ghostguy123
Footballguy
Is there a link someone would be able to recommend with the layout of how the whole life works in terms of the growth, withdrawals..........
This is a pretty decent tutorial on how insurance worksIs there a link someone would be able to recommend with the layout of how the whole life works in terms of the growth, withdrawals..........
No problem, and happy to help answer any question or clear up any misconceptions. As was pointed about by someone above who's apparently not a fan of WL, it does have quite a few moving parts and he (I assume it was a guy) is very correct.Matttyl,
Appreciate all of the explanation w/o the hostility. Due to my financial situation, there’s a good chance that eventually WL might be a good option for me as far as diversification at some point in the near future. That being said, a few clarifications if you don’t mind.
· Can you explain the difference b/w the “guaranteed returns” and the “actual returns”? What’s the delta b/w the two based upon? Obviously that is where the “risk” lies…..and why does that delta decrease with time and/or with increased frontloaded payments.
· Are all withdrawals from the cash policy in fact “loans”? If so, is that rate locked throughout the course of the policy?
I talked a bit about the guaranteed return above, and how it differs (hopefully) from what your actual return will be. Again, that guaranteed return is typically small, and will still have insurance costs taken from it, so the effective rate is even smaller. It's one of the few products, though, that give you any sort of absolute worst case scenario for what it will be worth 10 or 20 years from now.As a financial idiot, I think the Bogleheads did a really good job talking about keeping it simple, and why. It covered the basics but also laid out why the basics are really all you need to do "well" with your retirement investments.
Back to whole life insurance. I guess the part I am not understanding is that it has a guaranteed return? So the premiums you put in are growing, you are able to withdraw from them, AND it covers you in the event of a death?? The way it is described my Mattyl made it sound too good to be true (nice salesmanship), but I have to imagine there are 500 other things I am not aware of that make it much less of a tool than how I understand it to be.
It's only like that sometimes. On days that end with a Y.
So given the common 4% rate you referenced above, after costs/commissions are taken out....what's the typical effective rate of a policy?I talked a bit about the guaranteed return above, and how it differs (hopefully) from what your actual return will be. Again, that guaranteed return is typically small, and will still have insurance costs taken from it, so the effective rate is even smaller. It's one of the few products, though, that give you any sort of absolute worst case scenario for what it will be worth 10 or 20 years from now.
you definitely can, after you have a proper retirement trajectory, own a home, and have reserve cash beyond that.Stupid library didn't have the Finance for Dummies - picked up a couple of other general finance books just to skim. Plan to spend some time on that site mentioned a few times.
Back to the 529 - I only threw it out there as an idea. All four of my kids have been told they will need to get scholarship/ grants. They can do it - just thought if it made sense throw some money for them in a 529
The typical effective rate of the policy's guaranteed rate you mean? Well, it's negative in the early years, and probably isn't even back to even for 15 or so. It's not positive for a bit, and likely never gets above 2.5% or so. Looking at my policy now (which may not be fair, as it's already paid a dividend each year of it's 13 years which at this point can't be undone) has had an effective rate (13 years of 1,149 and a cash value just over 15k) of just .37%. At year 30, the absolute minimum cash the policy will have is 47,756 which is an effective rate of 2.15%. Year 43 (my age 65) the minimum effective rate after all costs/commissions would be 2.26%.So given the common 4% rate you referenced above, after costs/commissions are taken out....what's the typical effective rate of a policy?
Also, isn't the term "cash value" misleading...b/c you're not taking the cash out free and clear...you're simply just taking a loan out (albeit you already have the means to pay back the loan upon death).....or am i missing something?
Thanks...for both posts....makes sense....will have to look into further.Here is a good little tidbit that spells out loans on WL policies better than I did, if you're interested (I think they are talking about VULs in the prior paragraph, and continue to a bit, though)....
Policy Loan
There is a way to avoid the income tax on your cash value growth. You are allowed to take money out of your policy through a loan instead of a withdrawal. The IRS doesn't tax loans. As long as you keep your policy active, you never need to pay back the loan. When you die, it will be repaid out of your policy death benefit. This lets you spend your cash value growth without paying taxes. However, borrowing your cash value will decrease the inheritance for your heirs. If you want to pay back to loan and get your original death benefit, you need to pay your loan back with interest.
There may be some account minimums, other than that, it's very reasonable.Is there anything wrong with at least opening the 529, just so that the grandparents can throw some birthday money in there? I mean, even if he doesn't fund it himself until all the other stuff is taken care of, any harm in having it available?
There may be some account minimums, other than that, it's very reasonable.
