Dave Ramsey Thinks IUL is CRAP (My Response!)
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- čas přidán 12. 01. 2023
- In Dave Ramsey's most recent video on Indexed Universal Life Insurance, he calls it a big pile of...In this video, I'm going to respond to each of his criticisms. Dave Ramsey gives a lot of good advice about staying out of debt and managing your finances. But that doesn't mean that everything he says is beyond reproach. He's not lying but he doesn't fully understand the nuances. He often conflates whole life with indexed universal life. Let me know what you think in the comments below.
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I sell IUL as an asset protection account.
10 to 15 years front loaded, with more cash accumulation towards to later years.
I will also select "less death benefit, more cash accumulation option " should a client want.
You just have to be upfront with these things.
Some great reads, Nelson Nash's "Be Your Own Banker", "Money Wealth and Life Insurance" and "The 770 Account".
Great stuff you mentioned. As an advisor I’m always learning. Why do you feel an IUL pairs with IRA well? Would you say it depends on the client and them not maxing out an IRA ? Would other tools do you add as part of a complete comprehensive plan?
IRAs work well if you can get the balance low enough such that RMDs are offset by the standard deduction.
The other point to consider, whether a standard IRA or Roth is, "Where do I invest?" Which mutual fund do you use of the 8,000 that are available? I have had people say "I have an IRA with Fidelity" & I say, great. They have about 100 different funds. Which did you get? I have had clients say "I have a Roth IRA with Chase" & I say, great. What is it invested in? & their response "What do you mean? The bank has it." They mistakenly believe that the bank has a special Roth account you invest in but unless you give that banker specific investment instructions your money just might sit in a money market account earing 1% interest, or whatever they are paying today.
The cost of insurance and charges is shown in the illustration.Yes,the cost of insurance increase but cash value also increase based on interest rate.Beside,nobody knows when are we going to die.Most people die at the later age.If you put the IUL in option B,the beneficiary will get the cash value plus death benefit.
still does not convince me, I enroll on WFG to become a sales person and the commission is very high, but I do not see a reason to put my money on it yet.
@@kdengo IUL IS NOT FOR EVERYONE THEIR ARE BETTER IUL OPTIONS THAN TRANSAMERICA/WFG IT ALL DEPENDS HOW AND WHEN YOU PLAN TO USE YOUR MONEY
@@429mas Transamerica has one of the worst IUL's on the market
I have been paying 600 per month into my max funded IUL policy. The only one telling me it is a good financial decision is my salesman who wants me to do more lol. I think I will side with Ramsey on this one based on my experience so far. Just get term life and invest the difference before you get stuck into a lifetime decision like me.
I think if it’s the only retirement tool you’re using then it probably was a mistake.
Term and invest the difference doesn’t produce value like a Lirp sounds like primerica lol apparently no one taught you how a lirp works
i have the same experience. for 10 years, i have paid almost 30k in cash but my cash value is only 9k. where is the rest of my money!!!!! the fees i read on the report is insane! the only thing i can say is STAY AWAY FROM LIFE INSURANCE.
@@shihgung7161 wow. Sounds like someone ripped you off.
@@shihgung7161 who is the underwriter?
The key term is if it's set up properly. The average person won't know if it's set up properly. The sales person will set up the policy purposefully as to get most of the money you pay out. They sale the IULs focusing on the potential of the upside of the policy, but never dicuss the risks- you're set up for the kill.
This is an unfortunate truth. Fortunately qualified power of zero advisors know how to do it the right way. Find one at davidmcknight.com.
This video actually ironically, without intending to, supports what Dave Ramsay and other financial advisers warn against IULs. So, thank you for affirming from the insurance agent’s side.
In what way?
I would also like to know "In what way?" Dave Ramsey says that when you die you don't get the CV & David says you do & your annual cost of insurance decreases every year. Guess what: If you buy a mutual fund & the 12b-1 fees (management fees) are 1.75%/yr that fee NEVER decreases but the fee in the IUL does. So, if you have accumulated $100,000 in a mutual fund your fee is $1,750 annually & may be higher the next year. The fee on the IUL is on the premium, not the CV.
@@richardcaridi1982 ok I think I understand what you’re saying now.
People don't realize that when the broker says "it's a no-load fund" that it actually cost more. If a person buys a front-end loaded fund he may pay 4% & have 12b1 fees of 0.75% annually. But if he pays no fee up-front his fees could be up to 2%/yr. And if you factor that out over 30 years it's a lot of money.@@DavidMcKnight
I guess any idiot can make statements in the comments and run away.
I had a convertible term policy for 500k. I had a salesman talk me into converting into a 100k IUL policy. I thought it was a whole life policy. The salesman was concerned about his commission only. Every year I would call him. He explained nothing. He died along with my first insurance salesman.
Nothing wrong with a 100k IUL. Once you feel it’s maxed out to the principal amount, invest in something else. Maybe an index. IUL are good generally for older people.
@@JocobsComments hey I am a 18 year old and I just did a 100k iul is that bad? I didn’t do my reasarch and an agent sold me it and I’m a dumb 18 year old lol so I went ahead and I’m kinda scared.
