says

        P.S. I don’t think permanent life insurance is “better” than term or vice versa. They can both be valuable in the context of someone’s overall financial plan provided that the product is properly structured with the appropriate company and used in a way that addresses that person’s needs. Low cost investing is great, but only insurance companies can transfer catastrophic risk away from the individual. Also unique to insurance companies are guaranteed lifetime annuitization strategies which can serve a helpful role for a component of one’s overall retirement income plan. Like life insurance, many annuity avenues carry fees and commissions that can create a drag. That said, there are exceptions to the rule and conventional wisdom. There is a demand for high quality, plain vanilla, and low cost options within insurance solutions just the same as how this demand exists for low-cost (and effective) investment solutions. If your financial planner is heavily biased towards using pure investments or pure insurance, I believe that can be a red flag. Usually it makes sense to incorporate some balance between risk protection (insurance) and wealth accumulation (investments). That particular mix is unique to each client situation, their comfort level, and what they’re really looking to accomplish. Advisors should be knowledgeable and unbiased across the wide array of both insurance and investment options.

  33. Carl Flarity says

    Update: My previous description of the Life Insurance policy was based mainly on the agent’s description, samples and examples. I just got the actual contract and find that it is nothing like his description. My gut was right. Although there is no surrender charge, there are severe restrictions on short term withdrawals (limited to 50% in the first year) and the interest rate quoted is only the “current” rate of 4% (minus cost of insurance gives 1.9%). The guaranteed minimum rate is 3%.

    I’m actually in a great financial position for retirement. Between my 401K, several pensions and Social Security I’d have enough without having to use this large chunk of money. However, we were planning to purchase a second home all cash using the large chunk of money within the next year. So, it needs to be truly liquid. The life insurance policy is not the answer. Thanks for your responses.

    • Roger Wohlner says

      Carl thanks for the follow-up. There are many excellent insurance agents out there and life insurance is an important tool in many financial plans. Based on your description it didn’t sound like this policy (or any for that matter) was the right answer for your short-term cash needs especially in light of the fact that you will be buying the house within the next year. Safety and liquidity should be your top returns, any return you earn is gravy IMHO.

  34. Great ideas to invest in an insurance policy which will give benefit after retirement. Your little savings can save you from post-retirement issues. Good article for discussing financial problems which give relief to customers

    • Roger Wohlner says

      Michael thanks for your comment. However the point that post makes is that life insurance is generally a lousy investment for retirement.

  35. James Wilber says

    I appreciate the different points of view, however, I disagree. Life insurance is what it is. It pays a defined amount at end of life. As “Whole life”, it has a Cash Value of Life Insurance, (CVLI), which is actually and asset, defined line on a Personal Financial Statement (PFS), required by Banks for FHA loans. “Life” insurance is not and shouldn’t be confused with living income or assets for retirement. However, if integrated with with a life strategy, early investment in a life insurance policy can “insure” retirement and a life legacy. Appropriately structured, a fix annuity financed with 100% of an individual’s investment assets can be replenished at death with a life insurance policy, providing retirement income until death and legacy value to beneficiaries upon death. An equivalent structure is impossible, with investments alone. I would recommend, don’t limit your view of Life Insurance as a single type of product and integrate investments to accomplish what they are best used for.

    • Roger Wohlner says

      James thanks for your comment. I’m a fan of life insurance, even at times whole life or permanent policies. As I mention in the post, I’m not a fan of situations where whole life is used as a solution seeking a problem which was the case in the situation I outlined. Whole life can be effective in a number of situations including certain estate planning scenarios. Overall I think life insurance is a key part of a financial plan. However, the policy suggested needs to fit the needs and situation of the policyholder. Life insurance is rarely, if ever, the right solution for accumulating retirement assets in my experience.

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