I don't really know much more about it than what I have already typed above. Could someone explain or direct me to a good site that has info on the topic. Perhaps recommend a good company to go with? ING, Vanguard?

Right now I am saving...
15% 401(k) (company matches 3.5% of my salary)
10% Stock Purchase Plan
A couple hundred a month into my savings at my own discretion. (sometimes more)

If the insurance policy is what it is cracked up to be I would like to back off my 401(k) to 10% and send 10% into the life insurance plan.

If this works out I will be saving 30% (up from 25%) of my income before it gets a chance to burn a hole in my pocket. Not counting what I put into saving on my own.

Thanks

More to follow....

I was able to read up a little on ING's site but I am looking for some unbiased info and a pretty much straight to the point whats what.

If it is what I am thinking it is I'm down to give it a shot. Especially if I can use it for another source of retirement income or maybe even to buy a house.

I like the tax shelter idea too even though I don't really need it (yet) but I figure that it is best to get these things started now instead of wishing I had done so ten years from now.

You have read up on what Variable Universal Life (VUL) insurance is but for others ill explain it. Basically what happens is a VUL is a flexible premium, permanent form of insurance that allows you to invest your premium dollars into subaccounts that invest in mutual funds, stocks funds, bonds funds and even fixed asset accounts..

The policy provides tax-free death benefits, has a cash value that grows tax-deferred and the cash value money that has grown is accessible through policy loans and/or withdrawals. Also when you take out a loan the money is tax free, you don’t have to pay it back if you choose to do so and the amount loaned ( that you do not pay) will be deducted off the top of the death benefit unless it is paid back before the insured has died. However before you can take money out certain policies have certain and time periods in when you must be vested (3 years in the industry standard) and cannot take out the money without paying high surrender fees. ( ill get into that later).

Some advantages to VUL policy.

Tax-Free Withdrawals: Unlike 401k they money you take out is tax-free and you can take money out for a variety of reasons. Buying a house education, home improvements etc. You can take the money out at anytime and it doesn’t haveto be paid back. You cant do that with a 401k before the 59 ½ age limit where you would be taxed unless it was for a qualified withdrawal. Some insurance policies will let you withdrawal up to 85%- 90% of the cash value you have.
Also depending on the policy it may have the Guaranteed Minimum Death Benefit Rider witch will pay a min death benefit even if you withdrew more than what is left in the account..

Premium flexibility: after a while the premiums in the policy will decrease over time and the extra premium payments ( if you pay the same amount of premium) will go into the cash accumulation account and earns interest based on the rates the mutual funds the account is set up through is returning. Its sort of like paying term insurance prices for a better, larger death benefit. Also as your cash value builds you will have “paid in” enough to where you can ultimately not pay any premiums if you run into a hard month want to take a vacation etc and you don’t have to worry about your policy lapsing. You can increase or decrease coverage amount based on family situations( birth of a child, child graduates school no longer needs to be insured, marriage, divorce etc) without the need to apply for a new policy,

It’s great for retirement since as you near retirement a Universal Life policy will allow you to increase premium payments( since by this time your premiums are realtivly low since you are vested) and increase the plans cash value at a more rapid rate.

Guaranteed insurability: one of the big sellers for these products and I tell this to everyone is with permanent insurance once you lock into that rate your premiums will never increase due to medical issues that may arise later. Most Whole Life (WL), Universal Lfe (UL) or VUL’s will cover you for the life of the insured or up to age 100 so if you buy term policy for say 30 years and when that policy is up at the end at age 55 and you are diagnosed with lung cancer, guess what you may not be insurable anymore.. so there goes all that money down the drain in premiums and now you are SOL.

Okay now here is the downside to VUL’s

Higher Premium: Okay you will here this argument until the end of time that term is better and buy term invest the difference.. Whole life policies premiums are relatively higher than term based on all the different products they offer. I tell individuals who are young and starting out if they can’t afford a WL product to buy a “convertible” term policy. Meaning they can convert that term policy into a permanent policy at any time and not waste the premiums paid. Once you get settled in your job and make more money, have kids; buy a house a WL policy IMO is a better route.