@@va1056depends on how its structured
@@va1056depends how it was built. You need a good agent to curate an IUL that fits your needs.
No @jacobs it’s a good investment brother , your not losing as in a 401k, but your not gaining, you have living benefits, let it compound for good 21 yrs, everyone has a different opinion. Once you have a good amount use it to open a business, make profit in your business and continue the good about IUL.
option b is increasing or level? do you reccomend starting the policy at increasing and change to level at a certain age or how do you suggest agents structure them?
Yes B is increasing. The policy structure depends on the client’s situation.
Well done, David! Very professional.
Thanks!
Dave what is the max age where this IUL would make no sense? What is the minimum period you must hold it to grow your cash to a point where you can borrow $60,000 w/o compromising the contract. Thanks.
Do you show agents how to structure these and your favorite companies to use?
Hey Dave Ramsey what's an index?
I hate when they say permanent life insuramce makes more commission. If you use excess premium or PUA it pays way leas commission then a higher term. I just wrote my own iul at $200 a month, and planning to up it in the near future, and i took like $200 in commission. That is way low. My agency sold a term revently that 6x that in commission.
an IUL is just a Life Insurance Policy. After exhausting all investment instruments available, maybe, some qualified people would put some money aside to an Index Universal Life Insurance policy as it is, just a life insurance policy.
Love your response. I use to follow Dave Ramsey but now I realized he has an ancient mindset living in the dinosaur years.
Thanks!
Question, If I'm understanding this correctly, in the Index Life Insurance, you start with a high premium for more life insurance, then overtime when you have a higher cash value you pay less in premiums. Is that correct?
Less in premium as a percentage of the entire cash value.
The premium goes towards the life insurance at first and less in cash value and overtime the life insurance starts to cannibalize the cash value, correct? I did not understand the generic response, host.
I think of the largest issues is just how complex these products are. Just like any product all IULs are different and unfortunately sold as “you can’t lose as there is a floor of zero”. In recent years IULs were sold with very high multipliers that came with a cost anywhere from 2 to 6 percent a year for added performance. Issue in that zeros where there was a 0 percent rate of return the actual downside with COI and additional riders was negative 2-8 percent.
One other factor that many do not realize is the product is just a general account product with many levers the insurance company has control of (cap rates, participation rates etc) and are also unaware S&P historical returns are not accurate as the IUL does not include dividends.
Good comments. I address these issues in my other videos.
@@davidmcknight8201 nice well done 👍. Appreciate the detailed videos like anything when used correctly very powerful, just really requires a deep dive.
Keep up the good work!
@@Anthonys771 Thanks Anthony!
no matter how they try to dress them up just a glorified whole life
@@mikej3571 well to be fair in some circumstances that is a complement. One of the largest sellers and proponents of IUL - World Financial group has “priority product” built by insurance companies that performs worse then normal retail product due to expected lapse ratio etc..
Key word: "structured" properly! Most insurance companies do not no how to do this. Dave Ramsey is looking out for the average American.
Are you saying that IULs are only good if structured properly?
@@DavidMcKnight no this is what your saying... I believe two or three times in this video... I'm just agreeing with you.
@@TOP_LOVELL Ah, got it.
thats key... WLI if STRUCTURED PROPERY""! i pay into for 32 years pay 28000.00 premium cost
the policy has A NET CASH value of $53000.00
They don’t structure it to benefit the insured because that will decrease the commission and fees significantly but increasing the cash value and decreasing the death value should be the correct way..
How does the average person know if an insurance plan is structured properly? I'm going to research this next because I'm interested in MPI RELOC.
You can get a second opinion. Unfortunately the agent who’s selling you the policy isn’t always forthright in this regard.
So I don’t have a 401k currently. I travel for work and I just got into an IUl putting money away for my retirement. My travel work pays well but I don’t get 401k. Have over 100k in savings and I put a chunk of it in my IuL every month. Is that a good thing you think? I eventually will get a full time job that I can contribute to a 401k also. I’m 36 years old and and I’m just a little nervous and I want to be smart o about my retirement ! Please let me know
Do you qualify for a Roth IRA? If so make sure you fund that right off the bat. IUL would be a good supplement to that.
Open/fund a ROTH IRA and MAX out yearly contributions on that from your 100k. Invest 80% in VOO (low cost index fund) automatically each month and keep 20% "cash" (currently earns 5%). Keep that "cash" in ROTH as "gunpowder" for really BAD days (3-5% crash) drip investing (500-1000). You could also learn about selling covered calls and cash-secured puts options (research wheel strategy) and use some of that cash in ROTH to sell call/puts in individual stocks/companies you may like to own. Once you get comfortable in all that check IUL or other options.
Friends get multiple certificates from the credit union when they have large amounts saved to get a guaranteed 5% interest to save for their kids. Would an IUL be a better investment? They wouldn't have dedicated amounts to put towards a policy every month, just sporadic one-time amounts. Should they pay off credit card and other debts like Dave Ramsey suggests before contributing to a retirement account?
Definitely get the match in your 401(k) and then pay off high interest credit cards with whatever is left.
Good video. Dave is rich he doesnt understand things we struggle with. Thanks for educating us.
Happy to help.
