Dare I Say It? A Case for Whole Life Insurance?
Greetings!
Hope you’ve all had a great weekend. Each week, I will highlight one central idea for you to think through on your own. The goal, as always, is to break down the complex and make it as digestible as possible.
This Week: Dare I Say It? A Case for Whole Life Insurance?
First: If you have the time, the desire, and the patience to read through 28 pages of financial-jargon-heavy language written by a few (genuine) financial gurus, this case study on retirement strategies is outstanding.
Now: If you do NOT have the time, desire, or patience, and you would rather find some quick added value from subscribing to these weekly thoughts, please, allow me. :)
My Personal Take-Away: I have always been a “term life and invest the rest” sort of guy, you know, mostly because such a strategy tends to provide the highest expected return for a given level of risk over time. (And the day I pay an 80% commission for a product is the day...well, I’ll leave that alone for now.) That said, here are five quick reasons you might consider learning more about the role Whole Life and Annuities can play in your retirement planning. (And no, I am not getting paid by an insurance company to compile these thoughts.)
1) Buffer against market risk. The cash value can serve as a “buffer asset”, protecting you from having to liquidate other investments (like stocks) during downturns.
2) Reduced sequence of returns risk: Cash value can provide a level of stability and smoothing of returns, which can help mitigate impact of low/negative market returns early in retirement (most crucial years for protection!)
3) Inflation protection: Cash value policies typically grow over time, providing hedge against inflation and ensuring purchasing power is maintained.
4) Higher expected returns than short term bonds: I have usually suggested that people consider thinking about money markets and treasuries as part of their fixed income strategies, but this article shows some solid support for the increased potential return and the lower expected volatility of holding Cash Value vs. short or long term bonds.
5) Stable growth: Historically, cash value growth resembles that of long-term bonds but with much lower volatility.
Action Item: this week, just have an honest conversation with your partner, your family, your cats, or yourself about your risk tolerance. I’m always a risk-taker and still don’t know when and how Whole Life would work its way into my own portfolio, BUT I am not you, and I never will be. These arguments are the best I’ve heard thus far, and even though the upfront premiums will certainly be higher, for many, the long-term benefits of stability, growth potential, and financial security can make it worth every penny.
Have a great week, and will always try to get us all one step closer to where we need to be.
Tyler
