Life insurance or more specifically, Whole Life or Cash Value Life Insurance is not an investment. I don’t think it is even legal for someone to say it is, but I can say that many financial advisors would talk about the benefits of Permanent Cash Value Life Insurance to your retirement plan. What caught my eye is this piece from Kiplinger.com talking about “10 Financial Myths Busted”. I’ll just say that this time in 2008 if you would have said that permanent life insurance was better than cheap term insurance you would have been laughed at, loudly and for a long time. But now things have changed…
MYTH 6. Life insurance is not a good investment. This canard spread as 401(k)s and IRAs supplanted cash-value life insurance as Americans’ most popular ways to build savings while deferring taxes. True, the investment side of an insurance policy has higher built-in expenses than mutual funds do. But two factors point to a revival of insurance as an investment. One is guaranteed-interest credits on cash values, which means that if you pay the premiums, you cannot lose money unless the insurance company fails (see “Savings Guarantees You Can Trust,” on page 55). The other is the boom in life settlements. If you’re older than 65, you can often sell the insurance contract to a third party for several times its cash value — and pay taxes on the difference at low capital-gains rates.
Truth: A good investment is one in which you put money away now and have more later. Checked your 401(k) lately?
Permanent Life insurance can have many benefits to a retirement savings plan and a good financial advisor will be able to help you decide if it has a place in your retirement plan.
{ 0 comments… add one now }