First, the (amazing) assumption is that the market will do well and you'll have 700k in your 401k in 20yrs. There are NO GUARANTEES. You may have 700k. You may not. The cash value in a Whole Life policy is guaranteed. Any prudent financial adviser will tell you to invest in the market AND have a foundation of guaranteed growth. Both. Not one or the other.
Second, another assumption is that Whole and Term is an either/or decision. You can do both. He also assumes that Whole Life and 401ks are an either/or decision. It isn't. Term is so cheap that the 32yr old in the example should have a Whole Life policy AND a 20yr term. When that 32yr old is 60 he'll have a substantial amount of cash value that he can gift one of his children for the downpayment on a house.
Third, he assumes you die in 20yrs. How convenient that the person in the example happens to die at the EXACT time you can stop paying your Whole Life premiums? That 32yr old will stop paying the premium in 20yrs and keep his policy. If he dies at 70 he'll leave his family with a few hundred thousand dollars in ADDITION (not either/or) to his 401k.
Dave, I love you man, but insurance isn't your area of expertise.
SWI Sharon wants it she rather have millions of dollars than another thing on her finger well duh
The wise man has spoken. Term it is then. Currently in the process of buying right now and was uninformed. Crystal clear now. Thanks Dave!
Sounds like Dave's wife wants to kill him.
Everyone is right and wrong. First, the biggest mistake I see is people buying the wrong coverage for the wrong reasons. I am a Fan of Term, WL, UL, and secondary guarantee UL. To pay off Debt, replace your income, help with education term makes the best sense.
So who should buys Permanent Life 1. People with a business that what to equalize the inheritance Take this example. Two kids in business, two kids not in the business How do you distribute the estate fairly without the insurance. I remember back in 2007/2008 when the banks were not lending money. The cash value on the life of a business owner saved his business. He paid the interest back to himself on his terms and paid the principle back to the policy to preserve the full value ten years later. Hey Dave what about volatility in the market. That was also the worst time to have pulled money out of the market. What about someone wit a younger spouse and kids. The insurance would allow them to spend more of their money and leave the insurance to the wife and kids. 2.Whole life should be looked at as a bond alternative. Stop comparing it to the market. Since you are guaranteed more than you put into it living or dead. Yes, you can make more in the market, but you are comparing a safe asset vers an asset without any guarantees. Does anyone own Koda stock? Eron? MCI? Stock It is just part of some one's total portfolio. What happens if you need to start to take income at 2007, and you started to withdraw funds at the worst time. Perhaps a life policy you could pull from till the market recovered could make sense. I have run the retroactive numbers in the real world, and it works. Predicting a liner grow is dangerous. If you run the numbers, the sequence of returns does not matter 8% is 8% any matter if the market was negative all year and bounced back the last day of the year. Now if you needed to take income, the sequence of returns does matter. If you withdraw when the market is negative, you will never recover.
Why do I get most of my request for life insurance over $250K from the wealthy individual over the age 65?
Lastly, everyone knows you are not supposed to pull money out of the market during a bad market right. Well, it turns out you still need money even in a bad market. Many people pull funds out of their life insurance during those bad markets.
One note there are other forms of permanent insurance that have their place and they are all good if they are designed properly. And since only 2 percent of term insurance is ever collected on it turns out it is the most profitable form of insurance for life companies. In fact, many are having trouble because in this low-interest rate investment people are not dropping their permanent life as fast as they thought they would. Remind me what are Dave Ramsey's credentials. who are his sponsors?
When the father passes away, will the wife have to pay tax on the 401k/IRA?
After the term finishes, does the premium stay the same?
well put. also watch his video on whole life insurance vs term. its great. I sell insurance but I will only sell term for a reason. also retirement is very important, make sure you're doing it right!
look up the word mutual company. Real mutual companies are who you want to buy insurance from.
Also what about leaving behind a legacy? In this example the person has $700,000 to leave behind to his 3 members of his family.
