Is Cash Value Life Insurance (“whole life” insurance) a good idea for my future?
I am of the strong opinion that life insurance should be purchased as a term product and nothing more. The internal expense is usually high, the returns, poor and the product disclosure is often incomprehensible. The only purpose Cash Value Life Insurance serves, in my opinion, is to fund the retirement and college educations of those selling it. "I have an answer and a few comments. Back to the basics:  Insurance is purchased to provide protection in case of a loss. It sounds as though you are doing well, from a financial perspective. If you have $0 of financial obligations (loans, mortgages, credit cards, etc.) and you are comfortable with the amount that would be passed on to your heirs, then you DO NOT NEED LIFE INSURANCE. Life insurance is PROTECTION for your heirs so that they can pay off debts and pay for necessities, if you are the ""bread-winner"" and your assets won't be enough. That's all. Life insurance should never be viewed as an investment vehicle. Some policies allow you to invest in funds of your choosing, but the fees charged by the insurance company are usually high. Higher than you might find elsewhere. To answer your other question: I think NY Life is a great life insurance company. They are a mutual company, which is better in my opinion than a stock company because they are okay with holding extra capital. This means they are more likely to have the money to pay all of their claims in a specific period, which shows in their ratings: http://www.newyorklife.com/about/what-rating-agencies-say Whereas public companies will yield a lower return to their stock holders if they are just sitting on additional capital and not paying it back to their stock holders." "Almost everyone needs an insurance, you should also probably buy it. If you are good at planning [which it seems from your question], you should stick to Pure ""Term"" insurance and avoid any other types / variants of CVLI.  CVLI is only advisable if one cannot commit to investing or is not good at saving money, or one feels that one loses money in Term Insurance. Otherwise term insurance is best."
Does such insurance make any sense or is it just wasting money for passengers? As with most insurance, it depends. If you just look at the probability of a payout, the cost of the insurance, and the payout amount, then statistically it will always be better to avoid buying insurance. This is because there is a certain amount of overhead in an insurance company, like the commissions and salaries you mentioned. The goal when buying insurance should be to avoid a cost that you cannot afford or is inconvenient to be able to afford. For example, if your family would be devastated financially by your death then it would make sense for you to buy some sort of life insurance. Whether or not this particular insurance makes sense for you depends on your financial situation and risk tolerance. Whole life insurance accumulates a cash value on a pre-tax basis. With a paid-up policy, you make payments until a particular age (usually 65 or 70), at which point you are insured for the rest of your life or a very old age like 120. You can also access this pool of money via loans while you are still alive, but you reduce your benefit until you repay the loans. This may be advantageous if you have a high net worth. Also, if you own a business or farm, a permanent policy may be desirable if the transfer of your property to heirs is likely to generate alot of transactional costs like taxes. Nowadays there are probably better ways to do that too. Whole life/universal life is a waste of money 95%+ of the time. An example, my wife and I were recently offered open-enrollment (no medical exam) insurance policies our employers in New York. We're in our early 30's. I bought a term policy paying about $400k which costs $19/mo. My wife was offered a permanent policy that pays $100k which costs $83/mo, and would have a cash value of $35k at age 65. If you invested the $60/mo difference between those policies and earned 5%/year with 30% taxes on the gains, you'd have over $40k with 4x more coverage. "anything whole life has a value (sometimes known as ""cash value""), which is the value you get if you surrender the policy to the insurance company (ie. cancel the policy).  I'm not sure i'd sell another person/company a life insurance policy on myself though.  Kinda creates a bad incentive problem." "Often in life we have to choose the lesser of evils.  Whole Life as an investment vs. Term Life and invest the difference is one of these times. I assume the following statement is true. ""The commissions on whole life are sick. The selling agent gets upward of 90% of your first year's premium."" But how does that compare to investing in mutual funds (as one alternative)?   Well according to Vanguard the average mutual fund keeps 60% of the total returns over the average investors lifetime. And of course income taxes (on withdrawal) consume another 30% (or more) of the dollars you withdraw (from a tax deferred retirement plan like a 401k.) http://www.fool.com/School/MutualFunds/Performance/Record.htm So you have to pick your poison and make the choice that fits your view of the future. Personally I don't believe my cost of living in retirement will be radically lower than my cost of living while working. Additionally I believe income tax rates will be higher in the future than the in the present and so deferring taxes (like a 401k) doesn't make sense to me.  (In 1980 a 401k made sense when the average 401k participant was paying over 50% in federal income tax and also got a pension.) So paying 90% of my first year's premium rather than 60% of my gains over my lifetime seems acceptable.  And borrowing tax free against my life insurance once retired (with no intention of paying it back) will, I believe, provide greater income than a 401k could." Actually, most insurance policies DON'T have a cash value if you don't make a claim.  The reason that some life insurance policies do this is that they are really tax sheltered investments posing as insurance.  With that in mind, the root of your question is really whether insurance premiums are wasted if you never make a claim. It really makes no difference if you are talking about EI, Auto, or Homeowner's insurance. My answer to that is no. What you are paying for when you buy insurance is financial risk avoidance. Look at it this way, you don't buy EI as an investment where you hope to get a return on your investment. You are buying the right to be protected against catastrophic financial difficulty associated with losing your job. Whether you claim it or not you did receive that protection. This is what drives me so crazy when I hear people talk about how an insurance company is ripping you off because you paid more in premiums than they paid out in benefits. Of course you did! If most people didn't pay in more than the company paid out there would be no financial interest for someone to form an insurance company. "Disclaimer: I work in life insurance, but I am not an agent.   First things first, there is not enough information here to give you an answer.  When discussing life insurance, the very first things we need to fully consider are the illustration of policy values, and the contract itself.  Without these, there is no way to tell if this is a good idea or not. So what are the things to look for? A. Risk appetite.  People love to discuss projections of the market, like for example, ""7-8% a year compounded annually"".  Go look at the historical returns of the stock market.  It is never close to that projection.  Life insurance, however, can give you a GUARANTEED return (this would be show in the 'Guaranteed' section of the life insurance illustration).  As long as you pay your premiums, this money is guaranteed to accrue.  Now most life insurance companies also show 'Non-Guaranteed' elements in their illustrations - these are non-guaranteed projections based on a scale at this point in time.  These columns will show how your cash value may grow when dividends are credited to your policy (and used to buy paid-up additional insurance, which generates more dividends - this can be compared to the compounding nature of interest).   B. Tax treatment.  I am definitely not an expert in this area, but life insurance does have preferential tax treatment, particularly to your beneficiaries. C. Beneficiaries.  Any death benefit (again, listed as guaranteed and maybe non-guaranteed values) is generally completely tax free for the beneficiary. D. Strategy.  Tying all of this together, what exactly is the point of this?  To transfer wealth, to accrue wealth, or some combination thereof?  This is important and unstated in your question. So again, without knowing more, there is no way to answer your question.  But I am surprised that in this forum, so many people are quick to jump in and say in general that whole life insurance is a scam.  And even more surprising is the fact the accepted answer has already been accepted. My personal take is that if you are just trying to accrue wealth, you should probably stick to the market and maybe buy term if you want a death benefit component.  This is mostly due to your age (higher risk of death = higher premiums = lower buildup) and how long of a time period you have to build up money in the policy.  But if a 25 year old asked this same question, depending on his purposes, I may suggest that a WL policy is in fact a good idea." For cash, SIPC insurance is similar to FDIC insurance. Your losses are not covered, but you're covered in case of fraud. Since your cash is supposed to be in a trust account and not commingled with brokerage's funds, in case of bankruptcy you would still have your cash unless there was fraud. There are also low-risk money markets to invest into.  With that kind of long-term savings plan I'd look into those first for the investment factor. I used one like this so that I had the flexibility to either use it for a down payment on a house or school.  And make sure to name a new  administrator in your will if you want to make sure the intent is upheld. (Disclosure - I am a real estate agent, involved with houses to buy/sell, but much activity in rentals) I got a call from a man and his wife looking for an apartment. He introduced itself, described what they were looking for, and then suggested I google his name. He said I'd find that a few weeks back, his house burned to the ground and he had no insurance. He didn't have enough savings to rebuild, and besides needing an apartment, had a building lot to sell.  Insurance against theft may not be at the top of your list. Don't keep any cash, and keep your possessions to a minimum. But a house needs insurance for a bank to give you a mortgage. Once paid off, you have no legal obligation, but are playing a dangerous game. You are right, it's an odds game. If the cost of insurance is .5% the house value and the chance of it burning down is 1 in 300 (I made this up) you are simply betting it won't be yours that burns down.  