Mass Mutual whole life legacy pay 20

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anthonypals
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Mass Mutual whole life legacy pay 20

Post by anthonypals »

Is anyone familiar with - Mass Mutual whole life legacy pay 20?
Last edited by anthonypals on Sun Jul 25, 2021 8:42 am, edited 3 times in total.
123
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Re: Mass Mutual whole life legacy pay 20

Post by 123 »

Do you need life insurance? Is anyone else dependent upon you for support?

To put money away monthly for 20 years and have it available without any risk many people just use a bank savings account.
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anthonypals
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Re: Mass Mutual whole life legacy pay 20

Post by anthonypals »

123 wrote: Thu Jul 22, 2021 10:08 am Do you need life insurance? Is anyone else dependent upon you for support?

To put money away monthly for 20 years and have it available without any risk many people just use a bank savings account.
I am still young so I will have dependents in the future. I like the idea of being done with payments eventually but still have a life insurance policy plus it makes money I can use in retirement.
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Re: Mass Mutual whole life legacy pay 20

Post by Stinky »

While I’m not familiar with this particular product, it sounds like a “20-pay whole life policy”. As you note, payments for 20 years, insurance coverage for life.

In general, Bogleheads would advise against buying any form of whole life insurance, including this product. If you have needs for life insurance, you will be far better served with level term insurance.

In my view, whole life is a mish-mash of life insurance and “savings” elements thrown together. It doesn’t do either function very well.

Buy term if you need life insurance. Use your $90 per month to invest in a low cost equity index fund like Total Stock Market. You will come out way ahead of whole life over time.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: Mass Mutual whole life legacy pay 20

Post by tc101 »

I agree totally with the last post.
Buy term if you need life insurance.
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Re: Mass Mutual whole life legacy pay 20

Post by exodusNH »

anthonypals wrote: Thu Jul 22, 2021 10:02 am Is anyone familiar with - Mass Mutual whole life legacy pay 20?

I am 31 years old and From what I was told I will need to pay a $90 monthly premium for 20 years and At the end of 20 years I no longer have to pay any premiums, I will have a set life insurance amount for life and I have a cash value amount I am allowed to take from if I need it, without paying it back (estimated to be $20K+ in 20 years that will increase the older I get).

Does this sound legit?
You do not want whole life insurance. Search the forum.

I made the mistake at about the same age you are. The money I put into the whole life policy has literally cost me about $250,000 in market returns.
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anthonypals
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Re: Mass Mutual whole life legacy pay 20

Post by anthonypals »

Stinky wrote: Thu Jul 22, 2021 10:20 am While I’m not familiar with this particular product, it sounds like a “20-pay whole life policy”. As you note, payments for 20 years, insurance coverage for life.

In general, Bogleheads would advise against buying any form of whole life insurance, including this product. If you have needs for life insurance, you will be far better served with level term insurance.

In my view, whole life is a mish-mash of life insurance and “savings” elements thrown together. It doesn’t do either function very well.

Buy term if you need life insurance. Use your $90 per month to invest in a low cost equity index fund like Total Stock Market. You will come out way ahead of whole life over time.
From my calculations $90 a month or $1080 a year invest for 20 years with an 8 percent average return is $58K. With this policy I would have a $75K policy left for when I die plus $20K cash value.
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Re: Mass Mutual whole life legacy pay 20

Post by Rex66 »

Horrible idea

Never trust an insurance agent for investment advice

Yes it is true that a 30 pay only requires 20 pay of premium

If you however buy cheap term for 20-30 years and invest the difference then you will be much better off

They charge interest paying monthly by the way and interest to loan your own money later in life
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Re: Mass Mutual whole life legacy pay 20

Post by exodusNH »

anthonypals wrote: Thu Jul 22, 2021 10:17 am
123 wrote: Thu Jul 22, 2021 10:08 am Do you need life insurance? Is anyone else dependent upon you for support?

To put money away monthly for 20 years and have it available without any risk many people just use a bank savings account.
I am still young so I will have dependents in the future. I like the idea of being done with payments eventually but still have a life insurance policy plus it makes money I can use in retirement.
This is the same line they used on me and my same reasoning.

