@Dougie the "real" return is actually closer to 2% on your premium, as we stated. But can we agree that neither a 2% long-term investment NOR a 20% credit card are good ideas and we should look for something better? Thanks for watching! -- P
It should go without saying, but if you don’t have any dependents or anyone relying on your income then you don’t need any kind of life insurance (assuming you have a net worth sufficient to cover your final expenses).
Even if you invested that $15 every month for 60 years, you still wouldn't reach that at 7%, so I don't even know how they make money. Maybe they are assuming that everyone is going to live 70+ years after you started.
Would it even matter if you didn't have the net worth sufficient to cover your final expenses? The municipal authorities will cremate you on their dime anyway. Not like they'll leave your corpse outside for the vultures lol
@Bryeana Rhodes I mean, sure, you could, but life insurance isn't meant to be a payday for people that survive you. It's meant to provide for dependants. If you have no dependants, you're probably wasting money by buying a policy.
@Bryeana Rhodes If it were really a steal, do you think the insurance company would offer it to you? They do a lot of complicated statistics to make sure that they make a profit on the average investor. Term life is generally worth that penalty if you leave survivors who depend on your income so they can pay off a mortgage or set up a trust fund. But if you don't have that, do yourself a favor an put that $15 into an index fund where it will make you a profit that either you or your survivors can enjoy in the future!
I used to sell insurance for a bit. I started doing it because I wanted to get out of used car sales because selling people cars for more than they are worth felt unethical and the dealership I worked at was all about lies that lead to commission. Leo me tell you, Financial advisors are generally more shady than used car salesman. They tell bigger lies and they ruin people's whole family future just to make a buck
It’s true, but irrelevant. The net amount at risk in whole life insurance is the insurance. The cash value is the savings/investment portion which pays off the insurance (which is why these things endow). If you think about how it works, it’s not lousy at all. It does exactly what it says on the box. What people don’t like is the difference in hypothetical projected returns between an equity fund and a whole life policy. When someone tells you you could earn 8% in the stock market, it’s an excellent excuse to save less money than if your projected return is 2% - 5%. In both cases, the returns are projected but are treated as if they were either guaranteed or “reasonably certain” to happen. That is not the case but once you bring it up, it’s anchored in a person’s mind.
Another name for what Tamera did in this video is BTID: Buy Term, Invest the Difference. Term insurance IS cheaper since there is no investment component (where there are fund managers in place to manage that, and of course there are fees, like in Tia's case). Awesome video, you killed it in the commercial Philip! 🤣
I first heard about this on an investment course from a guy who left FA company mainly because he hated the practices of pushing to sell whole life insurance to everyone. That guy became my personal FA that day :)
Thank gosh this video took a turn towards the end! I was thinking this was in support of whole life at first. Another thing about whole life policies is that your beneficiaries typically won't receive the cash value of the policy if you die during the term (it usually ends at 100 years old, so it's technically not even whole life) and will only receive the death benefit. The cash value goes right back to the insurance company you bought from, meaning you just paid for really expensive life insurance. And one other negative is that you often have to pay interest to the insurance company if you withdraw from your cash value. Most people wouldn't be willing to pay interest to a bank in order to withdraw money from your checking account until it's replaced, so it doesn't really make sense to do it for the cash value portion of whole life insurance either. Awesome video!
One thing they forgot to mention in this video is that salesmen and saleswomen for whole life insurance will approach you as a "financial advisor" and then they recommend a whole life insurance policy as part of their investing. When I met up with a whole life insurance agent I was under the impression that he was going to show me how to better my financially position instead of just trying to sell me on something that I didn't really need.
@Erik , bruh, 24k p.a. is a very good wage in Czech republic. That's why many Czechs go to Eastern Germany, because it's cheaper and salaries are higher. Even in Sachsen 🙂
This is accurate. I’ve always been an advocate of investing in the stock market because it has paid off handsomely since I decided to invest in it. Great video.
You can’t overlook the fact that it’s paramount not to get greedy but remain invested by careful study, take chances and most importantly remain patient in the market.
@@Halllaand The dangers can be curbed once you invest with a reliable FA. You are pretty hands off other than the routinely monitoring of the market. You can divest as long as you have a trustworthy broker guiding you through your trades. I trade with Clemans and I’ve not had any reason to complain because I’ve been able to make returns from my investments.
He has absolutely changed the game I don’t know if this was meant to be, but coming across comments here, getting paid today for the month’s trading cycle 🙏🙏 Is the premium service here to stay permanently?
Insurance salespeople are so sleazy. When my wife and I bought this farm 10 years ago, we decided to take out a life insurance policy to cover the cost of it in case I died. We sat down with an insurance agent and she started in on lifetime income, kid's college costs, etc. She recommended over 2 MILLION in insurance! I put the brakes on and said the premium was far beyond what we could afford. Her response? "Don't you want to be sure your family is comfortable?" My Response -"I'm not a lottery ticket. We want this much (much smaller amount) insurance. If you don't want to sell us this much, we're done here." She acted like I was the worst kind of bad husband and parent for not going with her amount. She obviously was trying to play with our emotions to get more sweet, sweet premium money. And that was only one of the parade of scumbags that tried to sell us more than we could afford.
I understand your feeling @farmerboybill I was once that sleazy Insurance salespeople. The reason we got into this mess of selling this product was due to our desperation for cash. After all that, I had decided to leave the industry and do something else and give an honest opinion and to guide others like @Two Cents on how personalized each family personal finance independently!
I hope you told her to get out of your house.....the only thing you need is term! when someone tries to sell a whole life.... RUN!!!! The extra money you have should be invested, saved or whatever! but I wouldn't waste money on whole life!!
I had an insurance agent do the same exact thing to me. Our circumstances are diffrent, but the pitch about taking care of my wife after I'm gone was thrown in the conversation.
My mom was on the verge of buying Whole Life Insurance, which included an "attractive" payout after some time has passed. I literally only had to make some simple math to realize that it was worthless. Mom didn't buy the policy.
You guys are actively changing peoples' lives for the better. I hope you think about that if you have a rough day. Thanks for sharing your two cents with us.
I subscribed to you guys channel a few months ago, and I always loved your information! Today when I saw the title of this video I was very intrigued. As an insurance agent my self, I felt that this video is where I could test you guys knowledge, and see if you really knewwhat ya’ll were talking about. I have to say I AGREE with this video. I always educate my clients before I offer them any insurance, similar to the educational approach of this video. I will make sure to show this video to my associates and clients. Keep of the good work. This channel and Dave Ramsey’s are my favorite Financial RUclips channels!
Thanks Dimensions -- you're one of the few insurance agents that wasn't peeved by this one! I also sold insurance for years, and I know ALL the arguments of why WL "isn't a scam". Our job is to educate, and offer as unbiased a view as possible. Glad we didn't get the facts wrong, thanks for watching!
0:03 - The name of the movie is My Name is Trinity. It is a Bud Spencer and Terence Hill movie, and they are famous only in my country which is Hungary. It was surprising to see here :D
Actually it's an italian Western movie. The main actor (Terence Hill, the one slapping super fast) is still active and nowadays plays a priest in an italian tv fiction (Don Matteo)... Anyway I was surprised to see it here too!
Former life insurance salesman here. Only did it for 6 months. Even in training they don’t teach you how bad you’re scamming the people you’re selling to or really what it is you’re selling. They barely teach you the “good parts” of it. Took me a couple of months and getting my friends and family signed up for it that I began to realize what a horrible scam it was. I convinced all of my friends/family to cancel and just get basic term insurance with a different company. I stopped taking meetings after 4 months and actively looked for a different job the last two months. This video is amazing and I’m so glad that they showed easy and simply what a scam it is. Awesome job 2 Cents!!
Devere I only was a salesman for 6 months because unless except for a small percentage of the population, IUL or whole life is a scam and a money waster for a majority of people
Adam Duggan if you think Universal Life (which is a scam) and whole life are the same, you learned nothing about life insurance. The worst part is that people like you just give us a bad reputation. Whole life insurance is the best financial tool (not investment) in this country. If you didn’t do your job correctly it’s your problem, not the industry.
@@luisuribe5457 Wow. There is no indication that would suggest he doesn't understand the difference between IUL and whole life insurance. Learn to read, YOU are giving your profession a bad name. What exactly - other than your premiums - makes whole life insurance "one of the best financial tools in the country"? And you have to agree that in the example put forth in the video whole life insurance makes absolutely no sense whatsoever, right?
Ralph Körner tax advantage, guaranteed contract, liquidity and velocity of money, tax free dividends, death benefit for pennies on the dollar, internal rate of return of 4%. It’s all about a well designed policy, if this guy was selling IULs with those MLM companies is not a surprise that he think life insurance is a scam, I started with them, but if you do your homework you’ll find out soon that whole life policies save many people during the 1929 crash, maybe you heard about J. C. Penney, and you my find out that banks dump billions on whole life policies, do you think they would do that if it were a scam??, life insurance is the best way to transfer wealth from one generation to other tax free.
I saw a financial advisor 5-ish years ago at Northwestern Mutual, and he sold me a whole life policy. I just did whatever he recommended. He said it was good for when the market is down during retirement, and it was the right time to start one since I was young. I’ve been having my doubts lately though. Thanks for the video. I’ve been debating whether to cancel the policy and put the difference in an index fund. The sunk cost fallacy has held me back, but I’m leaning more toward cancelling.
This is 1000% the truth. I am licensed to sell accident, health, life and fixed annuities in Pennsylvania. I no longer practice due to a bad overall experience and untrustworthy coworkers. Also, commissions goes for everything that I would sell. Don't let insurance companies push you around make your own choices and take the time to think it out.
@@no.7711 Actually is was socialism that made the college degrees price skyrocket. Or do you think that if was government didn't make loans they would cost this much?
I went to a free financial ''class'' (a few hours for a couple of days only) and they went on and on about life insurance and almost 0 info on other forms of investing... I was disappointed, to say the least. -.- Thank you for clearing this up for us all
I'm someone who believes in the buy term invest the difference mentality, but whole life can be a decent option for people who don't have the discipline to do that. i see it as a if you struggle to save your money and like to spend it all, go whole life. if you can properly financially plan, go with term
Wow, this is amazing! Thank you so much. You guys rock. I was very tempted to get whole life insurance when I sat down with a financial advisor. I thought about through the whole (no pun intended) process and thought to myself that I could just use the extra money that I'm saving with my current term life insurance policy and just dump it in a mutual fund. Now, thanks to you guys, it looks like I made the right decision. Thank you!!
I'm sad you guys didn't mention the difference between a Fiduciary and a FInancial Adviser! A LICENCED FIDUCIARY must ALWAYS act and recommend IN YOUR BEST FINANCIAL INTEREST, NOT THEIRS.
My licensed fiduciary recommended an whole life insurance policy. It was technically in my benefit as 2% is better than 0 or negative returns and it is a "tax advantaged account". They did reveal they made commission on it, but only after I specifically asked. I had to do my own research to realize there were many pitfalls, among them, if I ever stopped paying my premium (I had an unstable income), I'd end up mostly just paying for insurance. That was bad for me, because I had no dependents and the policy was meant to be purely an investment! A "licensed fiduciary" is at this time, just another tool to help make the sale. It is not any protection for the consumer. I've only done a cursory search, but I could not find any instance of a licensed fiduciary being brought to court and being significantly penalized.
Every time you say "whole life" and "investment" in the same sentence, I cringe. It would result in an insurance producer losing their license in most/all states.
Becoming a financial advisor in the next few weeks here. Michigan. I definitely make sure to do my research on term life insurance. I love this and it motivates me to not only learn but make sure I’m doing what’s best for my clients. The money will come if I’m putting their needs first.
