Cash Out My Whole Life Policy?
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These whole life salesmen need to be in prison.
You wouldnât be saying that if they paid $10k a year for it and he died 15 years ago and received the $600k. This is how insurance works.
Only time Dave ever said âno, you know what your doing. â
I was literally pulling my hair out thinking No Dave you're not taking into consideration the 200k plus 10k yearly investment would get you more than 400k in just a few years lol
Yea, I didn't get that either. He's dividing up the face value of 400K into future years but didn't factor in that they could have the 200K+ today. Or, I am missing something.Oh, I just got to @6:25 and the caller makes that clear.
Same! My brain was going in circles trying to figure out how I was wrong lol
This shows Dave's ethics he can admit to mistakes
Youâre forgetting the 400k death benefit is tax free. Getting your investment account to 400k to be taxed upon withdrawal is not the same
AgreedâŠshe (and her financial planner) need to do a more detailed (2nd order, or 3rd order if you include inflation and purchasing power) analyses.
These sound like good people. Its just, its real hard out there in the world.
They also don't need life insurance if you have no kids at home and have a good retirement
This is the only time Iâve ever seen a Caller stump Dave. I guess age does come with smarts lol đđœ
Policy purchased 1997. Supposed policy maturation date of 2062 at age 102? Can that even be right?
You have to look at the lost opportunity of the money too. Both the 240 K and the cash flow of 10 k a year.
Have to consider taxes on the growth too⊠the life insurance death benefit is tax free
Have to consider taxes on the growth too⊠the life insurance death benefit is tax free
Daveâs reaction to 666k at 2:13 đ
I said the same thing đ
Financial "Experts" always like to conveniently ignore the reality of inflation like they can "just do math". LIke, 30 years ago we could buy houses for what cars now cost, and houses have gone 5x in price. Inflation rates have shown to be logarithmic in nature across all currencies/nations. 400k in 30 years will at best only be equivalent to about 80k or less.
I hate this... because you're correct
Good point, but since hyperinflation will definitely happen within the next decade and likely sooner (this year or next) rather than later, the $400k will essentially be worthless. Cash out now and exchange the fiat cash value for some silver and mostly gold. Hide it well.
Bingo. One needs to think about âpurchasing powerâ as inflation & cost of living increases (e.g., CPI) are a tax on income. Plus, always assume taxes will increase and the Governmentâs numbers for CPI are bulls**t.
I'd take it out, saves me 10k per year and invest the rest in the S&P500
Be careful talk to your agent / company that issued policy - if you cash in the policy there are tax consequences- you may want to keep policy and withdraw premiums you have paid - and you can invest that money- also see when it will be paid up
Government always has to get their cut.. Smh. We don't have a tax problem in this country we have a SPENDING problem
people hate what they don't understand
Her only problem was not canceling maybe 6 years ago. She had kids and only way to get life insurance, so she had no choice.
Exactly and cause of her husband's illness she had to go with whole life but now she has a wad of cash to use as it built up 220k or whatever it was and she still has alot of death benefit
The problem was opening the policy
What about tax implication?
Wow, Dave admitted that he was wrong. This is like sun rising from the west.
I know that exact feeling of the sun rising from the wrong direction.
Haha
Just had an insurance guy try to sell us whole life (they've renamed it to may it sound cooler by the way) on our kids. Guaranteed insurability! No underwriting! ... Those were his big selling points as to why we should pay for 20 years for a policy that would grow stupid slowly over time. After watching Dave so much I decided to be politely interested, take the papers to "look them over" and we're going to get small term life policies on the kids when things settle down around here. My dad just passed away, that's the only reason we even sat down and talked to the insurance guy because we're trying to get a mess sorted out. Have a will. If you can do it, have a trust! Then your kids probably won't have to go through probate court, hire a lawyer, and spend countless hours on the phone trying to sort everything out. And have a folder with all your debts, all your bills, all your accounts, and all your investments. Have it organized and keep it updated. Dad did the old "We can worry about that later," right up until there was no time left. And in the middle of our grief and pain we have to get this all figured out. It sucks.
Sorry to hear that. My grandpa was the same way and now we have to pay thousands of dollars to lawyers and such to get the properties in Mexico. Sucks. Oh well though.. wish you the best
condolences đ
Putting another name on a title means when one person passes away, the other becomes the owner of the property, as someone who passes away can't own property. Sort of bypasses a will, and possibly probate. Many people say they should've bought insurance when they were younger, you can also purchase your final plan insurance. It locks the current price in, there is an insurance component, and certain parts can be changed, if wanted.
