Whole Life Can Be Flexible Too

So what we’re going to look at here is the exact same policy you can see in year one. It is three hundred sixty-one thousand dollar death benefit like before but it does increase a little more dramatically and that’s mainly because we’re funding it to the maximum allowable limit every single year for the first seven years. And you’ll notice this little footnote over here between year 7 and 8.

And this blue box we see right here where the death benefit actually goes down substantially. What’s happening is we’re electing the reduced paid-up option which is allowable with any Whole Life policy. And even though these Whole Life policies are supposed to be paid until age 100 or 99 or whatever it is.

What you can do in any year is you can say, “you know what I don’t want to pay time 99 or 100″. But I did pay a little more in sooner. And so just tell me how much Whole Life I have contractually paid up right now and then I don’t want any more mortality drag or mortality charges coming out of this thing.

I just want maximum cash value growth, which by the way when you roll your dividends back into the policy and don’t take them as income they buy paid-up additions and then the death benefit starts to grow from there. So you can see in this between year 7 and 8 you take a pretty substantial step back but then it starts growing dramatically because all of these dividends are being rolled back into the policy.

The other thing that we can see is between the relationship between the changing cash value and the last year’s total cash value. It’s a really nice ratio.

So this is how to get the best performance so if I just divide nine hundred nine thousand one hundred ninety-nine dollars divided by the previous year’s cash value.

You can see that we’re getting over 6 percent. Six point one percent. About when we just let the dividends roll back into the policy so that’s a pretty nice return. And the other thing that you should notice earlier on in the policy is the changing cash value. The increases are much more dramatic.

And again that’s mainly because we’ve just maxed funding this thing every year. So you could see the year two growth is a little bit better and that’s because you’re max funding. But by the year three you put in 20000, you’re getting more substantial increases. And every year thereafter as well.

So I love to say that more and sooner is better. It definitely goes for these policies and you don’t have to stop paying in year seven. This is just kind of the minimum funded scenario that’s optimal for Whole Life we find seven years to be optimal. Truth be told if you wanted to stop paying in year five, you probably could. And you couldn’t do a reduced paid up yet.

You can select this option in year five because you may turn the policy into a med but you could use your dividends to pay that base premium of 5745. I believe it was. And if you’re a little light it’ll sacrifice some of your PUAs to go ahead and subsidize this premium.

It does put a little drag on the overall performance but it’s not too penal if you just had to stop funding after 5. So let’s see what happens when we want to pay for this policy even longer than the seven years so if we look at this we can see the same policy.

Right?

Only we’re not dropping the death benefit, right? There are no footnotes and we do run into a new med test. You actually get a new med test every seven years and it looks like we can pay 20000 for one more year but then every year thereafter we’re somewhat limited into how much we can put into the policy.

But by doing so we get very robust increases in cash value and the total cash value and total death benefit does balloon up to be pretty nice numbers. So let’s just go back and review and see the different scenarios, let me get my eraser here. Let’s erase all this junk.

So if we just look at year 20, this person started at age 50 and there we’re just looking at age 70, so if you max fund for the first looks like eight years well you’re max funding every year but you do have to back off the premiums you would have put in 284000.

I don’t like that box, let’s do it again. Let’s hit the eraser here. Come on. So you would have put in 284 thousand. See this is cumulative of premium outlay and total cash value. And at the end of year twenty, you have five hundred twenty-five thousand in cash value 912000 of death benefit.

If we just back it down to the seven-year scenario when we reduce paid-up let’s erase all this junk and see what we end up with sorry about this.

So in the reduced paid-up scenario if we would have paid 140 we have 320 and 517000 of death benefit. So still pretty nice numbers for a limited pay scenario that we manufacture just by electing the reduce paid-up option and even in the flexible scenario where this person paid for 10 years, let’s hit our eraser get rid of this junk or this person paid for 10 years but then they couldn’t pay any longer they opted not to, even if they didn’t reduce the death benefit.

Right?

So there’s no reduced paid-up option. But even without doing that you can see they end up with 440000 of death benefit from only putting in 114. And there are still 2 211000 in there so I show clients this, you know we hope that we can fund it longer and harder.

But even if you can’t for an asset that is guaranteed to go up every year and not go down and to be liquid even before age 59 and a half and tax efficient and protect your family, this particular policy has chronic illness provisions to where you could tap into some of the death benefit even if you weren’t dead if you had a scenario where you would need long-term care.

This is still pretty good even if you had to light fund it. Hopefully, you can do some of the more optimal scenarios but there is a range of flexibility and that’s what I wanted to show you in this video.

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