Yes! I used to pay all my bills ahead. I sat down with a financial lady at church and she told me some things I didn’t want to hear. Basically if I can’t budget my normal bills On my month to month income I would hurt myself paying bills with tax money.
How about adjust your W-4 with your employer so that money comes to you in your paycheck each week? Why would anyone give an interest free loan to the government when they could use that money to help fund their 401k or Roth IRA?
I never really understood life insurance before. The way Dave Ramsey explains life insurance and what it's supposed to be for helped me grasp the concept
@@astroman30 not only that, the rising cost of insurance eats into your cash values. The speculative illustrations that they use to sell UL are misleading, you need IN-FORCE illustrations to see just how bad the policy truly looks over time
I sold life insurance for a year. I spent the summer researching what type of return you can expect and what type of competition is out there. A couple points -it is nearly impossible to get accurate data if you are the public. I am convinced they design these policies so you do not research them. -Only two companies that I know of sell whole life insurance that I could consider to be honest and pay a REAL dividend. 99% of companies that do sell this are scamming you. -The 99% of companies who sell Whole Life quote a huge dividend like 10%. BUT they take out expenses of the company from YOUR dividend. Most companies pay that 1-2% you were talking about. -Lastly it is Tax free if you the consumer pays for your policy. Not tax deffered which is only if a business pays for it. Oh! One last point. Having some whole life insurance is good for market dips when you are retired. But please talk to a financial advisor about this. Overall great video and you got the main points!
@@stewartcharles I worked for Northwestern Mutual and they paid the highest only matched by USAA. But your representative is a huge component of this as well. You can easily get taken advantage of.... Its very complicated but something you should look for is Additional Premium. There is a lot of circumstances but if your whole life policy does not have additional premium you may be taken for a ride. Whole life policies come with large commissions however additional premium is almost nothing and is beneficial for the client. Look for it as a gage for trust. If you really want to get into it nearly all whole life policies should have a plan in place to hit that limit before it turns into a MEC or modified endowment contract. Make sure it MECs before you retire. You shouldnt have to worry about life insurance payments when you are pulling from your investments. If you want more info let me know. I no longer work in the industry so I do not have any conflicts of interest
Alex Howard Thanks for the response. I asked because I was curious in what you've seen. I've actually been a financial planner at NM for about 10 years now. I'm a little surprised to hear that USAA's IRR was matching NM or beating any of the other major mutual companies. I agree that it depends on the advisor (I made a recent comment on this video). The piece about average rate of return being at 2% is not even the case for average mutual companies.
I totally agree, the advisor has to set up a policy that will pay him less if he does Additional premium (we call it OPP or paid up additions) and that maximizes the clients’ money and reduces the commission. You must have a trustworthy advisor to get these rare policies.
5:34 I have one small question about these numbers. The final value of their policies should neither of them die is as shown in this timestamp. However, Tia's policy never expires so that death benefit of $500,000 is guaranteed to be paid as a result. Hence, if say both of the sisters die at aged 70, then wouldn't the $500,000 death benefit payout bump Tia's life insurance value to $774,077 vs Tamera's $619,780, making the whole life policy quite worth it for their dependents or descendants?
I could be wrong, but I believe the cash value is given to the insurance company upon your death. Your beneficial will still receive the entire death benefit though, the 500,000
This video would have helped me 2 years ago before I got a pushy "financial planner" that practically forced whole life insurance on me. After a lot of work I managed to cancel it. Hopefully this video can help other people make more informed decisions than past me.
True. With an MLM, look at how the money is made. If it's made by selling products, you might be okay. If the real money is made by getting people to sign up and pay membership fees, training, or buy large amounts of inventory up front, then it's likely a racket.
I've seen companies show that the death benefit increases along with the cash value. And what about the direct recognition vs the indirect recognition when it comes to borrowing from a policy?
THANK YOU THANK YOU THANK YOU for posting this. I have had to do the math for my friends who get tricked into stupid MLM's that sell a new product called an Indexed Universal Life Policy. They do a bait and switch when trying to sell it to you they keep talking about the returns and the lack of risk but they never ever tell you about the commissions and the ballooning price of the policy after a certain time that eats up your cash value. (your video should have mentioned that after 30 years or so the cash value is used to pay off the life insurance premiums a HUGE no no). I can't believe these are still legal or widely pushed
Can you make a part 2 that goes into borrowing from this Whole Life Insurance rather than a normal bank? Say they both take the same loans out that are the average loans that people take. And then include the age of average death to see how the return on the $500,000 fits in since 1 expires. Maybe even start from age 30 and go to 80ish. And also show a chart of when investment in 1 overtakes the other (if at all)? That would be awesome.
Borrowing money from yourself and paying interest is never a good idea. Any money borrowed plus interest is taken off the face amount in the event of a payout of the face amount.
My wife and I just did term until our house is paid off incase one of us died and had to take care of the kids we wanted to be financially secure. Took the extra money and throw it in investments every month instead, no need for whole life, once kids are old enough and homes are paid off its no longer needed really.
I use to work for one of the top insurance companies and sell Whole Life and Term as well. And this video nailed it! I would receive 100% commissions for Whole Life, and almost nothing for Term. This lead to several unethical practices of the majority of people pushing only Whole Life even when that was not the best Financial advice for the customer. I quit after 6 months because of these unethical practices. The best thing you can do is talk with Financial Advisors who do NOT receive commissions, but work only on a hourly rate.
I got convinced to sign up for whole life when I was like 20 years old. The agent did not mention that a portion of my monthly payment was not going into the investment aspect, but rather to fees. He made it sound like the entire payment was going towards an investment account. Sure, ignorant of me to think that, but he made it sound like it was a no-lose deal, so I bought it. Cancelled a year later when I saw my first annual summary and how much was going to fees.
David Tran this is a foolish cancel depending on the company. Whole life insurance is like owning a house you pay the mortgage/fees upfront and you end up with liquid asset in the end. With New York Life for instance you pay fees for about four years coming from your premium and once that clears it goes towards the cash value and death benefit growth. Basically you bought a house at full price and then sold it at a third of the price a year later. Not smart
Travis Nelson i think the agent must have done a poor job explaining that. But the investment piece is there. It’s a guaranteed growth and it should have been apparent in the illustration that the CV would take a couple years to accumulate.
Back in time, when they offered me this kind of insurance, I kindly refused because I didn't trust a legal entity to own my money for such a long time... probably wrong reason, but definitely right choice :) Thanks Two Cents, I just stumbled upon your channel and I love it!
Love the way you RUN THE NUMBERS. I had thought that the full life insurance would've been good until you calculated the difference in appreciation from term life insurance. Thanks
I had a couple of friends who had been trying to sell me VUL. I think they believe in the product (and yeah commissions too) because in order to become an agent, they had to have one themselves. I I have to decline over and over because I don't take advice from people with conflicts of interest. If financial gurus with nothing to gain says term and invest the rest, then yeah, that is what I am going to do should I have a dependent in the future.
I’ve been a Dave Ramsey follower for eight years and am now completely debt free including my home. I like your videos. They explain both sides to each topic. Keep it up.
I was in the mortgage business for awhile and 98% of the time, reverse mortgages do NOT make sense for the client. There are far better ways to utilize debt if you absolutely have to.
If you've been in the industry for a decade and you can't refute misinformation like this, then quit. That it's on PBS, is shocking. They're just simply not correct in a number of ways, it just not this simple, if it was then everyone would be the same, all companies would be the same, all products would be the same, there would be no need for the heavy regulation that insurance companies and the agents that work for them MUST adhere to, at least I'm Canada. The information is at best incomplete, definitely misleading, but it suits a narrative and fear based/bias based "newsyish" faux journalists seem to get more views. Of course they make nothing if you don't watch.
@@sjonas8777 I actually work with our legal team on compliance and regulations. You live in Canada....much, much different. Before you go insulting people you should know the subject matter at hand. But assholes like you feel the need to pipe up on EVERYTHING you disagree with on the internet. I would normally wish anyone well, but you can fly a fucking kite. Insurance is very complex, and I suppose it is unfair to expect someone of your likes to understand it. But this was a very comprehensive presentation meant to give people the basic principles of the different kinds of policies so they can be a bit more informed on their own. Agents are in no way required to explain the differences - they just get to earn the commission. Enjoy your miserable life trolling good people on the internet!
@@lizswank7239 you say I'm insulting, yet I never swore nor did I put people down or call them "trolls", rarely do I comment and certainly even more rarely in a negative way. If you are indeed in compliance then you would realize, basically am saying exactly what you said that insurance is a complicated business, and that this simple video does not do it justice. You will think whatever you think, and you're overreacting continues to make me glad to be Canadian, if you ever come up, I will treat you and your spouse to dinner then ,I will meet the real you and have good conversation about things we can agree on, there is likely many more of those than you would believe.
When I went to invest my first ever savings of around 2000$ I was sold a ULIP plan which had a lock in period and it was 2000 per annum for 5 years!!!! I was naive with no financial education!!! What you’re doing is very important and I genuinely thank you for it
Love this video AAA was trying to sale me whole life but I already have term. They told me not to cancel the term but add more with whole life. But I already had done the numbers before. Insurance is for insurance purposes and savings that’s something in a different category
Nice earrings! By the way, what happens if I don't get any life insurance and stick to just index funds until old age? My dependents can use the value of those funds when I'm dead to cover their needs, anyway, right, so there's no point for insurance?
Thanks! I take my earring game seriously. And you're correct. Your family can do whatever they want with your estate. But life insurance can basically tide you over until the time comes where your built-up wealth means you're self-insured and your dependents will be fine. We're personally not there yet because we're young, and so since we have a kid, we have term life for the next 30 years, by which time we probably won't need life insurance anymore.
SamianHQuazi The point of insurance is risk management. If you live to old age, then yes, your plan will work. If you don’t live long enough for your investments to grow, then your dependents are in a tough spot if you don’t have any life insurance.
@@TwoCentsPBS i like you guys stuff but this one is very one sided and not good enough research. I'm a cfp and i have whole life... Wait for it.... For the investment, not life insurance. Not for everyone but even if i don't make commission, which i don't now. I still wouldn't single out whole life only cuz it's whole life.
Awesome Keep it going! The whole life insurance idea is to hedge against any debt recurring especially in your mortgaged property. It is rendered useless if you are debt free! Heck if I were to protect my family, I'd rather invest in a medical policy with the insurance company!
@@littlegeo1 simply put a protection against your house debt. If anytime that your life is gone, the debt will be passed down to the next person to payoff the debt. That term life is a partial protection to payoff that debt in cases of anything happen to your life.
As part of my union benefits at work a small insurance policy of $5,000 was included. When I filled out the information for that I was forced to have a meeting with an agent to get my policy set up. The whole time she was trying to sell me whole life insurance. I have no dependents and no one who is reliant upon my income if I passed away suddenly. Whole life insurance for me isn't a good fit, and likely will never be since my only dependents are generally going to be of the canine variety . The agent kept trying to push it to cover funeral costs. I watch Ask A Mortician, and know I could easily do a direct cremation for less than the $40,000 she was trying to claim I needed, the $5,000 should cover that just fine. As someone in my 20's being sold a policy for my possible early death trying to sell it as a big ticket party type expense just felt annoying and sleazy.