You don't currently have dependents. You don't need life insurance. When you do have dependents, you will need life insurance but you will never need whole life insurance.

The "available for retirement" is misleading. Yes, the cash value builds up, but all of that money is earning 1-3% annually. And you're paying for a life insurance policy you don't need. But when you withdraw that money, you're going to be paying income tax rates on the withdrawal.

If you instead put the $90/month into a brokerage account, when you eventually withdraw it, the gains will be at the more favorable capital gains rate. It will also, historically, have grown at 6-10% instead of 1-3%.

The sales person you're talking to stands to earn a fat commission on a whole life policy.

Please just search "whole life" in this forum. You will hear the same story again and again.
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Re: Mass Mutual whole life legacy pay 20

Post by exodusNH »

anthonypals wrote: Thu Jul 22, 2021 10:35 am
Stinky wrote: Thu Jul 22, 2021 10:20 am While I’m not familiar with this particular product, it sounds like a “20-pay whole life policy”. As you note, payments for 20 years, insurance coverage for life.

In general, Bogleheads would advise against buying any form of whole life insurance, including this product. If you have needs for life insurance, you will be far better served with level term insurance.

In my view, whole life is a mish-mash of life insurance and “savings” elements thrown together. It doesn’t do either function very well.

Buy term if you need life insurance. Use your $90 per month to invest in a low cost equity index fund like Total Stock Market. You will come out way ahead of whole life over time.
From my calculations $90 a month or $1080 a year invest for 20 years with an 8 percent average return is $58K. With this policy I would have a $75K policy left for when I die plus $20K cash value.
No, you have $75K policy OR $20K value. You don't get both. And you'll pay income tax rates on the gain in the $20K instead of capital gains.

Ignore the $75K. You've already done the math, $20,000 or $58,000.

This is an insurance product NOT an investment product. The person that's showing you all the nice figures and scaring you with taxes is set to earn a couple thousand dollars in commission if you buy this plan.
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Re: Mass Mutual whole life legacy pay 20

Post by anthonypals »

Rex66 wrote: Thu Jul 22, 2021 10:36 am Horrible idea

Never trust an insurance agent for investment advice

Yes it is true that a 30 pay only requires 20 pay of premium

If you however buy cheap term for 20-30 years and invest the difference then you will be much better off

They charge interest paying monthly by the way and interest to loan your own money later in life
What about the advantage of being done with premiums eventually, wont that allow me to catch up and invest more for the last 30+ years instead of constantly paying term?
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Re: Mass Mutual whole life legacy pay 20

Post by Rex66 »

Nope

They charge you enough in those 20 years to cover cost of insurance over your whole life
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Re: Mass Mutual whole life legacy pay 20

Post by aerofreaky11 »

Term life is pennies on the dollar compared to Whole Life. You don't need this product. Buy term when you need it. Invest the rest.

BTW, 75k is a very small policy. You could get a 1m or 2m term for much less than you think. (Your salesperson won't tell you about this option because there isn't a healthy commission)
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Re: Mass Mutual whole life legacy pay 20

Post by exodusNH »

anthonypals wrote: Thu Jul 22, 2021 10:47 am
Rex66 wrote: Thu Jul 22, 2021 10:36 am Horrible idea

Never trust an insurance agent for investment advice

Yes it is true that a 30 pay only requires 20 pay of premium

If you however buy cheap term for 20-30 years and invest the difference then you will be much better off

They charge interest paying monthly by the way and interest to loan your own money later in life
What about the advantage of being done with premiums eventually, wont that allow me to catch up and invest more for the last 30+ years instead of constantly paying term?
$75,000 is nothing for an insurance payout AND it's not inflation-adjusted.

Life insurance's point is to provide your dependents the same lifestyle that they had while you were alive. Without dependents, there's no reason. When you have dependents, get term insurance. A $1M-$2M policy will cost you $10-$20/month.

In the meantime, take that $90 and put it in the market.

