Universal Life Insurance

[Sherbears]

Hello, My name is Sherri and I am new to this site. I'm glad I found you. I am a 49 single person just now starting to save for retirement. I was approached with the opportunity to purchase life insurance with interest growth through a company called WRL (Western Reserve Life). The agent company is WFG (World Financial Group). The potential growth sounds too good to be true. Is anyone familiar with these institutes?

Thank you
Sherri

[jpg7n16]

Life insurance should be just that - insurance. It is not a retirement savings vehicle. And the person selling you that product may not have your best interest in mind. In fact, if you're 49 and haven't saved for retirement yet, the likelihood is that you do NOT have a life-long insurance need.

-What is your need for life insurance coverage?

You should get life insurance to cover the need you have for life insurance. Likely term to age 65/70/whenever you expect to retire.

• What changed and got you looking at your retirement picture today?
• What sort of retirement planning have you done so far?
• Do you have a company savings option? (401k, 403b, 457, SIMPLE IRA, SEP IRA, etc.)
• Have you looked into IRAs?
• How much excess funds do you have to save per year?
• How much wiggle room is there in the budget each month? (If little, please post your budget for review)

I'd start by using some sort of retirement calculator. Try this one:

AARP Retirement Calculator - How to Retire, Plan for Retirement, What Is Retirement? - AARP

[Sherbears]

Thank you jpg7n16 for your insight.

I am starting so late in life because my financial situation is finally allowing me to do so. No excuse, I should have started much earlier. I am starting over again with absolutely nothing. I am just starting to search retirement plan options.

The reason I ask about WRL is that it claims to have an interesting angle that would allow me to do quite a bit of catch up, with a guarantee minimum 1% interest rate, a non guarantee current average of 8% interest rate resulting from changes in certain global indexes, and a death benefit. You can withdraw and take out loans from your account, including increases from interest rates, tax free. Whatever you don't pay back gets subtracted from your death benefit, tax free.

It has however very high costs of doing business. if this is all true, I could do decent for retirement starting the age of 65 yrs. If middle of road and I get 4%, I would take me til Im 75 to match my contribution premiums. With only the guarantee 1% I will lose a ton of money over the years because of cost of business.

Not sure if the 8% is too good to be true.

I will definitely take a look at the link you suggest.

Thank you much
Sherri

[disneysteve]

Do you want the short answer? Turn and run away. It sounds too good to be true because it is. Do not mingle insurance and investments. They are two distinctly different things and should be handled separately. Get term life (if you have a need for life insurance) and do your investing elsewhere.

If you want the long answer, we can give that, too, but it won't change the short answer.

[Sherbears]

Thanks Steve, I think you guys have helped me with me decision.

Sherri

[jpg7n16]

Thanks Steve, I think you guys have helped me with me decision.

Sherri

I'm glad we could help with that one decision, but that doesn't take away your need for retirement savings. We just don't feel a universal policy is the way to get there.

-How can we help you get to a decent retirement?


I believe that over time you should strive to save 15-20% of your pretax income. If you make $60k, that should be between $9-12k/year. In your case, maybe higher if we can stomach it.

This is even more important to you because we're playing catch up here.

[dczech09]

Hi Sherbears.

This reminded me of a thread that we had a short while back. Myself, DS, and jpg were arguing cash value insurance within a salesperson.

Its a fairly chaotic thread with a lot of back and forth, but there is certainly a lot of good information. I think this thread can help give you further insight as to why we recommend you not go with this deal.

http://www.savingadvice.com/forums/personal-finance/64417-indexed-universal-life-insurance.html

With that said...
You need to save for retirement. But life insurance is not the place for it. Any salesperson selling you life insurance as an investment- you gotta walk away from them! Run for the hills!

[jpg7n16]

Its a fairly chaotic thread with a lot of back and forth, but there is certainly a lot of good information. I think this thread can help give you further insight as to why we recommend you not go with this deal.

http://www.savingadvice.com/forums/p...insurance.html

This would be that "long answer" DS was talking about

[Sherbears]

Ira

Thank you all for your help. So next question, does anyone have a recommendation for a investment broker? Also, should I go traditional IRA or Roth?

Any advise is appreciated
~ Sherri

[disneysteve]

So next question, does anyone have a recommendation for a investment broker? Also, should I go traditional IRA or Roth?

The big 3 are Vanguard, Fidelity and T. Rowe Price. You can't go wrong with any one of them.

Personally, I prefer to pay taxes now and be done with it, so I'd opt for the Roth, but others will disagree.

[ronekenn]

Hello, My name is Sherri and I am new to this site. I'm glad I found you. I am a 49 single person just now starting to save for retirement. I was approached with the opportunity to purchase life insurance with interest growth through a company called WRL (Western Reserve Life). The agent company is WFG (World Financial Group). The potential growth sounds too good to be true. Is anyone familiar with these institutes?

Thank you
Sherri

Hi Sherbears, Universal life insurance is a one type of permanent life insurance. In this insurance cash value is credited each and every month with interest.

[dczech09]

Hi Sherbears, Universal life insurance is a one type of permanent life insurance. In this insurance cash value is credited each and every month with interest.

I'm gonna sound the buzzer. EEEERRRR! Wrong!

What happens with a cash value policy is that you pay level premiums- the same amount when you are older as when you were younger. So when you are older, you pay less premium than your risk level would suggest. When you are younger, you pay more premium than your risk level would suggest.

When you are younger, all of the excess premium that you are paying is going into a "cash value account" which is basically the policy's equity. The insurance company is investing your excess premiums which allows the value to grow over time. So this is not "interest." It is "investment returns" that are being credited to the insurance company. The insurance company makes your cash value increase with it for one reason- as a policyholder, you are part owner of the insurance company! So as the insurance company reserves grow, your "share" grows as well.

This would be all great if this cash value were actually an investment. It is not. You do not get the money when you die. You only get the money when you terminate the policy.

This cash value is really a benefit to the insurance company because you are effectively paying more premium than you should be for many years.

Anytime readers on this forum are at risk of getting bad information on these types of policies, I am going to jump in!

[snafu]

Sherbears, do you have life insurance as an employment benefit? If you have dependents or expenses that will need to be taken care of via your estate, you need term life insurance.

Mostly a plan to save for retirement starts with taking advantage of any matching funds from your employer. It's free money! Most important is to Start Saving for Retirement. If you are willing to post details of income and expenses [non discretionary & discretionary]there is a lot of help here from knowledgeable, experienced posters who have hugely varied backgrounds.

[Sherbears]

Thank you Snafu,

Unfortunately, I do not have any employment life insurance or retirement fund. At this point it's all me. I was directed to a site "fool.com" that had many calculators to help with determining my financial outcome for my retirement years. A few questions:

1. My accountant tells me that state taxes are not deferred with traditional IRA's, but these calculators include state taxes into their formulas.

2. Is 8% a true figure for current average investment return is 8% for IRA's?

3. If I'm understanding correctly, interests earned on Roth IRA's are tax free?

Appreciate any advice.

Sherri

[disneysteve]

2. Is 8% a true figure for current average investment return is 8% for IRA's?

3. If I'm understanding correctly, interests earned on Roth IRA's are tax free?

2. You return will depend on how you invest your money. If you invest fairly aggressively, I think an 8% average annual return is a reasonable number.

3. Yes, earnings in your Roth account are tax-free. You fund your Roth with after-tax money and then never pay taxes again on that money.