The Truth About Whole Life Insurance and Why It’s More Than a “Rich Man’s Roth”

I came across an online article by an anonymous blogger who claimed that the only good purpose for whole life insurance was as a rich man’s Roth. He was certain whole life insurance was only for individuals whose high incomes made them ineligible for the tax-saving advantages of a Roth IRA.

That’s actually pretty funny. Why restrict the incredible advantages of whole life insurance—including the tax advantages—only to the wealthy?

Let’s look at how a Roth IRA works and then compare it to a Bank On Yourself-type whole life insurance policy.

How Does a Roth IRA Work?

A Roth Individual Retirement Arrangement (Roth IRA) is an IRS-approved strategy that allows you to invest money you have earned by making contributions to a Roth IRA plan you have set up. You are not allowed to take a tax deduction for your contribution as you are with a traditional IRA. However, none of the money you take from your plan in the future is taxable. As far as the money in your Roth IRA is concerned, you will not be affected by future changes in the tax rate.

How a Roth IRA differs from a traditional IRA

Roth IRAs are quite different from traditional IRAs.

Chart Comparing Key Differences Between Traditional And Roth IRAsWith a traditional IRA, your contributions are tax-deductible. However, when you withdraw money from your traditional IRA—and you must withdraw specific percentages annually, beginning soon after your seventieth birthday—you must pay taxes on everything you withdraw—at whatever the tax rate happens to be at the time.

See the table for a summary of the key differences between a Traditional IRA and a Roth IRA.

Roth IRAs—like all IRAs—are highly regulated

Roth IRAs, like traditional IRAs, come with many government regulations, including limits on contributions. The rules for 2017 say: If you’re a married couple filing jointly and your “Modified Adjusted Gross Income” is less than $186,000, the most you can contribute to a Roth IRA is $5,500, unless you’ve had your 50th birthday. In that case, you can contribute $6,500.

But if your income is greater than $186,000, your limit is lower. And if your income is $194,000 or more, you can’t contribute anything to a Roth (unless you’re converting a traditional IRA to a Roth IRA).

Confusing? That’s just a quick summary of some of the rules limiting contributions. There are other rules, too: When you can withdraw from your Roth IRA without penalty (that depends on a number of factors), whether or not you can borrow from your Roth (you cannot), limits on the “kind” of money you may contribute (only earned income) and so forth.

Some advisors will say, “Hey, if you can’t contribute what you want to your Roth, put your money in whole life insurance. It’s the Rich Man’s Roth IRA.”

The problem is, they’re portraying life insurance as a second choice. Advisors who fully understand the benefits of a supercharged whole life insurance policy realize a Bank On Yourself-type high early cash value whole life insurance policy should be your first choice—even if you’re ultra-rich!

How Whole Life Insurance Is Better Than a Roth IRA

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This anonymous blogger appears to be a financial advisor, based on his reference to his “clients.” But if he is an advisor, he is shockingly ignorant about some critical life insurance basics.

For example, he says, “Whole life insurance is also known as permanent or universal life insurance.”

Whoa! There are two broad types of life insurance: term and permanent. There are three very, very different kinds of permanent life insurance: Whole life, universal life, and variable life.

If you say that whole life insurance is also known as universal life insurance, you are showing your ignorance.

Here’s one very important way whole life insurance and universal life insurance are not the same:

Both whole life insurance policies and universal life insurance policies contain a “cash value” component—that part of the insurance policy where wealth grows. But with a whole life policy, that growth is guaranteed, based on a schedule that is set in stone—and augmented, in some policies, by dividends (which are not guaranteed).

On the other hand, with a universal life policy—even guaranteed universal life—growth of your cash value is not guaranteed. Veteran life insurance advisor Ken Buccico lists two major disadvantages of universal life insurance that do not apply to whole life insurance:

First, this product [universal life insurance] may [might] not have any cash value, unlike alternative permanent [whole] life insurance products.

Second, the greatest disadvantage of guaranteed universal life is that the timeliness of premium payments is critical to maintain the guaranteed level premium. Other [whole life] policies that contain cash value can provide a source within the policy to cover the required premium to maintain the death benefit; however, a missed or late [universal life] premium payment can jeopardize the guaranteed premium feature, resulting in a policy without a guaranteed premium.”