I do not understand why he says the cash value would be pulled from the death benefit. Cash value should equal the death benefit at maturity ie 100 or 121. The insurance company does not keep the cash value, it is a part of the death benefit that goes to the beneficiaries, potentially tax free (depending on estate net worth which she had said she is below the limits, but I would ask a tax expert). Depending on the policy, the equity in themselves should grow faster now than before. Just like a mortgage, the first years mortgage payments goes towards the principle more than the interest or premiums go towards the mortality credits vs the cash value growth. Unlike a mortgage, the Life Insurance policy can be overfunded to be more of an asset.
A properly funded Life Insurance policy should have an increasing death benefit with out increasing the cost.
Yes Ramsey misrepresents what cash value is, maybe because he doesnât full understand himself. Also, think you meant that during the first years mortgage payments go towards interest more than principle (not vice versa)
I love her!! Smart lady.
Whole life policies often have a point at which they are paid in full. Dave never addressed that. At least he admitted his huge omission of the earnings on investing . That's a first!
Some of these not-so-good ones don't because there's no dividend, there's just a guaranteed rate and it's normally not very good. My parents have a policy similar to this with Nationwide, there's no option to go "paid up"
There is the cost of insurance,
Similar to the cost of gas, per gallon.
Cost of insurance is per $1k.
As we get older, the cost of insurance goes up.
Even though it's "paid up", it will reach a point where they will take money from the cash value to keep it in force.
Dave, all it takes to figure out when the money will reach $660K is a compound interest calculator, which you can pull up on your computer, or Rachel or a production assistant can do it.
I respectfully disagree.
A properly designed whole life insurance policy allows for the dividend to purchase additional paid up death benefit, which increases the death benefit.
Aside from the dividend election, the callerâs premium payments of $10,000 will purchase additional death benefit each and every year.
The simple calculation of reaching $660,000 will become a harder and harder to target to catch because the policy exponentially gains efficiency each year it is in-force.
Her policy is a tier 1 asset and has a wonderful asset on the familyâs balance sheet.
She could take loans against the cash value, TAX FREE, in their retirement years and still leave their family some nice death benefit when her husband graduates!
Iâll buy the policy from them before they surrender it. I love it.
That's around $30 per day.
whole life is garbage too many people fall for that pipe dream. the rate of return of the cash value is nothing
I think if the couple was making closer to 130 k a year or more, this would have not been a difcult decision, the problem is that 10% of their income is going to this stupid insurance which is just too much
Policy loan has tax advantage...if you understand the tax advantage, you cannot be fooled by buy term and invest in difference.
Any loan is tax free. Giving away your money with only an option to borrow is a stupid plan.
Good call, not the âtypicalâ reply.
Beans and Rice, Rice and Beans...
9 years at a more conservative 8% investing the $834 per month they already are. That gets them to nearly exactly $666,000
^^^ This guy gets it. ^^^
What's the tax impact?
more simple questions that need to be asked like are there dividends that could be applied to reduce premium ? Does the death benefit increase over time ? Whatâs the increase in cash value every year . Iâm sure when all questions are answered it would make sense to keep .
Only reason to keep it is if she can't get a term policy.
@@astroman30 if I remember correctly the husbands health changed quite a bit after policy was issued Iâve dealt with 10âs of thousands of people on life insurance this isnât a situation where a policy gets cashed in unless people needed the cash urgently
The husband canât qualify for term or any kind of life coverage now . Ramsey is very successful at what he does but not correct in this situation - the conversation term vs WL isnât applicable in this situation theyâre deep in there Whole Life policy sound like it was paying for itself
@@jonathangoldstein7246 sounds like they past the point of no return. Sorry they got scammed into buying this garbage in the first place. When healthy, he couldâve bought term at a fraction of the cost and have a bigger death benefit to secure familyâs future
Why cash it out?
She just wants to cash out on her investment. That husband is like a walking mutual fund. Poor guys gonna die working. Would be nice for her to work and make more and for him to retire and enjoy life.
Whole life policies are criminal. If she invested that in the S&P 500 she would have 1.135 million. The cash value is pretty much what she put in.
