When I was a fresh faced kid directly out of college. Nobody but insurance companies wanted to hire me, because after all, the only skill I had was the ability to write my name. I had an interesting exchange with an agency owner who was interviewing me.
The interviewer asked me if I had any problem with selling life insurance. I promptly informed him that I thought whole life insurance was crap and that it should not be sold (I didn't get the job). I gave him my philosophy on how a person should only get term life insurance and invest the rest in index funds, thus giving them greater returns and more flexibility later in life.
His response was telling. He said, "That's fine, but many people retire on the cash benefit of their whole life policy." Let me show you why he was wrong. I used myself as an example for this. So let's say you're in your early 30's, non-smoker, male, normal BMI (not counting the cheeseburger for lunch) and extremely good looking!
You're going to pay $2,037 a month for your whole life bare bones insurance policy. Let's also say that that policy is fully funded and you can withdraw $2,000,000 worth of it at 65.
Due to inflation, what will that $2,000,000 now be able to buy for you? Well if you assume a historically moderate amount of inflation at 3%, then you now have $776,674 worth of purchasing power. What if inflation goes nuts all the way up to 6% because the Federal Reserve continues to print money?? Well, now you have $309,915 worth of purchasing power. If you think that's a lot of money, look how much you spend in a year now and see how many years that'll last you.
The interviewer asked me if I had any problem with selling life insurance. I promptly informed him that I thought whole life insurance was crap and that it should not be sold (I didn't get the job). I gave him my philosophy on how a person should only get term life insurance and invest the rest in index funds, thus giving them greater returns and more flexibility later in life.
His response was telling. He said, "That's fine, but many people retire on the cash benefit of their whole life policy." Let me show you why he was wrong. I used myself as an example for this. So let's say you're in your early 30's, non-smoker, male, normal BMI (not counting the cheeseburger for lunch) and extremely good looking!
You're going to pay $2,037 a month for your whole life bare bones insurance policy. Let's also say that that policy is fully funded and you can withdraw $2,000,000 worth of it at 65.
Due to inflation, what will that $2,000,000 now be able to buy for you? Well if you assume a historically moderate amount of inflation at 3%, then you now have $776,674 worth of purchasing power. What if inflation goes nuts all the way up to 6% because the Federal Reserve continues to print money?? Well, now you have $309,915 worth of purchasing power. If you think that's a lot of money, look how much you spend in a year now and see how many years that'll last you.
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