New York Life Insurance
What do people think about paying into whole life insurance? If I get old and don’t want to leave my kids a huge bill upon my death. Is it worth it or a scam?
Scam. Just get a term life for your life insurance needs and invest your money elsewhere.
Term is temporary. There are many reasons why you would need life insurance that goes into old age. Tax benefits are one advantage, Long Term Care is another. Estate taxes, income tax reduction, liquidity, cash value accumulation are all good reasons.
Those are good reasons, but for the average person it is almost always better financially to get a long term policy that lasts until you’ve accumulated enough assets to not need the term insurance any longer. Then fund those items you listed with the money you saved and invested.
Every thing has it’s place. NY Life whole life is expensive, and returns are low compared to other products in the market, but are meant for someone who wants certainty, coverage and tax benefit through old age and passing estate tax free. Lot more to consider, but If you have specific questions, pm me. I have been a customer for 10 years, but have moved on to other products that are better suited for what I need now. Several considerations like fees, opportunity costs, tax bracket now, in retirement, your goals / needs and how your assets are distributed all comes into play. End of the day, it is not term vs whole life or VUL or IUL, it is what you need for your situation - not a one size fits all.
I am not clear why there is income tax advantage , plus estate tax free ?
I believe that the death benefit isn't taxable, so if you plan to leave enough that you'd be subject to estate tax, then there could be a tax advantage. I also believe you can take loans against the policy benefit and not pay them back until you die, in which case the death benefit would be used to pay back the loan. Since it's a loan, you wouldn't pay income tax on the money you got.
Yes, that is correct. Look at the loan rates and the structure of the underlying vehicle before you decide how much to take. Properly structured, in a good vehicle, the costs are way cheaper than paying taxes.
Also any good website to check how much cost would it incur
Shop around. Talk to a few different providers. Not aware of one that puts all of what I would shop for in one place. It is not just a cost equation, it is also the features, benefits, brand, risk tolerance, your health rating, age and what decisions you take if you chose one of these vehicles vs. what you would do on your own that influence the outcome. I have done a lot of analysis. Happy to take you through that if you pm me.
FWIW, I have a term policy and my wife has a whole (actually a VUL) policy. Term life is to make sure house and college can get paid off if I die young. Whole life is mostly as a retirement vehicle since we'll have enough traditional retirement assets to think about tax rates. It's not clear cut to figure out what's better since cost/fees of whole life, similar term life cost, investing vs insurance cost, how long we'll live, tax brackets, etc. all come into play.
A VUL with good underlying funds and reasonable loan rates can be a vehicle to build up cash value, but with the caveat that it is subject to market risks. I know people who trade inside that, buy more of the right mutual funds when the market is down. If cash flow allows, you should also look at a permanent policy with a long term care provision for yourself.
IMost likely not, though there may be some specific cases where it can make sense. For example, when your older you can borrow against the cash value and never pay the loan back (it comes out of your death benefit). This loan, being a loan, isn't subject to taxes. That said, you'll need to know fees, opportunity costs, anticipated tax bracket in retirement, etc. to really know if it's worth it.