OK, here goes. I completely disagree with the notion that some form of permanent life insurance is not necessary. In order to re4ally gurantee your financial future, regardless of where you have your money allocated, it is absolutely necessary to have some form of a emergency exspense account to pull money from in the even that you need it. The reason you are buying permanent life insurance is several fold. First, as mentioned, you have got to have a pool of money to pull from. What happens if you get really sick and can't work. Your disability at work covers you for three years. Add the sum of lost wages, coinsurance bills, deductibles, etc, where does this money come. You have two options as I see it. Well, maybe three. You can liquidate your savings account until it's balance reaches zero. You can cash out the 401k or tax-qualified retirement account, take a ton of penalties, pay taxes on the interest, and have absolutely nothing to retire with, or you cann simply allocate a pot of money towards not only a death benefit, but also a cash account which is going to grow at a sdpecific interest rate each and every year. I have heard the addage over and over again, "I have always heard buy term and invest the rest." Well folks, the reality is 90 percent of the population simply doesn't do it. They would rather spend a butt load of money, paying interest, on boats, trailers, rv's, snowmobile's, fucking McDonlads even. Then when it comes time to really needing a pot of money in a specific situation, retirement, illness, etc, they simply don't have it. Let me give you an example. You have been investing 10 percent into a 401k account since you started working. The average american will retire with roughly 200,000 dollars in this account and rely on socialsecuirty for the rest. Let's say you have married couple. So we have 400ik dollars to allocate towards retirement. Let's assume they have been forthright enough to have at least established something, preferrably a roth ira if they are within the income level. 90 percent of retirees have no owned retirement account nationally speaking. That gives us 500k plus social security from which to withdraw money. Now the first thing we have to realize is that that 400k from the 401k is essentially 300k assuming a tax rate of 25 percent on the groth. So 300 plus 100 gives us 400k. Let's say as a married couple you need 50,000 dollars per year to enjoy retirement, and in my opinion this is very very low. well, 24000 comes from uncle sam, as the average retiree male recieves 1200, the average female 800 per month. 24,ooo. where does the extra 26000 come from your 401k of course. so, we divide 300k by 26,000 and we get roughly 11 years of income. We are now a married couple at age 76 and we are now living on just social secuirty. 24 whopping thousand dollars a month assuming everythng I have said is true, which we are assuming it is for this example. Now, we couple have possibly offset the taxation of our retirement accounts and had our full 400k, which would have helped siginifigantly, by uttilizing our whole or universal life insurance account value.
I explain life insurance like this...
From the age of 25 or so on, you are going to have the same variables which need to be protected. You will have medical, funeral, and some sort of income you want to leave to someone, whether it be a loved one, a friend, whomever, in order to ensure they are able to bear the financial burden of your loss. Average fun. exspenses are about 12 grand right now, medical we need to allocate a minimum of a year's salary, and income we would decide after talking with each other and performing a life need's analysis. These exspenses are permanent, whether you are 45 when you die, or 100. YOu are also gioing to have temporary need because of marriage while younger, kids, education costs, mortgages, loans etc. The acronym life will help you calculate the number. L is for loans, total the total amount of all outstanding loans together. I, is for income replacement. In the event that you die tomorrow, how much will your spose/children, etc need to continue living the same type of lifestyle they would have led assuming you were here. For most married americans the answer is 12x salary, and for american's with children 20x salary. F is for final exspenses, roughly 12ki. E is for education. Is it important to you to leave something in the evcent of a tradgedy to allocate funds towards the education of your children, spouse etc. This could be college, technical/trade school etc.
Your need for some of this is permanent. Let's assume for easiness sake, your permanent need is 100,000. In today's dollars let's say we allocate 12k for burial, 70k for income, and the remainder for education. Now, this is fine and dandy. The majority of advisors will pull out a quote for a Universal life policy and tell you this is perfect, we take care of the need for cash value as well as the aforementioned variables. Universal life is not guranteed and fluctuates with the interst rate FYI. The problem with this product is the fact that with option 1, the death benefit is going to stay the same. Now, can you honestly look me in the eye and tell me that 100k today is going to be enough in 40 years for instance. NO, no way! Thus, whole life and universal life option 2, death benefit increasing are more appropraite. The reason UL's are popular is that they are cheaper, plain and simple. However, we are assuming and not thinking that 10k is going to be enough in the future. "Well, I could just buy more later." OK, this is true, if and only if you can gurantee me today that you will be insurable when the time comes.
In sumary, the need for permanent life is obvious. You can cover the portions of the LIFE structure mentioned above with term insurance of course, as your needs during the ages of 30-60 are goiung to be quiite signifigant. But don't tel me for one minute there is no need for permanent insurance, there is always a need, and I hope I have explained this well enough to make sense!
Daryan
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