So a new advisor myself in the insurance industry, my question to you is this, what about persons who are not investing savvy? There are very many persons who would watch these figures, agree its a scam, NOT invest in stocks, save in a bank and withdraw when non essentials go on sale and never allow their monies to grow only to reach a stage where there is absolutely nothing to fall back on. And if I sound like the typical advisor, by all means call me out, it's how I grow to better assist persons with their financial plan, using the tools in equipped with, and not just believe what I've been trained to and currently studying. Also, as a long time follower before getting into this industry, I always wanted this topic to come from you guys so it would be nice if you touched on endowments and annuities as well. What are your thoughts then on medical and health insurance? Would appreciate your research :) And as a response to the horrible experience below, not all of us are greedy, and if this person was not tailoring to your needs then yeah, good call backing off. But there are honest persons out there. As with any commission based sales careers, you'll get persons who do it solely for their own interest and others who actually try to meet the specific needs inspite of the commissions. I've heard persons selling perfumes that will get you a jobs, so... Yeah.
I dont think it's wrong to pay someone else to help you if someone isn't "discipline", but i think the problem is that people aren't equiped and informed to make good financial decisions. Typically insurance agents aren't clear about these, which make it more difficult. If you take the scenario in the video, at the end of 30 years there's a difference of over $300k. That's roughly $10k a year. This might over simplify it, but would you rather pay me $10k a year for thirty years, or get help/pay someone a (hopefully reasonable one time) fee to get you setup with an brokerage account and auto invest into index funds. This is a set it and forget it option that shouldn't take more than half a day. Is the value of these packaged insurance/investing solutions worth it? For some, yes, others, maybe not... but at least people can make clearer financial decisions for themselves. Also, i dont blame insurance agents and Financial Advisors on these type of things, it's not their job to teach people on how to make good financial decisions. I believe it is for people to take responsibility on equipping and educating themselves, that's why channels like this one get my thumbs up!
I've been wrestling with this for the past month. I've had a whole life policy through Northwestern Mutual for the last four years, and this video and conversations with friends have made me start to rethink it. I met with my financial adviser from NWM earlier this week to talk through it. He said of course he'd do whatever I said regarding the policy, but he wanted to talk about why I'm rethinking it. His main argument in favor is that it's a shelter from bear markets during retirement. He acknowledged that it doesn't grow as efficiently as an index fund or something similar, but he said the savings from pulling money from the cash value instead of a market-related fund in retirement during a bear market can be huge. He showed some graphs and sent me some materials to read over. It's all pretty overwhelming for me. I'm digging in, but I don't feel like I have the background to make the decision. Is there any validity to that argument? I don't have an dependents, so the insurance component doesn't mean much for me. I've already maxed out my IRA and am putting money in a brokerage account, so this is more of an extra thing he recommends as protection during a recession. Any advice on how to validate the accuracy of the bear market shelter stuff and how to determine if that's worthwhile?
@@NateGreensides Thanks for the input! From what I understand from what my FA told me and what the Whole Life paperwork says, after age 65 I quit paying the premium. From there there's a guaranteed cash value and an estimated cash value based on estimated dividends (which my FA says is slightly low-balled). The insurance payout includes a base amount plus cash value, so what gets paid to my beneficiary includes a guaranteed amount plus part of my remaining cash value, as I understand it. My FA mentioned annuities and other options that work for bear market protection as well, but he recommended the whole life policy because of the dividends and the tax benefits. He also said that this policy is different from a lot of the whole life policies out there. He said that most of them are crap, but this type of policy is the OG whole life, not one of the newer models. I don't remember what terms he used specifically. What he said made sense to me, but I'm still thinking about getting a second opinion from a fee-only FA.
@@NateGreensides Thanks for the insight. I do not live in CA, but this is helpful for informing my conversations with my FA. According to my paperwork, the premium will never go up. I also have a document that shows what the policy looks like each year. The insurance payout column starts at the base amount and increases as the cash value increases. That's what my FA meant by the two being combined. I'll ask for clarification, though. The annual premium column stays the same until age 65, when it goes to 0. There are two cash surrender value columns, one that is guaranteed and another that adds in potential dividends. The guaranteed column is always slightly higher than the total premium paid column, but it continues to increase even when the premium stops at age 65. The cash value column with potential dividends is significantly higher (almost double) the guaranteed.
I've been putting around 500 a month for over 5 years now. With covid19 my unemployment was stuck and I had the plan pay for itself for a month. I've taken out quite a few loans on the policy and it's been quite helpful. I now have a son and it's good to know that even if I never pay back the loan the death benefit still pays a large sum minus the loan amount. Buying into stocks fluctuates a lot and buying these days when the market is up (falsely imo) is quite risky. Overall I'm happy that I'm doing the policy and also have other investments that have higher risk but I can count on the policy.
I can’t speak to the individual integrity of your FA, but he has a personal relationship with you, knows your needs, and can be held accountable for his advice. Those other sources can’t. I recommend sticking with your FA if he’s trustworthy and gets good results.
Just came across this channel and I’m now a subscriber! Can’t wait to learn about 401k, Roth, etc from you both! I am financially illiterate and would like the info in small, easy to understand doses like this.
I've been looking for life insurance for myself recently and talked to an agent who was adamant about whole life and said she even had a whole life policy herself. I could tell it was a total sales pitch but decided to hear her out, and it was basically everything that was stated in this video - premium never changes, you'll be covered your ENTIRE life, dividends.... But I'm glad I did my own research beforehand, because when I reinvest the difference, I know it'll be worth more than the whole life policy in the end, AND I feel like I'm on track for a retirement savings so I don't have to depend on a whole life insurance policy. Great video!
@@heinaye3594 Hein Aye we bought it for my mom and me when I was very young. It was a cash value whole life insurance. Turns out the premium was very much higher for me as well as my mom. If I would have taken the term insurance then my coverage would have been very high as compared to the coverage whole life insurance provided. To my knowledge, plans we were offered were all the ones which would give you the money back with some interest over the years (cash value) and the salesperson told us that it was an investment and we would get back high return and we should buy it because of money that we will be returned was way higher.
@@dhavalchheda1626 ahhh gotcha. Sounds like it was a dishonest insurance salesperson. In general though, you can lock in a cheap premium for whole life when you're young and you can potentially stop paying premiums in your 30's or 40's with paid up premiums.
Sad part of this video is that they left out that Tia has probably around $400-450k of death benefit over the top of the cash value. However, if you buy whole life to have your cash value compete with investments, you are doing it wrong and will be disappointed, which they do address. Lastly, IRR on good WL policies are typically 3-4%. So higher than shown, but do not compare with long term investment returns.
I got talked into this scam and lost 5k. I didn't know anything about investing so I was an easy target. After cancelling it, I Invested in Tesla and made 60k the next year. Not a fair comparison, but there are better investments out there.
I have objectively studied the numbers and have tried to explain to so many people that whole life is not the way to go however I am left with a lot of frustration :(. Even with videos like this, people make their own choices with how they spend their money
Holy....that is information I did not know. I thought I might get some money after my tern life policy is done but no. Thank goodness I'm learning it now. It just pisses me off because with a little self-control I could have put that money in a savings account and got a better return. I'm also pissed because a few years ago I called to stop or at leased reduce my policy and they said no, to both. Thanks.
I am a licensed financial advisor and I don’t have a whole life policy on myself nor would I ever recommend this to a client. If an agent/advisor offers you a whole life policy, run the other way.
You wouldn't recommend this to a client because you don't understand the value of building capital, you don't think long-term, and you have faith in markets that are heavily manipulated and prone to crashing, as well as a currency (the US dollar) whose value is being inflated away at a record pace. Maybe if you took the time to do any research at all on whole life, you would have a different perspective, instead of dismissing it out of hand.
@@theAppleWizz You clearly have no idea how cash value life insurance works. You shouldn't speak from ignorance. Also, if you think that the market and real estate will always go up, then you don't understand why that is happening or why it is unsustainable. I suggest you educate yourself before making these ridiculous claims.
@@moriendus bro this a whole video on why whole life is a stupid idea. This is why people like Warren Buffett buys out gullible people at 80 90. If you can’t handle a 30% market drop just say that but that does not mean the cash value is anything more than just a marketing ploy. Just so you know the insurance company has been investing your money and making 10x what you will ever get.
@@theAppleWizz This video has factually incorrect information and therefore draws invalid conclusions from that bad info. It also doesn't address how someone can actually use the cash value in the policy. I know that the cash value isn't a "marketing ploy" because I have cash value and have financed things in my life with it. I can tell you don't understand whole life insurance because you think the insurance company is "making money off of me" and you fail to understand that a MUTUAL life insurance company is owned by the policyholders. If the insurance company makes money, then I make money as an owner of the company. This is what dividends in life insurance are. As I said, you need to do actual research on the subject instead of listening to the fake gurus who made this video because they either lied or just didn't know what they were talking about as they just made blatant factual errors.
But term and invest the difference can and does work for people. One thing I’ve noticed in my short career, is that my younger clients all say whole life is terrible and they would rather buy term. And then the older clients will say they regret buying term and wish they bought more whole life lol. That’s not to say whole life is the only or best insurance to buy, but it is an interesting observation to think about. I guess it just proves that one size does not fit all.
great advice guys, put all your money in stocks, live through volatile years, lose money in retirement in the down years - clearly you don't understand the value of having 'some' money in whole life - you already own bonds, why not improve on that return?
Two cents, love the videos, keep making the great content! I personally love my whole life policy, we use it primarily as our emergency fund now. There is a lot more information about whole life than cover by this video. For example I wouldn't buy a whole life policy but a CUSTOM whole life policy. It also depends on what you do with the dividends, are you buying Paid-up additions, taking the distribution, using it to pay premiums? Whole life is NOT for everyone, but it can be helpful to some. A lot more involved than can be covered in a 7 minute video. Note: I do not sell insurance or financial products of any kind. Just pointing out there is a lot more to consider about whole life. I would agree it is not really for purely investing, but is another potential useful financial tool.
Zachary Hayes Paid up additions is extra insurance purchased from your overpayments from previous years. These “dividends” are not profits from the company. If they were you would be taxed on them. Instead life insurance companies use the name “dividend” for the refund you get from being overcharged then they trick you with that wording to use your refund to buy more insurance which is called paid up additions, And if your agent didn’t tell you, when you die the money in the Cash Value is kept by the insurance company. Whole Life is a bad way to have an emergency fund.
You’re spot-on. This video is absolutely correct, but very reductive. It’s like how I feel about Dave Ramsey: he gives great advice, but it’s too reductive to be the right advice for everyone listening. It would be like a doctor prescribing medication to an entire audience.
Thank you for this video, this also applies to variable life insurance but its worse since they transfer the risk to the insured. Term and Invest are the best!
@Exoplanet Research Yep. The death benefit is tax-free, while estate taxes can run up to 40 percent. Once the estate tax provisions of the TCJA sunset, we're back down to a much lower exemption. Ouch.
The other thing these guys totally miss is how these policies are actually constructed in the field. For example, hardly any 20 something is ever going to be sold a 500,000 pure whole life policy. It's going to be something more like a $50,000 permanent death benefit and a $450,000 term rider, which allows the policy owner to put a lot more premium in, up to the MEC limit, to build cash value much faster. After x number of years, the term goes away (as does the cost of continuing that term insurance) but the cash value, including a bunch of dividends paid along the way (if it's a participating policy) will support a much higher permanent death benefit than the 50,000... and continuing to earn dividends tax free, which can be withdrawn tax free if you no longer need the life insurance. That and you can exchange it for a lifetime income annuity if you like without having to pay capital gains tax (or ...if it's in an IRA, ordinary income tax). I don't think whole life policies are for everybody. They're frequently oversold. But for people in high tax brackets, with illiquid estates, estate tax concerns, probate concerns,or asset protection concerns, they can be terrific. These are people a lot of 20-something and 30-something financial reporters who never sign the front of a paycheck don't understand, and aren't writing for.