High Fees: With VULs you are paying fees (marketing, sales loads, and annual operating costs of your sub accounts) witch will eat away at the total return of your investment, however you will pay these same fees in some ordinary mutual funds they are called 12b-1 and Front Load. Some VUL’s have higher fees than others so it is imperative to have the agent explain to you what % of these fees are taking off the op of your investment returns and consider that when buying a VUL

Potential Tax Hit- if you took money out of your VUL and you let your policy lapses ( I have yet to see it but I have heard of people doing it) then that money will be triggered as a gain in income and you could pay up to 35% in taxes on that money. Most people don’t let a WL policy lapse and if they are vested they can forgo a few payments here and there and not worry about policy lapse

Surrender charges. VUL’ and Annuities have high surrender charges, basically preventing you form withdrawing your money sooner than allowing it to mature. Some surrender charges are 5-10% of the cash value and some will not let you withdrawal for the first 3-5 years of policy ownership (depending on how much you have invested).

Volatility: With these variable investment contracts you are investing in the stock market (depending on fund) so if you are in an aggressive fund category and you are not ready or comfortable with that, you will loose money when the market is turbulent, so be aware of where you are investing your money, and reseach the funds that insurance products is linked to. Some VUL’s offer fixed assets and conservative funds for the stock market shy investor.

Now my advice!

VUL is a great product but it’s not for everyone. Some feel variable life insurance products are a scam and you can do better with a simple term policy and max out your 401k and IRA accounts and purchase mutual funds that offer the same performance and no loads… VUL’s are great for those who make too much money that they cannot contribute to the traditional retirement accounts or for those that want a little more added protection and the added assurance that they have tax-free income coming if they need it. They can be costly but if you are in good health you can find a company that can actually give you rates that are less or the same as a non permanent term policy.. Guardian has some of the best Whole life products I have seen.

Scaling down to 10% in your 401k isn’t a bad idea. Historically IRA’s will give you more money over time than a 401k would but you don’t get that immediate tax write off now. But they way I look at it is if am making 28-40K now I’m probably paying 15-20% in taxes now I would rather save my ass off now build up a huge nest egg and then not have to worry about paying taxes later. I would hate to have a $3-5 Million dollar 401k balance and then have to take my mandatory withdrawals(annuity payments) that could be 80-120k annually and end up paying 25-35% in taxes on that and who knows what the tax system will be like when we all retire.

I don’t know your tax or financial situation but I say variable insurance products should never be your only investment/retirement option, it should be a supplement to them. Continue to contribute to your 401k, contribute to an IRA (max them out if possible) and then what ever is left you can fund a VUL. Make sure what ever company you go with you are looking at what funds they are investing in and what companies are controlling the investment portion of your sub account. Bottom line also get a GOOD insurance company there are a shitload of companies out there but stick to the companies with AAA, AA+ A and even BBB (being good) ratings and never go less than that. ING is a great company and a lot of guys in my office sell that. Another good company to check out is Northwestern Mutual, Mass Mutual, John Hancock, Geneworth, AIG, and New York Life. Most of them invest in American funds, Marisco funds, and a bunch of others.

Hope this helped…………..

Evan.


Modified by Token Blk Guy at 12:06 AM 6/19/2008

My current financial situation is stable. I am very good at minimizing my overhead and staying out of debt.

Even though I don't make allot of money (student), I would like to invest what I am able to. I figure that it is best to learn now, make mistakes and take risks with small money instead of later on when I will be riding on much larger balances.

I thought about starting an IRA but I thought it would be pretty much the same thing as my 401(k). Maybe I should take that step before getting a VUL.

Just determine what policy works for you (price wise) now since you are a student a permenant policy may be pricey but as I said if you're in great health I would jump in one now so 20 years from now your policy premiums will be cheaper than if you were to carry a term policy. IRA and 401K are different but the end result is somewhat the same i like them both but for me beinf self employed IRA's are more in my favor, but since you are getting a company match thats free money and dont let that go.

Everyone should have insurance its the basis of a financial plan and structure. It just takes time to navigate through all the different policies and riders, it can get confusing. Just hitme up if you have any questions....

Evan

I'm going to talk to a friend of mine and read up some more on this.
Maybe Ill do both an IRA and VUL. Ill just cut back the 401(k) so I still get the max match but won't be putting in extra like I am now.

When I make a decision Ill post back here.