Given that for most people, a paid off house is their largest asset, more value that all other savings combined, it's a risk most would prefer not to take.  Life insurance is a different matter. A person with no dependents has no need for insurance. For those who are married (or have a loved one), or for parents, insurance is intended to help survivors bridge the gap for that lost income. The 10-20 times income value for insurance is just a recommendation, whose need fades away as one approaches independence. I don't believe in insurance as an investment vehicle, so this answer is talking strictly term. "Technically there could be a true cash fund, but the issue is it would need to have some sort of cost associated with it, which would mean it would have negative yield or would charge a fee.  In some cases, this might be preferable to having it invested in ""cash equivalents,"" which as you note are not cash.  It is important to note that there is nothing, even cash or physical precious metals, that is considered zero risk.  They all just have different risks associated with them, that may be an issue under certain circumstances.  In severe deflation, cash is king, and all non-cash asset classes and debt could go down in value.  Under severe inflation, cash can become worthless. One respondent mentioned an alternative of stopping contributing to a 401k and depositing money in a bank, but that is not the same as cash either.  In recent decades, people have been led to believe that depositing your money in the bank means you hold that in cash at the bank.  That is untrue.  They hold your deposit on their books and proceed to invest/loan that money, but those investments can turn sour in an economic and financial downturn.  The same financial professionals would then remind you that, while this is true, there is the Federal Deposit Insurance Corporation (FDIC) that will make you whole should the bank go under.  Unfortunately, if enough banks went under due to lack of reserves, the FDIC may be unable to make depositors whole for lack of reserves.  In fact, they were nearing this during the last financial crisis.  The sad thing is that the financial industry is bias against offering what you said, because they make money by using your money.  Fractional reserve banking.  You are essentially holding IOUs from your bank when you have money on deposit with them. Getting back to the original question; you could do some searching and see if there is an institution that would act as a cash depository for physical cash in your IRA.  There are IRA-approved ways of holding physical precious metals, which isn't all too different of a concept from holding physical cash. 401k plans are chosen by your company and often have very limited options available, meaning it'd be unlikely you could ever hold physical cash or physical precious metals in your 401k." the cash is not penalty free. if you take up loans from the policy to pay for retirement growth essentially stops and the interest will eat away policy value over time. so instead of gaining 7-8 % per year and taking withdrawals, you would be taking loans and losing whatever the interest rate is.  Dividends are just the profits made from the company which is why its tax free. its considered a return of premium. you are just overpaying for the policy by its dividend rate.   whole life is a great vehicle for some situations, but it always comes after a 401k or other retirement savings. whole life doesnt even begin to make sense imo until you are making a few hundred thousand a year and need it for a business buy sell agreement or legacy money to leave children/grandchildren.  it doesnt scale well to lower incomes. "To be honest, I think a lot of people on this site are doing you a disservice by taking your idea as seriously as they are. Not only is this a horrible idea, but I think you have some alarming misunderstandings about what it means to save for retirement. First off, precious metals are not an ""investment""; they are store of value. The old saying that a gold coin would buy a suit 300 years ago and will still buy a suit today is pretty accurate. Buying precious metals and expecting them to ""appreciate"" in the future because they are ""undervalued"" is just flat-out speculation and really doesn't belong in a well-planned retirement account, unless it's a very small part for the purposes of diversification. So the upshot to all of this is the most likely outcome is you get zero return after inflation (maybe you'll get lucky or maybe you'll be very unlucky). Next you would say that sure, you're giving up some expected return for a reduction in risk. But, you've done away with diversification which is the most effective way to minimize risk... And I'm not sure what scenario you're imagining that the stock market or any other reasonable investment doesn't make any returns. If you invest in a market wide index fund, then the expected return is going to be roughly in proportion with productivity gains. To say that there will be no appreciation of the stock market over the next 40 years is to say that technological progress will stop and/or we will have large-scale economic disruptions that will wipe out 40 years of progress. If that happens, I would say it's highly questionable whether silver will actually be worth anything at all. I'd rather have food, property, and firearms. So, to answer your question, practically any other retirement savings plan would be better than the one that you currently outlined, but the best plan is just to put your money in a very low-cost index fund at Vanguard and let it sit until you retire. The expense ratios are so stupidly small, that it's not going to meaningfully affect your return." You are likely thinking of a individual variable insurance contract (IVIC) , better known as a segregated fund, or a principal-protected note (PPN). For a segregated fund, to get a full guarantee on invested capital, you need a 100/100 where the maturity value and death benefit are each 100% guaranteed. The PPN works similar to a long-term GIC (or CD) with a variable investment component.  