@@jasonvansteenwyk5984 I'm sure the no one watching this video will have estate tax problem tho lol. Very very few do. Even if you're rich enough. Your death benefit is in your gross estate so it'll get taxed at 40 percent unless you have ILIT...
@@ksmoothy28 Expand your thinking. People watching this video are unlikely to have an estate tax problem NOW. However, they may well have estate tax concerns (and asset protection concerns) 25, 30, 40, 50 years from now. After their term insurance has expired, and they have a successful business, a comfortable home, maybe some other rental properties, accumulated stock, etc. And who knows what the estate tax exemption will be then... especially the way younger voters are breaking for Sanders. If that trend continues, we may well have a very low estate tax exemption at some point in the future. Meanwhile, yes, your death benefit would be in your gross estate IF you own the policy in your own name. But people with estate tax concerns are going to use ILITs. Meanwhile, trusts can't own IRAs. So you can't move any wealth in your IRAs, etc. out of your estate. It's trapped there. Don't get me wrong... I'm a YUUUUUUGE fan of term... especially with shorter terms, like 1 year and 5 years. (People selling 10-20 year term on a BTID concept don't quite understand their own system, or they're trying to goose their commissions, too). I'm also a HUUUUUGE fan of index investing. But people in high tax brackets, with successful businesses, significant real estate, real asset-protection concerns, etc. are playing a different ballgame than W-2 folks working jobs... even if some of those jobs pay pretty well. It's a different mindset. A lot of online content and financial journalism doesn't get that. What's good advice for a schoolteacher isn't going to be great for the guy who owns a chain of tire shops, a general contracting company, or a good-sized farm, and vice versa.
One financial advisor made the argument to me that with a standard index fund, because of fees at whatnot, you’re real annualized expected interest per year is like 4ish percent over long periods of time. And therefore recommended the insurance policy. I noticed that over the last 30 years, there was a 7.8% annualized average boost in the snp 500 (but this might be higher than it should be because were likely nearing the end of a cycle); how much of this is lost to fees?
Invest in Vanguard and their fees are incredibly low. There is probably somewhere with insanely high fees, but clearly this person was just giving you advice that would help themselves.
I made a call to Dave Ramsey about this. The video is called Aunt and Uncle $5,000,000 mistake. I couldnt talk my aunt and uncle out of it, but showing a video of Dave Ramsey talking to me about it sure did. One thing you forgot that I think is important is people with whole life think their dependents will receive the cash value along with the policy. Thats false, the insurance keeps the cash value, they only get the policy.
So I've been considering Whole Life insurance but not for the investment opportunity, but for the Infinite Banking Opportunity (I invest in other ways). So I really wished you could have elaborated more on whether that aspect of it was a good idea. Would taking out a loan against your life insurance to buy things like cars or other large ticket items be a better source than a standard loan and are there any downsides to it. For me, the whole life wouldn't be an "investment" arm so much as just life insurance WITH a savings account attached. If I'm already putting $500 in savings a month (using your example) wouldn't it be worthwhile to use a whole life insurance as a savings arm instead of an investment arm?
olandir No. If the savings is your money, why would you have to take it as a loan? Buy cheap Term and invest the difference in a Roth IRA. Also with Whole Life there is only one pay out.... either the death benefit and the insurance company keeps the cash or you get the cash which likely has about a 2% return and the policy is canceled. If you borrow from it you have to pay it back with interest either way. If the idea of taking money out of your own savings account and it being treated as a loan with interest seems stupid, Whole Life is exactly that.
its not worth it at all. invest in realestate if you want take a shot at the silverbullet. you can take out loans based on the value of your real assets.
I agree. Life insurance isn't an investment product at all. It's just a place to store cash safely and efficiently without the ups and downs of the market. I think it should be the first asset people get in life honestly. It's a responsible thing to do especially when one has a family. I also have heard that comparing any life insurance product, even a dividend paying whole life policy to an investment account with an index fund isn't a fair comparison? Should advisors be marketing life insurance as an investment? Again, I was taught it's just a great place to store cash. Mr. CFP, are you teaching your clients to save $$ first? That's what I remember mine teaching us a long time ago. Emergency funds and such? Where are they putting it? Savings account? Losing money there since banks only pay .10-.25 annually on those things right? Certificates of Deposit don't work either because they aren't as liquid and you get penalized for early withdrawal in most cases. What's the next best liquid savings vehicle you can recommend to us?
Nice job! In my experience working with people, I've found that most people with a whole life insurance policy were underinsured as they couldn't afford the proper amount of life insurance. Term life insurance provides the coverage people need at an affordable rate. Most term policies offer a conversion privilege should the insured become sick and need coverage beyond the initial term.
So if I understood this video correctly, term insurance is like a contingency plan on life until one can build enough wealth to cover funeral expenses + dependent costs? So when term life insurance runs out in 20 or 30 years, you’re not insured anymore?
Yes! But if you aren’t disciplined and actually save you’ll be up a creek. That’s why I have an increasing term. I’m insured all the way until I’m 80 if I want to keep it that long. Just in case I get sick or something and wouldn’t be able to buy more insurance when I need it.
Love you guys!!! This is such a great video. Someone from NYLife tried to rip us off. Our new advisor told us exactly what you suggest in this video. Invest the different and when your term expires you’ll have a lot more in retirement savings so if you die your family can use that $!! Genius. But I do plan on living to 100+. 😉
I have been watching tons of videos trying to understand more about whole life insurance and whether it makes sense. This is definitely the best one. Thank you Two Cents.
The problem is assumption. They assumed that people would actively invest the savings (from not buying whole life insurance and instead buying the cheaper conventional life) that they have on index funds or something. In truth people will just spend the saving on frivolous goods.
Hans Erich Pediapco Yours is the most legit state in the comment section. I’m not a cpa or fa, but after decades of investing in real estate, the ability to borrow from yourself to invest AND use the banks money is big over time. But most will either do like you describe or fund a policy and never take a loan unless it’s for something that loses value.
As a new (started last month) financial representative for a full service brokerage, I've ran into the term vs whole debate a lot. I get paid a commission on the policies I sell as well so I am incentivized to sell more expensive policies. I also have fiduciary responsibility and a moral prerogative to treat my clients the way I would want to be treated. I would take less money if it helped my client out more. Which type of client would you recommend would benefit from whole life. I vow to not scam my clients and to treat them ethically and I want to balance opinions from every side.
Taxes are paid on earned income when withdrawn from the cash savings. There’s a bit more to it but the basics are that if you make money, you get taxed when you cash out.
Allianz in Mexico keeps pushing this type of "investment" here. And the commissions are very confusing and hidden toward the back of the brochure and divided up as several hard to calculate fees which of course the sales person doesn't mention. I've been approached several times and realized that the commissions were very high and the returns (pre fees) were not any better than a relatively safe investment that I could use at a fraction of the cost that would be available in the short term without cancellation fees. It is really sad how they mislead people by hiding that information and making it confusing.
Hey, I totally get your point on this one if you are comparing the policy with Term life for a person at the age of 40 but try doing the same thing for someone at the age of 20 for the same life expectancy with whole life just to be paid for 20 years.
I sold life insurance for years and this is totally accurate! Well done! People need to know this information.
Heyoooo!!! Thanks for the vote of confidence. ; )
Bob Harper Agreed!
Bob Harper salespeople are the best to be around!
@Dougie the "real" return is actually closer to 2% on your premium, as we stated. But can we agree that neither a 2% long-term investment NOR a 20% credit card are good ideas and we should look for something better? Thanks for watching! -- P
Jazmin Bautista also is the 7% before or after taxes?
Tia and Tamera, huh? 90's kids for sure.
DUH
Math checks out
Bet gen z kids think it's a doja cat reference
Sister Sister 🙌
I thought that was a doja cat thing. Well I am a gen z
It should go without saying, but if you don’t have any dependents or anyone relying on your income then you don’t need any kind of life insurance (assuming you have a net worth sufficient to cover your final expenses).
TRUE THAT FRIEND
Even if you invested that $15 every month for 60 years, you still wouldn't reach that at 7%, so I don't even know how they make money. Maybe they are assuming that everyone is going to live 70+ years after you started.
Would it even matter if you didn't have the net worth sufficient to cover your final expenses? The municipal authorities will cremate you on their dime anyway. Not like they'll leave your corpse outside for the vultures lol
@Bryeana Rhodes I mean, sure, you could, but life insurance isn't meant to be a payday for people that survive you. It's meant to provide for dependants. If you have no dependants, you're probably wasting money by buying a policy.
@Bryeana Rhodes If it were really a steal, do you think the insurance company would offer it to you? They do a lot of complicated statistics to make sure that they make a profit on the average investor. Term life is generally worth that penalty if you leave survivors who depend on your income so they can pay off a mortgage or set up a trust fund. But if you don't have that, do yourself a favor an put that $15 into an index fund where it will make you a profit that either you or your survivors can enjoy in the future!
I used to sell insurance for a bit. I started doing it because I wanted to get out of used car sales because selling people cars for more than they are worth felt unethical and the dealership I worked at was all about lies that lead to commission. Leo me tell you, Financial advisors are generally more shady than used car salesman. They tell bigger lies and they ruin people's whole family future just to make a buck
THIS! Thank you for telling the truth about how greedy insurance salesmen truly are.
There's an old saying: "Investments make lousy insurance and insurance makes a lousy investment".
Lyle G I agree. Both have their place
It’s true, but irrelevant. The net amount at risk in whole life insurance is the insurance. The cash value is the savings/investment portion which pays off the insurance (which is why these things endow). If you think about how it works, it’s not lousy at all. It does exactly what it says on the box.
What people don’t like is the difference in hypothetical projected returns between an equity fund and a whole life policy. When someone tells you you could earn 8% in the stock market, it’s an excellent excuse to save less money than if your projected return is 2% - 5%. In both cases, the returns are projected but are treated as if they were either guaranteed or “reasonably certain” to happen. That is not the case but once you bring it up, it’s anchored in a person’s mind.
You’re listening to people who can’t even run the numbers right. They never mentioned the death value of the whole life policy at the end.
Gavin L this is a valid point. As the cv increases, so does the db
@@gavinl4388 the scenarios considered are both examples living till the expiry of the policy
Another name for what Tamera did in this video is BTID: Buy Term, Invest the Difference. Term insurance IS cheaper since there is no investment component (where there are fund managers in place to manage that, and of course there are fees, like in Tia's case).
Awesome video, you killed it in the commercial Philip! 🤣
Lolz. Thanks!
The Sister Sister reference killed me. And Australians are scam artists. Got it lol
Definitely wasn't Australian
@A G Maaaate. Trust me. It wasn't an Aussie accent. A bad attempt - yes.
Australian accents are notoriously difficult for foreigners to imitate, so he did a decent job.
@@AlexanderRafferty just need to talk with your teeth closer to keep the flies out!
I didnt
I first heard about this on an investment course from a guy who left FA company mainly because he hated the practices of pushing to sell whole life insurance to everyone. That guy became my personal FA that day :)
Thank gosh this video took a turn towards the end! I was thinking this was in support of whole life at first. Another thing about whole life policies is that your beneficiaries typically won't receive the cash value of the policy if you die during the term (it usually ends at 100 years old, so it's technically not even whole life) and will only receive the death benefit. The cash value goes right back to the insurance company you bought from, meaning you just paid for really expensive life insurance. And one other negative is that you often have to pay interest to the insurance company if you withdraw from your cash value. Most people wouldn't be willing to pay interest to a bank in order to withdraw money from your checking account until it's replaced, so it doesn't really make sense to do it for the cash value portion of whole life insurance either. Awesome video!
I wish they would have mentioned that.