I think you can't do anything with them - unless you want to pay taxes on them. If you have access to them personally, it's a taxable event. If you're ok with that, no issue with a 6 month CD I could see.need advice. Selling our condo and moving to Portland later this month. Condo went on the market yesterday and it's on fire. I'm expecting to get offers over the listing price and might actually bank 75K from the sale. I'll be using this to buy a house in Portland later this year or early in 2017. I have at least a six month lease on the place we are renting. What should I do with the proceeds from this sale? Just put it into savings? CD? short term bond? TIA
I think you can't do anything with them - unless you want to pay taxes on them. If you have access to them personally, it's a taxable event. If you're ok with that, no issue with a 6 month CD I could see.
No, you don't pay taxes on the sale of your personal property (up to like 500K profit). The money is yours free and clear.I think you can't do anything with them - unless you want to pay taxes on them. If you have access to them personally, it's a taxable event. If you're ok with that, no issue with a 6 month CD I could see.
call me crazy / stupid / whatever. but we've been putting money into our kids accounts before buying a home. Different circumstances than your "normal" family who lives in one place for 10-50 years. But even now with a mortgage, we'll put money into their Coverdell accounts before paying off the house. Convince me otherwise.you definitely can, after you have a proper retirement trajectory, own a home, and have reserve cash beyond that.
it's just that, that defines almost no one. If you can be that person, then go for it
Is it possible to take out a loan for retirement where you live if you're short?call me crazy / stupid / whatever. but we've been putting money into our kids accounts before buying a home. Different circumstances than your "normal" family who lives in one place for 10-50 years. But even now with a mortgage, we'll put money into their Coverdell accounts before paying off the house. Convince me otherwise.
Too many unknowns: Assuming it's you or your wife's work that cause the different circumstances...if so: How often do you move around? Does your company compensate you for closing costs when you move? Would hate to get caught in a down market when you absolutely have to sell a house to move for a job.call me crazy / stupid / whatever. but we've been putting money into our kids accounts before buying a home. Different circumstances than your "normal" family who lives in one place for 10-50 years. But even now with a mortgage, we'll put money into their Coverdell accounts before paying off the house. Convince me otherwise.
to the first two "questions". To the 3rd, very but we're not counting on that. I never said we weren't saving for retirement, we just haven't bought a house.Is it possible to take out a loan for retirement where you live if you're short?
How about college, can you take out loans for that?
How confident are you that your kids will support you if you were destitute in retirement?
For the past 17 years it's been my work moving us, but that will change in the next few years. Job doesn't compensate for closing costs. Like I wrote before in here, we are buying our house now because we expect to stop moving and stay here for a while.Too many unknowns: Assuming it's you or your wife's work that cause the different circumstances...if so: How often do you move around? Does your company compensate you for closing costs when you move? Would hate to get caught in a down market when you absolutely have to sell a house to move for a job.
When was the house built? 15 years ago when we bought a house built in 1900, we had the same issue. It happens.Speaking of insurance, I met with my insurance guy to just go over all my policies and make sure I had things in order.
I had thought my home insurance was a little high, come to find out my house (which I paid $118,000 for and is maybe now worth $130,000 after some upgrades) has a total loss coverage (not even counting personal property) amount of around $250,000. I was asking the guy WHY, and apparently based on the square footage that is the estimated cost to rebuild the house. I was like whaaaaaaaaaaaaaaaaaaaaaaaaaaaat?????
Made me wanna burn my house down.
1978. If THIS house costs THAT much to rebuild, then anyone building a house in this area is a total moron.When was the house built? 15 years ago when we bought a house built in 1900, we had the same issue. It happens.
Inheritance?Alright financial wizards help me out with this one. What is the best way to prepare for a child's retirement? I can set up a Roth for my kids but I can't contribute until they have an actual job with taxable income. Savings and CD's suck. What vehicle can I use to throw $10 a week into an account for my 10 y/o so if he winds up with his mother's financial IQ he won't have to eat Alpo when he turns 60?
I'd rather they have something they are vested in and can contribute to rather than having them hoping I die soon.Inheritance?
This happens on almost all of my rental properties because they are big old houses. Its because your policy is based on replacement cost (and you will have to rebuild it to get the full amount if it burns down). If you want a much cheaper policy ask your ins guy to base it on acv (actual cash value).Speaking of insurance, I met with my insurance guy to just go over all my policies and make sure I had things in order.
