Dave Ramsey Thinks IUL is CRAP (My Response!)
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- Опубликовано: 5 окт 2024
- In Dave Ramsey's most recent video on Indexed Universal Life Insurance, he calls it a big pile of...In this video, I'm going to respond to each of his criticisms. Dave Ramsey gives a lot of good advice about staying out of debt and managing your finances. But that doesn't mean that everything he says is beyond reproach. He's not lying but he doesn't fully understand the nuances. He often conflates whole life with indexed universal life. Let me know what you think in the comments below.
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I sell IUL as an asset protection account.
10 to 15 years front loaded, with more cash accumulation towards to later years.
I will also select "less death benefit, more cash accumulation option " should a client want.
You just have to be upfront with these things.
I have been paying 600 per month into my max funded IUL policy. The only one telling me it is a good financial decision is my salesman who wants me to do more lol. I think I will side with Ramsey on this one based on my experience so far. Just get term life and invest the difference before you get stuck into a lifetime decision like me.
I think if it’s the only retirement tool you’re using then it probably was a mistake.
Term and invest the difference doesn’t produce value like a Lirp sounds like primerica lol apparently no one taught you how a lirp works
i have the same experience. for 10 years, i have paid almost 30k in cash but my cash value is only 9k. where is the rest of my money!!!!! the fees i read on the report is insane! the only thing i can say is STAY AWAY FROM LIFE INSURANCE.
@@shihgung7161 wow. Sounds like someone ripped you off.
@@shihgung7161 who is the underwriter?
Some great reads, Nelson Nash's "Be Your Own Banker", "Money Wealth and Life Insurance" and "The 770 Account".
The biggest issue I have with IUL are the people who present it as a replacement for a 401k. I'm still not a huge fan of it as you can get a better return by just investing in an index fund but you have a more sensible, honest approach than some of the people I've seen pushing it.
I had a convertible term policy for 500k. I had a salesman talk me into converting into a 100k IUL policy. I thought it was a whole life policy. The salesman was concerned about his commission only. Every year I would call him. He explained nothing. He died along with my first insurance salesman.
Nothing wrong with a 100k IUL. Once you feel it’s maxed out to the principal amount, invest in something else. Maybe an index. IUL are good generally for older people.
@@JocobsComments hey I am a 18 year old and I just did a 100k iul is that bad? I didn’t do my reasarch and an agent sold me it and I’m a dumb 18 year old lol so I went ahead and I’m kinda scared.
@@va1056depends on how its structured
@@va1056depends how it was built. You need a good agent to curate an IUL that fits your needs.
No @jacobs it’s a good investment brother , your not losing as in a 401k, but your not gaining, you have living benefits, let it compound for good 21 yrs, everyone has a different opinion. Once you have a good amount use it to open a business, make profit in your business and continue the good about IUL.
If you really understand the cost involved in the IUL and the potential cap upside of the gain, it is an average investment tool. I would argue if you get a much cheaper term insurance and invest the excess to the similar safer index SP 500 investment over 30-40 years period, you could be doing quite better. Now if you don’t sell it, then there is no tax issue. Life insurance agent will sell you all kind of tax tricks but you can get it in the real life too such as ROTH IRA.
The expenses are the IUL’s strength. Comparable to an S&P index over the life of the program, with a death benefit to boot.
Structured properly?????? why shouldn't it "structured properly" Is it because it is structured improperly? Why would i buy something with loopholes?
The cost of insurance and charges is shown in the illustration.Yes,the cost of insurance increase but cash value also increase based on interest rate.Beside,nobody knows when are we going to die.Most people die at the later age.If you put the IUL in option B,the beneficiary will get the cash value plus death benefit.
still does not convince me, I enroll on WFG to become a sales person and the commission is very high, but I do not see a reason to put my money on it yet.
@@kdengo IUL IS NOT FOR EVERYONE THEIR ARE BETTER IUL OPTIONS THAN TRANSAMERICA/WFG IT ALL DEPENDS HOW AND WHEN YOU PLAN TO USE YOUR MONEY
@@429mas Transamerica has one of the worst IUL's on the market
The reason we choose the UL is to be benefitted from the investment part while the investment part is technically a part of face value! Meaning that the table shows that we have the term death benefit plus the investment part which is growing while the investment part is technically a part of the Death benefit itself. Meaning that we are investing money by paying a huge amount of premium while the insurance company will take it all and nothing will be left in our beneficiaries hand. My question is why the insurance companies advertise its investment part? what is its benefit for us? even if we take the investment part, we require to pay tax for the any values more than amount of our premium investment. Moreover, the cash value will be used to feed the insurance rate once the premium term stops ( like after 25 years). To be honest, I am surprised how the UL stays legal? !!! Something is wrong with this plan.
At 54, I recently purchased a $250k UIL policy for $500/mo. After 7 months of numbers crunching, I contacted my agent to cancel the policy. She pleaded not to cancel due to the return of her commission, also, I would lose on the premium I paid. She adjusted the premium down to $170/mo. Knowing by lowering the premium, at age 83, my policy will lapse with zero cash value. But it's alright because I took the difference ($330) and invested inside a Roth IRA earning a conservatively 1.75% compound monthly trading option selling cash secure put w/wheel strategy. My 30-year Roth IRA projection is to be $8.7 million tax-free, but, I will settle at $5 million give or take regardless of the market condition. In the meantime, I'm still insured for a $250k policy at $170 premium/mo.