One thing they forgot to mention in this video is that salesmen and saleswomen for whole life insurance will approach you as a "financial advisor" and then they recommend a whole life insurance policy as part of their investing. When I met up with a whole life insurance agent I was under the impression that he was going to show me how to better my financially position instead of just trying to sell me on something that I didn't really need.
Great video guys, definitely something people should watch before sorting out their finances. Cheers!
Hey! It’s the plain bagel!
Hey! It’s the plain bagel
Hey! It’s the plain bagel!
Have you tried putting sour cream on the bagel?
Is it bay-gul or bah-gul
This channel motivates me to pay off my student loans.
Erik Not as bad as my friends, I owe $30,000.
I recommend you watch Dave Ramsey, he'll light your butt on fire until you pay off that student loan.
Everything you see around should motivate you to pay off your student loan.
@Erik , bruh, 24k p.a. is a very good wage in Czech republic. That's why many Czechs go to Eastern Germany, because it's cheaper and salaries are higher. Even in Sachsen 🙂
@Erik , ja, Sie (die Deutschen) sind besser als wir. Immer besser
This is accurate. I’ve always been an advocate of investing in the stock market because it has paid off handsomely since I decided to invest in it. Great video.
You can’t overlook the fact that it’s paramount not to get greedy but remain invested by careful study, take chances and most importantly remain patient in the market.
@@Halllaand The dangers can be curbed once you invest with a reliable FA. You are pretty hands off other than the routinely monitoring of the market. You can divest as long as you have a trustworthy broker guiding you through your trades. I trade with Clemans and I’ve not had any reason to complain because I’ve been able to make returns from my investments.
@@Halllaand I’ll leave you his mail where you can write him if you don’t mind. Leviclemans@gmalcom
Once I got my feet wet and my confidence in my investments with Clemans grew, I adjusted my portfolio accordingly to make bigger bets.
He has absolutely changed the game I don’t know if this was meant to be, but coming across comments here, getting paid today for the month’s trading cycle 🙏🙏 Is the premium service here to stay permanently?
Insurance salespeople are so sleazy. When my wife and I bought this farm 10 years ago, we decided to take out a life insurance policy to cover the cost of it in case I died. We sat down with an insurance agent and she started in on lifetime income, kid's college costs, etc. She recommended over 2 MILLION in insurance! I put the brakes on and said the premium was far beyond what we could afford. Her response? "Don't you want to be sure your family is comfortable?" My Response -"I'm not a lottery ticket. We want this much (much smaller amount) insurance. If you don't want to sell us this much, we're done here." She acted like I was the worst kind of bad husband and parent for not going with her amount. She obviously was trying to play with our emotions to get more sweet, sweet premium money. And that was only one of the parade of scumbags that tried to sell us more than we could afford.
Ugh. That's a horrible and all too common experience. Glad you knew what was up!
I understand your feeling @farmerboybill I was once that sleazy Insurance salespeople. The reason we got into this mess of selling this product was due to our desperation for cash. After all that, I had decided to leave the industry and do something else and give an honest opinion and to guide others like @Two Cents on how personalized each family personal finance independently!
I hope you told her to get out of your house.....the only thing you need is term! when someone tries to sell a whole life.... RUN!!!! The extra money you have should be invested, saved or whatever! but I wouldn't waste money on whole life!!
I had an insurance agent do the same exact thing to me. Our circumstances are diffrent, but the pitch about taking care of my wife after I'm gone was thrown in the conversation.
@@investingwithaaron9876 Why didn't you just continue selling and stop being sleazy lol
My mom was on the verge of buying Whole Life Insurance, which included an "attractive" payout after some time has passed. I literally only had to make some simple math to realize that it was worthless. Mom didn't buy the policy.
What math did you did exactly?
You guys are actively changing peoples' lives for the better. I hope you think about that if you have a rough day. Thanks for sharing your two cents with us.
I subscribed to you guys channel a few months ago, and I always loved your information! Today when I saw the title of this video I was very intrigued. As an insurance agent my self, I felt that this video is where I could test you guys knowledge, and see if you really knewwhat ya’ll were talking about. I have to say I AGREE with this video. I always educate my clients before I offer them any insurance, similar to the educational approach of this video. I will make sure to show this video to my associates and clients. Keep of the good work. This channel and Dave Ramsey’s are my favorite Financial RUclips channels!
Thanks Dimensions -- you're one of the few insurance agents that wasn't peeved by this one! I also sold insurance for years, and I know ALL the arguments of why WL "isn't a scam". Our job is to educate, and offer as unbiased a view as possible. Glad we didn't get the facts wrong, thanks for watching!
0:03 - The name of the movie is My Name is Trinity. It is a Bud Spencer and Terence Hill movie, and they are famous only in my country which is Hungary. It was surprising to see here :D
Norbert Posta You are not the only one who recognized it. We - Hungarians - are huge fans of these type of movies :D
Bojler eladó.
Actually it's an italian Western movie. The main actor (Terence Hill, the one slapping super fast) is still active and nowadays plays a priest in an italian tv fiction (Don Matteo)... Anyway I was surprised to see it here too!
Only in Hungary? Nope! They are even more famous in Germany! XD
OK, let’s just say that many of us love movies with Bud Spencer & Terence Hill ;)
Former life insurance salesman here. Only did it for 6 months.
Even in training they don’t teach you how bad you’re scamming the people you’re selling to or really what it is you’re selling. They barely teach you the “good parts” of it. Took me a couple of months and getting my friends and family signed up for it that I began to realize what a horrible scam it was. I convinced all of my friends/family to cancel and just get basic term insurance with a different company. I stopped taking meetings after 4 months and actively looked for a different job the last two months.
This video is amazing and I’m so glad that they showed easy and simply what a scam it is.
Awesome job 2 Cents!!
Devere yes, I helped sell them
Devere I only was a salesman for 6 months because unless except for a small percentage of the population, IUL or whole life is a scam and a money waster for a majority of people
Adam Duggan if you think Universal Life (which is a scam) and whole life are the same, you learned nothing about life insurance. The worst part is that people like you just give us a bad reputation. Whole life insurance is the best financial tool (not investment) in this country. If you didn’t do your job correctly it’s your problem, not the industry.
@@luisuribe5457
Wow.
There is no indication that would suggest he doesn't understand the difference between IUL and whole life insurance.
Learn to read, YOU are giving your profession a bad name.
What exactly - other than your premiums - makes whole life insurance "one of the best financial tools in the country"?
And you have to agree that in the example put forth in the video whole life insurance makes absolutely no sense whatsoever, right?
Ralph Körner tax advantage, guaranteed contract, liquidity and velocity of money, tax free dividends, death benefit for pennies on the dollar, internal rate of return of 4%. It’s all about a well designed policy, if this guy was selling IULs with those MLM companies is not a surprise that he think life insurance is a scam, I started with them, but if you do your homework you’ll find out soon that whole life policies save many people during the 1929 crash, maybe you heard about J. C. Penney, and you my find out that banks dump billions on whole life policies, do you think they would do that if it were a scam??, life insurance is the best way to transfer wealth from one generation to other tax free.
I love the amount of effort and care that goes into these videos. Please, keep it up!
Thank you so much Michael!
I saw a financial advisor 5-ish years ago at Northwestern Mutual, and he sold me a whole life policy. I just did whatever he recommended. He said it was good for when the market is down during retirement, and it was the right time to start one since I was young. I’ve been having my doubts lately though. Thanks for the video. I’ve been debating whether to cancel the policy and put the difference in an index fund. The sunk cost fallacy has held me back, but I’m leaning more toward cancelling.
This is 1000% the truth. I am licensed to sell accident, health, life and fixed annuities in Pennsylvania. I no longer practice due to a bad overall experience and untrustworthy coworkers. Also, commissions goes for everything that I would sell. Don't let insurance companies push you around make your own choices and take the time to think it out.
Thank you for your honesty. Too bad there are too many weasel salesmen lying to clients.
[Dave Ramsey, loudly, from the back of the classroom] YES IT IS
Marie K.
And next he yells “Sell the car!!!”
And then when he's asked a question about college debt and having kids while in massive debt, he grumbles about socialism.
And then in the next breath yells loudly "go deliver pizzas."
"Rich people are afraid of leaves, get a leaf blower!"
@@no.7711 Actually is was socialism that made the college degrees price skyrocket. Or do you think that if was government didn't make loans they would cost this much?
I went to a free financial ''class'' (a few hours for a couple of days only) and they went on and on about life insurance and almost 0 info on other forms of investing... I was disappointed, to say the least. -.-
Thank you for clearing this up for us all
I'm someone who believes in the buy term invest the difference mentality, but whole life can be a decent option for people who don't have the discipline to do that. i see it as a if you struggle to save your money and like to spend it all, go whole life. if you can properly financially plan, go with term
Exactly. Many of these types of videos don’t take account people who are bad with money.
@@highgaugedesign i doubt that irrational spenders are the demographic watching these vids.
I've said it before but you're rocking that moustache!
Wow, this is amazing! Thank you so much. You guys rock. I was very tempted to get whole life insurance when I sat down with a financial advisor. I thought about through the whole (no pun intended) process and thought to myself that I could just use the extra money that I'm saving with my current term life insurance policy and just dump it in a mutual fund. Now, thanks to you guys, it looks like I made the right decision. Thank you!!
I'm sad you guys didn't mention the difference between a Fiduciary and a FInancial Adviser!
A LICENCED FIDUCIARY must ALWAYS act and recommend IN YOUR BEST FINANCIAL INTEREST, NOT THEIRS.
It's all subjective.
My licensed fiduciary recommended an whole life insurance policy. It was technically in my benefit as 2% is better than 0 or negative returns and it is a "tax advantaged account". They did reveal they made commission on it, but only after I specifically asked. I had to do my own research to realize there were many pitfalls, among them, if I ever stopped paying my premium (I had an unstable income), I'd end up mostly just paying for insurance. That was bad for me, because I had no dependents and the policy was meant to be purely an investment! A "licensed fiduciary" is at this time, just another tool to help make the sale. It is not any protection for the consumer. I've only done a cursory search, but I could not find any instance of a licensed fiduciary being brought to court and being significantly penalized.
@@jaymathew sorry you got scammed.
Every time you say "whole life" and "investment" in the same sentence, I cringe. It would result in an insurance producer losing their license in most/all states.
Exactly. The two are exclusive and this guy is incorrectly putting them in the same category and misguiding so many people
Exactly. The two are exclusive and this guy is incorrectly putting them in the same category and misguiding so many people
Becoming a financial advisor in the next few weeks here. Michigan. I definitely make sure to do my research on term life insurance. I love this and it motivates me to not only learn but make sure I’m doing what’s best for my clients. The money will come if I’m putting their needs first.
You two should make a video on how to spend tax refunds! Considering it’s tax season.
Save them! Invest them!
Or pay your debt with it
Yes! I used to pay all my bills ahead. I sat down with a financial lady at church and she told me some things I didn’t want to hear. Basically if I can’t budget my normal bills On my month to month income I would hurt myself paying bills with tax money.
How about adjust your W-4 with your employer so that money comes to you in your paycheck each week? Why would anyone give an interest free loan to the government when they could use that money to help fund their 401k or Roth IRA?
Pro tip. Not having any refund is the ideal situation as you just gave uncle sam an interest free loan for the past year
I never really understood life insurance before. The way Dave Ramsey explains life insurance and what it's supposed to be for helped me grasp the concept
Dave Ramsey also doesn’t give you context that the example of life insurance he refers to, is Universal Life. Not the same thing
@@Anthony-iu5vs Universal Life is garbage with their high fees.
@@astroman30 not only that, the rising cost of insurance eats into your cash values. The speculative illustrations that they use to sell UL are misleading, you need IN-FORCE illustrations to see just how bad the policy truly looks over time
@@Anthony-iu5vs Yes, it's actually worse than buying a whole life policy.