Because our less-than-well-informed advisor doesn’t understand that the cash value growth of a whole life insurance policy is guaranteed—he makes uninformed statements like:

  • “Every scenario I have ever encountered where an individual has been paying on a whole life policy for an extended number of years, what they were told they would have accumulated by that point has never been even close to what they actually have.

    That’s true for universal life, but not true for whole life insurance. In fact, the opposite is true: Because of the non-guaranteed dividends of some whole life policies, those policy owners virtually always have more—usually, significantly more—than they were guaranteed they would have. In fact, many dividend-paying whole life companies have an uninterrupted track record of paying dividends for more than 100 years!”

  • “Illustrations of potential cash value offered by agents are so often unrealistic.”

    Again, true for universal life, but not true for whole life. Whole life cash value growth (not including dividends) is absolutely guaranteed—in writing. All fifty states regularly audit the whole life insurance companies doing business in their state to ensure that the companies have the reserves to back up their guarantees.

    Furthermore, by law, whole life insurance policy illustrations must show projections based on that guaranteed growth. They are also permitted to show the growth you would have if, over the life of the policy, the company paid dividends no higher than they are currently paying.

  • “A whole life policy that is supposed to make you rich in retirement is a terrible idea. You’ll simply be sending good money into the ether and not necessarily seeing the return you could get with other investments.”

    The poor guy’s talking about universal life and doesn’t even know it. While it’s true that with whole life insurance, you’re not seeing the gains you might get with other investments, you’re not seeing any of the losses, either. For that and other reasons, whole life insurance can be a very good investment alternative.

Our friend confuses stock market returns and whole life insurance growth

This blogger says, “If you’re putting money into a whole life policy in the hope that it will mean smooth sailing in your retirement years, then you are wasting your money.”

That’s backwards!

If you’re putting money into the Wall Street Casino in the hopes that it will mean smooth sailing in your retirement years, it means you weren’t paying attention to what the market has done in the last 17 years or so: two crashes of about 50% or more!

Competitive growth, safety, freedom from most government regulation, and the fabulous tax advantages of whole life insurance make it the smart option, hands down.

Wall Street is the sucker’s bet.

The Importance of Good Whole Life Insurance Policy Design

Mary has a sensible 178-horsepower Kia. Larry has an outrageous 650-horsepower Corvette.
If you want to win a drag race, which car should you drive?

Would you say, “It doesn’t really matter. A car is a car is a car?”

Of course not!

And you shouldn’t think for a moment that all whole life insurance policies are the same, either. A book could be written on the ideal whole life insurance policy—one that combines reasonable cost with superlative cash value growth capabilities, and an increasing death benefit.

I wrote that book. It’s my second New York Times best-seller, The Bank On Yourself Revolution. If you don’t have my book, get my free Special Report on the subject here, which comes with a free chapter from my book.

This blogger doesn’t understand the plain, simple facts about whole life insurance!

Just look at how this anonymous blogger messes with the truth:

Blogger: “This whole life enthusiast wants me to wait 35 years until I start seeing my cash value accrue.”

Gosh, is he really saying that with whole life insurance you’ll have little if any cash value for the first 35 years?

As you can plainly see on my website, you can have a whole life insurance policy with solid growth beginning in Year 1!

Our blogger’s 35-year-old male can see cash value in the very first year—and reasonably expect that by year eight or nine, his cash value grows by more than his annual premium, year after year, after year.

To get that kind of return with any other financial product, you’d need an annual return of more than 8% every single year. Are you skeptical of that? The spreadsheet you can download here demonstrates that it takes an annual return (after any fees) of more than 8% for your annual growth to exceed your annual contribution by year nine—something this high early cash value Bank On Yourself-type life insurance policy does.

  • Download the spreadsheet, then enter any amount you wish in the light blue Annual Contribution box.
  • Choose an Annual Rate of Return and enter that amount in the Rate of Return box.
  • Look in the right column, Difference. The first black (positive) number is the first year your annual growth exceeds your annual contribution. The far left column, Year, tells you which year that is.

Blogger: “Commissions for whole life policies can start at 55 percent of the first year’s premiums and can be as high as 100 percent.”

He needs my book. He’ll see how the type of whole life insurance policies recommended by Bank On Yourself Authorized Advisors cut the advisor’s commission by 50-75%—leaving the advisor with just a small portion of the typical whole life insurance commission.

