How does the PB utilize a well-designed, high-grade, dividend-paying Whole life insurance policy compared to a ROTH IRA? Scenario #1 This is an example of two twin sisters, aged 40, trying to decide whether to deposit $6,000 annually into a Roth IRA or PB. Their tax bracket of (22%) does not matter as they are using after-tax dollars in both scenarios. They are assuming a 4% rate of return on both money in both scenarios, and they are informed that neither of the scenarios is guaranteed. PB includes a waiver of premium in case of a disability for 26 years.
Year
Sister #1 IRA 4% ROR
Death Benefit
Sister #2 PB Acct.
Death Benefit / Waiver of Prem.
Year 1
$6,240
None
$5,275
Year 10
$74,918
None
$52,195
$264,100
Year 20
$185,815
None
$177,332
$442,525
Year 26
$193,247
None
$278,714
$564,017
Sister #1 goes ahead and puts her money in a 4% account, while sister #2 puts her money in PB with life insurance. After 26 years, they are both retired. Sister #1 has $193,247 in her ROTH account. Sister #2 has $278,214 in her cash value account with a net death benefit of $285,803. Should Sister #2 die at this time, her family would receive both cash value and net death benefit with a value of $564,017. Sister #2 has had life insurance for the entire 26 years with the waiver of premium should she become disabled. How does sister #2's financial strategy compare to yours? One should always do the math when considering retirement planning. I would encourage a person to shy away from agents or advisors who do not understand our changing demographics, plus they need to understand the IRS's Publication 590. I have shared this with you before. You cannot get a guaranteed stream of income from a non-guaranteed
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