The reason I decided to keep the IUL policy: 1. Still have a death policy in place should death knock on my door. 2. the rate is $30 different vs. 30 year-term rate. 3. I don't lose out on my 7-month premium payment and 4. Allow the agent to keep her 70% commission of the first year premium plus 10% yearly after.
What happens when the iul is upside down ? How do we benefit if no one pulled cash value ?
Maybe I’m dumb, but I still don’t understand.
Still seems like you’re overpaying for insurance, getting a crappier rate of return on your “investment”
Why not just get the cheaper term life, and take the insurance savings, plus what you would have been paying into stuffing its cash value - and put that into a proper investment vehicle.
Your endgame number will be higher
If you're comparing the IUL to a stock portfolio, you may be right. But the IUL is not a stock market alternative. It's a bond alternative which will give you far greater return for far less risk than a typical bond portfolio.
I was fortunate to have a subsidized universal life policy through work. I put $1000 per month into the cash value for many years which paid a guaranteed 4% interest rate when other risk free investments paid less than 1%. I now have over $600k in cash value which is added to the death benefit. Of course 4% is not as good today and the cost of insurance increases each year. The interest on the cash value is still more than double the cost of insurance but I have started to decrease the insurance amount and will continue to do so each year, as low as they let me without withdrawal of the cash value.
So the really hard part about using IUL's is finding somebody whom you can trust. From what I'm reading, this topic has vultures circling all over. What to do.
Watch some of my other videos. I tell you what to look for.
an IUL is just a Life Insurance Policy. After exhausting all investment instruments available, maybe, some qualified people would put some money aside to an Index Universal Life Insurance policy as it is, just a life insurance policy.
I think of the largest issues is just how complex these products are. Just like any product all IULs are different and unfortunately sold as “you can’t lose as there is a floor of zero”. In recent years IULs were sold with very high multipliers that came with a cost anywhere from 2 to 6 percent a year for added performance. Issue in that zeros where there was a 0 percent rate of return the actual downside with COI and additional riders was negative 2-8 percent.
One other factor that many do not realize is the product is just a general account product with many levers the insurance company has control of (cap rates, participation rates etc) and are also unaware S&P historical returns are not accurate as the IUL does not include dividends.
Good comments. I address these issues in my other videos.
@@davidmcknight8201 nice well done 👍. Appreciate the detailed videos like anything when used correctly very powerful, just really requires a deep dive.
Keep up the good work!
@@Anthonys771 Thanks Anthony!
no matter how they try to dress them up just a glorified whole life
@@mikej3571 well to be fair in some circumstances that is a complement. One of the largest sellers and proponents of IUL - World Financial group has “priority product” built by insurance companies that performs worse then normal retail product due to expected lapse ratio etc..
Key word: "structured" properly! Most insurance companies do not no how to do this. Dave Ramsey is looking out for the average American.
Are you saying that IULs are only good if structured properly?
@@DavidMcKnight no this is what your saying... I believe two or three times in this video... I'm just agreeing with you.
@@TOP_LOVELL Ah, got it.
thats key... WLI if STRUCTURED PROPERY""! i pay into for 32 years pay 28000.00 premium cost
the policy has A NET CASH value of $53000.00
They don’t structure it to benefit the insured because that will decrease the commission and fees significantly but increasing the cash value and decreasing the death value should be the correct way..
Good video. Dave is rich he doesnt understand things we struggle with. Thanks for educating us.
Happy to help.
@@DavidMcKnightwould you prefer this for someone in their mid 30s?
@@YeaImFlyHo possibly. Unless they’re looking to do a Volatility Buffer type approach, then I prefer IUL.
When Dave says the life insurance gets more expensive each year, I think he means you are paying more per dollar of death benefit. The best part is that if you die with a large cash value and smaller death benefit when you’re older, doesn’t the insurance company take your cash value?
Again, this comment betrays your misunderstanding of how these products work. Every Dave Ramsey acolyte reflexively resorts to the old "they take your cash value when you die" trope when challenged on these products. The answer, of course, is no. And I've done lots of videos debunking this claim over and over again.
Cash value loses money through the fees and highly inflated commissions paid to the insurance that sell this crap.
They average about 50 basis points over the life of the program.
@@DavidMcKnight that’s a lot.
This video actually ironically, without intending to, supports what Dave Ramsay and other financial advisers warn against IULs. So, thank you for affirming from the insurance agent’s side.
In what way?
I would also like to know "In what way?" Dave Ramsey says that when you die you don't get the CV & David says you do & your annual cost of insurance decreases every year. Guess what: If you buy a mutual fund & the 12b-1 fees (management fees) are 1.75%/yr that fee NEVER decreases but the fee in the IUL does. So, if you have accumulated $100,000 in a mutual fund your fee is $1,750 annually & may be higher the next year. The fee on the IUL is on the premium, not the CV.
@@richardcaridi1982 ok I think I understand what you’re saying now.
People don't realize that when the broker says "it's a no-load fund" that it actually cost more. If a person buys a front-end loaded fund he may pay 4% & have 12b1 fees of 0.75% annually. But if he pays no fee up-front his fees could be up to 2%/yr. And if you factor that out over 30 years it's a lot of money.@@DavidMcKnight
I guess any idiot can make statements in the comments and run away.
