07-24-2003, 03:45 PM
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 Re: Sanity check on VUL Jeff Johnson wrote: - quote - > Sandy,
So far, I concurr 100%> You'll want to be careful with these type of products. - quote - > They can be very expensive which will drag down the rate of return.
Very true- quote - > You'll typically pay a higher premium for the insurance plus you may
Not knowing which company or product this thread> pay a sales charge on the non-insurance (investment) part of your > payment plus you'll pay management fees for the sub-account funds plus > any options you choose are a percentage of the value of the policy. started with, I can NOT comment on the ACTUAL cost of insurance. However, generaly speaking, th C.O.I. should be the same for most contracts with the same carrier. There will of course be a difference in C.O.I. between various companies. - quote - > Also, they can be very confusing. For example, if they become over
This should not be a problem, and would be the LEAST of> funded the policy can turn into a Modified Endowment Contract (MEC). > (note, an insurance company will give you the option of returning your > over-funding payments to avoid it being converted to a MEC). How they > determine this is beyond me. your worries with this type of contract. Cal Lester CLU -- Who is General Failure and why is he reading my disk ? This signature file is generated by Pick-a-Tag ! Written by jeroen[at]vanbaarsel.net |
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#-1
07-24-2003, 09:00 AM
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| Re: Sanity check on VUL Sandy, You'll want to be careful with these type of products. They can be very expensive which will drag down the rate of return. You'll typically pay a higher premium for the insurance plus you may pay a sales charge on the non-insurance (investment) part of your payment plus you'll pay management fees for the sub-account funds plus any options you choose are a percentage of the value of the policy. Also, they can be very confusing. For example, if they become over funded the policy can turn into a Modified Endowment Contract (MEC). (note, an insurance company will give you the option of returning your over-funding payments to avoid it being converted to a MEC). How they determine this is beyond me. Jeff On 18 Jun 2003 23:00:27 GMT, sandy_folsom[at]yahoo.com (Sandy) wrote: - quote - > Hi, > I was recently talking to a financial planner and looked at the > numbers he presented on Variable Universal Life (VUL) policy. I came > to the conclusion that a VUL is best when you invest the maximum you > can to reduce the "drag" of the expenses. This is mentioned in the > misc.invest FAQ. > So, here's my thinking. I'm 36 and am planning on retiring when I'm > 65 but may want to pull money out in 20 years to help my kids with > college or home down payment. I can invest $8000/year into some sort > of tax-advantaged investment vehicle/insurance. I also need 300k in > insurance. By looking at the max. investments in various flavors of > VULs, I find the following setup the best... > 1. Invest in a $200k VUL. The maximum per year to avoid IRS issues is > about $8k/year. Based on a 10% return on the market over 20 years, > the IRR (internal rate of return) comes out to 8%. Withdrawls is > considered tax-free as long as I keep the policy current. This comes > out to a after-tax 8%. Investing the $8k/year elsewhere and using a > 10% return, my after-tax could be around 7.5% (15% Fed, 10% State). > So in this case, the VUL would be better. > 2. Buy a $150k term policy. > Is there something I'm fundamentally I'm missing? > Thanks, > Sandy |
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