Whole Life for the 99%

Are you among the 99%, struggling to get ends to meet or at least to wave to one another? So many people are in a position where they feel that their lifestyle and expenses consume all of their earnings. That belief is at the center of why many people don’t save money. There is a whole school of research called “behavioral economics”, that says a human being will consume what it earns or all that comes into his or her economy. Because of that, it becomes incumbent upon us to develop good savings habits and the discipline to save first and then spend what’s left on our expenses, lifestyles, etc.

I advise my clients, no matter how challenging their situation, to allocate from 15% to 20% of their gross income to some place that is outside of immediate reach. This keeps it segregated from the money that would be utilized for personal expenses like the mortgage, the electric bill, the car payments, the gas, the groceries, etc. When people do this, they often find that their lifestyle fits into the 80% that they have left. Good discipline, savings and smart habits can help anyone start to be successful at saving .

It is really an important issue for people to try and develop a system. Money should immediately go right out of your checking account on a given day every month to some other place, another bank account, a retirement account, savings, or cash value life insurance. It has to be done systematically so that over time money will accumulate in that account. If you find yourself short and can’t pay your bills in a given month, it’s not a problem because you can take some of the money that you have saved to cover your needs. The plan, however, is that your lifestyle fits into that 80%, allowing your savings to grow so you can accumulate wealth.

Cash value life insurance is a smart choice, no matter your income level. Why? Because  it forces you to save money, in fact, you are billed to save money. The question, of course, is “Where am I going to get the premium for a cash value life insurance policy?” Cash value life insurance is much more expensive than term life insurance but at the same time, it creates value where term life only provides protection.

When we talk about cash value life insurance, people say, “It’s expensive.”   Let’s look at the cost of a $250,000 participating whole life insurance policy. Premiums would be about $6,700 a year for a 40 or 45 year old male. You have to come up with the money, true, but if we look at it as savings of that same level, you wouldn’t say, “That’s expensive savings.”  You would say “I’m saving $6,700.”

If we compare saving that money in a bank account versus saving that money through cash value participating whole life insurance, what you will find is that you will have significantly more benefits inside the life insurance policy over a period of time:

• Creditor protection depending on the state you live in
• Tax deferred growth (no tax on the growth)
• Different pools of money inside the insurance contract
• Cash value
• Death benefit value
• Long-term care benefit (depending on the type of policy)

So then the questions become, “Is that a cost or is it a savings? Is it a smart place to put your money?” I submit to you that it is a very smart place to put your money. A place where the consumer gains so many additional features and benefits including protection against disability creditors, lawsuit taxes, creates estate liquidity, etc. In that context, is it expensive? I would say that the opposite is expensive. Not saving that $6,700, not developing the discipline to put aside money, is a costly decision that has placed too many people in a position where they will have to work the rest of their lives.

Alright, so you can see the wisdom of a whole life policy, but you are one of the 99% and just getting your bills paid every month. The savings angle makes a lot of sense, but how can you come up with a $6,700 premium for a whole life insurance policy?

Whole Life Insurance isn’t just for multi-millionaires. Look at a smaller policy with a premium that you can afford, like $100, $200, or $300 a month. Your life insurance benefit might be smaller, but you would still benefit from all the advantages of this type of policy. The policy’s cash value and death benefit would begin to grow regardless of how small it started out as. That’s basically how it would work. The younger you are, the more years you have to save. The longer you save, the more the cash and other values will grow.

Whole life or permanent Life Insurance has stood the test of time. It has been around for a hundred years. Products that fail don’t stay around that long. In America, in the 50’s, 60’s and 70’s this was a very common place for people to save money, but then the financial markets, mutual funds, stocks, bonds, and 401K’s became the rage. These products create the illusion that people are going to get a great rate of return, but as we found out, that is not necessarily the case. A lot of people lost a lot of money over time in the market.

Whole Life Insurance for the 99%.  It works.

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