BTW, Stinky already replied to this thread. He was an executive at a very large insurance company for a very long time. You've got an industry-insider telling you this is not a good deal.
Last edited by exodusNH on Thu Jul 22, 2021 11:39 am, edited 1 time in total.
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Re: Mass Mutual whole life legacy pay 20

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anthonypals wrote: Thu Jul 22, 2021 10:35 am
Stinky wrote: Thu Jul 22, 2021 10:20 am While I’m not familiar with this particular product, it sounds like a “20-pay whole life policy”. As you note, payments for 20 years, insurance coverage for life.

In general, Bogleheads would advise against buying any form of whole life insurance, including this product. If you have needs for life insurance, you will be far better served with level term insurance.

In my view, whole life is a mish-mash of life insurance and “savings” elements thrown together. It doesn’t do either function very well.

Buy term if you need life insurance. Use your $90 per month to invest in a low cost equity index fund like Total Stock Market. You will come out way ahead of whole life over time.
From my calculations $90 a month or $1080 a year invest for 20 years with an 8 percent average return is $58K. With this policy I would have a $75K policy left for when I die plus $20K cash value.
You are a bit off. You will have 75K total death benefit. If you die prior to using your cash balance, your heirs will not get the cash value. The insurance company keeps the 20K. As you build cash value, the amount of life insurance decreases which enables them to write such a policy.

You are far better off buying term, while you need it, in the amount you need. That amount will probably be on the order of 1.5 million. If you live to be a ripe old age, invest well, keep debt low or non existent then you probably will not need life insurance in the distant future. Lets say your kids are all out of college, and you have 3 million in cash. Do you really need life insurance? Your future spouse will do quite well to live off the money saved.
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Re: Mass Mutual whole life legacy pay 20

Post by Stinky »

You’re talking to a financial advisor life insurance salesman who stands to make a commission of about $1,000 on your policy premium of $1,080.

Meanwhile, I suspect that your surrender value at the end of policy year one will be $0. ZERO. Substantially all of your first year premium will go into the salesman’s pocket.

Your second year cash value will be minimal, likely less than $1k. And, based on what you’ve posted, you’ll pay about $22k during your 20 year payment period, which is more than your 20th year cash value of $20k. (You’ll get insurance protection during that time which is worth less than $2k).

So you’re being pitched an “investment” that is basically guaranteed to lose you money until 2041.

Does that sound attractive to you? Not to me.

Walk away. And stop talking to this salesman.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: Mass Mutual whole life legacy pay 20

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anthonypals wrote: Thu Jul 22, 2021 10:47 am What about the advantage of being done with premiums eventually, wont that allow me to catch up and invest more for the last 30+ years instead of constantly paying term?
Get a quote on term insurance & run your calc's again. You'll see pretty quickly that the savings on Term vs Whole Life is more than enough to close the gap in the # of payments you'll need to make.

I'll add another unsolicited option for you to consider as well. My own personal strategy is a version of "laddered" term life insurance spread across multiple policies. Essentially, I buy a new 20 year term policy every 5 years for ages 25-45. At each 5-year interval, keep all prior policies that were purchased. This allows building up from a low total coverage at age 25 to a pretty high total coverage at age 45, then decreasing coverage from age 45 to age 65. That approach generally aligns well with a typical lifecycle. Your needs aren't as great at 25-35 (smaller house, fewer dependents). Needs will be highest around 40-50 (lifestyle creep, still building investments), then by age 65 you should have enough nest egg that you don't need life insurance coverage.

The biggest down-side to that strategy is if there's a change in your health status & you can't get additional coverage. But that risk is also present for the 20-Pay product you suggested originally.

An agent should be able to run you quotes at all of those ages as well to give you a ballpark figure of what the premiums will look like. Obviously, those rates won't be guaranteed until you actually reach those ages, but it'll give you a better cost-benefit-analysis of what you mentioned above.

And if your agent tells you term premiums 'are definitely going up in the next few years' ...... ask him (1) did he say the same thing back in the early 2000's, and (2) what happened to term rates when they switched from 2001 CSO to 2017 CSO?
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Re: Mass Mutual whole life legacy pay 20

Post by Brianmcg321 »

You currently do not need insurance.