What you are missing is that if the guy would have died earlier, she would have received the death benefit immediately. Tax free.
Whole life insurance isn't an investment. It's insurance with a cash value feature. It's not supposed to compete with index funds.
@@jevs402 Iâm missing nothing. Whole life insurance policies are significantly more expensive than term. He could have purchased a term policy when he was young for $30 a month with a benefit of 500k. Invested the difference and if he died she would have got the 500k insurance and also had a million dollars in an index fund.
The life insurance agent didnât designed the policy properly. Iâm a financial advisor and I always recommend a well designed custom whole life. It also will depend the company youâre using for.
@@ricardoalcides7184 you always recommend them because you make a lot off them. Itâs a garbage product. Term is all you should be recommending and investing the rest index or low cost managed funds like Vanguard. My mom had a whole life policy for $75 a month through Northwestern Mutual. She invested in it for over 35 years and had a death benefit of around 25k with a cash value barely more than she put in. I think I figured out she maybe got a 1.5% return annually.
Where should one invest a large life insurance payout?.
My financial advisor who is really primerica salesman wants me to put a big chunk of it in a annuity or bonds.
I already have $400-k in roths, a nd Iraâs with $200-k in a high yield savings, A $210-k life insurance payout policy to my kids.
I would like to out this payout somewhere where I have total control of it and can witthdraw without penalty and access it easily if I want to buy real estate or something.
Of course Id like to invest some of jt but Iâm looking at properties.
Is another high yield savings a good option, possibly some cds to break up the kitty somI can have $250-k insured by the FDIC and the rest in Cdâs?
I hate the idea of an annuity and your total non control of your money.
Yeah problem is he is uninsurable. Humble of Dave to admit he is wrong. I think the reason he didn't jump at it right away which he ALWAYS does to cash out whole life is because it sounds like he is uninsurable so he can't just replace it with some term as most people could. It is kinda close because she figures he only has probably 10 years left but if I was in there situation I would probably cash out the money and go take that trip of a lifetime you have planned in your mind, sure maybe you are blowing $20k but why not, they would have over $1M still, their house is paid off and they are out of debt so not a lot of bills.
Why cash it out. Instead take a policy loan against your cash value and still keep paying your premiums and enjoy that vacation you've always wanted. Then at the time of his death maybe sooner than he thinks because of family history; the insurance payout is going to be $660K minus any unpaid policy loans against the cash value.
Basically pay 10k per year and the installment on that loan. May hurt worse. Taking on more loans is never gonna ease the situation..
You donât have to pay policy loans back
At the end, both Dave and the caller agreed that taking the $240k and investing the $10k/yr was the way to go.
He didnât consider the other option which is to find out what the life insurance face amount would be if they took a reduced paid up option.
That life policy has been based on a time when interest rates were higher.
Plus, her husband is no longer insurable.
And everyone diesâŠ.
And the taxes on the above basis, doesn't mean it was wrong advice, just more variables to consider.
Whatâs a reduced paid up option mean
I still don't understand these insurance policies! So confusing!
Whole life is basically a savings account, except it costs 15 times more than term life.
Its better to get term life and save money. Life insurance is not an investment.
@@joebidenisyourpresidentget2481 Nothing like a savings account.
Don't you have to pay it back on what you borrowed on it?
If I withdraw from my savings, I don't have to pay it back.
They do that on purpose. Thereâs so much math that goes into these polices that once itâs broken down, they are never in favour of the client
Iâd sell it and invest the current cost theyâre paying for it as well. Going to end up being a lot more.
Is it going to be a lot after taxes? The death benefit is tax free.
Ramsey team: posts about cashing out whole life
Me, who has no whole life: interesting
That must be with a non mutual company, in 25 years of 10K in premium she should have north of 500K in cash and the death benefit should be around $1M
Exactly
Agreed
Correct,
A good mutual company would have had a significantly higher face value and cash value at this point. Cash values are never great in WL policies, but this is significantly bad
An 11% return on investment. Dave?!... That's egregious.
If caller has an advisor and insurance person looking out for their best interest, they all sit down together. // Note 600k of death benefit only Growing to 666 in that many years. Doesn't sound like a great policy mix... Probably should have been suspicious of this up front.
