Hall It used to be that if you wanted to find out who owned your mortgage, you could go to the office of your local register of deeds, the final authority on questions of property ownership. But when banks set up their own private registration system to help them bundle and resell mortgages in a whirlwind of securities exchanges, the land offices of record had no hope of keeping up. And when some banks later foreclosed on many of those properties, often cutting corners or worse - creating phony documents - it left register of deeds offices across Wisconsin awash in forged and fraudulent documents.
Bank On Yourself Instead of borrowing money from a bank to buy your next car or other large expense, you borrow it from your life insurance policy. You can pay it back whenever you like. Paid Up Additions The problem with most whole life insurance policies is that it takes forever to get any decent cash value in there.
The IRS limits how much more money you can put in.
Ideally, you fund the policy right up to the MEC line to decrease the amount of underwriting assistant salary metlife insurance it takes until your policy has significant cash value. Another benefit of maximizing Paid Up Additions instead of just getting a bigger policy, is that the agent commission on a PUA is lower than a larger policy, so more of your money goes to work for you, not to mention the required ongoing premiums are lower.
Kind of cool huh. If you kick the bucket during this process, your heirs still get the death benefit minus the loan amount of course. Tax and Asset Protection Benefits Insurance policies have four main tax benefits. First, you can borrow from the policy tax-free.
Third, the death benefit is income tax-free to your heirs. Those of us constantly concerned about being sued see that as a benefit. The Downsides You can understand why at this point people are often pretty excited about this whole concept.
Of course there is. Like with a loaded mutual fund, a small percentage of that money goes toward the costs of the policy and toward the commission of the salesman. Those premiums come due every year, whether you like it or not and without concern for your current financial situation.
Wanted to cut back? This factor alone is the single biggest downside to this idea. This would keep a wise doc from putting a whole lot of money into a policy. But I worry more for the average earner that this idea is sold to.
One new expense and all of a sudden his whole financial system is collapsing around him. Source of Funds You have to take the money from somewhere in order to dump it into a life insurance policy.
Proponents often recommend pulling it out of your K, IRA, house via refinancing or a home equity loan etc. Not exactly the difference between poverty and financial bliss for a doctor. It especially bothers me to see people recommending you stop contributing to a retirement account that provides tax protection, asset protection, and solid returns in order to buy more life insurance, that has nowhere near the same tax benefits, asset protection, or estate planning benefits.
Risking your house to invest in life insurance seems even more stupid.
Takes Time To Get Money Loans from an insurance policy are a bit less liquid than what I think an emergency fund should be. Perhaps if you know a big purchase is coming a few weeks early it could work. Additional Complexity Everywhere else in the financial world additional layers of complexity favor salesmen and the companies they represent.
Why would this be any different? Purpose The books and websites that most push this concept like to talk about buying cars, as if saving up to buy a car vs taking out a car loan is the biggest financial concern in the world. Maybe save up for 3 months if you want a new one. When is the last time you went car shopping?
You still have to make the interest payments each year. My goal is to minimize my fixed expenses, especially the closer I get to retirement. In my opinion the downsides outweigh some significant positives. What do you think? Keep comments professional, avoid profanity, and avoid ad hominem attacks.
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