Point number 1. Annual renewable term or option 1 as you call it, is the foundation of any universal life policy. If you lower the insurance coverage you will also limit the amount of money you can put into the IUL which will impact the cash value in the long run. Point 2. Do not compare IUL to whole life. Whole life is the only insurance product that comes with guarantees; guaranteed premium, guaranteed death benefit, guaranteed cash growth, an IUL illustration may look pretty on paper but none of it is guaranteed and it is always manipulated to look that way. Point 3. If you are paying for less insurance as you get older, what is going to happen when you start using the cash value in retirement? The selling point of IUL is the cash value growth but you are going to empty the pot in retirement and leave your family with no money when they need it. Taking out loans + increased insurance cost+ you not being able to make payments in retirement = money running out in your early 80’s. Stop lying and comparing IUL to whole life, a great whole life prepared by one of the top mutual life insurance companies in the country that comes with guarantees and extra benefits should be in everyone’s portfolio. Unfortunately it is bad IUL agents that are turning people away from great products.
You keep mentioning "Structured properly"? How do I make sure my insurance agent structured it properly? What do I say or see to know it is structured properly? Can you define the terms or keywords to expect? I hear people saying a similar word but it means nothing without properly knowing what "structure properly" looks like.
It means you got as little death benefit as the IRS requires of you and are putting as much money in as the IRS allows.
you can structure IUL as 1) high death benefit 2) high cash value 3) combination of both.
You can choose 1 of them depending on your goal, longevity etc.
Dave, I was sold an IUL that I pay a $400 monthly premium on. I already have a $130k Annuity and a $700,00.00 Term policy that will expire when I am 77. ( I am currently 59). I was told in 3 years my money would double and my compound % would compound. Yet when I called the company they said it would take 8 years for me to make 50k !!! Was I given good advice? Or should have I put that $400/mo. to better use. I don't have an IRA and don't want one because seems we may be heading to a digital dollar and the IRAs are going to start charging extra fees to those who don't invest their money in Globalist companies I want no part in!
Thanks! Chris
Go to davidmcknight.com and click on connect with advisor and we can take a look and give you some thoughts. Thanks, Chris.
Dave Ramsey's most important person is Dave Ramsey. In his bid to self-promote, he has the workings of IUL backwards, as this video perfectly points out.
Thanks Gary!
The key term is if it's set up properly. The average person won't know if it's set up properly. The sales person will set up the policy purposefully as to get most of the money you pay out. They sale the IULs focusing on the potential of the upside of the policy, but never dicuss the risks- you're set up for the kill.
This is an unfortunate truth. Fortunately qualified power of zero advisors know how to do it the right way. Find one at davidmcknight.com.
Love your response. I use to follow Dave Ramsey but now I realized he has an ancient mindset living in the dinosaur years.
Thanks!
the best thing is that every policy is different so you just have to read through the 150 page prospectus to try to figure out which one screwing you the least.
IULs don’t have prospectuses. They have policies and they aren’t 150 pages. Not even close.
Wrong. In the policy of IUL it states there and with computation that the cost of insurance increases. Dont lie to people
Its in there.
Not lying. The cost goes up but the amount they require you to buy goes down.
Great video! Absolutely the IUL is a great COMPLIMENT to a diversified portfolio of assets that will lead you to a tax free retirement. It’s not the end all be all like some agents market it as but can play a big part
Couldn’t agree more!
Besides IUL, what else can I do to invest my money for my retirement
5:55 It is my understanding that in an IUL, there's a general account and an index account. The former has a guaranteed return, which would create a predictable cash value as show in the chart. The latter is tied to an index (say S&P 500) and cannot be forecast years in advance. How does the chart show a continuous increase of cash value?
Besides, if the death benefit remains the same as shown, does it imply that the policy premium goes up every year as Ramsey said? A whole life premium is much higher at age 60 than at age 20, and probably unaffordable at age 80... I don't see how IUL can modify the mortality rate of the insured.
I’m death benefit option 1 the cost of the annual renewable term insurance goes up every year but if your cash value is growing the amount you would be required to pay for goes down.
@@DavidMcKnight I guess you’re saying that “out of pocket” money goes down, simply because the money needed to cover the ever-increasing premium is taken out of the cash value of the policy. I can see that scenario; however, if the cash value remains the same (bad S&P performance) and the premium keeps going up (insured is aging): how will the chart at 5:55 timemark show a constant, decreasing risk value as time goes by?
@@donsergio2406 chart is only for illustrations and does not guarantee anything but the agents always try to convince you that you will make such and such, on cash account you may get accumulation average 3.5% returns after first 3 years but if you take money out like they say tax free then you will pay interest over 6% until you pay them back. The money is tax free because that your money and the only way to pay taxes on them is if you withdraw more than you deposited but that will never happen with insurance companies. Not worth it.
Great stuff you mentioned. As an advisor I’m always learning. Why do you feel an IUL pairs with IRA well? Would you say it depends on the client and them not maxing out an IRA ? Would other tools do you add as part of a complete comprehensive plan?
IRAs work well if you can get the balance low enough such that RMDs are offset by the standard deduction.
The other point to consider, whether a standard IRA or Roth is, "Where do I invest?" Which mutual fund do you use of the 8,000 that are available? I have had people say "I have an IRA with Fidelity" & I say, great. They have about 100 different funds. Which did you get? I have had clients say "I have a Roth IRA with Chase" & I say, great. What is it invested in? & their response "What do you mean? The bank has it." They mistakenly believe that the bank has a special Roth account you invest in but unless you give that banker specific investment instructions your money just might sit in a money market account earing 1% interest, or whatever they are paying today.