@@astroman30 by a lot, cash-value whole life is truly a Cadillac investment vehicle. It’s unmatched
I sold life insurance for a year. I spent the summer researching what type of return you can expect and what type of competition is out there.
A couple points
-it is nearly impossible to get accurate data if you are the public. I am convinced they design these policies so you do not research them.
-Only two companies that I know of sell whole life insurance that I could consider to be honest and pay a REAL dividend. 99% of companies that do sell this are scamming you.
-The 99% of companies who sell Whole Life quote a huge dividend like 10%. BUT they take out expenses of the company from YOUR dividend. Most companies pay that 1-2% you were talking about.
-Lastly it is Tax free if you the consumer pays for your policy. Not tax deffered which is only if a business pays for it.
Oh! One last point. Having some whole life insurance is good for market dips when you are retired. But please talk to a financial advisor about this.
Overall great video and you got the main points!
Alex Howard what companies were they?
@@stewartcharles I worked for Northwestern Mutual and they paid the highest only matched by USAA. But your representative is a huge component of this as well. You can easily get taken advantage of.... Its very complicated but something you should look for is Additional Premium. There is a lot of circumstances but if your whole life policy does not have additional premium you may be taken for a ride.
Whole life policies come with large commissions however additional premium is almost nothing and is beneficial for the client.
Look for it as a gage for trust.
If you really want to get into it nearly all whole life policies should have a plan in place to hit that limit before it turns into a MEC or modified endowment contract.
Make sure it MECs before you retire. You shouldnt have to worry about life insurance payments when you are pulling from your investments.
If you want more info let me know. I no longer work in the industry so I do not have any conflicts of interest
Alex Howard Thanks for the response. I asked because I was curious in what you've seen. I've actually been a financial planner at NM for about 10 years now. I'm a little surprised to hear that USAA's IRR was matching NM or beating any of the other major mutual companies.
I agree that it depends on the advisor (I made a recent comment on this video). The piece about average rate of return being at 2% is not even the case for average mutual companies.
My whole life pays 0% id be happy with 1-2%
I totally agree, the advisor has to set up a policy that will pay him less if he does Additional premium (we call it OPP or paid up additions) and that maximizes the clients’ money and reduces the commission.
You must have a trustworthy advisor to get these rare policies.
Thanks for this enlightening video :)
Some guy actually tried to sell this kind of insurance to me last year and i don't even have any dependents
They do it all the time -- that's bold!
5:34
I have one small question about these numbers. The final value of their policies should neither of them die is as shown in this timestamp. However, Tia's policy never expires so that death benefit of $500,000 is guaranteed to be paid as a result.
Hence, if say both of the sisters die at aged 70, then wouldn't the $500,000 death benefit payout bump Tia's life insurance value to $774,077 vs Tamera's $619,780, making the whole life policy quite worth it for their dependents or descendants?
I could be wrong, but I believe the cash value is given to the insurance company upon your death. Your beneficial will still receive the entire death benefit though, the 500,000
Loving Tia and Tamara 🤣
Thicc
This video would have helped me 2 years ago before I got a pushy "financial planner" that practically forced whole life insurance on me. After a lot of work I managed to cancel it. Hopefully this video can help other people make more informed decisions than past me.
An insurance salesman and a financial planner are NOT the same thing.
why did you cancel it?? Im in the process of learning how to get one the right way
@@travis1240 Lots of FPs sell shitty life insurance. They aren't mutually inclusive, but they certainly can be one in the same in many circumstances
@@Picwajzzz did you not learn anything from the video
STAY AWAY FROM WHOLE LIFE INSURANCE AND MLMS...…..
True. With an MLM, look at how the money is made. If it's made by selling products, you might be okay. If the real money is made by getting people to sign up and pay membership fees, training, or buy large amounts of inventory up front, then it's likely a racket.
MLMs yes, Whole life, incorrect.
I've seen companies show that the death benefit increases along with the cash value. And what about the direct recognition vs the indirect recognition when it comes to borrowing from a policy?
THANK YOU THANK YOU THANK YOU for posting this. I have had to do the math for my friends who get tricked into stupid MLM's that sell a new product called an Indexed Universal Life Policy. They do a bait and switch when trying to sell it to you they keep talking about the returns and the lack of risk but they never ever tell you about the commissions and the ballooning price of the policy after a certain time that eats up your cash value. (your video should have mentioned that after 30 years or so the cash value is used to pay off the life insurance premiums a HUGE no no). I can't believe these are still legal or widely pushed
Can you make a part 2 that goes into borrowing from this Whole Life Insurance rather than a normal bank? Say they both take the same loans out that are the average loans that people take. And then include the age of average death to see how the return on the $500,000 fits in since 1 expires. Maybe even start from age 30 and go to 80ish. And also show a chart of when investment in 1 overtakes the other (if at all)? That would be awesome.
Well, the probably don’t want to emphasize being able to use the cash. Where 401k , and IRAs are only meant for the time spent after 59 1/2.
Borrowing money from yourself and paying interest is never a good idea. Any money borrowed plus interest is taken off the face amount in the event of a payout of the face amount.
My wife and I just did term until our house is paid off incase one of us died and had to take care of the kids we wanted to be financially secure. Took the extra money and throw it in investments every month instead, no need for whole life, once kids are old enough and homes are paid off its no longer needed really.
Short answer: Yes
Long Answer: Hell Yes
Sequency especially if you have kids
Though long answer, it can benefit some, but not most
I use to work for one of the top insurance companies and sell Whole Life and Term as well. And this video nailed it! I would receive 100% commissions for Whole Life, and almost nothing for Term. This lead to several unethical practices of the majority of people pushing only Whole Life even when that was not the best Financial advice for the customer. I quit after 6 months because of these unethical practices. The best thing you can do is talk with Financial Advisors who do NOT receive commissions, but work only on a hourly rate.
Good explanation but I have not met anyone who bought term and invested the difference.
I got convinced to sign up for whole life when I was like 20 years old. The agent did not mention that a portion of my monthly payment was not going into the investment aspect, but rather to fees. He made it sound like the entire payment was going towards an investment account. Sure, ignorant of me to think that, but he made it sound like it was a no-lose deal, so I bought it. Cancelled a year later when I saw my first annual summary and how much was going to fees.
David Tran this is a foolish cancel depending on the company. Whole life insurance is like owning a house you pay the mortgage/fees upfront and you end up with liquid asset in the end. With New York Life for instance you pay fees for about four years coming from your premium and once that clears it goes towards the cash value and death benefit growth. Basically you bought a house at full price and then sold it at a third of the price a year later. Not smart
@@sG_Chimera yeah but obviously he was sold something he didn't want or need, by an unscrupulous agent. Should have gotten his money back IMO.
Travis Nelson i think the agent must have done a poor job explaining that. But the investment piece is there. It’s a guaranteed growth and it should have been apparent in the illustration that the CV would take a couple years to accumulate.
Back in time, when they offered me this kind of insurance, I kindly refused because I didn't trust a legal entity to own my money for such a long time... probably wrong reason, but definitely right choice :) Thanks Two Cents, I just stumbled upon your channel and I love it!
Sister sister
Seán Ahern 😂😂
Love the way you RUN THE NUMBERS.
I had thought that the full life insurance would've been good until you calculated the difference in appreciation from term life insurance.
Thanks
I had a couple of friends who had been trying to sell me VUL. I think they believe in the product (and yeah commissions too) because in order to become an agent, they had to have one themselves. I I have to decline over and over because I don't take advice from people with conflicts of interest. If financial gurus with nothing to gain says term and invest the rest, then yeah, that is what I am going to do should I have a dependent in the future.
I’ve been a Dave Ramsey follower for eight years and am now completely debt free including my home. I like your videos. They explain both sides to each topic. Keep it up.
This explains nothing much. Glad you got out of debt !
I’m not sure what you mean.
Look into reverse mortgages too! It seems sketchy af
I was in the mortgage business for awhile and 98% of the time, reverse mortgages do NOT make sense for the client. There are far better ways to utilize debt if you absolutely have to.
I always walk away from your videos feeling like I learned more than a few things! And I have been in the insurance industry for a decade! 🙃
If you've been in the industry for a decade and you can't refute misinformation like this, then quit. That it's on PBS, is shocking. They're just simply not correct in a number of ways, it just not this simple, if it was then everyone would be the same, all companies would be the same, all products would be the same, there would be no need for the heavy regulation that insurance companies and the agents that work for them MUST adhere to, at least I'm Canada. The information is at best incomplete, definitely misleading, but it suits a narrative and fear based/bias based "newsyish" faux journalists seem to get more views. Of course they make nothing if you don't watch.
@@sjonas8777 I actually work with our legal team on compliance and regulations. You live in Canada....much, much different. Before you go insulting people you should know the subject matter at hand. But assholes like you feel the need to pipe up on EVERYTHING you disagree with on the internet. I would normally wish anyone well, but you can fly a fucking kite. Insurance is very complex, and I suppose it is unfair to expect someone of your likes to understand it. But this was a very comprehensive presentation meant to give people the basic principles of the different kinds of policies so they can be a bit more informed on their own. Agents are in no way required to explain the differences - they just get to earn the commission. Enjoy your miserable life trolling good people on the internet!
@@lizswank7239 you say I'm insulting, yet I never swore nor did I put people down or call them "trolls", rarely do I comment and certainly even more rarely in a negative way. If you are indeed in compliance then you would realize, basically am saying exactly what you said that insurance is a complicated business, and that this simple video does not do it justice. You will think whatever you think, and you're overreacting continues to make me glad to be Canadian, if you ever come up, I will treat you and your spouse to dinner then ,I will meet the real you and have good conversation about things we can agree on, there is likely many more of those than you would believe.
@@sjonas8777 troll. Telling people to quit and calling this misinformation....You suck
When I went to invest my first ever savings of around 2000$ I was sold a ULIP plan which had a lock in period and it was 2000 per annum for 5 years!!!! I was naive with no financial education!!! What you’re doing is very important and I genuinely thank you for it
Love this video AAA was trying to sale me whole life but I already have term. They told me not to cancel the term but add more with whole life. But I already had done the numbers before. Insurance is for insurance purposes and savings that’s something in a different category
Nice earrings! By the way, what happens if I don't get any life insurance and stick to just index funds until old age? My dependents can use the value of those funds when I'm dead to cover their needs, anyway, right, so there's no point for insurance?
Thanks! I take my earring game seriously. And you're correct. Your family can do whatever they want with your estate. But life insurance can basically tide you over until the time comes where your built-up wealth means you're self-insured and your dependents will be fine. We're personally not there yet because we're young, and so since we have a kid, we have term life for the next 30 years, by which time we probably won't need life insurance anymore.
SamianHQuazi
The point of insurance is risk management. If you live to old age, then yes, your plan will work. If you don’t live long enough for your investments to grow, then your dependents are in a tough spot if you don’t have any life insurance.
@@TwoCentsPBS i like you guys stuff but this one is very one sided and not good enough research. I'm a cfp and i have whole life... Wait for it.... For the investment, not life insurance. Not for everyone but even if i don't make commission, which i don't now. I still wouldn't single out whole life only cuz it's whole life.
Awesome Keep it going! The whole life insurance idea is to hedge against any debt recurring especially in your mortgaged property. It is rendered useless if you are debt free! Heck if I were to protect my family, I'd rather invest in a medical policy with the insurance company!
Can you explain your comment further? What do you mean the whole idea is to hedge against any recurring debt?
@@littlegeo1 simply put a protection against your house debt. If anytime that your life is gone, the debt will be passed down to the next person to payoff the debt. That term life is a partial protection to payoff that debt in cases of anything happen to your life.