Blogger: One “aspect of whole life insurance that makes personal finance experts twitchy is that illustrations of potential cash value offered by agents are so often unrealistic.”

No, no, no! Learn the difference between universal and variable life insurance on the one hand, and dividend-paying whole life insurance on the other hand.

The Dual Purposes of a Well-Designed Whole Life Insurance Policy

Our friendly but not-so-well-educated blogger also says, “It’s best to uncouple your life insurance needs from your investment needs.”

He doesn’t say why. I guess he just doesn’t like the idea of dual-purpose products.

He wouldn’t buy a radio that’s also an alarm clock. He wouldn’t carry a cell phone that also takes pictures. He wouldn’t want a refrigerator that has a built-in freezer. And he for sure wouldn’t want a refrigerator that has a built-in freezer and an ice maker.

Just like he wouldn’t buy a financial tool that provides for your financial needs both now and later—a whole life insurance policy!

Here’s another myth about whole life insurance that makes me shake my head in bewilderment …

Blogger: “Whole life is dangerous because it is so expensive. It soaks up so much of your cash. You may not have enough money to buy all the coverage you really need. As a result, many people go terribly underinsured, and it’s the family that pays the price. … Most earners should purchase a sufficient term life policy and a modest permanent life insurance policy.”

That’s pretty amazing. After bashing permanent life insurance—even calling it “dangerous”—he says most earners should have some!

Blogger: “Many financial experts recommend that people … buy term insurance and invest the difference between the term premiums and the whole life premiums.

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Don’t get me started! Let’s say his 35-year-old male buys a 30-year term policy and invests the difference between the term policy’s premium and what he would pay for a Bank On Yourself-type policy.

Sure, in the early years, he could—in theory— be investing the difference. But before too many years have passed, he will be selling off his investments to fund his high term policy premiums. That’s because term insurance starts out cheap but ends up extremely expensive.

Over 50 years, he could save about $30,836 in premiums by getting a Bank On Yourself-type policy, instead of buying term insurance.

Besides, “People don’t buy term and invest the difference,” said David F. Babbel, professor at the Wharton School of the University of Pennsylvania and co-author of “Buy Term and Invest the Difference Revisited,” published in the May 2015 issue of Journal of Financial Service Professionals.

“They most likely rent the term, lapse it and spend the difference,” he said.

Bank On Yourself-Type Whole Life Insurance Policies to the Rescue

Bank On Yourself really does give you the best of both worlds:

  • You can access your principal and growth, with no taxes due under current tax law
  • Immediate cash value, with growth that gets better every year
  • Premiums that never increase—even when you’re 100 years old (imagine a term life insurance policy offering that!)
  • A death benefit that grows over time and is income tax-free to your heirs
  • Flexibility and no government restrictions or penalties, compared to Roth IRAs

You can have all the advantages of the so-called “Rich Man’s Roth” (and more!) with a Bank On Yourself whole life insurance policy—even if you’re not rich

Discover for yourself how people of all ages and incomes are enjoying real tax-saving, wealth-generating, free-from-worries benefits from the “Rich Man’s Roth!

To find out more, request a FREE Analysis and Personalized Solution—customized to your specific situation.

When you request a free Analysis, you’ll get a referral to one of only 200 financial advisors in the US and Canada who have met the rigorous training and requirements to be a Bank On Yourself Authorized Advisor. The advisor will look at your overall financial picture to find creative ways you may be able to fund a bigger policy than you thought possible—sooner than you thought possible—sometimes with little or no increase in your out-of-pocket cost.

When you request a FREE Analysis, you will discover:

  • The guaranteed minimum value of your plan on the day you plan to tap into it … and at every point along the way
  • How much income you can count on having during your retirement years
  • How much you could increase your lifetime wealth—just by using a Bank On Yourself plan to pay for major purchases, rather than by financing, leasing, or directly paying cash for them
  • How you can achieve your short-term and long-term financial goals in the shortest time possible
  • Answers to other questions you may have

No two plans are alike. Your policy will be custom tailored to your unique situation, goals and dreams.

Don’t procrastinate! Request your FREE Analysis here now, while it’s fresh in your mind!

