retirement plan IRA, 401K plans witch is best
Member since 2022 · 28 posts · 8 votes
what's better whole life insurance , IRA, 401k? for contributing to long term ?
Whole life insurance is NOT a retirement plan. It is a life insurance with forced savings component, bunch of fees and high commissions paid to the sales person selling it. For most people whole life insurance is a rip off, it is almost never a good idea to bundle life insurance and savings. You will be better off buying cheap term life insurance to protect your loved ones and invest separately, you won't have to pay any fees and will have 100% of your savings to invest.
IRA vs 401k - depends on your situation. IRA contribution limit is $6,500 per year. Solo 401k contribution limit on the other hand is 10 times higher, $66,000 for 2023. You don't have to have a custodian for the 401k (unlike an IRA) and can have "checkbook control" and ability to invest in alternative assets such as real estate or private lending. However, to qualify for a Solo 401k you must be self-employed.
Whole life insurance is NOT a retirement plan. It is a life insurance with forced savings component, bunch of fees and high commissions paid to the sales person selling it. For most people whole life insurance is a rip off, it is almost never a good idea to bundle life insurance and savings. You will be better off buying cheap term life insurance to protect your loved ones and invest separately, you won't have to pay any fees and will have 100% of your savings to invest.
IRA vs 401k - depends on your situation. IRA contribution limit is $6,500 per year. Solo 401k contribution limit on the other hand is 10 times higher, $66,000 for 2023. You don't have to have a custodian for the 401k (unlike an IRA) and can have "checkbook control" and ability to invest in alternative assets such as real estate or private lending. However, to qualify for a Solo 401k you must be self-employed.
Whole life insurance is NOT a retirement plan. It is a life insurance with forced savings component, bunch of fees and high commissions paid to the sales person selling it. For most people whole life insurance is a rip off, it is almost never a good idea to bundle life insurance and savings. You will be better off buying cheap term life insurance to protect your loved ones and invest separately, you won't have to pay any fees and will have 100% of your savings to invest.
IRA vs 401k - depends on your situation. IRA contribution limit is $6,500 per year. Solo 401k contribution limit on the other hand is 10 times higher, $66,000 for 2023. You don't have to have a custodian for the 401k (unlike an IRA) and can have "checkbook control" and ability to invest in alternative assets such as real estate or private lending. However, to qualify for a Solo 401k you must be self-employed.
Dollar for dollar, a maximum over-funded life insurance policy will provide more after-tax retirement income. This is all despite the fees in the policy. Buying term and investing the difference is not the best option.
these are just words... you've got nothing to back this up with
@Dmitriy Fomichenko great advice and use of common sense regarding whole life not being an investment. Watch the shady ,slick , insurance salesmen , disguised as investment advisors come out of the woodwork to defend life insurance without any factual basis .
@Dmitriy Fomichenko great advice and use of common sense regarding whole life not being an investment. Watch the shady ,slick , insurance salesmen , disguised as investment advisors come out of the woodwork to defend life insurance without any factual basis .
Obviously a lot of people here have not made their own research on LIRP. While life insurances are not an investment per se, they are very useful and safe retirement vehicle. The growth of the cash value in a permanent life insurance optimized for LIRP is only in the 3 to 8% IRR depending on the product. They grow tax free like in a Roth component of a retirement plan. However, during the disbursement phase, while it is recommended not to withdraw more than 3% from a regular retirement account to make it last for 30 years, with a LIRP you can disburse safely 8% per year until 120 year old. And there will be money left over to transfer tax free to your heirs, without all the pesky limitations of an inherited IRA.
Before dismissing these products, please educate yourself. They have drawbacks like all other plans including IRA, 401, 403 or 457. But they also have plenty of great benefits. And the often repeated "buy term invest the difference" or "life insurance agent are making a huge commission, so the product is bad" is only proving that you have not studied these products and are relying on other people's opinions with nothing to back it up as it as been debunked many times.
these are just words... you've got nothing to back this up with
Actually, I do.
It's just math. Build yourself a spreadsheet. Borrowing against the cash value of a policy is not the same as withdrawing it from an IRA, 401(k) or brokerage account. 100% of your assets keep working. This provides for much greater income over time.