I had thought my home insurance was a little high, come to find out my house (which I paid $118,000 for and is maybe now worth $130,000 after some upgrades) has a total loss coverage (not even counting personal property) amount of around $250,000. I was asking the guy WHY, and apparently based on the square footage that is the estimated cost to rebuild the house. I was like whaaaaaaaaaaaaaaaaaaaaaaaaaaaat?????
Made me wanna burn my house down.
If either you or your partner are not maxing out your Roth contributions, invest your kid's money in there. You can get at the principal anytime. Then once they are working age, move the money into their personal Roth year by year. I've looked into Government EE bonds, old-school style, and they are horrible. Btw if your Roths are maxed out then just open up an online brokerage account for each kid. Bummer is that they'll have to pay taxes on the gain but its still overly kind of you.I'd rather they have something they are vested in and can contribute to rather than having them hoping I die soon.
The "can't have access to the cash" rule you mentioned is in regard to 1031 exchanges, aka "like-kind" exchanges. That would apply to investment property or income-producing property but wouldn't apply to a personal residence. In a standard real estate 1031 exchange, commonly called a "Starker exchange" named after a court case, the taxpayer sells the property, the buyer pays a qualified intermediary who holds the funds. The taxpayer acquires a new property, and directs the qualified intermediary to disburse the funds to acquire the new property. There are a whole host of rules and regulations and such, but the gist is that if the taxpayer never accesses the proceeds, the gain on the initial sale is tax-deferred.Sorry, was thinking of my buddy who sold a piece of land recently (which wasn't a primary residence). My bad, carry on.
Just put it here: https://www.capitalone.com/bank/expectmore/need advice. Selling our condo and moving to Portland later this month. Condo went on the market yesterday and it's on fire. I'm expecting to get offers over the listing price and might actually bank 75K from the sale. I'll be using this to buy a house in Portland later this year or early in 2017. I have at least a six month lease on the place we are renting. What should I do with the proceeds from this sale? Just put it into savings? CD? short term bond? TIA
Track the $10/week and throw it into a S&P 500 mirroring mutual fund twice a year (minimizing fees and somewhat dollar cost averaging)...when they get a actual job, deposit that into a rothAlright financial wizards help me out with this one. What is the best way to prepare for a child's retirement? I can set up a Roth for my kids but I can't contribute until they have an actual job with taxable income. Savings and CD's suck. What vehicle can I use to throw $10 a week into an account for my 10 y/o so if he winds up with his mother's financial IQ he won't have to eat Alpo when he turns 60?
Well, if they are bad with money they will just blow through whatever account you set up for them, and then they would be hoping you die soon anyway.Statcruncher said:I'd rather they have something they are vested in and can contribute to rather than having them hoping I die soon.
If you must have some kind of estimated number with which to work - I would go with something based on very recent historical appreciation. The other big part of the variables will also depend on what kind of a deal you got - price per SF/where the home is on the neighborhood scale lowest vs. highest.How would you estimate the appreciation of a home over the course of the next 7 years? Is there a general standard % for long-term appreciation? This is in an area that is quite stable, so while I realize that there can be many variables, I would feel comfortable using some historical norm for my purposes, just to get an estimate. I have data for 872 properties in the directly adjacent area. Should/can I use the average increase for those properties (maybe taking out certain sales that might have occurred within certain times in the fairly recent past? like only use anything that sold 10 years ago or more?). Or would some generic historical norm work?
Sounds like a 1035 exchange in regards to life insurance. Thanks for the info!The "can't have access to the cash" rule you mentioned is in regard to 1031 exchanges, aka "like-kind" exchanges. That would apply to investment property or income-producing property but wouldn't apply to a personal residence. In a standard real estate 1031 exchange, commonly called a "Starker exchange" named after a court case, the taxpayer sells the property, the buyer pays a qualified intermediary who holds the funds. The taxpayer acquires a new property, and directs the qualified intermediary to disburse the funds to acquire the new property. There are a whole host of rules and regulations and such, but the gist is that if the taxpayer never accesses the proceeds, the gain on the initial sale is tax-deferred.
The whole 103x series is related to transactions with tax-deferred or otherwise special tax consequences. 1033 deals with my favorite tax term, the involuntary conversion....meaning casualty loss, theft loss, eminent domain issues, etc.Sounds like a 1035 exchange in regards to life insurance. Thanks for the info!The "can't have access to the cash" rule you mentioned is in regard to 1031 exchanges, aka "like-kind" exchanges. That would apply to investment property or income-producing property but wouldn't apply to a personal residence. In a standard real estate 1031 exchange, commonly called a "Starker exchange" named after a court case, the taxpayer sells the property, the buyer pays a qualified intermediary who holds the funds. The taxpayer acquires a new property, and directs the qualified intermediary to disburse the funds to acquire the new property. There are a whole host of rules and regulations and such, but the gist is that if the taxpayer never accesses the proceeds, the gain on the initial sale is tax-deferred.