@@DavidMcKnightwould you prefer this for someone in their mid 30s?
@@YeaImFlyHo possibly. Unless they’re looking to do a Volatility Buffer type approach, then I prefer IUL.
I follow Dave's videos, and I like the Baby Steps/ BUT you are right here in your video. I just have one question. What happens to my cost of insurance if at age 60yo I will withdraw 90% og my Cash Value? Since the Cash value went down to only 10%, so the net amount at risk of the Insurance company increases, WILL my cost of insurance Soar high too?
Sure will which is why you take a loan not a withdrawal.
@@DavidMcKnight I forgot to mention that I am in the Philippines. Our VUL here is kind of different I guess? because you cant take a loan from your cash value instead you can only withdraw from it.
@@user-xf3vy9ot6ryes that’s a significant difference.
I always recommend to my clients that keep 10/15% in the policy if you are planning to withdraw everything to keep the policy alive so in case something happens you are steel cover. some of my customers said that they don't plan to live so long so they focused in the saving and free tax benefit at the age of 60.and then after that they said don't care.
Dave thank you very much for the priceless information. The question is which company and who exactly can structure it properly?
Email me at info@powerofzero.com for the companies. Thanks!
I was fortunate to have a subsidized universal life policy through work. I put $1000 per month into the cash value for many years which paid a guaranteed 4% interest rate when other risk free investments paid less than 1%. I now have over $600k in cash value which is added to the death benefit. Of course 4% is not as good today and the cost of insurance increases each year. The interest on the cash value is still more than double the cost of insurance but I have started to decrease the insurance amount and will continue to do so each year, as low as they let me without withdrawal of the cash value.
Point number 1. Annual renewable term or option 1 as you call it, is the foundation of any universal life policy. If you lower the insurance coverage you will also limit the amount of money you can put into the IUL which will impact the cash value in the long run. Point 2. Do not compare IUL to whole life. Whole life is the only insurance product that comes with guarantees; guaranteed premium, guaranteed death benefit, guaranteed cash growth, an IUL illustration may look pretty on paper but none of it is guaranteed and it is always manipulated to look that way. Point 3. If you are paying for less insurance as you get older, what is going to happen when you start using the cash value in retirement? The selling point of IUL is the cash value growth but you are going to empty the pot in retirement and leave your family with no money when they need it. Taking out loans + increased insurance cost+ you not being able to make payments in retirement = money running out in your early 80’s. Stop lying and comparing IUL to whole life, a great whole life prepared by one of the top mutual life insurance companies in the country that comes with guarantees and extra benefits should be in everyone’s portfolio. Unfortunately it is bad IUL agents that are turning people away from great products.
Only a very well misuninformed person would put $20,000 a year in a Index Universal Life INSURANCE. That would be a terrible bad idea.
Dave Ramsey's most important person is Dave Ramsey. In his bid to self-promote, he has the workings of IUL backwards, as this video perfectly points out.
Thanks Gary!
Where did the idea that cash value is not paid out come from? I have read a couple policies but none that surrender that built up cash value to the insurance company... It's always been part of the final payout if not used before or if it surpasses the death benefit.
I did. Different video delving into this. You can check it out on my channel.
Dave why didn’t you mention that the only way the death benefit and cash value pays out is if option B is selected which is more expensive than option A 🤔?
Because even with option A the amount of life insurance you’re paying for reduces as time goes on. That means your cash value accumulates more quickly. Dave Ramsey NEVER brings this up.
Hi David, quick clarification - does it mean your beneficiary will not get the face value plus the cash value when you die with the IUL?
With option 2 that is the case. With option 1 you get the combination of the cash value and the amount of life insurance you happen to be paying for in a given year which in the early years is equal to the face amount but which in the later years can be more.
Dave Ramsey is right. Whenever a policy holder has an issue with their policy( whether IUL or Whole Life), the argument is always "Your policy wasn't structured properly."
That’s not my argument.
If your IUL is set at increasing DB option 2, does your cost of insurance still go down the higher the cash value gets?
Not unless you change it to option 1 later in the contract.
@@DavidMcKnightat what point do you need to change that back to option 1?
@@olababs2048 When you stop funding the policy. If you had premiums scheduled for 7 years then, year 8 you switch to a level death benefit option. This is to shrink the cost of insurance charges.
Question 1. I have 250,000 CV and 250,000 FV witch equals 500,000 death benefit year 5 and on year 6 I borrow 100,000 how much death benefit do I have?
Question 2. Can my CV grow higher then my death benefit? If so explain what happens to the premiums.
No
You’d have a $500k death benefit with a $100k outstanding loan. If you died before paying the loan back your heirs would get $400k.
Been following you and watching your videos David. Thank you for all the information shared.
Is it true that IUL is only for the rich people? Will you still recommend this product to be used for retirement for someone who can’t even maxout the other tax free vehicle? Thank you!
Great question. The answer depends on why you define as rich. I would say you don’t need to max out all the other vehicles before being able to do an IUL.
@@DavidMcKnight I should have been more specific, should we even recommend it to anyone who’s still eligible to do roth ira? Whom should take advantage of IUL when you can’t do Roth IRA?