Cash Value is a living benefit - Insurance proceed is a death benefit. You can’t live and die at the same time, hence you get either or.
Dave what is the max age where this IUL would make no sense? What is the minimum period you must hold it to grow your cash to a point where you can borrow $60,000 w/o compromising the contract. Thanks.
Don’t listen to him I opened a IUL 5 years ago and now I’m sitting on 350,000
$350,000 of cash value?
i doubt it.
@@DavidMcKnighthow much can they cash out now !!!
@@yodhangzien You can cash out everything if you want but if you dont leave about 10% in then u kill the death benefit
Possible if he had the funds to expidite it within 5 years. Usually takes 10 years+ with smaller monthly premiums @mikej3571
Dave why didn’t you mention that the only way the death benefit and cash value pays out is if option B is selected which is more expensive than option A 🤔?
Because even with option A the amount of life insurance you’re paying for reduces as time goes on. That means your cash value accumulates more quickly. Dave Ramsey NEVER brings this up.
Thank you for the articulate explaination.
You’re welcome.
My IUL policy will defund at age 82 when I need it the most unless I increase my payments from 78 to 125 per month.
Did you max fund it from the very beginning?
@@DavidMcKnight absolutely not. I just did what the insurance salesman signed me up for. I had no clue about max funding like Dave Andrew’s suggests. They put me in what I could afford only. I don’t think the salesperson even knew about that at that time.
@@KatsDad It sounds like they were being sensitive to what you could afford. There are lots of times when people want permanent insurance because their friends have it only to learn they can not afford to do what their friends can do.
@@janisegraham5079 I’m guessing that the reason most people die without the policy in force is they are probably self insured and have plenty other assets so insurance isn’t that necessary
@@KatsDad Many people pass away without any insurance coverage due to several reasons: they never secured a policy in the first place, purchased more coverage than they could afford and allowed it to lapse, or opted for term insurance and were left shocked by the higher age-adjusted rates when they sought to renew after the term expired. Self-insuring and depleting assets to cover lifestyle, expenses, taxes etc. is a considerable risk. In fact, most of us wouldn’t even consider self-insuring our cell phones.
I suggest anyone buying any type of insurance and such to get educated first so you’ll understand what the agent is talking about to protect yourself.. there is so much information on RUclips for example that can be helpful. Remember we are in the age of information, use it to your advantage!
Good advice.
THANKS for explaining that this can double as ling term insurance. I think you may want to write a second book as I loved the first one. May I suggest real estate investment? My wife and I met you at your lecture in Toledo Ohio, right after the hurricanes in Puerto Rico where I am from. Thanks for your kind words to us during the signing of your book.
OK I saw the Guru Gap, getting a copy pre-ordered
You info sounds valid and to some extent is, but you didn’t address the fact that the average American can’t afford to pay the option A in a IUL and the option B is way worse for the average working class. In Dave’s video he addresses option B that most of the average working class can afford.
This might help: ruclips.net/video/NOkbUF6lcoY/видео.html
Hey Dave Ramsey what's an index?
Can An IUL be considered the complete package of “Buy Term and Invest the Difference”?
In some cases yes. It’s often compared that way.
In your 500k example, the person is simply overpaying for a 500k death benefit. You can split that 500k into 2 pools (Cash value & life insurance), but it is still only a 500k benefit paid out at death and vastly overpaid for. Also you forgot to mention the money you are losing for 15+ years before you break even and can start taking loans of your own money. You're also forgetting that you are paying significant interest rates on the loans you are taking from "your own" money. I made the mistake of this investment a long time ago. You could literally be making more money right now paying for term insurance and putting the difference in an Ally or SoFi savings account. Obviously, over the long term you probably should invest in a mutual fund instead
if you are looking for an iul, make sure it is structured properly to the way that you are looking for, you can structure it towards retirement, you can structure it to have more cash value/use it as your own bank. ive noticed that agents tend to not structure it properly and give you more death benefit because they get more commission, if it’s properly structured, and let’s say structured for immediate access to cash value, you can access your money immediately, which is cause the death benefit is lowered, the higher the death benefit the less money you are able to access.
Total BS. Show me one structure in this comment that’s is good for retirement. There is soo much wiggle room in the way it’s structured like your fees goes up every year, cap rate can change and the interest to borrow your money is up to 8% and you don’t compound when you have 0 years.
Keep in mind that when you waive surrender charges, that comes at a cost and exerts a drag on your cash value over time.
Only a very well misuninformed person would put $20,000 a year in a Index Universal Life INSURANCE. That would be a terrible bad idea.
20K X 25 years X 6.6% compound interest, is approx. 2.4 M. A 1.08 M benefit, shows approx 1.4 M went towards life insurance over 25 years. Why should anyone pay 56K / year to insure life, for 25 years, when they can benefit from funding an ETF or an index fund??
This represents a 5.887% rate of return to that point in the contract and that rate continues to rise over the life of the contract. Eventually you get to the point where the average expense per year is less than 30 basis points. Why not do an index fund instead? Because this is not designed to be a stock alternative but a bond alternative as I repeatedly suggest in all my videos.
Been in the insurance industry for 13 yrs. Never have I seen an ACTUAL POLICY STRUCTURED PROPERLY. I replace them all the time with Term.
I’ve been structuring them properly for 25 years. How do you define structured properly? And are you honestly saying that you wouldn’t replace a policy if it were structured properly?
