Whole Life Insurance - Why it is a bad investment

[Deleted]

I posted this in knavy's post re: help with her financial adviser, but I also wanted to post this blog on its own so it is easily searchable the next time whole life comes up.

momanddadmoney.com/why-whole-life-insurance-is-a-bad-investment/

Basically:

Whole life insurance is undiversified

Whole life returns are not guaranteed

Positive returns take a long time to appear

Whole life insurance is illiquid

Less cash flow flexibility

The claim of “tax-free” withdrawals is misleading

Lack of transparency in fees. Complicated terms and conditions.

There are plenty of other options available

[niq]

I think in the past, you've said there are certain high net worth cases where you've said whole life might make sense? When does this kick in? Is it just if you're already maxing all your tax favored savings options? Or something else?

[Deleted]

Apr 24, 2014 12:08:03 GMT -5 niq said:

I think in the past, you've said there are certain high net worth cases where you've said whole life might make sense? When does this kick in? Is it just if you're already maxing all your tax favored savings options? Or something else?

High net worth (or on the way there), and high income. Maxing all tax-favored retirement options, including HSA where available, and still not being able to save 15%. I would say, depending on other expenses/obligations, a HHI of $400k+ is a good place to consider it.

[cjeanette]

Apr 24, 2014 12:08:03 GMT -5 niq said:

I think in the past, you've said there are certain high net worth cases where you've said whole life might make sense? When does this kick in? Is it just if you're already maxing all your tax favored savings options? Or something else?

Even in high new worth cases variable life is often better of whole.