Our Story: Why did I Start BravoPolicy?
My sister, Moon (or Nguyet in Vietnamese) works at a nail salon as a manicurist. She is always big on savings and very conscious to plan for the future. She saves a significant portion of her income each month in a high-yield savings account.
Despite being single, she bought a whole life policy from MassMutual 4 years ago when she was 33 having heard that she could withdraw some cash from the policy when she retires. She pays $220 a month for $150,000 death benefit. And she is supposed to pay premiums for 20 years until she reaches 53 years old.
Not having a 401K account, other than her savings account, she considers the policy as a part of her retirement plan.
She recently asked me to help look into her whole life policy to see how much she can withdraw annually when she retires at 60 years old. As I researched to help my sister, I realized that she had made a wrong decision to purchase the whole life policy for her retirement savings purposes.
Whole life insurance is really a bad product. It is outdated, inflexible, and ridiculously expensive. Other than for older people having medical conditions who need a small whole life policy ($5,000 – $25,000) for burial costs and final expenses, it shouldn’t be recommended in any other situations. Learn more about why whole life insurance is not worth it.
Unfortunately, a lot of agents still push people to buy this inferior and ridiculously expensive product since their commissions are tied to the premiums my sister pays. For the same guaranteed and permanent coverage amount ($150,000), another product, guaranteed universal life insurance (GUL) would cost less than half the cost of whole life premiums. For example, Penn Mutual Guaranteed Life UL (a GUL product) would cost just $1,075 in annual premiums, compared to $2,640 of MassMutual’s whole life policy. An agent who recommends the Penn Mutual’s GUL product for my sister would earn just 1/3 of the commissions earned by the agent who recommended MassMutual’s whole life policy.
On the other hand, either indexed universal or variable universal life insurance product would be much better for my sister’s goal, which is to supplement her retirement income. If you don’t have much experience in investing, an indexed universal life insurance (IUL) policy is your best choice. They are particularly great for retirement savings and supplemental retirement income thanks to the cash value growth being tied to the performance of indexes like S&P 500. Learn more about the strengths and advantages of universal life insurance products.
Even better, you can withdraw from the cash value account of the policy, all withdrawals are completely income tax free. This is a big advantage over traditional retirement investment account like 401K or IRA. Learn more about the tax benefits and advantages of life insurance over other retirement savings and investment products.
I decided to became a licensed life insurance broker and helped my sister replace the MassMutual whole life policy with an indexed universal life (IUL) policy from Allianz (Life Pro+ Advantage product) as part of her retirement plan after comparing quotes of 90+ permanent life products from 30+ reputable companies. As a broker, I can work with many insurance companies to compare several quotes of their many products to find the best product for my sister.
She still pays $220/month ($2,640 a year), the same amount that she was paying for her MassMutual whole life policy, until she reaches 60 years old.
According to the policy’s illustrations, she will be able to withdraw up to $13,500 a year, tax free, for 30 years from 61 to 90 years old. If she passes away at 91 years old, her beneficiary can still receives $37,000 tax free death benefit.
Similarly, an agent who would recommend my sister this Allianz’s IUL policy would earn only 28% of the commission earned by the agent who recommended my sister to buy the MassMutual’s whole life policy.
I realize that many people are similar to my sister who can benefit from the right permanent life insurance policy. I want to help more people better understand the benefits and advantages of permanent life insurance policy, especially its tax-free investment growth and tax-free withdrawal, to make the right decision for them and their family. Learn more about why Indexed Universal Life Insurance (IUL) is a good choice for retirement savings and why paying less income tax in retirement is very important to the quality of your golden years.