I like cash value for flexibility when markets suck the wind out of investments during retirement/ btw: cash value does not equal surrender value
I don't get what he means they only receive 400k+ because the life insurance keeps the 240k. You still would get paid the 600+ policy in the event of his death, you just don't get the cash value. It seems more you don't get 800k+, by not getting the cash value.
You mean, the insurance company keeps the cash value? What a scam.
She would get the $666K, but not also the cash value. Later in the policy, the cost of insurance accounts for all the built up cash value (that the insurance company keeps) so your really only paying for $400K in insurance. I say in this case - definitely keep the policy and do not cash it out.
FV of 240K, 10K pmt, at 10% per year gets to 666K in 14.5 years.
Colby also what Dave is an idiot is that $666k death benefit is income tax free! So they need to grow that $240k + $10k/yr to $1million so after tax they would have $666k.
@@famousamos1 If they donât already they could use the cash to fund a roth IRA. With catch up they could get $150K-$200K in that same time frame. LTGC in a brokerage account is 20%, so it isnât as high as $1M. If they can take advantage of the roth itâs more like $625K taxable. At $230K PV and $2,500pmt thatâs still only 13 years.
Dave what are you talking about
So by the end the question is, will he live at least 5 - 7 more years?
Who knows?
They must be rich. I pay $500 a year on mine and think it's too much
Reduce pay up the policy, take a policy loan for $250k, take the 10k of premium that you were putting in and invest it.. that makes the most sense. You get everything..
-$250k in hand
-Still have about $250k of DB
-No more premium due
-Invest the 10k a year
Anything other than this is bad advice⊠Like REALLY bad advice
Missing another key variable. Youâre forgetting the 400k on the life insurance is tax free. Getting your investment account to 400k to be taxed upon withdrawal is not the same.
I'd rather pay taxes on something that I own than give it away with only an option to borrow.
@@astroman30 Dave Ramsey gives a misrepresentation of life insurance when it comes to cash value. Yes you can take out a loan against the cash value, but you can also take normal distributions. Itâs like accessing your death benefit early, lowers it accordingly.
@@Cdix Pay an insurance company fees/interest to borrow/withdraw MY OWN MONEY, and you think this is a good idea?
@@astroman30 your money grows just how an investment account grows, dingus. When you withdraw from a brokerage account your withdrawing your own money too
@@Cdix What do you mean, "your money?" If it were "my money," why do I need to pay to BORROW against it? Why is it when I die, the insurance company KEEPS "my money?" I'll wait for your answer.
This woman contributed 10k a year for 27 years. With compound interest at an 8% rate, she would've had 950k. Holy fucking shit.
A great example of why whole of life is a horrible product. She has to roll the dice here. If she had the cash value in investments since 1997, it's going to be worth a lot more than the current face value.
First time I've heard Dave put the mathematics ahead of the ideology.
You can usually back up the ideology with mathematics.
Do not cash out Whole Life cash value, take out a policy loan instead.
It is called an "& asset" for a reason.
Cursed number
I am of the opinion that that a young person with spouse + children is better off with term, preferably employer + supplement and investing. for equality, do the difference between term and whole life. More than likely, the term life supplement can be cancelled as person gets older, before it gets expensive
Yes!
I'm surprised astroman hasn't comment on this video yet.
Anyone notice how many times millionaires call this show.
More money, more problems I guess
Seems you wonât need Daveâs advise on what to do with a million dollars if you were able to make it on your own in the 1st place.
poor people dont think about their finances in such a way, estate planning, etc.
If they had invested 10k a year from the beginning they would be better off.
They hedged against the possibility of him passing away as early as 97. They held on to the policy a few too many years but I understand why they did it at the beginning.
This is clearly a great policy for this family, and a prime example of the power (both financial and emotional) that a good whole life insurance policy can bring. Iâm glad Dave decided to listen here first before making a blanket statement to cancel an in force whole life policy (which Iâve seen him do before).
@@dakotadak100 yea I saw that after I posted this⊠I got tired of watching him try to stumble through bad math. Should have watched the whole thing.
@@dakotadak100 yea I saw that after I posted this⊠I got tired of watching him try to stumble through bad math. Should have watched the whole thing.
Tell me you sell whole life insurance without telling me...
Don't give up the whole life policy, it is an asset and possible you are now un-insurable. Whole life will always be there for you and your family, great product!! 11% returns in stock market are no guarantee.
Trash value insurance is a scam. The premiums are 20 times higher than term and they keep your cash value.