@Dmitriy Fomichenko great advice and use of common sense regarding whole life not being an investment. Watch the shady ,slick , insurance salesmen , disguised as investment advisors come out of the woodwork to defend life insurance without any factual basis .
Obviously a lot of people here have not made their own research on LIRP. While life insurances are not an investment per se, they are very useful and safe retirement vehicle. The growth of the cash value in a permanent life insurance optimized for LIRP is only in the 3 to 8% IRR depending on the product. They grow tax free like in a Roth component of a retirement plan. However, during the disbursement phase, while it is recommended not to withdraw more than 3% from a regular retirement account to make it last for 30 years, with a LIRP you can disburse safely 8% per year until 120 year old. And there will be money left over to transfer tax free to your heirs, without all the pesky limitations of an inherited IRA.
Before dismissing these products, please educate yourself. They have drawbacks like all other plans including IRA, 401, 403 or 457. But they also have plenty of great benefits. And the often repeated "buy term invest the difference" or "life insurance agent are making a huge commission, so the product is bad" is only proving that you have not studied these products and are relying on other people's opinions with nothing to back it up as it as been debunked many times.
Exactly!
And even if you use the old "4%-Rule", a life insurance retirement plan will still provide much more after-tax income. You only need half the savings to generate an equivalent amount of income.
@Mike S.as a former licensed life and health insurance agent I have witnessed countless class action suits over the years against life insurance companies for their sales tactics in duping the public into buying life insurance policies as investments. As a result today ‘s whole life and universal life policies come with illustrations followed by 7-10 pages of disclosures in legalese.
Just because people don t agree with your sales pitch about life insurance does not mean they are uninformed. On the contrary, they have educated themselves and affirmed that lining the pockets of life insurance agents with commissions does not benefit their retirement plans.
If you want to be taken seriously Be upfront, identify yourself, and disclose your relationship with the insurance industry when making comments.
@Mike S.as a former licensed life and health insurance agent I have witnessed countless class action suits over the years against life insurance companies for their sales tactics in duping the public into buying life insurance policies as investments. As a result today ‘s whole life and universal life policies come with illustrations followed by 7-10 pages of disclosures in legalese.
Just because people don t agree with your sales pitch about life insurance does not mean they are uninformed. On the contrary, they have educated themselves and affirmed that lining the pockets of life insurance agents with commissions does not benefit their retirement plans.
If you want to be taken seriously Be upfront, identify yourself, and disclose your relationship with the insurance industry when making comments.
these are just words... you've got nothing to back this up with
Actually, I do.
It's just math. Build yourself a spreadsheet. Borrowing against the cash value of a policy is not the same as withdrawing it from an IRA, 401(k) or brokerage account. 100% of your assets keep working. This provides for much greater income over time.
Just more words... zero proof
@Jeff Nash would be an excellent resource to answer this question as well as provide resources for you as an individual and company (especially if you are self-employed).
@Mike S.you are showing your ignoranc of life insurance commissions vs ongoing investment monitoring and advice with securities.Before you make uninformed comments about life insurance commissions include yourself in the group you are criticizing as you don t even know what you paid when you bought the life insurance product. You probably have bought a timeshare. Can I sell you the Brooklyn bridge?
How can you tell others they don t understand whole life or universal life when you don t have a clue how much in commissions you paid for the same product? Clearly, you don t know what you don t know.
@Mike S.you are showing your ignoranc of life insurance commissions vs ongoing investment monitoring and advice with securities.Before you make uninformed comments about life insurance commissions include yourself in the group you are criticizing as you don t even know what you paid when you bought the life insurance product. You probably have bought a timeshare. Can I sell you the Brooklyn bridge?
How can you tell others they don t understand whole life or universal life when you don t have a clue how much in commissions you paid for the same product? Clearly, you don t know what you don t know.
Again you seem fixated on the commission. I don't care what portion of the fee is commission, state tax, insurance company overhead or life insurance cost. What matter to me is the IRR, that is the result net of fee over the duration of the product. Yes the front loaded fee are important, but divided by the duration of the life insurance they are very low, often lower than most low cost mutual funds.
Why are you not also talking about the 6% commission that real estate agents are making for a one time sale for just driving you to visit a house?
Why are you not talking about the 1 or 2% yearly commission that some financial advisers are charging on the totality of your asset under management every year?
Why are you not talking about front loaded mutual fund?