@@investingwithaaron9876 Got it. Thank you!!
@@littlegeo1 Welcome! That's my 2 cents :D
I wish this video was around a year ago when I decided to purchase a whole life insurance policy! I'm going to look into canceling it now.
As part of my union benefits at work a small insurance policy of $5,000 was included. When I filled out the information for that I was forced to have a meeting with an agent to get my policy set up. The whole time she was trying to sell me whole life insurance. I have no dependents and no one who is reliant upon my income if I passed away suddenly. Whole life insurance for me isn't a good fit, and likely will never be since my only dependents are generally going to be of the canine variety . The agent kept trying to push it to cover funeral costs. I watch Ask A Mortician, and know I could easily do a direct cremation for less than the $40,000 she was trying to claim I needed, the $5,000 should cover that just fine. As someone in my 20's being sold a policy for my possible early death trying to sell it as a big ticket party type expense just felt annoying and sleazy.
So a new advisor myself in the insurance industry, my question to you is this, what about persons who are not investing savvy? There are very many persons who would watch these figures, agree its a scam, NOT invest in stocks, save in a bank and withdraw when non essentials go on sale and never allow their monies to grow only to reach a stage where there is absolutely nothing to fall back on. And if I sound like the typical advisor, by all means call me out, it's how I grow to better assist persons with their financial plan, using the tools in equipped with, and not just believe what I've been trained to and currently studying.
Also, as a long time follower before getting into this industry, I always wanted this topic to come from you guys so it would be nice if you touched on endowments and annuities as well.
What are your thoughts then on medical and health insurance?
Would appreciate your research :)
And as a response to the horrible experience below, not all of us are greedy, and if this person was not tailoring to your needs then yeah, good call backing off. But there are honest persons out there. As with any commission based sales careers, you'll get persons who do it solely for their own interest and others who actually try to meet the specific needs inspite of the commissions. I've heard persons selling perfumes that will get you a jobs, so... Yeah.
I dont think it's wrong to pay someone else to help you if someone isn't "discipline", but i think the problem is that people aren't equiped and informed to make good financial decisions. Typically insurance agents aren't clear about these, which make it more difficult.
If you take the scenario in the video, at the end of 30 years there's a difference of over $300k. That's roughly $10k a year. This might over simplify it, but would you rather pay me $10k a year for thirty years, or get help/pay someone a (hopefully reasonable one time) fee to get you setup with an brokerage account and auto invest into index funds. This is a set it and forget it option that shouldn't take more than half a day.
Is the value of these packaged insurance/investing solutions worth it? For some, yes, others, maybe not... but at least people can make clearer financial decisions for themselves.
Also, i dont blame insurance agents and Financial Advisors on these type of things, it's not their job to teach people on how to make good financial decisions. I believe it is for people to take responsibility on equipping and educating themselves, that's why channels like this one get my thumbs up!
Love this channel! I have an investment channel so when this is a treat!
I've been wrestling with this for the past month. I've had a whole life policy through Northwestern Mutual for the last four years, and this video and conversations with friends have made me start to rethink it. I met with my financial adviser from NWM earlier this week to talk through it. He said of course he'd do whatever I said regarding the policy, but he wanted to talk about why I'm rethinking it. His main argument in favor is that it's a shelter from bear markets during retirement. He acknowledged that it doesn't grow as efficiently as an index fund or something similar, but he said the savings from pulling money from the cash value instead of a market-related fund in retirement during a bear market can be huge. He showed some graphs and sent me some materials to read over.
It's all pretty overwhelming for me. I'm digging in, but I don't feel like I have the background to make the decision. Is there any validity to that argument? I don't have an dependents, so the insurance component doesn't mean much for me. I've already maxed out my IRA and am putting money in a brokerage account, so this is more of an extra thing he recommends as protection during a recession.
Any advice on how to validate the accuracy of the bear market shelter stuff and how to determine if that's worthwhile?
@@NateGreensides Thanks for the input! From what I understand from what my FA told me and what the Whole Life paperwork says, after age 65 I quit paying the premium. From there there's a guaranteed cash value and an estimated cash value based on estimated dividends (which my FA says is slightly low-balled). The insurance payout includes a base amount plus cash value, so what gets paid to my beneficiary includes a guaranteed amount plus part of my remaining cash value, as I understand it.
My FA mentioned annuities and other options that work for bear market protection as well, but he recommended the whole life policy because of the dividends and the tax benefits.
He also said that this policy is different from a lot of the whole life policies out there. He said that most of them are crap, but this type of policy is the OG whole life, not one of the newer models. I don't remember what terms he used specifically.
What he said made sense to me, but I'm still thinking about getting a second opinion from a fee-only FA.
@@NateGreensides Thanks for the insight. I do not live in CA, but this is helpful for informing my conversations with my FA.
According to my paperwork, the premium will never go up. I also have a document that shows what the policy looks like each year. The insurance payout column starts at the base amount and increases as the cash value increases. That's what my FA meant by the two being combined. I'll ask for clarification, though.
The annual premium column stays the same until age 65, when it goes to 0. There are two cash surrender value columns, one that is guaranteed and another that adds in potential dividends. The guaranteed column is always slightly higher than the total premium paid column, but it continues to increase even when the premium stops at age 65. The cash value column with potential dividends is significantly higher (almost double) the guaranteed.
I've been putting around 500 a month for over 5 years now. With covid19 my unemployment was stuck and I had the plan pay for itself for a month. I've taken out quite a few loans on the policy and it's been quite helpful. I now have a son and it's good to know that even if I never pay back the loan the death benefit still pays a large sum minus the loan amount.
Buying into stocks fluctuates a lot and buying these days when the market is up (falsely imo) is quite risky.
Overall I'm happy that I'm doing the policy and also have other investments that have higher risk but I can count on the policy.
I can’t speak to the individual integrity of your FA, but he has a personal relationship with you, knows your needs, and can be held accountable for his advice. Those other sources can’t.
I recommend sticking with your FA if he’s trustworthy and gets good results.
His mustache makes this look so legit and gives me an urge to immediately snort some white powder.
Just came across this channel and I’m now a subscriber! Can’t wait to learn about 401k, Roth, etc from you both! I am financially illiterate and would like the info in small, easy to understand doses like this.
Awesome explanation - “run the numbers” section nailed the pro/cons. Great content folks!
Sweet, thanks Riyad!
scary if you think that "nailed it"
*Love Tia and Tamara*
Back to 90s are we
Quahntasy - Animating Universe
Cha cha cha chia
theyre still alive.
I've been looking for life insurance for myself recently and talked to an agent who was adamant about whole life and said she even had a whole life policy herself. I could tell it was a total sales pitch but decided to hear her out, and it was basically everything that was stated in this video - premium never changes, you'll be covered your ENTIRE life, dividends.... But I'm glad I did my own research beforehand, because when I reinvest the difference, I know it'll be worth more than the whole life policy in the end, AND I feel like I'm on track for a retirement savings so I don't have to depend on a whole life insurance policy. Great video!
That’s why I almost always avoid talking to an actual sales agent of insurance. They almost always round up.
Did a mistake when I was a kid. Never again. Recently, a salesperson was trying to force life insurance as "investment" and it really irked me.
What mistake? Whole Life would actually make a lot of sense when you're younger.
@@heinaye3594 Hein Aye we bought it for my mom and me when I was very young. It was a cash value whole life insurance. Turns out the premium was very much higher for me as well as my mom. If I would have taken the term insurance then my coverage would have been very high as compared to the coverage whole life insurance provided. To my knowledge, plans we were offered were all the ones which would give you the money back with some interest over the years (cash value) and the salesperson told us that it was an investment and we would get back high return and we should buy it because of money that we will be returned was way higher.
@@dhavalchheda1626 ahhh gotcha. Sounds like it was a dishonest insurance salesperson. In general though, you can lock in a cheap premium for whole life when you're young and you can potentially stop paying premiums in your 30's or 40's with paid up premiums.
Let me guess it was HDFC bank lol..
Sad part of this video is that they left out that Tia has probably around $400-450k of death benefit over the top of the cash value. However, if you buy whole life to have your cash value compete with investments, you are doing it wrong and will be disappointed, which they do address. Lastly, IRR on good WL policies are typically 3-4%. So higher than shown, but do not compare with long term investment returns.
I got talked into this scam and lost 5k. I didn't know anything about investing so I was an easy target. After cancelling it, I Invested in Tesla and made 60k the next year. Not a fair comparison, but there are better investments out there.
Somewhere Dave Ramsey is smiling right now.
humbertXX
“SELL THE CAR ALREADY!!!”
humbertXX term life insurance or whole life insurance with beans and rice
Make the kids think they're next!
You mean Mr. know it all?
0:56 When I check RUclips and there isn't a new video from you guys!
We'll keep 'em coming bud!
Use notification instead
I have objectively studied the numbers and have tried to explain to so many people that whole life is not the way to go however I am left with a lot of frustration :(. Even with videos like this, people make their own choices with how they spend their money
What would you recommend?
It is heartwrenching...
Holy....that is information I did not know. I thought I might get some money after my tern life policy is done but no. Thank goodness I'm learning it now. It just pisses me off because with a little self-control I could have put that money in a savings account and got a better return. I'm also pissed because a few years ago I called to stop or at leased reduce my policy and they said no, to both. Thanks.
Wouldn't there still be a significant advantage in interest rate savings by borrowing from your cash value for major purchases like cars, houses etc?
You have to pay it back
I am a licensed financial advisor and I don’t have a whole life policy on myself nor would I ever recommend this to a client. If an agent/advisor offers you a whole life policy, run the other way.
You wouldn't recommend this to a client because you don't understand the value of building capital, you don't think long-term, and you have faith in markets that are heavily manipulated and prone to crashing, as well as a currency (the US dollar) whose value is being inflated away at a record pace.
Maybe if you took the time to do any research at all on whole life, you would have a different perspective, instead of dismissing it out of hand.
@@moriendus get the gtof you don’t build wealth with a f insurance plan the general market and the Real estate will always outperform that.
@@theAppleWizz You clearly have no idea how cash value life insurance works. You shouldn't speak from ignorance. Also, if you think that the market and real estate will always go up, then you don't understand why that is happening or why it is unsustainable. I suggest you educate yourself before making these ridiculous claims.
@@moriendus bro this a whole video on why whole life is a stupid idea. This is why people like Warren Buffett buys out gullible people at 80 90. If you can’t handle a 30% market drop just say that but that does not mean the cash value is anything more than just a marketing ploy. Just so you know the insurance company has been investing your money and making 10x what you will ever get.
@@theAppleWizz This video has factually incorrect information and therefore draws invalid conclusions from that bad info. It also doesn't address how someone can actually use the cash value in the policy. I know that the cash value isn't a "marketing ploy" because I have cash value and have financed things in my life with it.
I can tell you don't understand whole life insurance because you think the insurance company is "making money off of me" and you fail to understand that a MUTUAL life insurance company is owned by the policyholders. If the insurance company makes money, then I make money as an owner of the company. This is what dividends in life insurance are.
As I said, you need to do actual research on the subject instead of listening to the fake gurus who made this video because they either lied or just didn't know what they were talking about as they just made blatant factual errors.
I work in the insurance business, I rarely recommend whole life, and tell to safe and invest the difference.