Why not cash out and keep the policy? Also, should she not consider an investment?
wow if she had just put that in to something else and used term insurance..what a waste.
this actually was a great call, good information=)
Cash out and invest it all in FTX, or bet it all on Red..
Enron, World Comm, Eastern airlines or maybe Nortel. All great beats.
Yes, cash it in and get dividends
Rachael is funny she said "you could take his job, I'm just kidding" đđ
No that was her being low key catty.
Not the 666 upon death đąđ
no buy an iul and stop acting like term is for every circumstance dave ramsey
IULs are garbage with high fees/commissions and capped gains.
Finally he admitted heâs wrong. đ
About...?
People at higher risk of death need insurance more.
$666k?
Oh boy. đ
That is weird, really weird
âïžđ
This situation is not as simple as u all r saying. Consideration needs to given as to what type of policy? Does it pay dividends? Can the duo e used to pay the premium etc etc.
Can he make it 10 years?
You never know. So I would just keep it and not cash it in.
@Jimmy, your advice won't make it 10 seconds
He forgot about the gains she would have investing the $240k cash value.
That's only 24k.
@@jimmymcgill6778 Nope, your math is wrong. Again you fail.
11% return on investment bullspit and as we all know the market never goes down plus taxes cut the crap dave
Yet, I'd rather pay taxes on something I own than give it away with only an option to borrow.
Itâs not genetic itâs their diet
Probably both, donât ya think?
@@gfcardi I believe in EpigeneticsâŠ.the death of the genetic theory. A great book by Dr Joel Wallach. He determined there were no genetically transmitted diseases
Oh for goodness sakes just cash it out
WHy would they keep 240k? That's the amount that she paid. So why wouldn't she get the who 666k?
$666k is the death benefit. That is the amount she would get when he dies, if the policy is still in place when he dies.
$240 is the amount they have paid in (24 years * $10k / year). If they cash out the policy before he dies, they get back what they put in.
@TfossS ...thx for the breakdown
@@tfosss8775 I'm not talking about the profit. They are still paying her 666k.
@@jimmymcgill6778 lol the husband has to die!! Then the life insurance pays out $666k death benefit income tax free to the wife. What donât you get?!?!
@@famousamos1 He said when he dies, they will keep 240k.
Or they can simply stop paying the premiumâŠ
He forgot to tell her to sell everything and live and rice and beans
If she were on step one or two you would be right. Some people forget to get intense and as a result seem to stay in debt.
@@brihal6498 come on, brother..... It's a joke
@@achavez78 haha đ đ đ đ€Ł đ I got it
Borrow the 200k from the policy to buy more real-estate and make rentals for income. Do not get rid of it. Don't trust other people (stocks)with your money
I donât like this advice at all. Heâs 62 and has had cancer in the past and health problems and family longevity is against him. When he passes away the beneficiary is going to receive $660K -not $420K. It doesnât matter if $240K has been paid in over 25 years in premiums. The life insurance contract says $660K. -assuming no policy loans have been taken.
Life insurance is not an investment folks because there are no risks. Life insurance has guarantees and safety. I hope she keeps the policy because of the questionable health of her husband. I only wished it was a dividend paying life insurance product with growing death benefit. Doesnât sound like it is.
Wrong, the insurance company keeps it. You do not get both.
@@alinatamashevich3354 Thereâs some confusion here. You are correct youâre not going to get the cash value AND the 660K. The cash value is the surrender value of your policy. When you graduate youâre going to get the contract value of the policy which is 660K minus any unpaid policy loans from your cash value that you have taken out.
@@jimcrowley1709 Well , I listened a 2nd time, she was not really clear (to me) as to what the policy stated. I suspect it had a 600K face (policy) value with a surrender cash value of $ 2xxK. And maybe the policy grew to $666K?
666 lol
Ahh yea, another woman who just can't stop talking about when their husband is going to die...poor guy probably doesn't have it in him anymore to remind his wife that he's sitting right here when you're running the death calculations. Obviously a very humble "Christian" motivational speaker.
Disgusting.
Ummm, he had a brush with cancer and a heart attack resulting in five bypasses. She cannot not talk about it.
@@angelmyers869 I know women like this, she can't not talk about it, it's humiliating for a man.
First đ
Dave didn't consider the crash in 2023 that will leave everyone with just 10% of they have now.
Maybe bad, but probably not that bad