Tad Borek wrote:

- quote -

I agree--with advice like that I suspect the best thing is
to move on to another adviser <grin> .

Seriously, either you are making leaps from what he said to
conclusions that aren't warranted (which may or may not have
been his intention) *OR* he has given you totally erroneous
information.

You do pay tax annually on dividends (not all gains) and
then pay tax on the gain when you sell--but no *double* tax
since, to the extent the dividends are reinvested, they add
to basis and *reduce* the gain on eventual sale. So every
dollar of increased value gets taxed only once and,
potentially, never if you hold the shares until you die. As
well, a large portion of that income may be taxed at
favorable rates under the new law.

If you have made the statement you made above in his
presence and he didn't correct you, it's time to find a new
adviser. Whether or not a VUL makes sense for you is a
different question--but whether you should use this adviser
to help you make that decision wouldn't appear to be open to
question if he won't correct the impression you have above.
Because I would have to conclude that either he was
grossly incompetent (if he believes the statements) *OR* he
is not terribly honest (if he allows you to continue to
believe something he knows is in error, but which might help
him close the sale).

As well, ask him what changes in your situation would make
him change his advice away from the VUL to the mutual funds.
If he can't think of any, then I would again leave
him--because while VULs are fine devices in the right
circumstances, not all circumstances are the right ones.

Finally, if he passes those tests, ask some of his long term
(preferably five years or more) customers about what he had
done for them after the sale. Most important (and don't
clue him on this question before he asks customers to talk
with you), ask about how often he has reviewed the policy's
performance with the customers since the sale. A VUL needs
careful "care and feeding" after the sale to assure it is
still meeting the goals--if this agent has tended to make
the sale and then disappear, it doesn't suggest he'd be the
best person to work with in your case.

--
Ed Zollars, CPA
Phoenix, Arizona

azneecs[at]yahoo.com (David) writes:

- quote -

No comments on the usefulness or not of VULs, but anyone
trying to sell you VULs at the same time as spouting blatantly
incorrect and misleading information about mutual funds is
probably not to be trusted.

Some mutual funds have commissions. Many do not. If you
are willing to do the research (ie. willing to select a
fund for yourself), nix that 4% right there. And you would
be taxed only _once_ on gains, not twice. And those gains,
even some of them distributed annually (and that's normally
only a subset of the gains on makes) are taxed at cap gains
rates.

Moreover, if your mutual funds are in a Roth or even a
regular IRA, those issues of taxation of distributions
aren't relevant, either.

So while I can't say whether VUL makes more sense for
you than a Roth, I can say that you need to watch out
carefully for what this guy says.


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

This comment is VERY WELL written
Cal Lester CLU




Brent D. Gardner, ChFC wrote:
- quote -

--
Seen it all, done it all, can't remember most of it

This signature file is generated by Pick-a-Tag !
Written by jeroen[at]vanbaarsel.net

David wrote:
- quote -

Whoa there podner..........

There is NO "no better medium term investment".
That in itself would infer that "one shoe fits all"........


He also says that having the VUL now will help
- quote -

That would apply to ANY Life Insurance Contract........

Also the cost of keeping the policy would take care of itself
- quote -


Do you KNOW what "assume" spells????????

making an ASS out of YOU & ME........

- quote -


- quote -

Absolutely NOT TRUE. There are MANY Income Tax Free
investments in the market place. I am NOT an investment
counselor, so I have no specifics to offer here...........


My only other choice is normal
- quote -


That is NOT your ONLY other choice...
a) there are mutual funds that offer Income Tax Free investment
b) If you are interested ONLY in investment, than ANY mutual fund
would be less expensive that the ADDED cost of VUL or ANY
Life Insurance contract.
c) IF however you ARE in NEED of Life Insurance, then there are
many avenues available to you


- quote -


Surprise surprise......................

He told me that normal mutual funds I would be
- quote -

NOT TRUE.......
a) some M/F have NO sales charge, others differing amounts
b) IF you are taxed on the gain, that INCREASES your BASIS,
so that you would not be re-taxed at distribution of those
M/F

I am a great believer in maxing out your 401 to the extent that
the employer contributes, then maxing out a Roth IRA. IMHO.......


- quote -


Again, surprise.....surprise........

Cal Lester CLU

David wrote:
- quote -

As an investment it's a lousy alternative for most 22 year olds because
you'll need to keep the VUL in place until you die if you really want to
avoid taxes. And to keep the VUL in place you need to pay a cost, every
year. Perhaps through the investments in the VUL but still, a cost that
wouldn't be there if the invested dollar was sitting elsewhere. You
might avoid taxes but end up with less money than if you'd paid them. As
they say "don't let the tax tail wag the dog." And buy life insurance
because you want a life insurance feature; don't confuse it with investing.

To put it in perspective, let's say you have an invested dollar today
earning 8% per year. After 50 years you've got something like $47 from
that dollar. If you've dragged it down 1% per year from "other costs"
then you've got less than $30.