Though $700,000 is a lot of money, it's not the legacy that life insurance can provide and that is what is most important to me. Sure I could possibly get by with out it and MAYBE my family can if everything god willing goes as planned, but I don't know what will happen. I rather know that no matter what I can make our family name financially strong when I am not here. But of course legacy is not important to everyone.
The problem with most people is, they will buy term and never invest the difference. If you fund your universal life insurance right it will work. It is always important to meet with your agent every year to make sure the cash value is being funded properly. Also it is easier to lock your rate in while you are young. If your term runs out and you still need/ want life insurance it will be a lot more due to age and health
Oh FOX news. They can't just give you the information, they have to punch you in the face with it. With them its all black & white. Something has to be either all good or all bad, and somebody always has to be the enemy. Just watching that short clip stressed me out, made me feel all riled up for no reason. I'll go somewhere else for financial advice, thank you.
I think there are good reasons for buying both term life for your short term needs using a laddered structure depending on the specific goals for your kid's college education, mortgage loan, spouse's retirement, etc., and a permanent life insurance plan for your long term goals including final expenses, and building some cash value for the future. Mutual life insurance companies are good for permanent life insurance because they may pay out dividends to the policyholders – think about Northwestern Mutual, they have been good for me.
That's not how middle America works. Average people are not investors. Whole life is an investment with a cash value
I have only sell term in the past but I'm finding people who are at the end of they term and want some permanent insurance to make sure they family can pay for funeral expenses and any debt.
First of all in the interest of full disclosure I am a licensed insurance agent. The problem with Mr. Ramsey's thinking is We do not live in this perfect world that he speaks of. We are talking about life and life is unpredictable. There is a life product that insures up to age 110. The rates are very reasonable and the premiums are level. Per usual Mr. Ramsey speaks to things he knows nothing about.
What about estate taxes? Wouldn't having SOME life insurance that is around forever take away the problem of families selling farms or businesses because grandpa or grandma died? I'm not advocating putting ALL of your money in life insurance, but just from an estate planning perspective, a "term only" approach is not going to work.
FFIUL baby!
Great job Mr Ramsey well said!!!
Perfectly said 🙂
There are a few problems with this scenario.
First, the (amazing) assumption is that the market will do well and you'll have 700k in your 401k in 20yrs. There are NO GUARANTEES. You may have 700k. You may not. The cash value in a Whole Life policy is guaranteed. Any prudent financial adviser will tell you to invest in the market AND have a foundation of guaranteed growth. Both. Not one or the other.
Second, another assumption is that Whole and Term is an either/or decision. You can do both. He also assumes that Whole Life and 401ks are an either/or decision. It isn't. Term is so cheap that the 32yr old in the example should have a Whole Life policy AND a 20yr term. When that 32yr old is 60 he'll have a substantial amount of cash value that he can gift one of his children for the downpayment on a house.
Third, he assumes you die in 20yrs. How convenient that the person in the example happens to die at the EXACT time you can stop paying your Whole Life premiums? That 32yr old will stop paying the premium in 20yrs and keep his policy. If he dies at 70 he'll leave his family with a few hundred thousand dollars in ADDITION (not either/or) to his 401k.
Dave, I love you man, but insurance isn't your area of expertise.
SWI Sharon wants it she rather have millions of dollars than another thing on her finger well duh
The wise man has spoken. Term it is then. Currently in the process of buying right now and was uninformed. Crystal clear now. Thanks Dave!
Sounds like Dave's wife wants to kill him.
Everyone is right and wrong. First, the biggest mistake I see is people buying the wrong coverage for the wrong reasons. I am a Fan of Term, WL, UL, and secondary guarantee UL. To pay off Debt, replace your income, help with education term makes the best sense.
So who should buys Permanent Life
1. People with a business that what to equalize the inheritance
Take this example. Two kids in business, two kids not in the business How do you distribute the estate fairly without the insurance. I remember back in 2007/2008 when the banks were not lending money. The cash value on the life of a business owner saved his business. He paid the interest back to himself on his terms and paid the principle back to the policy to preserve the full value ten years later. Hey Dave what about volatility in the market. That was also the worst time to have pulled money out of the market. What about someone wit a younger spouse and kids. The insurance would allow them to spend more of their money and leave the insurance to the wife and kids.