Eric Ortiz I believe everyone has their own opinion on each insurance! Love yours
But term and invest the difference can and does work for people. One thing I’ve noticed in my short career, is that my younger clients all say whole life is terrible and they would rather buy term. And then the older clients will say they regret buying term and wish they bought more whole life lol. That’s not to say whole life is the only or best insurance to buy, but it is an interesting observation to think about. I guess it just proves that one size does not fit all.
invest the difference - in reality people buy meme coin, NIKOLA, ARKK, NVDA at all time highs and lost their principal
~Sister Sister~
~Never knew how much I missed in~
~Potential savings in my life insurance~
great advice guys, put all your money in stocks, live through volatile years, lose money in retirement in the down years - clearly you don't understand the value of having 'some' money in whole life - you already own bonds, why not improve on that return?
Pay an insurance company 8% interest to BORROW against your own money, and you think this is a good idea?
Two cents, love the videos, keep making the great content! I personally love my whole life policy, we use it primarily as our emergency fund now. There is a lot more information about whole life than cover by this video. For example I wouldn't buy a whole life policy but a CUSTOM whole life policy. It also depends on what you do with the dividends, are you buying Paid-up additions, taking the distribution, using it to pay premiums? Whole life is NOT for everyone, but it can be helpful to some. A lot more involved than can be covered in a 7 minute video. Note: I do not sell insurance or financial products of any kind. Just pointing out there is a lot more to consider about whole life. I would agree it is not really for purely investing, but is another potential useful financial tool.
Zachary Hayes Paid up additions is extra insurance purchased from your overpayments from previous years. These “dividends” are not profits from the company. If they were you would be taxed on them. Instead life insurance companies use the name “dividend” for the refund you get from being overcharged then they trick you with that wording to use your refund to buy more insurance which is called paid up additions, And if your agent didn’t tell you, when you die the money in the Cash Value is kept by the insurance company. Whole Life is a bad way to have an emergency fund.
You’re spot-on. This video is absolutely correct, but very reductive.
It’s like how I feel about Dave Ramsey: he gives great advice, but it’s too reductive to be the right advice for everyone listening. It would be like a doctor prescribing medication to an entire audience.
Thank you for this video, this also applies to variable life insurance but its worse since they transfer the risk to the insured. Term and Invest are the best!
You guys didnt talk about the capital gains tax on that index fund investment. There's no tax on the life insurance policy.
They also jumped from a risk-free vehicle to a 100% market risk vehicle. Apples and oranges.
@Exoplanet Research Yep. The death benefit is tax-free, while estate taxes can run up to 40 percent. Once the estate tax provisions of the TCJA sunset, we're back down to a much lower exemption. Ouch.
The other thing these guys totally miss is how these policies are actually constructed in the field. For example, hardly any 20 something is ever going to be sold a 500,000 pure whole life policy. It's going to be something more like a $50,000 permanent death benefit and a $450,000 term rider, which allows the policy owner to put a lot more premium in, up to the MEC limit, to build cash value much faster. After x number of years, the term goes away (as does the cost of continuing that term insurance) but the cash value, including a bunch of dividends paid along the way (if it's a participating policy) will support a much higher permanent death benefit than the 50,000... and continuing to earn dividends tax free, which can be withdrawn tax free if you no longer need the life insurance. That and you can exchange it for a lifetime income annuity if you like without having to pay capital gains tax (or ...if it's in an IRA, ordinary income tax).
I don't think whole life policies are for everybody. They're frequently oversold. But for people in high tax brackets, with illiquid estates, estate tax concerns, probate concerns,or asset protection concerns, they can be terrific.
These are people a lot of 20-something and 30-something financial reporters who never sign the front of a paycheck don't understand, and aren't writing for.
@@jasonvansteenwyk5984 I'm sure the no one watching this video will have estate tax problem tho lol. Very very few do. Even if you're rich enough. Your death benefit is in your gross estate so it'll get taxed at 40 percent unless you have ILIT...
@@ksmoothy28 Expand your thinking. People watching this video are unlikely to have an estate tax problem NOW. However, they may well have estate tax concerns (and asset protection concerns) 25, 30, 40, 50 years from now. After their term insurance has expired, and they have a successful business, a comfortable home, maybe some other rental properties, accumulated stock, etc. And who knows what the estate tax exemption will be then... especially the way younger voters are breaking for Sanders. If that trend continues, we may well have a very low estate tax exemption at some point in the future.
Meanwhile, yes, your death benefit would be in your gross estate IF you own the policy in your own name. But people with estate tax concerns are going to use ILITs. Meanwhile, trusts can't own IRAs. So you can't move any wealth in your IRAs, etc. out of your estate. It's trapped there.
Don't get me wrong... I'm a YUUUUUUGE fan of term... especially with shorter terms, like 1 year and 5 years. (People selling 10-20 year term on a BTID concept don't quite understand their own system, or they're trying to goose their commissions, too). I'm also a HUUUUUGE fan of index investing.
But people in high tax brackets, with successful businesses, significant real estate, real asset-protection concerns, etc. are playing a different ballgame than W-2 folks working jobs... even if some of those jobs pay pretty well. It's a different mindset. A lot of online content and financial journalism doesn't get that. What's good advice for a schoolteacher isn't going to be great for the guy who owns a chain of tire shops, a general contracting company, or a good-sized farm, and vice versa.
One financial advisor made the argument to me that with a standard index fund, because of fees at whatnot, you’re real annualized expected interest per year is like 4ish percent over long periods of time. And therefore recommended the insurance policy. I noticed that over the last 30 years, there was a 7.8% annualized average boost in the snp 500 (but this might be higher than it should be because were likely nearing the end of a cycle); how much of this is lost to fees?
Invest in Vanguard and their fees are incredibly low. There is probably somewhere with insanely high fees, but clearly this person was just giving you advice that would help themselves.
Why are people still paying fees in index funds come onz
Can you guys do a video on all the types of life insurance and what's the best for different situations?
IT was omitted that you can over fund the policy and earn the % on it's cash value until it "MECs" out.
I made a call to Dave Ramsey about this. The video is called Aunt and Uncle $5,000,000 mistake. I couldnt talk my aunt and uncle out of it, but showing a video of Dave Ramsey talking to me about it sure did.
One thing you forgot that I think is important is people with whole life think their dependents will receive the cash value along with the policy. Thats false, the insurance keeps the cash value, they only get the policy.
Depends on the policy.
The cash value is the face amount. What are you talking about lol
@@kevinjohnstone2911 Cash value and death benefit are two separate things and in some cases a policy would pay both.
@@jeremyed9507 Same shit, different mask. Cash value is only used for emergencies and never for leasure
@@jeremyed9507 leisure
So I've been considering Whole Life insurance but not for the investment opportunity, but for the Infinite Banking Opportunity (I invest in other ways). So I really wished you could have elaborated more on whether that aspect of it was a good idea. Would taking out a loan against your life insurance to buy things like cars or other large ticket items be a better source than a standard loan and are there any downsides to it. For me, the whole life wouldn't be an "investment" arm so much as just life insurance WITH a savings account attached. If I'm already putting $500 in savings a month (using your example) wouldn't it be worthwhile to use a whole life insurance as a savings arm instead of an investment arm?
olandir No. If the savings is your money, why would you have to take it as a loan? Buy cheap Term and invest the difference in a Roth IRA. Also with Whole Life there is only one pay out.... either the death benefit and the insurance company keeps the cash or you get the cash which likely has about a 2% return and the policy is canceled. If you borrow from it you have to pay it back with interest either way. If the idea of taking money out of your own savings account and it being treated as a loan with interest seems stupid, Whole Life is exactly that.
its not worth it at all. invest in realestate if you want take a shot at the silverbullet. you can take out loans based on the value of your real assets.
We were able to get some term life insurance past year on the recommend of our FA. It was stupid cheap and really easy
Please make sure to invest the difference in a Roth IRA partnered with mutual funds.
I agree. Life insurance isn't an investment product at all. It's just a place to store cash safely and efficiently without the ups and downs of the market. I think it should be the first asset people get in life honestly. It's a responsible thing to do especially when one has a family. I also have heard that comparing any life insurance product, even a dividend paying whole life policy to an investment account with an index fund isn't a fair comparison? Should advisors be marketing life insurance as an investment? Again, I was taught it's just a great place to store cash. Mr. CFP, are you teaching your clients to save $$ first? That's what I remember mine teaching us a long time ago. Emergency funds and such? Where are they putting it? Savings account? Losing money there since banks only pay .10-.25 annually on those things right? Certificates of Deposit don't work either because they aren't as liquid and you get penalized for early withdrawal in most cases. What's the next best liquid savings vehicle you can recommend to us?
Nice job! In my experience working with people, I've found that most people with a whole life insurance policy were underinsured as they couldn't afford the proper amount of life insurance. Term life insurance provides the coverage people need at an affordable rate. Most term policies offer a conversion privilege should the insured become sick and need coverage beyond the initial term.
Unless you get a policy with a high PUA, which essentially boosts the amount of coverage you get over the term of the policy.
So if I understood this video correctly, term insurance is like a contingency plan on life until one can build enough wealth to cover funeral expenses + dependent costs? So when term life insurance runs out in 20 or 30 years, you’re not insured anymore?
Yes, but you can choose your term.
Yes, that’s exactly right. Have insurance to cover the short fall. Once build enough wealth, cancel it because you are now self insured.
Yes! But if you aren’t disciplined and actually save you’ll be up a creek. That’s why I have an increasing term. I’m insured all the way until I’m 80 if I want to keep it that long. Just in case I get sick or something and wouldn’t be able to buy more insurance when I need it.
Riley Yandell Yes, getting term for the right length of time is important. Having it be renewable is essential too.
A "financial adviser" that is recommending life insurance as an investment is likely not an adviser. They're a salesman.
You left out the part that the company only pays out the DB upon death while keeping the cash value.
They keep whatever one you don't pick. True though that you only get to pick between the cash value or the death benefit
Love you guys!!! This is such a great video. Someone from NYLife tried to rip us off. Our new advisor told us exactly what you suggest in this video. Invest the different and when your term expires you’ll have a lot more in retirement savings so if you die your family can use that $!! Genius. But I do plan on living to 100+. 😉
I have been watching tons of videos trying to understand more about whole life insurance and whether it makes sense. This is definitely the best one. Thank you Two Cents.
The problem is assumption. They assumed that people would actively invest the savings (from not buying whole life insurance and instead buying the cheaper conventional life) that they have on index funds or something. In truth people will just spend the saving on frivolous goods.
Hans Erich Pediapco Yours is the most legit state in the comment section. I’m not a cpa or fa, but after decades of investing in real estate, the ability to borrow from yourself to invest AND use the banks money is big over time. But most will either do like you describe or fund a policy and never take a loan unless it’s for something that loses value.
As a new (started last month) financial representative for a full service brokerage, I've ran into the term vs whole debate a lot. I get paid a commission on the policies I sell as well so I am incentivized to sell more expensive policies. I also have fiduciary responsibility and a moral prerogative to treat my clients the way I would want to be treated. I would take less money if it helped my client out more. Which type of client would you recommend would benefit from whole life. I vow to not scam my clients and to treat them ethically and I want to balance opinions from every side.
wait, you guys didn't go over the tax deferred stuff. how do the taxes work?
Taxes are paid on earned income when withdrawn from the cash savings. There’s a bit more to it but the basics are that if you make money, you get taxed when you cash out.
Allianz in Mexico keeps pushing this type of "investment" here. And the commissions are very confusing and hidden toward the back of the brochure and divided up as several hard to calculate fees which of course the sales person doesn't mention. I've been approached several times and realized that the commissions were very high and the returns (pre fees) were not any better than a relatively safe investment that I could use at a fraction of the cost that would be available in the short term without cancellation fees. It is really sad how they mislead people by hiding that information and making it confusing.
Hey, I totally get your point on this one if you are comparing the policy with Term life for a person at the age of 40 but try doing the same thing for someone at the age of 20 for the same life expectancy with whole life just to be paid for 20 years.