@@DavidMcKnight Make A video of you showing a 500,000 IUL policy vs a 500,000 level term policy for the same exact insurance class and age, and then show the difference that money saved would make if someone invested it, then SHOW us the NUMBERS on HOW the IUL could beat the end result for that same client. I've never seen that successfully done. that math says it's better to Buy Term and Invest your money separately in Mutual Funds. Do you have a securities license?
@@briansadberry Done: ruclips.net/video/F8rYumo0JgI/видео.html&feature=sharec
Dave Ramsey is right, this is crap. You are still better off buying term life insurance, then investing the difference. There is no scenario, where whole or universal life will leave you better off financially!!!
Thanks for your comment. Maybe research the Ernst & Young study on how paying for your lifestyle out of your cash value life insurance following a down year in the market can as much as double your sustainable withdrawal rate on your stock portfolio.
@@DavidMcKnight, so who paid for the Ernst & Young study? I bet it was insurance companies. The only way the math work in favor of Universal life is when you have too many bonds in your portfolio. If you do 100% stocks, like and S&P 500 index fund that reinvests dividends, it's not even close what you would have in 20 or more years.
@@beachbum77762 So your strategy calls for 100% stocks in retirement? 60/40 portfolio is out the window? The E&Y study calls for paying for your lifestyle out of your cash value in the years following a down year in your portfolio. This gives you a chance to let your portfolio recover before you take further distributions. The math on this is indisputable and has been vindicated by millions of Monte Carlo scenarios, not just the E&Y study. That you're not familiar with the approach doesn't invalidate it.
Good video and this explains what Dave Ramsey didn't mention however he is right when it comes to a fundamental point: to access the cash value you've built up you need to either borrow against your own money you put in or else surrender the policy fully. If you cash out the policy you're left with no more life insurance. If the benefit of cash value is to lower the cost of life insurance you py for, doesn't it make more sense to take out level term insurance and invest the cash value you otherwise would into growth stock mutual funds?
But if you can access it by way of a guaranteed zero percent loan then it’s cost free and tax free. And because of the death benefit that doubles as long term care it can be an intriguing compliment to Roth IRAs and Roth 401(k)s. Check out my other videos for the other contexts in which IUL can provide unique benefits as part of a balanced, comprehensive approach to tax-free retirement.
Let's say that's the case. What still doesn't sit well with me is that based on the math formulas, the amount of premiums needed for insurance will increase even when the amount of insurance needed decreases. Say for example you invested cash value worth half the face value, over time the cost would still creep up. Arguably you would save say more with level term insurance over 20 years and invest the difference into high growth stocks
@@sruelle1 but what are you paying for those investments? If it’s more than .3%, the IUL will outpace you over time. Expenses in the IUL reduce dramatically over time and are ultimately as low as most Vanguard funds when structured properly.
Stocks are more volatile and earnings not tax free
@@DavidMcKnight The key is "structured properly". How do we know if it's structured properly, with no experience ourselves? My greatest fear is my agent not doing so.
DR is actually right on this, especially when you start taking policy loans in retirement. IUL is rarely sold with opt a death benefit, it lowers the MEC limit. And index loans make the illusion sexy because it illustrates positive loan arbitrage…but it adds a tremendous amount of risk of policy lapse.
I open an IUL 3-4 years ago and it has grown a bit over one thousand. Not sure about it years later.
Dave Ramsey needs to get IUL 101. He needs to get educated about IUL.
Yes! And I’m here to help him.
Someone, at one of the insurance companies I use, said he met Dave & asked him where his money goes & he said "an IUL but I don't talk about it because it's too complicated for the average person."
There's one simple fact that wins every time. I have 10 eggs, I can turn those 10 eggs into 20 eggs buy hatching chickens. Or I can pay you to run my farm and my 10 eggs turn into 20 eggs, you keep 2 of those eggs and I get 18 of those eggs. There's no magic shortcut to life. You are getting a piece of my pie because you hope I don't understand that you are selling me the same product that I could buy myself in essence without a middle man.
Question 1. I have 250,000 CV and 250,000 FV witch equals 500,000 death benefit year 5 and on year 6 I borrow 100,000 how much death benefit do I have?
Question 2. Can my CV grow higher then my death benefit? If so explain what happens to the premiums.
No
You’d have a $500k death benefit with a $100k outstanding loan. If you died before paying the loan back your heirs would get $400k.
I was recently pitched an IUL policy at age 62 by a salesperson. Agent wanted me to put a decent % of my net worth into the product. Single premium. I'm retired and self insured so I don't need life insurance. The carrot for me was the stream of tax-free income that I could generate from the policy. But I need to increase my retirement income now and not wait 12-14 years. He showed some impressive account balances in the ensuing years but it wasn't for me.
I will continue to rely on my qualified dividends from my stock portfolio and make small withdrawals from mutual funds accounts to tide me over till I tap social security. I live in a higher cost area where property taxes continue to climb. There are no free lunches. For someone in there 40s, who needs life insurance this product may be useful.
Hi Dee, thanks for your comment. Yes, IUL is definitely not one-size-fits-all. For someone at your stage in the game, its most useful attribute is the death benefit that doubles as long-term care.
At that point get a FIA with a death benefit & income rider but maybe the sales person did not show you that because of lack of proper licensing
an what he showed you was only illustrations. the results won't hit the mark. alot of them don't even have an investment license
Wise
Salespeople show tax free income because it is a LOAN
I think diversity is key, if your just investing in a WL policy and that’s all you got, well that’s not good. If your in Realestate, mutual funds, gold, silver with WL. It’s a good mix.