Sort of related to your question - at what age can you start taking steps to start a credit history for a child? My folks did so for me, which greatly helped me when buying a car, house, and I would imagine other situations I wasn't even aware of. And what steps would you suggest?Alright financial wizards help me out with this one. What is the best way to prepare for a child's retirement? I can set up a Roth for my kids but I can't contribute until they have an actual job with taxable income. Savings and CD's suck. What vehicle can I use to throw $10 a week into an account for my 10 y/o so if he winds up with his mother's financial IQ he won't have to eat Alpo when he turns 60?
This one's pretty easy - estimate 0% (real, or tracked with inflation nominal). That matches historical for housing returnsHow would you estimate the appreciation of a home over the course of the next 7 years? Is there a general standard % for long-term appreciation? This is in an area that is quite stable, so while I realize that there can be many variables, I would feel comfortable using some historical norm for my purposes, just to get an estimate. I have data for 872 properties in the directly adjacent area. Should/can I use the average increase for those properties (maybe taking out certain sales that might have occurred within certain times in the fairly recent past? like only use anything that sold 10 years ago or more?). Or would some generic historical norm work?
…From 1890 to 1990 the appreciation in US housing was just about zero. That amazes people, but it shouldn’t be so amazing...
So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000’s. And I don’t expect it to come back. Not with the same force.
Generally 18. You might be able to find something 17 years if you are on it but generally not since at age 17 they are legally unable to enter in a contract and thus could walk away without any recourse.Sort of related to your question - at what age can you start taking steps to start a credit history for a child? My folks did so for me, which greatly helped me when buying a car, house, and I would imagine other situations I wasn't even aware of. And what steps would you suggest?
I would set up a trust and write it up that the trust so that it provides for their retirement after you are gone. In the meantime, it is your money (well as trustee) and you control it. It is further 'controlled' even if you are gone because a trustee can not legally go against how the trust is set up.Alright financial wizards help me out with this one. What is the best way to prepare for a child's retirement? I can set up a Roth for my kids but I can't contribute until they have an actual job with taxable income. Savings and CD's suck. What vehicle can I use to throw $10 a week into an account for my 10 y/o so if he winds up with his mother's financial IQ he won't have to eat Alpo when he turns 60?
How about co-signing on the loan with a parent to keep the rate reasonable?The other way most kids establish credit history is student loans. Almost everyone either get a student credit card, student loans or a car loan (but car loans to establish credit will be like 20% interest).
Depends on the lender but that is a possibility for sure. But I would go with a student credit card at 18 first and worry about the car loan as needed. IMOHow about co-signing on the loan with a parent to keep the rate reasonable?
Kid can drive at 16 or 17, though.Depends on the lender but that is a possibility for sure. But I would go with a student credit card at 18 first and worry about the car loan as needed. IMO
interesting. I'd think housing would keep up with inflation, buying long term is better than renting long term, and if you can buy a house and rent it out to pay the mortgage, that not a bad investment. But no, I wouldn't buy a house predicting any real gains.This one's pretty easy - estimate 0% (real, or tracked with inflation nominal). That matches historical for housing returns
Quote from Robert Shiller below, where he expounded on the point - "Don't invest in housing"
Yea, I am in the boat that the realtor value of what they use to provide to what they provide now is not in line with compensation. There still can be some value but things they did provide before are just not important in the information age we live in. You don't need local knowledge of crime, schools, etc now. You don't need them to know when a house is on the market. You basically need them now to see the houses because they have it set up that you can't unless you have a realtor.Bit of a tangent, but I can't wait until realtors are a thing of the past, or at the very least some form of selling homes where if I want to sell a home worth about $150,000 and buy a home worth about $150,000 I don't have to pay 10 grand to sell my house and pay another 10 grand for an inflated price on my new house..........all to cover realtor fees.
The way things are online now, this HAS to change soon. Has to.
Sorry. Rant over.
We are absolutely thrilled to be buying without a realtor. Unique circumstances but saving ~$20k is a huge win.Yea, I am in the boat that the realtor value of what they use to provide to what they provide now is not in line with compensation. There still can be some value but things they did provide before are just not important in the information age we live in. You don't need local knowledge of crime, schools, etc now. You don't need them to know when a house is on the market. You basically need them now to see the houses because they have it set up that you can't unless you have a realtor.