Why are not talking about the 20% commission of edge funds?
If you really were a licensed insurance agent, I hope you were not blindly selling the product that was making you the most commission without looking for your clients' best interest. Or if you were, that would explain your bias believing everybody else is as unethical as you.
@Mike S.stay in your own lane. Don t talk about financial products you know nothing about.
Indexed mutual funds have a management fee of less than 1/2 of 1%. Privately owned RE that is triple net leased can have a 16%+ cash on cash return with no management fees.
You talk about IRR without even knowing what that would be for a whole life policy. You can t get as high a return with life insurance when upfront commissions and cost of insurance is subtracted from the premiums paid.
Before you talk about ethics get a clue on what you are trying to talk about.
@Mike S.stay in your own lane. Don t talk about financial products you know nothing about.
Indexed mutual funds have a management fee of less than 1/2 of 1%. Privately owned RE that is triple net leased can have a 16%+ cash on cash return with no management fees.
You talk about IRR without even knowing what that would be for a whole life policy. You can t get as high a return with life insurance when upfront commissions and cost of insurance is subtracted from the premiums paid.
Before you talk about ethics get a clue on what you are trying to talk about.
Wow! How unprofessional.
@Mike S. knows more about life insurance than you ever learned as an agent. And that obviously wasn't much since you seem unable to comprehend the difference between a maximum over-funded policy and a traditional design with a death benefit focus. I've also tried to explain to you how investors can build more wealth by leveraging the cash value of a maximum over-funded policy. I know that my explanations work, because people reading these discussions reach out to me privately to set up policies.
You seem to have a chip on your shoulder. Maybe you had a bad experience as an agent. But you need to understand that this concept absolutely works. Mike S is not an agent. He is successfully using his policy for this purpose. He's here sharing the wealth with other investors.
As to your point, you can absolutely get an index mutual fund at those rates, but a Financial Advisor earns closer to 1% of the assets under management. That will most certainly add up to much more than the commission I make on a maximum over-funded life insurance policy.
@Mike S.stay in your own lane. Don t talk about financial products you know nothing about.
You talk about IRR without even knowing what that would be for a whole life policy. You can t get as high a return with life insurance when upfront commissions and cost of insurance is subtracted from the premiums paid.
I have posted multiple times on these forum that you can expect a 3 to 5% IRR for whole life and 4 to 8% on an IUL. And that is after all fee. And it is also tax free.
So before insulting me, please get your facts straight.
@Mike S.stay in your own lane. Don t talk about financial products you know nothing about.
You talk about IRR without even knowing what that would be for a whole life policy. You can t get as high a return with life insurance when upfront commissions and cost of insurance is subtracted from the premiums paid.
I have posted multiple times on these forum that you can expect a 3 to 5% IRR for whole life and 4 to 8% on an IUL. And that is after all fee. And it is also tax free.
So before insulting me, please get your facts straight.
The IRR of the Life Insurance policy itself is not really a relevant metric. The IRR can vary widely depending on the funding of the policy. A minimally-funded policy with a $1M DB will have a much different IRR from a maximum over-funded design on the same product with the same death benefit. What matters most is the policy design. The policy must be designed right up to the MEC or Guideline Premium to maximize the cash accumulation.
Who cares if you are losing 15% of your premium to the fees and expenses when you can leverage the other 85% to invest in real estate. It is the sum of these two that matter... The Double Play.
Whole life insurance is NOT a retirement plan. It is a life insurance with forced savings component, bunch of fees and high commissions paid to the sales person selling it. For most people whole life insurance is a rip off, it is almost never a good idea to bundle life insurance and savings. You will be better off buying cheap term life insurance to protect your loved ones and invest separately, you won't have to pay any fees and will have 100% of your savings to invest.
IRA vs 401k - depends on your situation. IRA contribution limit is $6,500 per year. Solo 401k contribution limit on the other hand is 10 times higher, $66,000 for 2023. You don't have to have a custodian for the 401k (unlike an IRA) and can have "checkbook control" and ability to invest in alternative assets such as real estate or private lending. However, to qualify for a Solo 401k you must be self-employed.
I see , But what about a whole life insurence plan that had a overfunded cash value account that you earn 5% on every year, and you can take loans from tax free and still earning 5% of whats always in there, and as you contribute each month your face value and death benefit keeps going up?