2.Whole life should be looked at as a bond alternative. Stop comparing it to the market. Since you are guaranteed more than you put into it living or dead. Yes, you can make more in the market, but you are comparing a safe asset vers an asset without any guarantees. Does anyone own Koda stock? Eron? MCI? Stock
It is just part of some one's total portfolio. What happens if you need to start to take income at 2007, and you started to withdraw funds at the worst time. Perhaps a life policy you could pull from till the market recovered could make sense. I have run the retroactive numbers in the real world, and it works. Predicting a liner grow is dangerous. If you run the numbers, the sequence of returns does not matter 8% is 8% any matter if the market was negative all year and bounced back the last day of the year. Now if you needed to take income, the sequence of returns does matter. If you withdraw when the market is negative, you will never recover.
Why do I get most of my request for life insurance over $250K from the wealthy individual over the age 65?
Lastly, everyone knows you are not supposed to pull money out of the market during a bad market right. Well, it turns out you still need money even in a bad market. Many people pull funds out of their life insurance during those bad markets.
One note there are other forms of permanent insurance that have their place and they are all good if they are designed properly. And since only 2 percent of term insurance is ever collected on it turns out it is the most profitable form of insurance for life companies. In fact, many are having trouble because in this low-interest rate investment people are not dropping their permanent life as fast as they thought they would.
Remind me what are Dave Ramsey's credentials. who are his sponsors?
When the father passes away, will the wife have to pay tax on the 401k/IRA?
After the term finishes, does the premium stay the same?
well put. also watch his video on whole life insurance vs term. its great. I sell insurance but I will only sell term for a reason. also retirement is very important, make sure you're doing it right!
look up the word mutual company. Real mutual companies are who you want to buy insurance from.
Also what about leaving behind a legacy? In this example the person has $700,000 to leave behind to his 3 members of his family.
Though $700,000 is a lot of money, it's not the legacy that life insurance can provide and that is what is most important to me. Sure I could possibly get by with out it and MAYBE my family can if everything god willing goes as planned, but I don't know what will happen. I rather know that no matter what I can make our family name financially strong when I am not here. But of course legacy is not important to everyone.
The problem with most people is, they will buy term and never invest the difference. If you fund your universal life insurance right it will work. It is always important to meet with your agent every year to make sure the cash value is being funded properly. Also it is easier to lock your rate in while you are young. If your term runs out and you still need/ want life insurance it will be a lot more due to age and health
Oh FOX news. They can't just give you the information, they have to punch you in the face with it. With them its all black & white. Something has to be either all good or all bad, and somebody always has to be the enemy. Just watching that short clip stressed me out, made me feel all riled up for no reason. I'll go somewhere else for financial advice, thank you.
I think there are good reasons for buying both term life for your short term needs using a laddered structure depending on the specific goals for your kid's college education, mortgage loan, spouse's retirement, etc., and a permanent life insurance plan for your long term goals including final expenses, and building some cash value for the future. Mutual life insurance companies are good for permanent life insurance because they may pay out dividends to the policyholders – think about Northwestern Mutual, they have been good for me.
That's not how middle America works. Average people are not investors. Whole life is an investment with a cash value
I have only sell term in the past but I'm finding people who are at the end of they term and want some permanent insurance to make sure they family can pay for funeral expenses and any debt.
First of all in the interest of full disclosure I am a licensed insurance agent. The problem with Mr. Ramsey's thinking is We do not live in this perfect world that he speaks of. We are talking about life and life is unpredictable. There is a life product that insures up to age 110. The rates are very reasonable and the premiums are level. Per usual Mr. Ramsey speaks to things he knows nothing about.
What about estate taxes? Wouldn't having SOME life insurance that is around forever take away the problem of families selling farms or businesses because grandpa or grandma died? I'm not advocating putting ALL of your money in life insurance, but just from an estate planning perspective, a "term only" approach is not going to work.