If you ever get life insurance then buy term only. Whole life is garbage.

You’re being scammed by a salesman. Don’t fall for it.
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Re: Mass Mutual whole life legacy pay 20

Post by Raymond »

One hopes the next post by the OP isn't "I went ahead and bought the whole life policy, and the insurance guy said those people on Bogleheads were doo-doo heads." :(
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Re: Mass Mutual whole life legacy pay 20

Post by Rex66 »

That happens

They pretend to be experts instead of salespeople
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Re: Mass Mutual whole life legacy pay 20

Post by BruDude »

In before this thread has 650 replies :mrgreen:
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Re: Mass Mutual whole life legacy pay 20

Post by Raymond »

BruDude wrote: Thu Jul 22, 2021 12:29 pm In before this thread has 650 replies :mrgreen:
What are your thoughts on this? You have some expertise in this area, I believe :happy
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Re: Mass Mutual whole life legacy pay 20

Post by UpperNwGuy »

anthonypals wrote: Thu Jul 22, 2021 10:02 am From what I was told
Who told you?
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Re: Mass Mutual whole life legacy pay 20

Post by BruDude »

Raymond wrote: Thu Jul 22, 2021 12:33 pm
BruDude wrote: Thu Jul 22, 2021 12:29 pm In before this thread has 650 replies :mrgreen:
What are your thoughts on this? You have some expertise in this area, I believe :happy
I think there’s no good reason for a 31 year old who doesn’t need life insurance to buy a $75k 20 pay whole life policy. A disability insurance policy would be way better use of that money.
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Re: Mass Mutual whole life legacy pay 20

Post by Madbull »

I'll be the first to toss out an exception, (with the caveat others are correct, in that right now you don't appear to need life insurance)....

If, (and only if), you do not qualify for a Term-life product, then you can consider Whole-life. The bandwagon is generally correct that WL is cr*p, (because it generally is), however there are exceptions for folks that just can not get a Term policy. Even those providers who don't require medical underwriting will still have the 'just answer these three questions', that can easily exclude you.

For example, the vast majority of companies will not issue a policy if you've had cancer within the last x years, or have had depression severe enough to be hospitalized, or who are HIV+, etc.

Some workarounds to those conditions are a very small number of companies that have started to specialize in 'high-risk' clients, (though they are few and far between). Another option is if you leave an employer, and they offer the option to port your policy over. That 'can' still be pricey, but if it's a large enough employer and you get to maintain their group discount, it shouldn't be overlooked.

It's easy to say "never" to a WL product, but there are exceptions not always thought about by some.

.02 has been given, haha. :beer
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Re: Mass Mutual whole life legacy pay 20

Post by fyre4ce »

You get cash value OR the death benefit, not both.

You don't need any life insurance right now. So, you would be paying for insurance you don't need - not a good idea.

If you do ever need life insurance, $75k will likely be WAY too little. If you ever need life insurance, get competitive priced term insurance.

If you are trying to grow assets, invest in a reasonable mix of stocks and bonds inside tax-advantaged accounts, or if those are full, a taxable account. Those will very likely give you (or your heirs) something like triple the investment value over time. Tax-advantaged accounts give your heirs an additional 10 year stretch after you die, during with the value might double again. Taxable accounts get no stretch, but do get a step-up in basis, putting the tax advantages on-par with the "tax free" life insurance policy someone is trying to sell you.

This is a financial product that offers low rates of return to you, and large commissions to the agent trying to sell it to you. Pass.
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Re: Mass Mutual whole life legacy pay 20

Post by hnd »

anthonypals wrote: Thu Jul 22, 2021 10:35 am
Stinky wrote: Thu Jul 22, 2021 10:20 am While I’m not familiar with this particular product, it sounds like a “20-pay whole life policy”. As you note, payments for 20 years, insurance coverage for life.

In general, Bogleheads would advise against buying any form of whole life insurance, including this product. If you have needs for life insurance, you will be far better served with level term insurance.

In my view, whole life is a mish-mash of life insurance and “savings” elements thrown together. It doesn’t do either function very well.

