Macomb, MI · Member since 2014 · 2 posts · 0 votes
Be gentil, Im young 24, and am still learning....
I have a FarmBureau Life Insurance Policy setup for me in 1990 that earns 4.5% for any funds deposited. I will pay $67 per month for the policy once I take it over from my parents. The way I understand it is if I deposit say... 50K into the account I begin earning 4.5% guaranteed and its locked in as long as I pay the $67 per month.
How do I figure out if this is a good investment vs stocks or bond funds?
Macomb, MI · Member since 2014 · 2 posts · 0 votes
12y
Not sure what you mean by that, I'm not asking about or for alternatives but more directly about the determination of the value of keeping such an investment vehicle.
Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
12y
Bill Bonds , if you were 64, I may feel differently, but at the age of 24, you could absolutely do better than 4.5% over the long term. It depends on the goal for the $50k you mentioned. Can you give us more details? It's hard to say exactly, without looking at the policy. Generally, for someone that's 24, unless you have a huge amount of surplus cash and have maxed out all available retirement plan options, etc., a cash value life insurance policy may not be what you're looking for. Don't get me wrong, they have their benefits, but it just depends on what you're looking for. As for annuities, most 24 year olds do not need an annuity. If you inherited millions of dollars that you were afraid to invest and wanted to convert that, or part of that, lump sum into a stream of guaranteed income payments, then you could possibly look at purchasing a SPIA or immediate annuity, however, this is fairly uncommon and can get quite a bit complicated.
Realtor · Schaumburg, IL · Member since 2011 · 289 posts · 118 votes
12y
Bill Bonds I'm not exactly sure but I would do a side by side comparison. So put the $50k in the annuity @ 4.5% until your 65 and figure out what that would turn into at age 65, minus monthly expenditures or maintenance and that's your projected net return. And then you find a good mutual fund earning on average 10-12% and figure out what that would make with same deposit, 41 years (65-24 y/o = 41 yrs) minus the expenses that would take and compare to see what is a better investment. Makes sense?
Realtor · Schaumburg, IL · Member since 2011 · 289 posts · 118 votes
12y
Bill Bonds there are probably different tax benefits too so you have to try and consider those in the equation as well. Ultimately, the goal is to figure out the net return.