OK now turn that into a real-world example...put a buck in a Roth IRA
and another buck in the VUL. In the Roth your investment gains are never
taxed, so in year 50 you have $47, and it's all yours, because that's
how a Roth works. In the VUL, assuming identical investments (they'll
actually do worse than some you could easily buy through your Roth) you
have $30, because you've had that extra 1% cost (being generous, it's
higher right?) and now you need to borrow against the policy so you
don't pay taxes on the $29 in earnings when you take money out. Showing
how the VUL could be better than a Roth requires some very creative
assumptions.

Of course with the Roth you don't have life insurance, the "L" in VUL.
But are you looking for a long-term investment, or are you looking for
insurance?

There's no denying that the tax-deferred buildup of assets, and the
tax-free nature of the policy loans, can be helpful. But realize that
the lifetime cost of these features (for a 22 year old) are enormous. So
there needs to be some other reason to use VUL. What is it? (he asks his
friend who says...?)

- quote -

If you're in a high tax bracket and you pick funds that spit out a lot
of income year to year, yes. If not, and/or if you buy low-cost and
reasonably tax-efficient mutual funds, no. Examples of low cost,
reasonably tax-efficient mutual funds: any Vanguard, broad-market stock
index fund, including the stock-heavy LifeStrategy funds.

- quote -

If you want life insurance, then consider some other type of policy
first. Next on the list is accessible savings, if you don't have that.
Then a Roth, then a trip to Fiji, then "touring with your band", then
new paint on the Corolla, then some more savings, then a bunch of other
stuff, then maybe, and only maybe, VUL. Actually if I had 22 to do over
I'd stuff my Roth to the gills every year, because you could conceivably
have your long-term savings more or less set within the next 10 years,
leaving you a lot of flexibility after that.

- quote -

Thousands of mutual funds are available at no load (zero commission) but
you don't get "help" from an advisor with them. Of course if the advisor
tells you mutual fund gains are taxed twice it's not worth the 4%.

- quote -

If the comparison is Roth vs. VUL and there's no fundamental need/want
for life insurance then there's really no comparison, the Roth will win
hands down. Roths are tax-free by nature, VUL _can be_ tax free if you
use policy loans to get cash, and you keep paying premiums FOR THE REST
OF YOUR LIFE (think of that: 50, 60, 70 years of paying money to the
insurance company simply to avoid some taxes. Regardless of where the
money comes from, it's still a cost). Even if your comparison is a
taxable account, that might be fine too - everyone needs accessible
money and by no stretch of the imagination is VUL as liquid as a
regular, taxable account.

I really consider VUL to be a special-purpose kind of vehicle, and if
one of the special purposes doesn't apply, it's not the way to go. For a
single 22 year old who (based on your ability to contribute to a Roth
IRA) doesn't have high income, it's hard to come up with the scenario
favoring it.

-Tad

"David" <azneecs[at]yahoo.com> wrote in message
news:82f53a38.0311041108.15dfb8b4[at]posting.google.com...
- quote -

There are many no-load funds out there, so the 4% information is totally
incorrect. Vanguard is the 2nd largest mutual fund company and also the one
with the lowest costs. Fidelity, the largest mutual fund company, also has
many no load funds, although I am not knowledgeable about costs. There are
other companies with no load funds.

As to the taxes, your friend is correct in that you would be taxed every
year for any distributions, but he is incorrect that you would pay taxes on
gains. You pay taxes on the gains only when you redeem the shares, and that
at the capital gains rate. I believe you will be paying normal income tax
rates on your VUL if/when you take a distribution. This difference in
taxation may or may not be significant to you, but it is definitely a
difference in what your friend told you.

Since you have no current need for life insurance, you might be more
interested in funding a Roth IRA. The mutual fund companies mentioned above
can help you with one if you decide to go that way.

Elizabeth Richardson

RTC <send.spam[at]nowhere.com> wrote in message news:<bnp3ah$lhl$1[at]terabinaries.xmission.com> ...
- quote -

The same can be said for any life insurance policy. That said, VUL
often pays less than UL/WL to the agent, so your assertion is not
fully supported by verifiable evidence.

- quote -

There are HUGE books written on this subject, by people who have spent
their lives in academia AND by
agents/advisors/accountants/attorneys/trust officers, and they would
laugh at your gross oversimplification. There are literally hundreds
of reasons why people buy permanent death benefits and/or use the tax
advantages of the life insurance contract for living benefit purposes.

- quote -

TIAA/CREF's product is not worth owning, when in fact one can get both
advice AND a policy, AND get better performance DESPITE the commission
paid to the agent. They are not in the hunt.

Common sense, if only it were more common: Do you think the people
that answer a toll free number work for free?

Thanks guys this is great info. Here is a small aside but my friend
is adamant in his view that there is no better medium term investment
vehicle than a VUL. He also says that having the VUL now will help
because my future Cost of Insurance will be lower than if I had
waited. Also the cost of keeping the policy would take care of itself
assuming that the market is doing decently. He showed me an
illustration with an 8% return. I have no idea if that's reasonable
or not.