The thing is, neither of these things are cheap and the cost structure that is built in behind them makes it difficult to make any real above market rates of return. In both cases, if you try to break the contracts early then the guarantees are null and void and you get out what you get out. The way the question is worded, it is slightly opinion based. Just to point out;   Tax benefits - Upto 50000 INR is tax free when invested here. This is actually 200,000 INR under 80C. So if you invest max of 150,000 in other instruments in 80C; you can still invest 50,000 into NPS. Hopefully it will provide some lumpsum money that I could probably use to buy a house / kid's education / kid's marriage. There are very few withdrawal options. Generally in the current scenario; By the time you retire; you would already have house, kid would have got married. Answers given the current data is it a worthwhile investment? It is a good investment option available. It is up to individual to select this or invest else where. If yes, would be better to fix choice at 50% in E and 25% in C and E or go for the auto choice? As you are young it is better to have max 50% in Equity and actively monitor this and change the percentage as you near the retirement age. If you don't have time, or are not financial savy, or one is plain simple lazy; going with Auto choice makes sense. bad investment because if you put the same money into equity oriented mutual funds then you will get better returns ... This depends. If you are currently investing everything into Equity; then yes at absolute level, the returns are high. However if you are investing into Equity and debt to achieve a balance, then NPS is doing it automatically for you. As the NPS has very low costs, there is substantial advantage. In some years [2013-2014?] the NPS equity return has been excellent and exceeded leading mutual funds. Other Aspect Edits: The Annuities need to invest in guaranteed risk free instruments; generally bonds. As the rates are locked for life, they need to factor things like average life expectancy, demographics, etc. This is largely statistical. Similar to how the Insurance premiums are decided. This is adjusted periodically. Say they offer 6.5% for 100 people. The investments into bonds is yielding only 6%. Then for next 100 people, they would offer 5.5%. However if the mortality increases, i.e. 50 people die at age of 70, they just need to adjust it to 5.75% for next 100 ... so there are quite a few parameters that go in and statical models output what the rate should be offered. At times the corpus manager may take a hedge to minimize downside. This is a specialized subject and there no dummies that show how rates are determined. It is also a trade secret. I feel like that any full answer has multiple facets:  **Free for 7 years:** I'm currently in KC, and most of the people in my area are opting in for the free service. So if I were able to get fibre (my neighborhood didn't get enough votes), it would cut my $40/mo bill from Time Warner and my service would increase if anything. That's a huge cut, and it pays for itself ($300 set up fee) in the first year. Then over the next 7 years it saves me over $3000 in bills. For some company like Time Warner to offer this, they'd lose a large amount of service. Free mediocre internet is a huge threat to companies whose top sellers are expensive mediocre internet.  **Lawsuits:** Like other people have stated, it's pretty impossible to become an actual competitor to these companies. The other ISPs (namely TWC and Comcast) fight anybody who pops up. There are minor providers in some of the outer suburbs, but they can't offer near the speed that a fibre solution provides.  **City Approval:** Even Google ran into issues with this. Cities have to approve things like new fibre lines, and if they don't you're pretty much stuck. Overland Park, a wealthier suburb of Kansas City, were really dragging their feet on getting Google approved. Google just decided to take the deal off the table. Google is such a big name, however, that people in Overland Park freaked out at their city council and I don't know what they did, but Google has opened up signups for them now. If this was a no-name company, though, they would have been out of luck and just been barred from entry altogether. City council problems are actually pretty interesting.  **Cost Effectiveness and Overhead:** Building a fibre network in KC is a pretty big cost. There are others around, but really only in the commercial areas. So whatever company wants to compete with Google has to go without making a profit for several, several years. In order to speed up that time (and save the company) they'd have to raise prices, and less people would be interested in their product.  Google really pulled off something huge, here. I'm pretty excited for what their doing (even if my stupid neighbors didn't sign up and I don't get to reap the benefits). I'm interested to see what effects this has on a larger scale when they start moving to other cities.