Life Insurance is not an investment! If you are saving for retirement then you want to look at other sources. Don't neglect the value of the Whole Life policy however. Whole Life can be a valuable part of the whole portfolio. It protects your family if you die too soon or become disabled and cannot fulfill your retirement goals. It is a valuable tool in estate and retirement planning.
Participating whole life can be a supplement with or an alternative to a retirement plan. Generally, it is classified as a savings plan, not an investment plan. The product suitability for participating whole life insurance as an income source for retirement is a long term saver with low to zero risk tolerance and no less than a fifteen year annual premium commitment.
The participating whole life policy needs to be designed for accumulating the maximum cash values over time. That means the design must use the lowest policy base amount with a combination of a term rider and paid up additions rider. Although historical returns are no indication of future performance, participating whole life insurance designed in this configuration has done well against long term government treasuries by several whole life companies.
Whole Life Insurance has many great aspects but using it as a retirement investment is not one of them. There are some companies that are promoting a concept of using your whole life insurance as your personal bank, instead of getting a loan from a bank to buy something use the cash value of your life insurance and then pay yourself back. But when it comes to retirement a whole life policy will not give you the gains needed to fund your retirement. When you look at your retirement saving, whether it’s your 401K that we are talking about or you’re personal saving. Your financial planner should be telling you that you can only talk out about 5% of the value per year otherwise you may run out of money. Think about that, if you have $100,000 in a 401k that will give you a yearly income of only $5,000. If you are looking for options to protect yourself against premature loss and has additional income options for retirement then you should really look at index universal life. A 45yr old male non-smoker could invest $150 per month into a $100,000 life insurance policy and when he retires at 65, he should be receiving about $6,000 of yearly income, most of which is tax free. This is a great option for most individuals, if you need more help or have additional questions please feel free to contact me.
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The participating whole life policy needs to be designed for accumulating the maximum cash values over time. That means the design must use the lowest policy base amount with a combination of a term rider and paid up additions rider. Although historical returns are no indication of future performance, participating whole life insurance designed in this configuration has done well against long term government treasuries by several whole life companies.