Thanks for your time
If people only knew of the gold mine sitting right below GD&D. lol

Just remember there are hundreds of companies out there who offer VULs find an agent or company and just get all the facts. You don’t want to get into a VUL with underlying charges and fees that weren’t explained and next thing you know it will cost you a boat load of cash to get out of it.. If you haven’t found one in a few months hit me back and ill see what I can find for you.. I can’t sell VULs yet i haven’t gotten my 6 yet, should have it in about 30 days.

http://img128.imageshack.us/img128/1092/haicq3.jpg

It's great if you can put in more than the minimum.
For most VUL's that I've seen, the longer you keep it the cheaper the insurance cost gets. I've had mine for over 8 years and I pay less than $600 a year for insurance. Anything above that is invested. It's the best place to park money and have it grow tax free. It's very liquid as well if you had for over 5 years. This is not a get rich quick product, it's for people with real discipline and are in it for the long run.

Just curious, what company do you plan on going with?

Yep he basically summed it up in a nut shell.....

Check this out guys something i found kind of funny for those who know Suze Orman. This vid she talks about why Variable Annuities are for the birds. LOL

http://money.cnn.com/video/#/v...eymag

old thread but i just don't want to retype it.
take what you can from it.

Charlie

Modified by Charlie Moua at 3:38 PM 6/26/2008

If so you don't need life insurance, Peroid. Don't let anyone sell you something you do not need. Max out your Roth IRA, keep contributing to your 401k and call it a day.

Vanguard is great.

No, only the principal can be taken out with no penalty. Interest earned stays.

Every week I seem to have deja vu.

Uncle made a valid point.

however, I only have one input, what happens when you get married have kids and own a home. You may not need it "now" but if you get it now and you are healthy rates will be great and you are building cash value (if you choose this type of insurance product). Most VULS carry a guarantee insurability rider (meaning you can increase death benefit anytime witching the certain window of the policy usually every 3 years and not have to get another medical exam for the updates to the existing policy) and premiums stay the same from when you originally purchased it.

Ex. you get a VUL at 25, 200k death benefit, your single good health, not married etc. Now you are 32, married, own home, a kid on the way you gained 30 lbs, you have high cholesterol and hypertension. With this guaranteed insurability rider you can increase your Death benefit to say 600k or more to cover the cost of maybe your mortgage, future income for your family etc. While never having to set foot in a hospital or doctors office.. Without that rider you could potentially take a medical exam, underwriting sees these conditions and next thing you know your premiums are through the roof.

I have seen this example and for some like I said in the beginning variable and whole life types of insurance may not be for everyone and if you get term( cheaper) make sure its convertible to a WL policy….. Almost everyone will need insurance at some time or another its that simple.

Quote, originally posted by uncle »

Also Ben, ANY money you put into a Roth IRA can be taken out at any time, for any reason, with no penalty.

Quote, originally posted by lke2drvgsr »

No, only the principal can be taken out with no penalty. Interest earned stays.

Both correct. Withdrawals of earnings out of an IRA are potentially subject to federal income taxes and penalties unless they are qualified distributions. You should tally up what your initial contributions were so when you deduct that amount you are only taking out that not the earnings.

You guys are on it

Most decent corporate jobs allow life insurance to be purchased without an exam, at least that I'm aware of. Also Ben (again IIRC) seems pretty active and healthy so that's a big if. You have a good point IF he has shitty genetics for lack of a better word and his family tends to get cancer or other illness early in life. That's the ONLY way I would purchase life insurace without dependants.

Ben for the record when I got married I was able to get term life (I was 21) for 300k that paid out in full for any reason for $20 a month.

You don't 'put in' interest, it's earned.

Good points again..

Yep thats right but sometimes not everyone works for corporate america and some of those policies are real low. So sometime supplimental insurance may also benifit the member.
So it really depends on the situation.. for the person to consider if life insurance is a good thing to have. I dont push it on anyone i just give them the options its not for everyone.

I'm curious about the Fees/Cost. I'm sure they vary but are there some ballpark numbers/%'s out there? I am in good health if that matters.

Like I mentioned before I don't make allot of money. So I need to maximize the bang for the buck. If there are aggressive fees they may eat up more than I would like.
If I were to die tomorrow life insurance would just be a bonus for the beneficiaries because I have zero debt and zero people are dependent on me. The VA will burn me for free.

I'm not sure what the percentages will work out too but I think I could swing this.
Approximate $ Per a year
$1500 401(K) (before match)
$1000 Stock Purchase Plan
$1000 (New tax shelter policy)
Still be able to put into ING savings and live normally.

Where you really pay the fees is if you surrender the policy and cash out!

Modified by Token Blk Guy at 9:03 PM 7/3/2008

I think my next step would be to talk to a broker and see what money is going to go where. Insurance is not too much of a priority for me.
I'm mostly looking for savings. I don't want the actual cost of the insurance+fees taking away from that.

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