Bill Williams’ AHA Moment: How Bank On Yourself Freed Him from 401(k) Loans and Mutual Funds

Bill Williams is an enthusiastic believer in the Bank On Yourself concept because of how it has helped his family financially. He wrote to me several years ago, and I included his letter on page 228 of my 2014 New York Times best-selling book, The Bank On Yourself Revolution:

Thanks for all the good things you are doing, Pamela. I am working with my Bank On Yourself Advisor to set up my third policy, and I am so appreciative of her guidance and expertise. She has been tremendously supportive.

The real “snake oil” is all of the purported advice about savings and investing we have been fed by the “experts” in the past. I get so upset by the advice to invest with before-tax dollars into 401(k)s or 403(b)s.

I’m over sixty years old and know when I turn 70½, I’m going to have to take required withdrawals from my plans and have the added burden of paying taxes on them. After all, the IRS wants to get its hands on the taxes they let me avoid paying all those years.

I wish not only that I had learned about Bank On Yourself earlier, but that the concept could be taught to the masses when they are young enough to get the maximum benefit from it.

Here’s why I say that: I think of all of the purchases I’ve made through the years where Bank On Yourself would have been a much better means to fund them. As an example, my son’s college expenses, which I paid every cent by selling stock and mutual funds and taking a loan from a 401(k).

Needless to say, my son received a great education (to his credit), but dear old dad has nothing to show for it. I had to put money into the stocks, 401(k), and mutual fund, so I had the resources—which could have been so much more powerful in a Bank On Yourself policy! It’s as simple as that. If I had done that, I would now still have the policies, which would have even more value.

I am depleting an IRA to fund my third policy and to help fund my first two Bank On Yourself-type policies. I just hope I live long enough to enjoy all the benefits.

Bill Williams writes again, about Bank On Yourself, tax-free retirement, and dividend-paying whole life insurance

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The Ticking Tax Time-Bomb of Conventional Retirement Plans

One of the biggest selling points of 401(k) and IRA retirement plans is that the money you put into them isn’t taxed right away. Bring out the bubbly to celebrate, right?!

Not so fast.

First of all, some people – hopefully not you! – mistakenly believe money placed into these retirement plans is “tax free.” It isn’t. It is “tax deferred,” meaning that you will pay tax on that money when you withdraw from your retirement plan down the line.

Deferred taxes might sound good, but deferring your taxes is like putting off a visit to the dentist. The problem compounds and will only get worse.

Deferring taxes creates a dangerous potential tax time bomb because you don’t have the answers to two critical questions…

First, what will the tax rates be when you retire? And what will they be 20 or 30 years later?

[Read more…]

The good, bad and the ugly of the new myRA

You’ve probably been hearing about the new “myRA,” a new government-run retirement account that President Obama unveiled at his State of the Union address and plans to create with a stroke of his pen.
Obama State of the Union Address
Its primary purpose is to offer a savings option to the 50% or so of U.S. workers who have no access to employer-sponsored retirement plans and have little saved for retirement.

The appeal is that it “guarantees a decent return with no risk of losing what you put in,” according to Obama.

Sounds okay so far, right?

I did some digging into the details to understand more about how this program will actually work… and to help you sort through the pros and cons of programs like this.

Below I’ve listed the good, the bad, and the ugly about this new program. But really, most of the bad and the ugly points apply to all government-run retirement accounts, including 401(k)’s, 403(b)’s, IRA’s, etc. So if you have one of these plans, I urge you to read this today.

The good…

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Are you putting your retirement savings in prison?

Ted Benna, "Father of the 401(k)"

Ted Benna is known as the “Father of the 401(k).” In the late ‘70’s, he worked as a consultant to business owners whose main agenda was “How can I get the biggest tax break, and give the least to my employees, legally?”

Tax nerd that he was, Benna discovered an obscure part of the tax code – section 401(k). Voila! By 2012, nearly 75% of all company pension plans had disappeared!

What does Mr. Benna say about his beautiful 401(k) baby today?

If I were starting over from scratch today with what we know, I’d blow up the existing structure and start over!” 1

Uh oh.

Per the US Senate Committee on Health, Education, Labor, & Pensions: “After a lifetime of hard work, many seniors will find themselves forced to choose between putting food on the table and buying their medication.” The U.S. Census Bureau says the average value of 401(k) accounts of pre-retirees between 55 and 64 is only $170,645; the average value of their IRAs is only $147,345. And half of all those close to retirement age have less than $50,000 in these plans.

