Where to invest $100,000

[Mama_Zappa]

@TommySeven

About 4%, assuming 50 years exactly. Some of those years were low-rate years like now, but that includes e.g. the seventies, when interest rates (on risk-free government debt) were double digits. You of course also got the insurance.

A bit lower, as it’s a bit over 50 years. And yes, I also have the insurance, though that doesn’t do me personally all that much good as I have to die to get the money :D. If I kick off, I gather my spouse would get 2,400 dollars (the 1,400 cash value and the 1,000 face value).

Ahead compared to what, though? You’d need to calculate the cost of equivalent term life insurance coverage, and the return on whatever you would have done on the leftover money, which is hopefully not zero. That gets complicated. For rough orders of magnitude, $10/month invested in the stock market for the last 35 years would be worth about $27k today, if I did the math right and assuming dividends were reinvested and ignoring taxes (so correct e.g. in a 401(k) or IRA, optimistic by zero to >20% otherwise), using Shiller’s stock market data, and assuming 1% expenses/year. That expense ratio would be unreasonably high now, but fewer low-cost products were available in the past.

Oh absolutely. Arguably the worth of the policy is its cash value + its face value - a whole life policy with face value of 10,000 that has built up a cash value of 7,000 is worth 17,000 to my heirs, versus the 27,000 you describe. So it’s less (assuming I were disciplined to put that 10 bucks a month aside all this time) but not negligible. And the fact that I could access the whole 27,000 now if I needed to is also a factor. I looked at the similar figures for the newer whole policy and if you add in the death benefit it’s currently worth MORE than the premiums paid to date - probably worth me extrapolating that to see where it would put me in another 10 years.

Anyway - the bottom line in my mind is that whole life is neither automatically perfect nor automatically bad, but can’t be ruled out as an appropriate “investment” in some situations and as one component of a financial plan.

[Dag_Otto]

@Mama_Zappa

If I kick off, I gather my spouse would get 2,400 dollars (the 1,400 cash value and the 1,000 face value).

I’d check up on that assumption. I thought the insurance usually just paid the death benefit. Your policy may vary, but probably worth checking.

[NAF1138]

@Dag_Otto

I’d check up on that assumption. I thought the insurance usually just paid the death benefit. Your policy may vary, but probably worth checking.

Yeah I don’t know any insurance company that pays out the cash value. Also if you have that much cash value built up in the policy and you don’t want to use the cash you should seriously consider buying a single premium policy with the cash.Assuming you are under 70 and reasonably healthy you can probably significantly increase your death benefit at no cost to you. Ideally you get yourself into a participating policy with an increasing face value.

[Mama_Zappa]

@NAF1138

Yeah I don’t know any insurance company that pays out the cash value. Also if you have that much cash value built up in the policy and you don’t want to use the cash you should seriously consider buying a single premium policy with the cash.Assuming you are under 70 and reasonably healthy you can probably significantly increase your death benefit at no cost to you. Ideally you get yourself into a participating policy with an increasing face value.

Did some googling and I think you’re right - it just pays the face value.

I think one of mine does pay the accumulated value - probably that one I was given at birth. As the cash value is larger than the face value, that makes sense.

There are a number of suggestions for how to use the cash value including buying more single-premium insurance or increasing the face value, or taking it as a loan.

[NAF1138]

@Mama_Zappa

Did some googling and I think you’re right - it just pays the face value.

I think one of mine does pay the accumulated value - probably that one I was given at birth. As the cash value is larger than the face value, that makes sense.

There are a number of suggestions for how to use the cash value including buying more single-premium insurance or increasing the face value, or taking it as a loan.

It doesn’t pay both. If it’s whole life that’s just not how whole life works. It’s not really how Universal life works either. Likely you have a participating whole life policy with paid up additions that increase the death benefit over time. If not there are some other possibilities but they are more unusual. The company keeps the cash when you die though. Also you should know that if you take a loan against the policy and don’t pay back the loan with interest that loan will get repaid with the death benefit when you die. In your case the dividends might cover the interest or a portion of it but make sure you know what you are doing before taking a loan. I see people every day who screwed up their life insurance almost irreparably because they took loans. If you know what you are doing a loan can be good though.
If you have an agent you should talk to them. If not you should probably find one to talk with. I would suggest not talking to the insurance company yourself as most of the people you will get will either be call center flunkies who don’t really know much or captive agents who will put the interests of the company ahead of your best interest. Brokers who have been working for many years are usually the way to go. Emphasis on longevity.

Or do nothing. Doing nothing won’t hurt. It just won’t help.

[NAF1138]

Missed the edit.

I said something stupid in my previous post. Call the company if you want facts about your current policy. Call someone else if you want to know what options you have to leverage your situation into a better one.