NFT: Another whole life insurance question

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Benefit

Do you still need life insurance at this point (are you self-insured)?

And if yes, could you still get a term policy if you wanted one?

I guess I really don't. Kids are all raised and now several grand kids.

exactly what sort of taxable event you're looking at if you were to cash it out. If it helps, I'm pretty sure you'd only be taxed on the growth of the cash value, not the money you were putting in all these years (which was already taxed).

Don't believe the proceeds are taxable, they are considered a return of premium

you can apply the CV to pay the current premiums if you wish

You paid the premiums with post-tax dollars, so their return to you as part of cashing out the policy is not taxable.

But the appreciation over the value of the premiums is taxable as regular income, and that portion of the proceeds is not taxed until you cash out the policy.

When you cash out, you'll get paperwork from the insurer with these details for your tax preparer.

From what you are saying, it sounds like it could be a good move to cash out. An empty nester with a paid-off mortgage really doesn't need life insurance except maybe for final expenses (funeral & burial), and even then if you are well enough off, you could skip this end-of-life insurance. It's a personal decision. Might be a different situation if you own a business though.

This assumes you have built enough total value in the policy to cover the taxes and still have cash above the premiums left. For analytic purposes, estimate premium payments and subtract from current cash value. Then subtract an estimate of all taxes to see what you would have left.

Otherwise, you might want to hold on to it until you have made it to the level of having something worthwhile left to take.

Talk to your accountant or tax guy first.

The amount of gain over and above your basis is taxable as ordinary income if you cash in as previously posted.
I would not cancel it so fast, an older policy like this may be providing you with a decent rate of return.
I would ask your rep or call the Home Office and ask for inforce illustrations.
Have one run as a full pay and another as a reduced paid up policy.
Also ask for the current annuitization rates, they may be very favorable.
Once you have all the information you will be able to make your decision.

48k in premiums and you have a whopping 70K cash value. Return < 1.5% per annum.

In comment 16022301 give66 said:

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48k in premiums and you have a whopping 70K cash value. Return < 1.5% per annum.

“66”
Some of that IS for the death benefit, so there’s that. Probably an actual 3-5 % annual return. Some WL policies actually guaranteed the dividend rate….at least 40 or> years ago.

In comment 16022321 Joe Beckwith said:

Quote:

In comment 16022301 give66 said: Quote: 48k in premiums and you have a whopping 70K cash value. Return < 1.5% per annum. “66” Some of that IS for the death benefit, so there’s that. Probably an actual 3-5 % annual return. Some WL policies actually guaranteed the dividend rate….at least 40 or> years ago.

Even if 25% is for the insurance(its more likely like 10%) that's 36k towards savings and still less than 2.5%, less with compounding. Lousy.

Your math is considerably off.

The original DB was 250K and I explained the CV is now 70% of the original DB. Your CV math (and therefore return %) is off by 100k

That's a lot of great ideas and information.

Very much appreciate your reply.

that whole life insurance "AS AN INVESTMENT VEHICLE" is not a great choice. Term life insurance for life insurance is the way to go. Cheaper and covers the timeframe you select/need.
Do not combine insurance needs and investment needs using a whole life insurance policy. Keep them separate.

I have been doing this for over 30 years.
No one answer is right for everyone.
Get as much info as you can before you make any decisions.
Out of curiosity would you mind disclosing the company the policy is with?

Guardian.

Take out a loan against the policy. Get your money out and never pay the loan back. The game most people play.

"Take out a loan against the policy. Get your money out and never pay the loan back. The game most people play."
If this loan causes your policy to lapse all the interest you have capitalized but never received is deemed income, you will be taxed on money you never received.
This policy probably has a fixed loan rate of 8%.
You have probably been assigned a service agent, you can start with him.
I am retired from Guardian, if you need send me an email and I can provide you customer service numbers to help you out.

