Northeast Nebraska and Candelaria Philippines | w1891 - 8/31/2014 11:33
I just hope you have read all of the fine print. Do you know what your participation rate is? Have you ran the numbers on what the premium you are paying could earn in the market? My guess is the annual investment cost is in the 2-3% range vs a 0.25% or less for other mutual funds which makes that 0% base actually negative. Also my guess is that your premium and other costs are not fixed in the policy and can change based on how much the company is earning. Just remember that the company has to earn above what you are being guaranteed so somewhere they are taking a cut of what you could be earning.
I'm an insurance agent, and sold the policy to myself, so yes, I'm very aware of all the fine print. My participation rate is 100% my cap is 14.5%. Yes, I have ran the numbers, and what I see is this is a better investment long term because of the lack of losses. I'm not going to have the 30 % gains but I'm not going to have the 30% losses either. The past performance of these has shown a 6-8% return after the premium load and cost of insurance has been taken out. Plus, you've benefited from having some life insurance.
You are correct, the premium and cost are subject to change. And if they do, I'll pull the money out and take my 10% IRS penalty. But, the fact is, the market factors that would cause the insurance company to raise rates or fees would be the same market factors that would indicate to me that other investments aren't preforming well either.
Yes, the fees are higher then a mutual fund, and yes, the insurance company is making a profit from these. They certainty are in business to do it for free. But I feel they are earning there load, and the premium load is worth what they are offering.
You mutual fund strategy is great as long as the market doesn't correct. My strategy will smoke a mutual fund strategy if there is a market correction again like in 2008.
I guess it all balances out. I'm willing to take a large risk in the commodity market with part of my funds. But my retirement funds I keep in a low risk universal life policy, so it all balances out.
A mutual find strategy is fine for younger and middle age people because if the market corrects they have time to wait to access there money. BUT, if you're within 5 or 10 years of wanting to access those funds, I would encourage you to do something like the equity indexed life fund as a market correction won't lower your funds. |
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