Should we discourage someone getting IUL for folks that is living to day to day paycheck?
I see folks getting lured to IUL promises and use IUL as ultimate solutions to everything from college funds, cash growth, retirement and perhaps including solution to global warming. Lol… kodding aside on the global warming thig.
@@LesterDG it’s definitely way over-sold to the younger crowd. That said people still have needs particularly when it comes to DB and LTC so I just suggest taking a balanced approach. Some Roth, some IUL. Just be sensible.
Thank you David! I appreciate the response and rest assured be keeping this in mind.
@@LesterDG you’re welcome!
"structure properly" meaning pay more in monthly premium. Its the only way. When the funding is high enough, the interest/dividend/performance gain from the fund should be able to cover the cost of the insurance, the admin fee, with a small surplus left over every year. The problem is that the sale agent is incentivized to push the IUL products without having it "structure properly" because many could not afford to pay high premium to have it "structure properly". But dont matter to sale agents, they get paid either way, properly or not.
I suggest anyone buying any type of insurance and such to get educated first so you’ll understand what the agent is talking about to protect yourself.. there is so much information on CZcams for example that can be helpful. Remember we are in the age of information, use it to your advantage!
Good advice.
IUL does not count dividends and have market cap rates thus eliminating the power of compounding in the stock market. The SPY performed at 20% last year. If you had an IUL, that means you only had 12%. It's CRAP
It’s a bond alternative not a stock alternative. Adjust your paradigm and all your angst will go away.
It is pitched as a stock alternative.
Good video and this explains what Dave Ramsey didn't mention however he is right when it comes to a fundamental point: to access the cash value you've built up you need to either borrow against your own money you put in or else surrender the policy fully. If you cash out the policy you're left with no more life insurance. If the benefit of cash value is to lower the cost of life insurance you py for, doesn't it make more sense to take out level term insurance and invest the cash value you otherwise would into growth stock mutual funds?
But if you can access it by way of a guaranteed zero percent loan then it’s cost free and tax free. And because of the death benefit that doubles as long term care it can be an intriguing compliment to Roth IRAs and Roth 401(k)s. Check out my other videos for the other contexts in which IUL can provide unique benefits as part of a balanced, comprehensive approach to tax-free retirement.
Let's say that's the case. What still doesn't sit well with me is that based on the math formulas, the amount of premiums needed for insurance will increase even when the amount of insurance needed decreases. Say for example you invested cash value worth half the face value, over time the cost would still creep up. Arguably you would save say more with level term insurance over 20 years and invest the difference into high growth stocks
@@sruelle1 but what are you paying for those investments? If it’s more than .3%, the IUL will outpace you over time. Expenses in the IUL reduce dramatically over time and are ultimately as low as most Vanguard funds when structured properly.
Stocks are more volatile and earnings not tax free
@@DavidMcKnight The key is "structured properly". How do we know if it's structured properly, with no experience ourselves? My greatest fear is my agent not doing so.
I was recently pitched an IUL policy at age 62 by a salesperson. Agent wanted me to put a decent % of my net worth into the product. Single premium. I'm retired and self insured so I don't need life insurance. The carrot for me was the stream of tax-free income that I could generate from the policy. But I need to increase my retirement income now and not wait 12-14 years. He showed some impressive account balances in the ensuing years but it wasn't for me.
I will continue to rely on my qualified dividends from my stock portfolio and make small withdrawals from mutual funds accounts to tide me over till I tap social security. I live in a higher cost area where property taxes continue to climb. There are no free lunches. For someone in there 40s, who needs life insurance this product may be useful.
Hi Dee, thanks for your comment. Yes, IUL is definitely not one-size-fits-all. For someone at your stage in the game, its most useful attribute is the death benefit that doubles as long-term care.
At that point get a FIA with a death benefit & income rider but maybe the sales person did not show you that because of lack of proper licensing
an what he showed you was only illustrations. the results won't hit the mark. alot of them don't even have an investment license
Wise
Salespeople show tax free income because it is a LOAN
I would like
to know more and I want to know.Is it good to get a iuL
Go to davidmcknight.com and we can help out.
Been in the insurance industry for 13 yrs. Never have I seen an ACTUAL POLICY STRUCTURED PROPERLY. I replace them all the time with Term.
I’ve been structuring them properly for 25 years. How do you define structured properly? And are you honestly saying that you wouldn’t replace a policy if it were structured properly?
@@DavidMcKnight Make A video of you showing a 500,000 IUL policy vs a 500,000 level term policy for the same exact insurance class and age, and then show the difference that money saved would make if someone invested it, then SHOW us the NUMBERS on HOW the IUL could beat the end result for that same client. I've never seen that successfully done. that math says it's better to Buy Term and Invest your money separately in Mutual Funds. Do you have a securities license?
@@briansadberry Done: czcams.com/video/F8rYumo0JgI/video.html&feature=sharec
Wrong. In the policy of IUL it states there and with computation that the cost of insurance increases. Dont lie to people
Its in there.
Not lying. The cost goes up but the amount they require you to buy goes down.
I appreciate the unbiased response 🫡
Thanks!
Can you choose how long you want to invest in an iul?
