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! 

[Mike S.]

Quote from @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! 

There are many threads on this topic in this forum. Do a search as this has been discussed in depth.
I am using overfunded permanent life insurance and I wish I would have started sooner as I would have been much more ahead. The younger you start, the cheaper the cost.
In my specific situation, I chose to use Index Universal Life instead of Whole Life. With a WL you can expect a 3-5% IRR, while with an IUL you can expect a 5-8% IRR on the long term. However an IUL will have much more volatility as some year you may get 0% and some other 15%. If you prefer the guarantee, but lower return go with a WL. If you don't mind the volatility, an IUL will probably get you better results on the long run. When you get older, a WL may make more sense as you have less time to absorb market volatility. Also as the total cost of insurance during your life is the same in an IUL and WL, but it is spread differently (in an IUL the cost increase each year but starts very low, in a WL the cost is the same from year one), the cheaper initial insurance cost with an IUL with possibly higher gain sooner may also increase the overall performance of an IUL vs WL.

Level of wealth has nothing to do with the concept. It works the same with a $10,000 premium per year or a $500,000 premium per year. You just need to make sure that you have enough cash flow to put the same premium every year for at least 5 years to optimize the cost.