Whole-Life Insurance Can Provide an 8%+ Equivalent Return for High-Income Earners

Rajiv RebelloAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

For high income earners, a 4.5% after-tax return is equivalent to an 8%+ pre-tax return. Whole-life insurance can provide the same after-tax return of an investment with a higher pre-tax return – but without the higher investment risk.

There are usually two types of people who talk about whole-life insurance:

  1. High-commissioned agents trying to sell you a policy; and
  2. Advisors who don’t understand how it works or have gotten burned by it in the past and are discouraging you from trying to understand it.

I’m going to use my expertise as an actuary to explain how to use whole-life insurance as a financial-planning, investment, and retirement tool and why it has many benefits that you can’t find elsewhere. I’m also going to explain why most people get burned by whole-life insurance and how that benefits policy owners who understand how to properly use it for their financial planning goals.

Here are the key elements of whole-life insurance you’ll learn in this article:

  1. How to use whole-life insurance to achieve higher risk-adjusted after-tax returns than by investing in bonds or risky assets directly;
  2. How people who structure whole-life insurance properly achieve great after-tax returns and limited volatility as a direct result of the people who don’t use it properly;
  3. How to maximize the returns of whole-life insurance by using paid-up additions;
  4. How to maximize the tax-free withdrawals of whole-life insurance in retirement;
  5. How whole-life insurance can be used as a tax-free bond ladder;
  6. Why whole-life insurance returns are stable and reduce volatility in portfolios;
  7. How to use whole-life insurance in retirement to maximize the use of 0% capital-gains taxation; and
  8. The conflict of interest in the financial advisory profession and why advisors aren’t using whole-life insurance.