Buy term if you need life insurance. Use your $90 per month to invest in a low cost equity index fund like Total Stock Market. You will come out way ahead of whole life over time.
From my calculations $90 a month or $1080 a year invest for 20 years with an 8 percent average return is $58K. With this policy I would have a $75K policy left for when I die plus $20K cash value.
its not plus. if you die and leave someone 75k the 20k is gone. you surrender it.

you can find 250k 30 yr term insurance for 20 bucks a month. invest the difference (70bucks) over the 20 years at 8% is $40k. So you'll have life insurance until you are 61. your survivors get over 3x the 75k, AND the 40k is still there.
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Re: Mass Mutual whole life legacy pay 20

Post by Rex66 »

Madbull wrote: Thu Jul 22, 2021 12:54 pm I'll be the first to toss out an exception, (with the caveat others are correct, in that right now you don't appear to need life insurance)....

If, (and only if), you do not qualify for a Term-life product, then you can consider Whole-life. The bandwagon is generally correct that WL is cr*p, (because it generally is), however there are exceptions for folks that just can not get a Term policy. Even those providers who don't require medical underwriting will still have the 'just answer these three questions', that can easily exclude you.

For example, the vast majority of companies will not issue a policy if you've had cancer within the last x years, or have had depression severe enough to be hospitalized, or who are HIV+, etc.

Some workarounds to those conditions are a very small number of companies that have started to specialize in 'high-risk' clients, (though they are few and far between). Another option is if you leave an employer, and they offer the option to port your policy over. That 'can' still be pricey, but if it's a large enough employer and you get to maintain their group discount, it shouldn't be overlooked.

It's easy to say "never" to a WL product, but there are exceptions not always thought about by some.

.02 has been given, haha. :beer
They make the same no physical term type policies

Underwriting for permanent policy is frequently more stringent
Statistical
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Re: Mass Mutual whole life legacy pay 20

Post by Statistical »

Buying life insurance you don't need is a bad idea. Buying whole life insurance is (almost) always a bad idea.

Whole life insurance companies insurance with a quasi investment/earnings and access to borrowing in a complex, expensive & opaque package. That allows them to hide how utterly horrible it is as a financial product.

There is no need to combine the two though. Buy term life insurance to protect spouse and children from your early death. Use low cost investments (i.e. 3 index fund portfolio) to grow your wealth.
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Re: Mass Mutual whole life legacy pay 20

Post by Nate79 »

This is a horrible product --> full stop, move on. Read the wiki and learn how to invest and build wealth the right way and use the right insurance products (term, disability, etc). Taking financial advice from an insurance salesman is a really bad idea.
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Re: Mass Mutual whole life legacy pay 20

Post by SpaghettiMonster »

I was sold a Mass Mutual Whole Life Legacy Pay 20 when I was 30. I was financially naive and bought the salesman's pitch. I took me 7 years to realize what a mistake I made and what a poor product this is for almost anyone. I surrendered the policy and received less than what I had paid into it (of course). I have since fired that "financial advisor," bought a lot of term life for a lot less in premiums, and am doing much better by investing the money that I would have otherwise paid in premiums. Do not make the same mistake I did.
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anthonypals
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Re: Mass Mutual whole life legacy pay 20

Post by anthonypals »

SpaghettiMonster wrote: Thu Jul 22, 2021 6:54 pm I was sold a Mass Mutual Whole Life Legacy Pay 20 when I was 30. I was financially naive and bought the salesman's pitch. I took me 7 years to realize what a mistake I made and what a poor product this is for almost anyone. I surrendered the policy and received less than what I had paid into it (of course). I have since fired that "financial advisor," bought a lot of term life for a lot less in premiums, and am doing much better by investing the money that I would have otherwise paid in premiums. Do not make the same mistake I did.
Why didn’t you do a reduced paid-up plan instead?
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Re: Mass Mutual whole life legacy pay 20

Post by adamthesmythe »

fyre4ce wrote: Thu Jul 22, 2021 12:58 pm If you do ever need life insurance, $75k will likely be WAY too little. If you ever need life insurance, get competitive priced term insurance.
If you DO need life insurance in the future you will need way more than 75K. More like 1-2 million.