You can choose how long you pay into it but you must keep the policy your entire life to maintain the tax-free growth.
@@DavidMcKnight there are lots of articles on this. Which makes things a bit confusing. No one has a set income for life. I read 7 pay option or lump sum set amount (a purchaser should pay the initial premium over seven years rather than one lump sum. This allows the cash value to accumulate more quickly and helps to maximize the returns of the policy). ?
Great video! Absolutely the IUL is a great COMPLIMENT to a diversified portfolio of assets that will lead you to a tax free retirement. It’s not the end all be all like some agents market it as but can play a big part
Couldn’t agree more!
Besides IUL, what else can I do to invest my money for my retirement
if you are looking for an iul, make sure it is structured properly to the way that you are looking for, you can structure it towards retirement, you can structure it to have more cash value/use it as your own bank. ive noticed that agents tend to not structure it properly and give you more death benefit because they get more commission, if it’s properly structured, and let’s say structured for immediate access to cash value, you can access your money immediately, which is cause the death benefit is lowered, the higher the death benefit the less money you are able to access.
Total BS. Show me one structure in this comment that’s is good for retirement. There is soo much wiggle room in the way it’s structured like your fees goes up every year, cap rate can change and the interest to borrow your money is up to 8% and you don’t compound when you have 0 years.
Keep in mind that when you waive surrender charges, that comes at a cost and exerts a drag on your cash value over time.
Is there a better company you recommend to work with for an Iul? I have a quote for a policy from Nationwide that shows an average increase of 6%. I got another quote from Ameritas that shows under 5%. Thanks for your videos, I'm learning alot. 😀
I like Allianz and North American.
@@DavidMcKnight Thanks! I saw a yt video for Leveraged Wealth Mgmt to have a proposed iul evaluated to make sure it's setup properly. Is that something you recommend? Is that a service you provide? I understand that if the policy isn't structured properly in the beginning you can't easily change it after you get it.
@@elevatefinancial4045 I know, that's what I said. I was asking if David provided the service of reviewing them or who he recommends to review it.
Transamerica has higher .check it out.nationwide is good,it has one that’s is uncapped .They give 6% but has a higher participation rate and can be uncapped.
Transamerica gives averages 7-13% this year.If you need help reach out.
@@DavidMcKnighthow about transamerica?
This is a great video
You keep mentioning "Structured properly"? How do I make sure my insurance agent structured it properly? What do I say or see to know it is structured properly? Can you define the terms or keywords to expect? I hear people saying a similar word but it means nothing without properly knowing what "structure properly" looks like.
It means you got as little death benefit as the IRS requires of you and are putting as much money in as the IRS allows.
you can structure IUL as 1) high death benefit 2) high cash value 3) combination of both.
You can choose 1 of them depending on your goal, longevity etc.
hi dave, I have IUL policy and just want to understand if it's true that I can withdraw my cash value anytime just in case I need for emergency use?
thank you
You could but you probably don’t want to use it as your emergency fund. IULs work best when they can sit and cook for a good long while.
@@DavidMcKnight thank you so much for advice 😊
I think it depends on the agent. My mom had iul but later lost her job during covid and couldn't keep up the monthly payment. There was no option to withdraw due emergency. We ended up forfeiting it. Read the fine print before signing.
sorry to hear she lost money because those IULs don't normally accumulate much cash value in the first few years@@Fuwa_san
@@Fuwa_san All permanent life insurance policies have a contractually guaranteed loan option. So you could have taken a loan for the full amount that you surrendered the policy for while maintaining coverage.
Great video! thank you for your breakdown and explaining IULs.
You’re welcome!
You tell ‘em Dave
Thanks Bob the tomato!
And is it true that you can borrow from your cash value interest free. I understand it’s tax free but is it interest free as well?
They charge you an interest rate but some companies will credit that same amount right back to you. So net cost of zero.
20K X 25 years X 6.6% compound interest, is approx. 2.4 M. A 1.08 M benefit, shows approx 1.4 M went towards life insurance over 25 years. Why should anyone pay 56K / year to insure life, for 25 years, when they can benefit from funding an ETF or an index fund??
This represents a 5.887% rate of return to that point in the contract and that rate continues to rise over the life of the contract. Eventually you get to the point where the average expense per year is less than 30 basis points. Why not do an index fund instead? Because this is not designed to be a stock alternative but a bond alternative as I repeatedly suggest in all my videos.
Dave Ramsey needs to get IUL 101. He needs to get educated about IUL.
Yes! And I’m here to help him.
Someone, at one of the insurance companies I use, said he met Dave & asked him where his money goes & he said "an IUL but I don't talk about it because it's too complicated for the average person."
Somehow I feel Puerto Rico vibe in that setting.
Hah!
If you really understand the cost involved in the IUL and the potential cap upside of the gain, it is an average investment tool. I would argue if you get a much cheaper term insurance and invest the excess to the similar safer index SP 500 investment over 30-40 years period, you could be doing quite better. Now if you don’t sell it, then there is no tax issue. Life insurance agent will sell you all kind of tax tricks but you can get it in the real life too such as ROTH IRA.
The expenses are the IUL’s strength. Comparable to an S&P index over the life of the program, with a death benefit to boot.