Yes, I typically call for between four and six different streams of tax-free income in retirement. Thanks for your comment.
I hate when they say permanent life insuramce makes more commission. If you use excess premium or PUA it pays way leas commission then a higher term. I just wrote my own iul at $200 a month, and planning to up it in the near future, and i took like $200 in commission. That is way low. My agency sold a term revently that 6x that in commission.
I have term life already and a 401k being maxed out, do you think an IUL would be a good addition for increase money? I dont even want it for the life insurance part really, just as a form of investing tax free legally.
The problem is what could you do with that Cash Value that you put into the policy. If you are a risk adverse person this may be a great way to save safely. If you are are a investor you have all that money tied up with very little gain over time.
Should be seen as a bond replacement. 5 to 7% net of fees over time. If you don't want bond alternatives as part of your portfolio, and you don't have a need for volatility mitigation in retirement, then maybe put your money elsewhere.
All loans are tax free, who pays tax on a loan? You pay interest.
On some IULs, insurance companies guarantee to credit back the exact amount that they charge for the loan so it ends up being tax-free and cost-free.
I hear a lot of “IF” statements in your video. Sounds like the small fine print in the commercials that you can’t read “If structured property” “If balance correctly with other investments revenues” If If If … sounds like the selling agent is getting paid
Nope just like any other financial tool in your portfolio that needs to be wielded judiciously.
@@DavidMcKnight wielded judiciously 🤣
@@Midwestplayers i don’t think laughing emojis add anything constructive to the conversation. Do you want to engage the topic in a meaningful way?
@@DavidMcKnight No you proved my point
@@Midwestplayers more glib responses.
Well done, David! Very professional.
Thanks!
Why give full control to the carrier, and you’re not invested in the market at all. It’s all disclosed in the illustration. IUL is crap. The SEC needs to get rid of these asap.
Who cares? If you can get 5 to 7 % net of fees and it’s more productive than your bond portfolio without the risk, why wouldn’t you want that?
Bond portfolio? Lol. Yeah, why would I do that if the market is up 7 out of 10 years. Most of these never produce 5-7%, which is why insurance agents needed to reduce the hypothetical performance. Plus you add in the caps, the spreads, and remove the “you can’t lose” other the costs of the policy in negative years, and you have a garbage product.
@@chargers9221you sound like a Dave Ramsey acolyte. You plan on going 100% stock for the rest of your life?
@@DavidMcKnightabsolutely!
@@chargers9221will you be taking 8% distributions during those 3 out of 10 down years in retirement?
And is it true that you can borrow from your cash value interest free. I understand it’s tax free but is it interest free as well?
They charge you an interest rate but some companies will credit that same amount right back to you. So net cost of zero.
@@SethOwusu-ManteJnr it like you borrow money from a bank for short term and you have to pay it back with interest but if you die or something happens to you they will deduct the loan from face value and you may not get much for your death benefit, in my opinion that like you freely give away your money so they will keep in definite, and in most cases when you get closer to retirement they will ask you for more money because it will not be enough to pay for death benefit. I’m a licensed agent my self and know how this works because you learn this on your state exam.
By term, invest the difference.
never on this earth will you accumulate so much money in the cash value given the fact that the percent of return is no bigger than 2 percent. so clearly your premium wouldn't go down as much as you make it seem, plus how do explain that premiums reduce when you are only getting older and technically much of a bigger risk to the insurance company. you don't know what your talking about.
IUL has a proven track record of 5-7% net of fees over time. Given that, the cost of insurance will fall dramatically relative to cash value in the later years.
@@DavidMcKnight Dave is that your personal insurance? Because that not how any of them work.
How does the average person know if an insurance plan is structured properly? I'm going to research this next because I'm interested in MPI RELOC.
You can get a second opinion. Unfortunately the agent who’s selling you the policy isn’t always forthright in this regard.
Where did the idea that cash value is not paid out come from? I have read a couple policies but none that surrender that built up cash value to the insurance company... It's always been part of the final payout if not used before or if it surpasses the death benefit.
I did. Different video delving into this. You can check it out on my channel.
Friends get multiple certificates from the credit union when they have large amounts saved to get a guaranteed 5% interest to save for their kids. Would an IUL be a better investment? They wouldn't have dedicated amounts to put towards a policy every month, just sporadic one-time amounts. Should they pay off credit card and other debts like Dave Ramsey suggests before contributing to a retirement account?
Definitely get the match in your 401(k) and then pay off high interest credit cards with whatever is left.
IUL does not count dividends and have market cap rates thus eliminating the power of compounding in the stock market. The SPY performed at 20% last year. If you had an IUL, that means you only had 12%. It's CRAP
It’s a bond alternative not a stock alternative. Adjust your paradigm and all your angst will go away.
It is pitched as a stock alternative.
if the product you're selling is this opaque and hard to understand, and requires videos like these to counter any ambiguity, why is it even legal to sell these? Isn't the objective to provide an actual useful financial product that clients can truly depend on and are able to utilize easily in retirement, instead of the snake pit that it really is? A ridiculously confusing and intentionally incredibly complex product that is designed to only line the pockets of the insurance industry and its underwriters solely in existence to extract huge fees and massive commissions, is what it truly is instead!
IUL is not opaque. All the fees are disclosed down to the last red penny. You’re thinking of Whole Life. I reject the premise that the only useful things in life have no complexity. You’d never step foot in your car if that were really true.
