Universal Life As A Tax Shelter

[Dan2020]

Anyone out there have any experience using Universal Life Insurance as a tax shelter in retirement? There seems to be a lot of conflicting information on this subject.

[dewilson58]

Depends.

[Stu from NYC]

To me insurance is for catastrophic occurrences only.

[villagetinker]

Talk to your financial advisor, a lot will depend on your specific situation and WHO is saving the taxes.

[rjm1cc]

Do not know your needs. For me the last place I would look for a tax shelter would be an insurance company product. Look at a ROTH

[retiredguy123]

Do not know your needs. For me the last place I would look for a tax shelter would be an insurance company product. Look at a ROTH
I agree. Life insurance is not an investment or a tax shelter. If you have assets in a traditional IRA, you can convert it to a Roth, pay the taxes, and your heirs can inherit the money tax free and they will avoid the hassles of dealing with taxes on an inherited IRA.

[dewilson58]

Life Insurance at our age.......................No, No, No.

[BlueStarAirlines]

David McKnight wrote a book that you'd probably be interested in. I skimmed it and knew the life insurance route was not for me.

https://www.amazon.com/Look-Before-You-LIRP-Retirement/dp/153294358X

His more well known book "The power of zero" is pretty good but again touches on the life insurance product which I just skimmed.

I think the product I most like from him is his documentary movie "The Tax Train is coming". Here is a link: https://vimeo.com/484182601

[WindyCityzen]

No way no how. Anything beyond term insurance is a fraud.

[BlackHarley]

By no means is permanent insurance a fraud. It's a reasonable alternative and or addition to traditional investments IF personalized to your situation AND if you can pass underwriting criteria for insurability. Don't rule it out, simply speak to several advisors.

[retiredguy123]

By no means is permanent insurance a fraud. It's a reasonable alternative and or addition to traditional investments IF personalized to your situation AND if you can pass underwriting criteria for insurability. Don't rule it out, simply speak to several advisors.
Unfortunately, many of the "advisors" who convince people to buy permanent insurance are actually insurance salespeople who make a large commission for selling the insurance. It's fine to speak to an advisor, as long as the advisor is not also an insurance salesperson. Most non-biased advisors will not recommend permanent insurance. The primary purpose for life insurance is to replace lost income for someone who needs financial support when you die. A "term" life insurance policy is the most economical product to accomplish that goal, not permanent insurance.

[petsetc]

Insurance (and annuities) make money for the seller! Not an investment.

Take time to read Paul Merriman’s 3 FREE ebooks.
1. First-Time Investor
2. 101 Investment Decisions
3. Get Smart or Get Screwed (read this first!)

Found at paulmerriman.com

He also has free suggests on investment strategies for taxable portfolios using Vanguard funds.

[Luggage]

Only when you really need the insurance for your partner or family. As above most of the whole life insurance is expensive because it goes towards commissions. If you check current rates for most people in our age bracket turn life can be 2,000 a month for 100,000 in value really ridiculous. I'd really suggest talking to an accountant versus the salesperson at an insurance company or a brokerage

[Stu from NYC]

Unfortunately, many of the "advisors" who convince people to buy permanent insurance are actually insurance salespeople who make a large commission for selling the insurance. It's fine to speak to an advisor, as long as the advisor is not also an insurance salesperson. Most non-biased advisors will not recommend permanent insurance. The primary purpose for life insurance is to replace lost income for someone who needs financial support when you die. A "term" life insurance policy is the most economical product to accomplish that goal, not permanent insurance.

Well said

[Bridget Staunton]

Roth is only is you have earned income. Transferring from an IRA you need to pay the taxes

[Pres1939]

Anyone out there have any experience using Universal Life Insurance as a tax shelter in retirement? There seems to be a lot of conflicting information on this subject.
Contact Ric Edelman Financial Engines. They will provide the info you need. Suggest you do not sacrifice investment growth for tax concerns. Also, insurance is not an investment - it is insurance. Insurance agents are not fiduciaries (who are required to look out for client’s best interest versus selling a product). Your best advice will come from a fiduciary, such as Edelman advisors. (I am not an Edelman employee). Best wishes on your research.

[Pres1939]

Unfortunately, many of the "advisors" who convince people to buy permanent insurance are actually insurance salespeople who make a large commission for selling the insurance. It's fine to speak to an advisor, as long as the advisor is not also an insurance salesperson. Most non-biased advisors will not recommend permanent insurance. The primary purpose for life insurance is to replace lost income for someone who needs financial support when you die. A "term" life insurance policy is the most economical product to accomplish that goal, not permanent insurance.
Agree.

[Ski Bum]

My Trust lawyer is adamant about having it for the tax advantages (basically, the policy pays the tax upon the taxable event.. death). My financial advisor is adamant about not having it. Leaving the premiums in an investment account will pay the tax through growth in the account.

In a perfect economy, both strategies will produce the same result. The final decision will depend on you, your risk aversion, and financial position.

[MidWestIA]

I heard it was a GREAT investment - from a guy selling insurance

[Tom M]

I think Roth's are fantastic but they have funding limits. Indexed UL (IUL) or Variable UL (VUL) can be effective and IUL protects against downside loss. I stopped contributing to my traditional 401k and am contributing now to just potentially tax free vehicles of Roth and IUL.

[manaboutown]

"And this is why IUL is a riskier investment than traditional insurance. Critics say that risk is not properly disclosed and is borne by the policyholder. “Consumers should avoid IUL because the insurers and agents who sell the product have no obligation to work in the consumer's best interest.Sep 23, 2020"

From: Sounding The Alarm On Indexed Universal Life Insurance – Forbes Advisor (https://www.forbes.com/advisor/life-insurance/indexed-universal-life-insurance-problems/)

"As mentioned above the VUL can provide a death benefit guarantee up through a certain age. But that is really just the bare minimum and is no better than Term. The separate accounts can gain or lose at any rate the market chooses. As such the risk is on your shoulders as a policy holder.Feb 1, 2021"

From: Top 10 Pros and Cons of Variable Universal Life Insurance (https://www.insuranceandestates.com/top-10-pros-cons-variable-universal-life-insurance/)

[FredJacobs]

Before I retired I taught life insurance to neophytes preparing for the licensing exam and to mutual fund and stock broker sales people.

At your age, assuming you live in The Villages and are over 60, I would not recommend Universal Life for you as a vehicle to amass retirement funds. Universal Life is nothing more than term insurance with an interest based side account to pay for the term insurance. Currently, interest rates are so low that most of your money money would be going to pay the cost of the term insurance - which, by the way, gets more expensive each year as you age. I suggest you ask a life insurance agent for an illustration and see how much premium you would have to pay at various interest rates - that are NOT guaranteed by the company.

The life insurance alternative to Universal Life is Variable Life. This works the same as Universal Life but is based on investment performance of various portfolios that you would select based on your risk tolerance. For older people, this can be very risky.

At your stage of life, I would suggest that you consider Life Insurance as a method of giving tax free and without probate to your descendants. I also suggest that, unless you are willing to take on risk, you reconsider a Roth IRA.