What do you mean by structured correctly? And why are my beneficiaries only getting $500k not $500k plus the $250k I raised? What’s the point of marketing it as a $500k death benefit if it really varies from person to person
This might help: czcams.com/video/NOkbUF6lcoY/video.html
Can An IUL be considered the complete package of “Buy Term and Invest the Difference”?
In some cases yes. It’s often compared that way.
I’m 17, I make good money for a teen. Should I begin paying into an IUL?
Not any more than 30% of your retirement contributions. The rest should go into Roth IRA or Roth 401(k).
I've been learning about IUL policies the past few months and if you get an increasing death benefit policy, your family will get paid the cash value AND the death benefit when you pass on. If you do a level DB policy and pass on before a certain time, that's when your family only gets the death benefit. IDK why it's set up that way yet, but that's the way I understand it.
This video might help: What Happens to My Cash Value When I Die? (What Dave Ramsey Thinks)
czcams.com/video/NOkbUF6lcoY/video.html
I think diversity is key, if your just investing in a WL policy and that’s all you got, well that’s not good. If your in Realestate, mutual funds, gold, silver with WL. It’s a good mix.
Yes, I typically call for between four and six different streams of tax-free income in retirement. Thanks for your comment.
Im just about start doing the IUL thing but im not sure if i can do it or not. Coz i got tradtional IRA and Roth IRA and 401k.
A good agent will run the numbers and show you what works best. If they can show you an illustration that provides information you understand don’t do it..yet… make sure the outcome at retirement makes sense to you… important to remember that any money you get from the policy at retirement will be tax free… zero tax on any money you take from the policy. 401K will be taxed. Certain IRAs also.
You info sounds valid and to some extent is, but you didn’t address the fact that the average American can’t afford to pay the option A in a IUL and the option B is way worse for the average working class. In Dave’s video he addresses option B that most of the average working class can afford.
This might help: czcams.com/video/NOkbUF6lcoY/video.html
My IUL policy will defund at age 82 when I need it the most unless I increase my payments from 78 to 125 per month.
Did you max fund it from the very beginning?
@@DavidMcKnight absolutely not. I just did what the insurance salesman signed me up for. I had no clue about max funding like Dave Andrew’s suggests. They put me in what I could afford only. I don’t think the salesperson even knew about that at that time.
Base😢on my experience with any cash value insurance I regretted and I hope the agent explained to me more about the cash value. The agent makes a lot of money.
It’s definitely not a good fit for everyone and you absolutely need to go into it with your eyes wide open. But the benefits can be tremendous for people for whom it’s the right fit.
They structured it incorrectly to make higher commissions and fees… you need to increase the cash value and decrease death benefit but your agent will hate that
@@New-bw4kz definitely need to find a trustworthy agent.
dont trust a whole life or iul agent
@@DavidMcKnightthere aren't any
All loans are tax free, who pays tax on a loan? You pay interest.
On some IULs, insurance companies guarantee to credit back the exact amount that they charge for the loan so it ends up being tax-free and cost-free.
So the really hard part about using IUL's is finding somebody whom you can trust. From what I'm reading, this topic has vultures circling all over. What to do.
Watch some of my other videos. I tell you what to look for.
Dave, I was sold an IUL that I pay a $400 monthly premium on. I already have a $130k Annuity and a $700,00.00 Term policy that will expire when I am 77. ( I am currently 59). I was told in 3 years my money would double and my compound % would compound. Yet when I called the company they said it would take 8 years for me to make 50k !!! Was I given good advice? Or should have I put that $400/mo. to better use. I don't have an IRA and don't want one because seems we may be heading to a digital dollar and the IRAs are going to start charging extra fees to those who don't invest their money in Globalist companies I want no part in!
Thanks! Chris
Go to davidmcknight.com and click on connect with advisor and we can take a look and give you some thoughts. Thanks, Chris.
5:55 It is my understanding that in an IUL, there's a general account and an index account. The former has a guaranteed return, which would create a predictable cash value as show in the chart. The latter is tied to an index (say S&P 500) and cannot be forecast years in advance. How does the chart show a continuous increase of cash value?
Besides, if the death benefit remains the same as shown, does it imply that the policy premium goes up every year as Ramsey said? A whole life premium is much higher at age 60 than at age 20, and probably unaffordable at age 80... I don't see how IUL can modify the mortality rate of the insured.
I’m death benefit option 1 the cost of the annual renewable term insurance goes up every year but if your cash value is growing the amount you would be required to pay for goes down.
@@DavidMcKnight I guess you’re saying that “out of pocket” money goes down, simply because the money needed to cover the ever-increasing premium is taken out of the cash value of the policy. I can see that scenario; however, if the cash value remains the same (bad S&P performance) and the premium keeps going up (insured is aging): how will the chart at 5:55 timemark show a constant, decreasing risk value as time goes by?
Don’t listen to him I opened a IUL 5 years ago and now I’m sitting on 350,000
$350,000 of cash value?
i doubt it.
@@DavidMcKnighthow much can they cash out now !!!
Bravo !
Very good book power of zero.
Thanks!