So with universal whole life over time you pay more and more for your life insurance, but the amount goes down?. This is a great scam for the insurance companies. If you need insuance only get term insurance.
I think you grossly misunderstood what I said.
How does the insurance company capture market appreciation in a down market? Can they raise premiums?
Their general portfolio consists primarily of long-term bonds. So, not really ebbing and flowing with the stock market.
But you didn't answer my question. Can they raise my premium?
@@jaunt3603 that wasn't your question. But yes, all insurance companies reserve the right to raise premiums based on mortality experience.
@@davidmcknight8201 So insurance agents advertise that it's indexed against the SP500 but really its a bond fund? Seems shady.
"Even tho the term insurance is more expensive, you're paying for less of it" uuum if you are paying for less of it that means they should only be taking out a constant amount since last time, and changing the ratio of that monthly expense on what goes where?? You shouldn't have to pay more?? More expensive = you're paying more money than before
It’s annual renewable term which means it gets more expensive every year.
@@Drewrejee actually with term life you can lock it for 35 years and price will stay the same unless you will have policy lapse then you will be rated by current age.
It’s easy to believe anything when your income is dependent on said belief
Classic! You believe in what you’re doing so it’s definitionally wrong. Piercing insight!
Thank you for this! Primerica agents can’t seem to leave the 80’s behind.
😀
Dave thank you very much for the priceless information. The question is which company and who exactly can structure it properly?
Email me at info@powerofzero.com for the companies. Thanks!
Just this week, I published a video on my channel entitled: "Sorry, Dave Ramsey, Debt is not Bad". In the video, I show 3 scenarios where an asset is being financed by all equity, 50% equity and debt, and then 20% equity and 80% debt. The purpose is to show the positive impact that debt (leverage) can have on equity returns. Check it out.
Dave Ramsey is right. Whenever a policy holder has an issue with their policy( whether IUL or Whole Life), the argument is always "Your policy wasn't structured properly."
That’s not my argument.
@@ShermaineLit it not just Dave Ramsey saying this, this been going on since the creation of the policy, this is why when people die they barely got money to cover funeral by death benefit, worst case they get nothing and end up doing fund raisers. Nothing against David but in my opinion insurance is rigged against policy holders and that why everyone is talking about if it structured right, it like if a builder tells you if he makes foundation good then the house will stand, so that’s how IULs work and whole life.
Dave Ramsey is not conflating anything.
I've been learning about IUL policies the past few months and if you get an increasing death benefit policy, your family will get paid the cash value AND the death benefit when you pass on. If you do a level DB policy and pass on before a certain time, that's when your family only gets the death benefit. IDK why it's set up that way yet, but that's the way I understand it.
This video might help: What Happens to My Cash Value When I Die? (What Dave Ramsey Thinks)
ruclips.net/video/NOkbUF6lcoY/видео.html
What’s the best IUL company to start investing?
@@chestermarquez2786 there are none, agents and companies will structure it wrong for you and you will realize when it to late, my cousin gave $35k in to this crap in first 2 month and when he was studying for state exam he realized he was ripped off because first 3 years everything goes to commissions and not your so called “infinite banking” and he was being told that this will be structured right. Complete nonsense.
I had my daughter Thursday -monday 3 weeks outta the month and Thursday night the other week. I worked around my daughter who went to school an hour away. I worked around that schedule. I had some good years. Should have sued that first doctor for not getting my bicep tendon fixed properly. I have had the back pain for years. Just need a little direction from people with simi white collar background or mindset . Bodies brake down, athletes have shorter careers than they used to. Everyone needs guidance
I follow Dave's videos, and I like the Baby Steps/ BUT you are right here in your video. I just have one question. What happens to my cost of insurance if at age 60yo I will withdraw 90% og my Cash Value? Since the Cash value went down to only 10%, so the net amount at risk of the Insurance company increases, WILL my cost of insurance Soar high too?
Sure will which is why you take a loan not a withdrawal.
@@DavidMcKnight I forgot to mention that I am in the Philippines. Our VUL here is kind of different I guess? because you cant take a loan from your cash value instead you can only withdraw from it.
@@MaricrisManoosyes that’s a significant difference.
I always recommend to my clients that keep 10/15% in the policy if you are planning to withdraw everything to keep the policy alive so in case something happens you are steel cover. some of my customers said that they don't plan to live so long so they focused in the saving and free tax benefit at the age of 60.and then after that they said don't care.
These policies are never structured properly
Rarely.
I like how you cleverly avoided calling him a flat out “ liar “ 😄
What do you mean by structured correctly? And why are my beneficiaries only getting $500k not $500k plus the $250k I raised? What’s the point of marketing it as a $500k death benefit if it really varies from person to person
This might help: ruclips.net/video/NOkbUF6lcoY/видео.html
What Dave Ramsey doesn’t tell either is that most Americans do not invest the rest of their money. They buy a term and then SPEND the rest. After the term expires, what happens? Premiums increase and face value decreases. If you ask me, a term is more expensive than a whole life and a UL over time.
@@misstaytay9694 Term life always cheaper, so it just untrue statement by you. People don’t invest the difference because they may not want to, but that’s their choice.
@@Getready2025 duh…I know it’s cheaper. And there is a reason for that. It is a LIMITED policy. After it expires, it will cost you more money to renew it. So in the end, you threw away all of your money for a policy that didn’t do anything for you. Temporary coverage only!!!