Something went horribly wrong. Actually, several things went horribly wrong, not only with 401(k)’s but also their kissing cousins: IRA’s, Roth Plans, 403(b)’s, SEP-IRA’s and so on.

And the problems with these government-controlled plans are in these five key areas:
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How will these 3 financial surprises affect you?

There have been three recent surprising revelations I urge you to pay close attention to, if you have any money invested in the stock market and/or you have an IRA, 401(k) or other government qualified retirement plan…

1. The ugly truth about the stock market’s new record highs

Take a look at the chart below which reveals how, when measured in real purchasing-power terms, the S&P 500 Index is nowhere near its March 2000 high. In fact, the index would have to increase by another 32% today, just to get you even (in real dollars) with where you were more than 13 years ago:

Your Retirement Plan Powered by Wall Street-Fast Graph

Even if you look at the total return of the S&P 500 (including reinvested dividends), the real (inflation-adjusted) purchasing power of your investment remains negative after 13 years. And this assumes you have no fees, commissions or taxes, which, of course, will take another big bite out of your savings.

2. Long-term investors received only HALF the return of the S&P 500 [Read more…]

Stock market hits 5 year high – what they’re not telling you

As the bull market that began in March, 2009 picks up steam, the Wall Street stock jocks are urging individual investors to jump back into the market with both feet. They boast that the S&P 500 has hit a 5-year high and is closing in on a new all-time high. But – somehow – they all forget to mention one pretty important fact: It also ended the year 3% lower than where it was 13 years ago at the end of 1999.

This chart tells the rest of the story you’re not hearing…


Your Retirement Plan Powered by Wall Street-Fast Graph
You’ll notice inflation was 36% over the past 13 years, which took an enormous bite out of the purchasing power of your savings.

Some readers may be wondering why I didn’t include the value of the dividends earned by the S&P 500 companies in the chart. So let’s do that now. The total return of the S&P 500 (including dividends) for the past 13 years was 22%, which is an average return of about 1.7% per year – and still lags inflation.

Don’t forget the fees and taxes…

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Bank On Yourself: The Ultimate Wealth-Building Strategy Video

Do you know what your retirement account will be worth on the day you plan to tap into it? If you’re like most people, you don’t have a clue. Well, here’s a reality check – that’s not a plan; it’s gambling.

Because people have blindly followed the conventional wisdom about investing and retirement planning advice, most baby boomers have been forced to postpone retirement an average of five years…and nearly half aren’t expected to have enough money in retirement to cover even basic living expenses, like food and medical care.1

At Bank On Yourself, we believe the decision of whether and when to retire – or not – should be a matter of choice, not necessity. If that makes sense to you, we urge you to watch this fast-paced video revealing seven reasons to consider using the Bank On Yourself method as a safe and proven alternative to traditional retirement plans.

Click the play button in the video below and see how many of these
seven advantages you’d like to have in your financial plan…

Bank On Yourself gives you guarantees, predictability, control, tax advantages and peace of mind missing from traditional financial planning

Want to find out how much money you could have – guaranteed – in 10 years, 30 years, and at any point along the way if you added Bank On Yourself to your financial plan?
Request Your Analysis Button
It’s easy to find out! Just request your FREE, no-obligation Analysis that will show you how a custom-tailored plan can help you reach your short-term and long-term goals and dreams in the shortest time possible.

1. Center for Retirement Research at Boston College, March 2012 Report

Fire Your Banker Video Contest Results

Wow! We received more than 150 terrific entries when we invited readers to tell us what you think about our unusual new video on “How to Fire Your Banker and Become Your Own Source of Financing”.


We want to thank everyone who took the time to give us such detailed and honest feedback, which is exactly what we need to be able to communicate the benefits of Bank On Yourself more effectively.

Five people on the Bank On Yourself team – myself included – poured through every single response, not just to pick the contest winners, but to also learn what questions and concerns you have about the Bank On Yourself concept.

At $1,000 per finished minute to film this kind of video, I was really glad no one said what they liked most about it was when it ended! Most people really liked the unusual video style and felt that it helped them better understand one of the most intriguing advantages of the Bank On Yourself method: How it lets you bypass banks, credit cards and finance companies and become your own source of financing.

If you haven’t watched the video yet, I encourage you to do that now…

There were many terrific insights and questions in the contest entries. It was tough to pick just five winning entries (we actually picked six), but you’ll find the winners listed below.
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