The following is a Q and A that I did with my own wealth coach and whole life insurance agent, Barry Brooksby in April of 2019.
In 2001, I had a financial mentor teach me about the market. What I was told is that the market was the best place to grow wealth and a person could earn incredible returns. But what I didn’t realize at the time, is that I was being shown inflated numbers. I began to put my money and my clients' money into the market, but about a year later my clients started to call me and ask the question, ''Barry, where are these great returns you told us we were going to get?''. They weren’t making money and some were losing money.
As I went through that experience I remember losing sleep and being worried about the uncertainty of these investments that I had put my clients into. I was worried about my future and I was worried about their future. It was at that point that I knew I had to find something better.
That is correct. In a property structured whole life policy, when you take a policy loan, the money is not physically removed from your cash value, the company puts a lien against it, so your full cash value is still earning interest. Basically, the cash value is unaffected by the policy loan. Hence, no lost opportunity cost.
When Dave speaks of a 12% return, he’s speaking of an “average” rate of return. There are two major problems with Dave’s advice of expecting a 12% return. First, an average return is not an actual return, meaning just because Dave said the market averaged 12%, that doesn’t mean that’s what you actually would get. Here’s a video to learn more. The second problem is the fees. Dave isn't deducting fees. He's using a "gross" rate of return, but when you minus out fees, they can DRAMATICALLY your net returns.
Yes, but not when you’re with the right company. For example, when purchasing a cash value whole life policy, it’s best to use only A rated, mutual life companies that have been in business for over 100 years. Mutual insurance companies invest more conservatively, have secure portfolios, and have withstood the test of time.
In a properly structured whole life policy the premiums will be flexible, meaning you can lower or raise the premiums in any given month or year. If the minimum premium payment is still too much, then yes, purchase term insurance that is “convertible term”, which could be converted to a cash value whole life policy at a later date without having to prove insurability.
If the policy has been set up properly, the premiums will be flexible so that the policy holder could lower the premium to the minimum amount and keep the cash value growing and the policy in force. The other option is a short term premium loan that would make the premium payment for the policy holder. This would allow them to stop an out-of-pocket premium payment with the hopes that they could continue the premium once their financial hardship was over.
Yes, those that don’t have sufficient discretionary income or those that are only looking for a short term investment option. Cash value whole life is a medium to long term play, with flexible to choose either option along the way. 10 years is the usual minimum timeframe of funding. However, there are other options like a single-premium policy. Consult a knowledgeable, independent, insurance adviser about your options.