I currently IUL but feel that my wife and I monthly premiums are a little higher ok high for our budget. Is there a way to change the contributions?
yes you should be able too, you have to talk to the agent to whoever brokered your insurance
Taxes: That's the big question in regards to the future.
never on this earth will you accumulate so much money in the cash value given the fact that the percent of return is no bigger than 2 percent. so clearly your premium wouldn't go down as much as you make it seem, plus how do explain that premiums reduce when you are only getting older and technically much of a bigger risk to the insurance company. you don't know what your talking about.
IUL has a proven track record of 5-7% net of fees over time. Given that, the cost of insurance will fall dramatically relative to cash value in the later years.
Please comment on the fee with IUL.
I have 4 or 5 videos in my channel describing the fees in detail. In most cases lower than a 401(k) over time.
We’ve been watching your CZcams videos regarding Dave Ramsey/cash value life insurance and have been saying the same things for many years. Buy term and invest the difference is what LIRPs do.
Aside from the idea that 12%-8%=4% and that should be enough not accounting for changing market returns over time is the idea that inflation is ACTUALLY 4% historically. Even if you believe the numbers they’ve been feeding us over the years, the last 4 years should be an indication that they’ve been vastly understated.
The big issue we have with his argument/argumentative approach to this is that he claims to do it to preserve hope for the people. Concealing the actual information on how this works from the public seems very similar to government concealing actual inflation numbers. If the general public were aware (and often is because they buy gas, groceries, etc., it’s just that they’re doing and feeling instead of doing the math all the time because it’s “overwhelming”), that could lead to quitting jobs, not paying taxes, eventually civil unrest, etc.-not a good outcome. It seems a better way is to educate people and show them the monster they’re facing so they can do something about it and not realize it when it’s too late, all in an effort to preserve the status quo of his program and “give the people hope”. He does do a lot of good for a lot of people but blanket approaches to every situation aren’t realistic or effective. We can all do better and we’d like to see him do better because he has a large platform, he could do a lot more good than pushing this agenda.
Also, as financial advisors, we appreciate what you’re doing. There is a train coming and people need to step off the tracks.
I appreciate your comment!
Dave Ramsey is right, this is crap. You are still better off buying term life insurance, then investing the difference. There is no scenario, where whole or universal life will leave you better off financially!!!
Thanks for your comment. Maybe research the Ernst & Young study on how paying for your lifestyle out of your cash value life insurance following a down year in the market can as much as double your sustainable withdrawal rate on your stock portfolio.
@@DavidMcKnight, so who paid for the Ernst & Young study? I bet it was insurance companies. The only way the math work in favor of Universal life is when you have too many bonds in your portfolio. If you do 100% stocks, like and S&P 500 index fund that reinvests dividends, it's not even close what you would have in 20 or more years.
@@beachbum77762 So your strategy calls for 100% stocks in retirement? 60/40 portfolio is out the window? The E&Y study calls for paying for your lifestyle out of your cash value in the years following a down year in your portfolio. This gives you a chance to let your portfolio recover before you take further distributions. The math on this is indisputable and has been vindicated by millions of Monte Carlo scenarios, not just the E&Y study. That you're not familiar with the approach doesn't invalidate it.
The problem is what could you do with that Cash Value that you put into the policy. If you are a risk adverse person this may be a great way to save safely. If you are are a investor you have all that money tied up with very little gain over time.
Should be seen as a bond replacement. 5 to 7% net of fees over time. If you don't want bond alternatives as part of your portfolio, and you don't have a need for volatility mitigation in retirement, then maybe put your money elsewhere.
excellent video, i disagree with your two comments on wl,
1.wl tell u how much you will have in cash value and how much for premium, look at the projection tables it's not a formula but it's dolllar accurate
2. wl on death give you the db exactly like iul or is not different in that matter, do dave , just lie not conflate with wl.
Thanks for your comment Nir. I didn’t get your second point.
@@DavidMcKnight I meant to say that the second time you mention that Dave conflicted IUL with WL when he talked about death situation , and that IUl take your money and pay only the DB, the way you said it sound like he basically meant WL and not IUl, and that in IUL DB include the CV, i.e when you get the DB you get the CV and the DB you paid for (which is DB -CV) - what I was trying to say is that in WL its the same approach you get DB+CV - where the DB you paid for is DB-CV
@@Unicorn-Black got it. Thanks for clarifying.
Whole life and IUL are such waste of time if I have to watch out and predict landmine like rules to get into and having such a low return on cash value. Jeez, I will just get a term life instead 😅
If you don’t like rules definitely don’t invest in any government sponsored plans.
@@DavidMcKnight What are you referring to? Government sponsors insurance plans?
@@Xinerius no, government sponsored retirement plans. If you think insurance plans are problematic because of rules, then you should have just as many problems with traditional retirement t plans which also have complicated rules. Try studying the 5-year rule for Roth Conversions.
What Dave Ramsey doesn’t tell either is that most Americans do not invest the rest of their money. They buy a term and then SPEND the rest. After the term expires, what happens? Premiums increase and face value decreases. If you ask me, a term is more expensive than a whole life and a UL over time.
Does it make for a older person at the age of 65 to start an IUL to supplement his retirement income?