In comment 16022909 gmenrule said:

Quote:

that whole life insurance "AS AN INVESTMENT VEHICLE" is not a great choice. Term life insurance for life insurance is the way to go. Cheaper and covers the timeframe you select/need. Do not combine insurance needs and investment needs using a whole life insurance policy. Keep them separate.

A long time ago bonds, bond funds, CD's heck even a savings accounts provided a low risk return that protected your principal and was a strategic way to diversify your portflio and allow your aggressive portion to be aggressive. today those vehicles do not offer that same balance.

When I first got a credit card at 18 years old my mother gave me advice that "don't use that credit card to pay for anything you won't still have when the bill gets there" lol.

Sometimes that advice you got a long time ago isn't as relevant in the current state.

That said that is not what the OP is looking for advice wise.

that paid pretty damn well. I remember looking at my statement
at about 15 years in and seeing that my earned interest was 25% higher than my premium.

I set up an appointment with my current rep and will get answers to the analysis questions you raised.

For me, the question isn't about whether whole life makes sense. Forty years have passed.

For me, I think it was a good decision. Yesterday I calculated my return and its been 5.4% over the 40 years. Not bad when you consider I had life insurance for the family and I also used 2 occasions to borrow against the policy for college expenses (and paid back the policy months down the road).

At this point, I am only looking forward.

Do I keep it in place?

Can I INCREASE my monthly payment from $100 to $200? (curious as to that answer-just want to know every option-knowing some will make little sense)

Clearly the dividends more than cover the monthly premium (and have for years), but is it better to just let the dividends continue to increase the DB

The posts here of many have been helpful and I welcome more.

Thanks

Can I INCREASE my monthly payment from $100 to $200? (curious as to that answer-just want to know every option-knowing some will make little sense)
When you bought that policy Paid Up Addition Riders were not very common so increasing your payment from 100-200 probably is not possible.
It may be available to you with medical underwriting....basically a few questions.
Before you do it, make sure he or she models it, you don't want to create a modified endowment.

So you had a 5.4% rate of return in a bondlike investment.
If you use a Linton yield method....(take out the cost of term insurance) the return is probably over 7%.
I am not taking taxes into consideration as I do not know your tax bracket.
You were covered with insurance all this time.
You had access to your money.
You were protected from creditors (depending on your state)
You probably can stop paying for it and the coverage will continue for the rest of your life.
Not one day in your period of ownership did your policy ever lose value.
Sounds like you did pretty good to me

you have been really helpful.

Another question I have. When the policy was 38 years old, I got a letter stating that going forward my monthly cost (taken from my checking account) would be REDUCED from $100 to $97.67. Though I have inquired, I really haven't gotten an answer I understand for that reduction. My monthly payment has stayed at that lower amount the past 24 months.

Can you explain?

Did you have waiver of premium on your policy?
If you did when you turned 65 it came off.
If that is not correct I would have to see the DEc page of the policy.

In comment 16023696 YANKEE28 said:

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you have been really helpful. Another question I have. When the policy was 38 years old, I got a letter stating that going forward my monthly cost (taken from my checking account) would be REDUCED from $100 to $97.67. Though I have inquired, I really haven't gotten an answer I understand for that reduction. My monthly payment has stayed at that lower amount the past 24 months. Can you explain?

this is interesting, my WL policy has a period of payment where I pay my premiums (mine is 10 years) and then I don't pay premiums any longer.

Thanks again.

That does make sense in my case.

I have added it to my list of questions for the rep to.

You have an a and d rider, that is expiring at age 65.
Ten pays are my favorite.
When he bought this policy, 10 pay policies were extremely rare.
In the mod 80's dividend crediting rates 11-13%.
Companies were showing policies offsetting in 7-8 years....not guaranteed.
Depending on which company you bought you 10 pay from dividend crediting rates range from 5-6%.
PJCas your 10 pay is written in stone, you are done in ten years.
Without looking at the policy I am guessing it is a pay to age 100.