The 75K is a drop in the bucket toward that possible future need. Enough to get you in the ground with a little left over for a wake.

I suppose if you wanted to be very very conservative you could buy the term policy now. Even though you don't need it now.
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Re: Mass Mutual whole life legacy pay 20

Post by anon_investor »

anthonypals wrote: Thu Jul 22, 2021 10:35 am
Stinky wrote: Thu Jul 22, 2021 10:20 am While I’m not familiar with this particular product, it sounds like a “20-pay whole life policy”. As you note, payments for 20 years, insurance coverage for life.

In general, Bogleheads would advise against buying any form of whole life insurance, including this product. If you have needs for life insurance, you will be far better served with level term insurance.

In my view, whole life is a mish-mash of life insurance and “savings” elements thrown together. It doesn’t do either function very well.

Buy term if you need life insurance. Use your $90 per month to invest in a low cost equity index fund like Total Stock Market. You will come out way ahead of whole life over time.
From my calculations $90 a month or $1080 a year invest for 20 years with an 8 percent average return is $58K. With this policy I would have a $75K policy left for when I die plus $20K cash value.
You fail to account for the fact that the money invested while $58k at year 20, will continue to grow (without adding more money), while the life insurance death benefit remains at $75k. 4 years later (year 24), at 8% average return that $58k would be nearly $79k.

Now look at this, 40 years from now (you would be age 71), that life insurance would still only have a death benefit of $75k, compared to the invested money which would be (assuming 8% average return) over $270k. Seems like a terrible deal to me.
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Re: Mass Mutual whole life legacy pay 20

Post by Nate79 »

Reminder there is a warning at the top of this forum section on Whole Life threads for a reason and it's not because they are wonderful investments:

viewtopic.php?f=2&t=57154
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Stinky
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Re: Mass Mutual whole life legacy pay 20

Post by Stinky »

anthonypals wrote: Thu Jul 22, 2021 7:54 pm
SpaghettiMonster wrote: Thu Jul 22, 2021 6:54 pm I was sold a Mass Mutual Whole Life Legacy Pay 20 when I was 30. I was financially naive and bought the salesman's pitch. I took me 7 years to realize what a mistake I made and what a poor product this is for almost anyone. I surrendered the policy and received less than what I had paid into it (of course). I have since fired that "financial advisor," bought a lot of term life for a lot less in premiums, and am doing much better by investing the money that I would have otherwise paid in premiums. Do not make the same mistake I did.
Why didn’t you do a reduced paid-up plan instead?
In my view, taking the reduced paid-up option on a 7 year old whole life policy is a perfectly awful idea.

SpaghettiMonster doesn't give us an idea of the size of the cash surrender value that he got back. But, for example, if he got back $5,000, that might have purchased $15,000 of paid-up life insurance.

There is simply no reason to clutter up one's financial life with trivial amounts of life insurance like this. Far better to take the $5,000 surrender value, invest it per his asset allocation plan, and leave the wretched Mass Mutual policy laying on the side of the road, rotting in the sun. Over a period of years, the $5,000 investec in equity mutual funds will grow to multiples of the $15,000 death benefit it could have purchased.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
SpaghettiMonster
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Re: Mass Mutual whole life legacy pay 20

Post by SpaghettiMonster »

It was a $2M plan. I surrendered it several years ago so I don't recall the exact numbers, but I think my surrender value was about $125K after having paid $175K in premiums.
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Re: Mass Mutual whole life legacy pay 20

Post by Stinky »

SpaghettiMonster wrote: Fri Jul 23, 2021 9:53 am It was a $2M plan. I surrendered it several years ago so I don't recall the exact numbers, but I think my surrender value was about $125K after having paid $175K in premiums.
Oh my goodness! That was a huge, very expensive whole life policy.

I’m sorry that you got snookered into it, but glad that you got out when you did.