@@misstaytay9694 same with Whole Life and IULs if it lapses or expires you pay more based on age and medical conditions. But Term always cheaper so if you lock your rate for 35 years when you are 35 or so you can have protection until 75 and price will not go up and at least you are covered for $150k-$500k all those years if something happens to you your family gets the money and it way better than other whole life and IULs
I know that you were try n to disprove Dave Ramsey but you just proved his point (agent to agent).
Actually my point was to show that tax-free is going mainstream. That’s it.
This video just proved Dave advice. The term " if structured properly keep being used" not only on this video but many other I have saw that tries to explain IUL. Many consumers and sellers of this product lacks the knowledge on how it should be properly structured. Make it simple buy term, no one can deny that it's much cheaper per month and you get more coverage. . No cost increase annually as well. Invest your money into better avenues that is not an insurance policy. To even talk about or solicit investments, you should have an investments License. SIE, 6, 26,65 etc. Majority of these life insurance agents that sell this stuff doesn't have one.
I have all these licenses and understand how using IUL in concert with Roth IRAs and Roth 401(k)s can dramatically increase your sustainable withdrawal rate in retirement. Hard to argue with the math.
@@DavidMcKnight You are right about the math part. I'm connected with many multi-millionaries and none of them believe in or have IULS. There all have those licenses as well. Their math seems to be working for them very well. Not to mention they don't have to state "if structured properly" when dealing with their investments. Historically it has always been better to just separate the two.
@@wardellnelson9379 Which part of the math related to the volatility buffer strategy do you object to? You may know many multi-millionaires but that has no bearing on the mathematical viability of the strategy. Non sequitur.
@@wardellnelson9379 Well if you think term is better than an IUL you are clueless, also in what world do multi-millionaires not buy IULs ??? I can tell you for a fact most of them do, even trump has a couple of generational wealth IULs in place. Any other investment needs to be structured properly for the highest returns possible, please tell me 1 that dosen't . IUL need to be structured properly depending on the customer's need, some may want DB more that CV, and some may want to put different caps or end dates. I can tell you just heard "if structured properly" and thought you had some going there xD
Dave Ramsey is fairly uneducated about IUL.
So it is good to have IUL at very young age or just stay away from it completely?
It’s ok, but not more than 30% of your savings.
@@DavidMcKnight ok. I'll definitely keep that in mind. Thanks for your response
Dave couldn't be more wrong than here on this one! BEST living benefit of an IUL tax free loans! Use it as your own infinite banking vehicle, use it to self insure for other things too...you could even make a case for self insuring instead of getting health insurance, if you take what you might've paid to your insurance premiums and put it into your IUL and then if you need to pay for something like a surgery or big doctor bill, you just take out a loan. Paid back in form of your premiums, again, especially if you're paying into it what you would've otherwise paid to a health carrier. I wouldn't recommend doing this if you're just starting out with your IUL or if you don't have like a big death benefit already built up (maybe you front loaded it a couple years in a row via a 401K from a former company or something, IDK) I'm not saying I think you should absolutely use it in this manner, but I think you COULD. At any rate, it's an extremely versatile investment vehicle and Dave Ramsey is way wrong on it!
Agreed. Thanks for your comment!
In the example you show where the cost of insurance is $540 per month, how much death benefit do you get for that? I love how 17.5% of your monthly outlay goes toward fees and insurance that is much more expensive than term life. 😅 what’s that saying about a fool and his money?
Ah yes, another massively reductive take from someone who has just the scarcest notion of what cash value life insurance is or how it works. If you were to scratch just below the surface you would find that the average cost per year over the life of the program is about half a percent, putting it very much in line with index funds from a cost perspective.
Dave, I’d love to see that policy illustration
Do you show agents how to structure these and your favorite companies to use?
Taxes: That's the big question in regards to the future.
Your talking about ultra wealthy people who can afford to "add" anything. Main street can't.
Whole life and IUL are such waste of time if I have to watch out and predict landmine like rules to get into and having such a low return on cash value. Jeez, I will just get a term life instead 😅
If you don’t like rules definitely don’t invest in any government sponsored plans.
@@DavidMcKnight What are you referring to? Government sponsors insurance plans?
@@Xinerius no, government sponsored retirement plans. If you think insurance plans are problematic because of rules, then you should have just as many problems with traditional retirement t plans which also have complicated rules. Try studying the 5-year rule for Roth Conversions.
option b is increasing or level? do you reccomend starting the policy at increasing and change to level at a certain age or how do you suggest agents structure them?
Yes B is increasing. The policy structure depends on the client’s situation.
Just like everywhere else, why are IUL accompanies not suing Dave Ramsey for “misrepresentation “ or “defamation”?
There’s a lot of misrepresentation going on out there.
Because Dave Ramsey is right
Dave Ramsey is right when its an improperly structured iul. He is wrong in not explaining how it can be good if structured correctly.
Buy term and invest the difference. Cash value is a ripoff! I just replaced 4 of those policies!
Yes, definitely believe someone who is financially motivated to slander cash value life insurance.
@@DavidMcKnight its just facks! All insurance is term insurance. You all just try to disguise it to confuse the consumer! Then go co-insure the consumer with affordable term behind there back and take the overage of payment to invest in the market! Yea im bashing it because it never mathamatically makes semse!
@@LoScrila84you haven’t given me any compelling arguments here while viewers can in fact find multiple videos on my channel corroborating the mathematical benefits of cash value life insurance.