Whole Life Insurance

[Zackary Thomas]

I am currently 20 years old and have been doing a lot of research in regard to Whole Life insurance with the main idea of using it as a savings vehicle and having access to the cash value I can use as a future down payment or whatever I see fit. The 4-5% interest, tax benefits, and having access to that money make it seem like a great investment as I pursue real estate and build wealth. Do you use whole life insurance? Why or why not? Any feedback is greatly appreciated! Thanks! 

[Ryan Kempkens]

@Zackary Thomas just from the way you formed your question I can see you have started your research, great job on that!! You know that the Whole Life policy is not an investment in it's self, it is a vehicle to make your investments from. If you start a properly structured policy at 20 years old your 40 year old self will love you Lol. That said there are a lot of well meaning agents out there that don't understand what they are building for you so make sure you interview them and they know how to build it. 

For the purpose your thinking about using this I would not get talked into an IUL. I have sold both and they have their place but not as a banking vehicle. They are sold on their flexibility but if they are not max funded they are not a viable product and the loans will put them in jeopardy. The problem with them is that they are 1 year renewable term life contracts with a cash value. If your cash value is high enough the amount the insurance company has to pay at your death is smaller so the cost of insurance stays low, if you don't over fund or take loans against that cash value the more the insurance company has to pay when you die so the cost of insurance goes up as you get older. So it is actually becomes less flexible because you have to max fund it to keep it enforce in the later years of the policy. 

In a Whole Life policy your cost of insurance stays the same. You can adjust the amount of PUA (Paid Up Additions) to make it more flexible. You want to put the least amount possible towards the death benefit as possible and still keep it under the MEC line to keep the tax favored status. How to do that can't really be explained it a post. 

If you ever have any questions or need help asking the right questions to your agent or prospective agent feel free to reach out. I have no doubt you will find yourself in a great financial position in life, starting to think about and plan for your life at such a young age!! 

Here is a good video that explains the best way to build a policy.