His take on the situation is that the VUL is there to be one of my
long term investment vehicles, but in the medium term the VUL would be
the only tax free form of investment. My only other choice is normal
mutual funds or stocks which are taxed. Would I be that much worse
off if I were investing in normal mutual funds rather than this VUL?
I currently just have enough cash flow to max my 401k and one other
investment vehicle (normal mutual funds, roth IRA, or VUL). The fees
for my VUL are as follows there's the Cost of Insurance(which is
currently about 190 a year), M&E charges are about 1.1% of my Cash
Value, and a flat 8.50 charge. I'd be overfunding the VUL, but i did
some calculations and for every 100 I put into the VUL about 75 goes
into the investments. He told me that normal mutual funds I would be
paying a commission of 4% right away, plus I would be taxed every year
for any gains, and then taxed again when I realized those gains.
Basically I'm wondering if it's as great as he makes it seem. Or if I
should just be putting a little into my Roth and a little into normal
funds rather than into this VUL.

Sorry if I seem to be rambling. The VUL is a complicated creature and
I just wanna get a grasp on it. It seems to do a lot of things and
have some good points, but it's hard to get my friend to point out the
bad ponits.

Thanks,
David

RTC <send.spam[at]nowhere.com> wrote in message news:<bnp3ah$lhl$1[at]terabinaries.xmission.com> ...
- quote -

If you "follow the money" you will find the reason for the popularity of
VULs. The reason VUL's are sold so often is that they generate large
commissions for the salesman -- furthermore, these commissions are
usually hidden and obfuscated.

In my never-humble opinion, VUL's and UL's usually only have application
in estate planning were the person's estate is over the exemption limit,
or in business planning (buy-sell, ESOPS, etc).

Stick with term, invest the difference. If you are bound and determined
to purchase a UL or VUL, look at a no-load product like TIAA/CREF's...

Regards,

RTC

A VUL would be a good thing to for your friend to sell, not for you to buy.

Since you are thinking about it, come up with a list of life events and how
you see them coming together.

Education, marriage, real estate purchase, family, business, career and
whatever else you deem important and then how you are going to save for
paying for them.

Stick with maxing out the 401k and learn the fundamentals of personal
investing.

Good luck.
"David" <azneecs[at]yahoo.com> wrote in message
news:82f53a38.0310251025.66ea1a66[at]posting.google.com...
- quote -

David wrote:
- quote -


At age 22, single, no dependents, there does NOT seem to be
a .........N E E D ................ for any Life Insurance.
Please understand, that there is a COST involved for the RISK
involved with ANY Insurance, especially Life Ins. Therefore, IF
there is no NEED for a Death Benefit at this time, then the REAL
COST involved in the ownership of a VUL policy would be
UNWARRANTED.

However, IF you intend to have such NEEDS, (marriage, business or
many other occurences), then it woud be prudent to PROTECT your
RIGHT to BUY Life Insurance. One does that through the purchase of
the LOWEST cost type, Annual Renewable Term.......

Although the COST of A.R.T. increases each and every year,
at your current age, (and for the next 15/20 years), that increase would
would be negligible.

I would also suggest that even though you are YOUNG, and do not
see the apparent need for RETIREMENT FUNDS, that you do FUND
a Roth IRA ASAP......

Cal Lester CLU

--
I'm going crazy. Wanna come along ?

This signature file is generated by Pick-a-Tag !
Written by jeroen[at]vanbaarsel.net

Since you are single with no dependents, why worry about life insurance?
Wait until you have someone that will need the help when you pass away...
unless I misunderstood your situation and you actually have someone in mind
that you want to support with the payout upon your passing.

Best wishes,
Chip

"David" <azneecs[at]yahoo.com> wrote in message
news:82f53a38.0310251025.66ea1a66[at]posting.google.com...
- quote -

Hi,

I've read many of the previous posts regarding VUL's vs BTID and I was
wondering if you guys could give me your opinion.

I am 22, single, no dependents. I have just started my first job and
am currently maxfunding my 401k. I do not have a Roth IRA yet and I
have no insurance.

My friend just started working a FA selling Hartford products. He
approached me about the VUL thinking it would be the right fit for me.
He chose a VUL policy because I'm helping my dad and sometimes
sending money home for them to use.

If I were to get the VUL it would be a 150000 policy and I would be
overfunding it with 150/month but it would still be short of the MEC
point.

He's marketing the VUL as a tax free medium term investment vehicle
because I can take loans at 0% essentially making it so that I could
access that money tax free as long as the VUL is kept in force.

He also mentioned that getting the VUL now would be more cost
effective than having to get term later in life because the rates
would go up marginally from now (until I die). However, I've read
that even though premiums do not go up much the mortality rate goes up
and that much of the cash growth in the future will be used to pay to
keep the VUL in force.

In his illustration at an 8% growth rate he showed me that a VUL can
outstrip normal mutual funds after 7 or 8 years while still paying for
itself.

I've read other articles and talked to friends and family and they
think that a BTID strategy would do better than a VUL since I'm so
young. So bascially some people say VUL is good for young people
while other say it's not...soo much information my head hurts > _<

My inclination at this point is BTID would do better than a VUL as
long as I start funding my Roth IRA and plan out the best point to get
term insurance so that i can be covered during my older years.

All advice and comments are welcome!

Thanks,
David