You’re very close to being too late in the game. It would depend on your health and how soon you need the money.
@@DavidMcKnight non-smoker in relatively good health and probably need money at 70
@@luciusang Yes, probably too late in the game. You really need to let the money marinate for at least 10 years before drawing the money.
@@davidmcknight8201 Thanks David. I almost jump into one quote
You can get certain cash surrendered amount same year depending on the amount you contributed as premium.
how much is the ave admin fee? and if an index let us say went up by 11% does the IUL really would honor that?
If index went up to 11% the iul will probably give u a 6 or 7% or even less. This is the part I don't like the concept of insurance controlling the perks in it.
@@olababs2048 thanks for the response, kinda figured out that you'll be tied for decades with this insurance , that's the fact i don't like
@@tadrod2323 If the cap rate on my Pacific Life policy is 10% and the S&P 500 goes up at least 10%, then they give me 24.4% dividends per year thanks to the multiplier. Costs matter in the absence of value. However, I find 24.4% dividends to more than cover the costs associated with an IUL.
I'm 45. I've been paying $500/month for the past 10 years into an IUL ($550k policy). Towards the end of this video you say that people shouldn't be spending hundreds of dollars per month. Now I'm confused. Am I doing something wrong?
I was referencing “financially beleaguered” Americans, ie, those drowning in debt.
@RusllTanner please do mind sharing how much cash value you have grown in the last 10years @500/month IUL policy
@RussellTanner
whats the cash value now? (if u r OK to share).
$500 per month (since Jan 2023) into S&P Index would have been $164K now (with dividends reinvested).
Your cash value is around $90K now?
If it structure probably????? If if.
Yes, sadly most advisors don’t.
DR is actually right on this, especially when you start taking policy loans in retirement. IUL is rarely sold with opt a death benefit, it lowers the MEC limit. And index loans make the illusion sexy because it illustrates positive loan arbitrage…but it adds a tremendous amount of risk of policy lapse.
I had my daughter Thursday -monday 3 weeks outta the month and Thursday night the other week. I worked around my daughter who went to school an hour away. I worked around that schedule. I had some good years. Should have sued that first doctor for not getting my bicep tendon fixed properly. I have had the back pain for years. Just need a little direction from people with simi white collar background or mindset . Bodies brake down, athletes have shorter careers than they used to. Everyone needs guidance
Just like everywhere else, why are IUL accompanies not suing Dave Ramsey for “misrepresentation “ or “defamation”?
There’s a lot of misrepresentation going on out there.
Because Dave Ramsey is right
Dave Ramsey is right when its an improperly structured iul. He is wrong in not explaining how it can be good if structured correctly.
I have a transamerica policy i can call and lower my death benifit and increase it at any time correct?
You can lower it whenever you want but to increase it you'd have to go through underwriting again.
Never believe anyone that wants you to buy something
You never buy things from people that are trying to sell them to you? Cars? Houses? Groceries?
How would I know if I’m over paying for my UIL policy ? I have a sales person trying to sell me this policy and recommends me to put $350 a month into this policy and even recommended me to not invest. To aggressive in my 401k which I JUST opened up a week ago . And I’m debating if I should get this policy and. Dontt know how to spread my cards correctly
It's always good to have balance between your tax-free streams of income and if the salesperson is recommending you forgo a different tax-free stream of income like a Roth 401(k), he may not be out for your best interest.
@@davidmcknight8201 thank you!
I hear a lot of “IF” statements in your video. Sounds like the small fine print in the commercials that you can’t read “If structured property” “If balance correctly with other investments revenues” If If If … sounds like the selling agent is getting paid
Nope just like any other financial tool in your portfolio that needs to be wielded judiciously.
@@DavidMcKnight wielded judiciously 🤣
@@Midwestplayers i don’t think laughing emojis add anything constructive to the conversation. Do you want to engage the topic in a meaningful way?
@@DavidMcKnight No you proved my point
@@Midwestplayers more glib responses.
Thank you for this! Primerica agents can’t seem to leave the 80’s behind.
😀
Haha. Dave Ramsey is a funny guy but makes good money doing it. I am an accountant with 2 graduate degrees that likes minimalism and have never listened to or read Ramsey. To each his own. Thanks for clarifying .
You’re welcome.
Why give full control to the carrier, and you’re not invested in the market at all. It’s all disclosed in the illustration. IUL is crap. The SEC needs to get rid of these asap.
Who cares? If you can get 5 to 7 % net of fees and it’s more productive than your bond portfolio without the risk, why wouldn’t you want that?
Bond portfolio? Lol. Yeah, why would I do that if the market is up 7 out of 10 years. Most of these never produce 5-7%, which is why insurance agents needed to reduce the hypothetical performance. Plus you add in the caps, the spreads, and remove the “you can’t lose” other the costs of the policy in negative years, and you have a garbage product.
@@chargers9221you sound like a Dave Ramsey acolyte. You plan on going 100% stock for the rest of your life?
@@DavidMcKnightabsolutely!
@@chargers9221will you be taking 8% distributions during those 3 out of 10 down years in retirement?
I wait for the day someone will actually show and explain a “properly structured” cash value policy! Lol