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Is an Equity Index Universal Life Insurance Policy a good investment?

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Is an Equity Index Universal Life Insurance Policy a good investment?

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The bottom line with your scenario is if the client was paying $50 per month for $1M in coverage, it would have been long lapsed at age 55 at that price, by the time the widow needed it. With the extra $140,000 that you skim off the top, one could buy term life for a long as necessary. You find me an honest Financial Advisor that can take $200 per month at a 1% flat fee without an initial deposit, making $2 per year from it. Anyone can put $200 per month in a no-load life-cycle mutual fund without any advisor at all. Look, I rarely get personal on the internets, but this is an exceptional case that really ticks me off. This guy invokes his concern for the widows when he knows that he is ripping them off with inappropriate investment products. For someone who is mid-20s, no dependents, and just started contributing to his 401k this product is a license to steal for the salesman. (Maybe that is one of mrannuity’s 11 licenses he keeps talking about). Anyone who tries to sell this product

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I agree with you completely ikkyu2! If someone invested in the fund you have listed, at 25 years old without enough money for diversification, and no saavy for analyzing markets, economic trends, and especially with 40 years to go until age 65, that idea is a good one. And back to the original question – and my backtracking a bit – if the 25 year old did need insurance, I would put him in Term and wouldn’t help him decide if he needed any permanent life insurance until his children were out of college. Then we would take a look at everything, i.e. investment and savings to that point, net worth, projected SSI and pension if any, spouse contributions and career history, beneficiary needs and contribution to the family support, and all other proper planning already in place. I got off track with the argument of the product – EIUL; which would be my ONLY choice entertaining any kind of investment associated with life insurance. (by the way, the tax deferral benefits and compound interest

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Oh, so you are selling inferior investment products because you have the widow’s welfare at heart! Wrong, you are selling inferior investment products because you want to take advantage of the poor widow’s investment ignorance. Let’s work through the original poster’s example. He pays $250 per month in premiums for 30 years. Let’s also assume that he get an unusually high market return of 12% as his salesman claimed. Of the $250, 5% or 12.50 goes for commissions leaving only $237.50 for investment. The annual expenses are 2% leaving a 10% compounded return. We plug the numbers ($237.50 @ 10%) into ikkyu2’s handy little calculator and get a total of $541,340 at the end of 30 years. Now compare that to the person who goes to a flat fee, honest financial advisor who has him buy $1 million of term life for $50 a month and puts the remaining $200 in a low cost Total Stock Market mutual fund. The fees are only 0.1% per year. The dividends are 1.5% per year but fully qualified at the 15% rate

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I disagree that equity life is a good deal when you can buy term insurance much cheaper and it directly serves the limited time that you need life insurance. Why pay for lifetime coverage when you only need it for a limited time. I also disagree that it is the best vehicle for people who have maxed out their tax advantaged accounts. The 5% or more load is unconscionable. On top of that there is probably a 2% annual management fee. You can buy low cost variable annuities at Vanguard that are a much better deal. But I still wouldn’t recommend even annuties for someone this young. They are better off just investing in a taxable account than paying the high fees. For example you can buy and hold a no-load Total Stock Market mutual fund for an annual fee of 0.1% and that is very tax efficient, about 0.25% per year. You only pay taxes on gains when you withdrawal, the same as for equity life. Because of the high fees and loads associated with equity life, you will end up with less after-tax

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Run away from this agent as fast as you can. He is pushing this plan because it is good for him, not for you. He will be collecting at least 5% of each payment from you for the rest of your life. A few of these deals and he is set for life. That 5% off the top each month is money that never goes to work for you in your investment. Read part 1 and part 2 of this this warning. Life insurance and investments should be kept separate. Depending on your age and health you can probably get $1 million in term life insurance for about $50 per month. With the $200 you save over universal life you can invest 100% in a better investment vehicle like maxing out your 401k or IRA. If you need life insurance — you currently have kids or other dependents — then buy term life insurance. This is generally a fixed

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