The agent likely made about $25k on the sale. I’ll bet it was one of the high points of his year when you signed up and paid the first year premium.
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Rex66
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Re: Mass Mutual whole life legacy pay 20

Post by Rex66 »

Currently a non overfunded non limited pay policy from a respected mutual will illustrate 17 years to break even. Dividends are falling so might take even longer. If dividends improve (not likely in near future) then it will take less.
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David Jay
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Re: Mass Mutual whole life legacy pay 20

Post by David Jay »

Anthony:

Go out and Google around the inter-webs. Try to find someone who recommends purchasing a whole life policy when the purchaser has no current requirement for life insurance who is not associated with the insurance industry.

It’s not easy. Because it is a truly a horrible idea. Pretty much the only people who recommend this have a financial interest.

Why do you give the insurance salesperson so much credibility? Is this individual a personal friend?
Last edited by David Jay on Fri Jul 23, 2021 5:10 pm, edited 2 times in total.
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Re: Mass Mutual whole life legacy pay 20

Post by deltaneutral83 »

anthonypals wrote: Thu Jul 22, 2021 7:54 pm
SpaghettiMonster wrote: Thu Jul 22, 2021 6:54 pm I was sold a Mass Mutual Whole Life Legacy Pay 20 when I was 30. I was financially naive and bought the salesman's pitch. I took me 7 years to realize what a mistake I made and what a poor product this is for almost anyone. I surrendered the policy and received less than what I had paid into it (of course). I have since fired that "financial advisor," bought a lot of term life for a lot less in premiums, and am doing much better by investing the money that I would have otherwise paid in premiums. Do not make the same mistake I did.
Why didn’t you do a reduced paid-up plan instead?
You're not getting it regarding whole life insurance. You have made the wonderful decision to come to BH and seek the guidance of the best financial advice on the planet. WL is woefully bad, the product is sold and not bought, as you can now see clearly. When you get well above the estate exemption then there are some scenarios where WL can make sense, and that would require you to be above $11.7 Million in your estate, or $23.4M if you're married which would put you squarely in the 1%, and that's not even a good move unless you are ahead of that by a wide margin.

Research the mathematics of WL vs. getting term and investing the difference at say 8% (spoiler, something like the first 5 years of premiums go directly into the agents pocket depending on which disaster WL vehicle you select, so your "investment" has been knee capped right off the bat). And this all revolves around you having an insurable interest, i.e. dependents, which doesn't appear to be the case.
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anthonypals
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Re: Term life Vs. whole life

Post by anthonypals »

[Posts moved into here from Term life Vs. whole life --admin LadyGeek]
rockAction wrote: Sat Jul 24, 2021 8:10 am
Rex66 wrote: Sat Jul 24, 2021 6:27 am There is a cost of insurance within all these products

With term (which should be level 20-30 year at your age), the premium just pays for insurance and insurance company profit.

With permanent insurance it’s that plus a crappy investment.

Finally term for the same health rating has a lower cost of insurance over 20-30 years.

Agents always present false scenarios to make that look different. Examples would be rebuying term every 5-10 years, not showing the rates on cheap term companies, and using unrealistic assumptions for performance of the investment part of the permanent insurance.

85% of people surrender permanent insurance and lose lots of money.
+1 This is important to understand. Permanent insurance is extremely expensive, and most people can't pay the premiums after a few years. If ANYTHING goes wrong (lose job, get sick, etc) and any large unexpected expenses come up, you may not be able to make the premium payments. It takes several years of paying HUGE premiums to build up virtually any cash value, at which point most people drop the policy and lose almost all the money they put into it. Is an 85% failure rate a game you really want to play?

I was one of the 15% who actually paid off the policy early using the Paid-up Additions Rider, and I can without reservation say that it is THE WORST investment decision I ever made. After holding it for 12 years and paying it off in 7, it's not worth much more than what I put into it, and if I ever want to borrow from the cash value, they'll charge me 8% interest, making it nearly inaccessible (who would pay 8% on a loan today, and against their own "cash value" no less!?). Run from these policies, and don't let the salesman use their tricks to talk you into it (like they did me). Buy term, invest the rest, and avoid all these headaches.
Can you give me more info on what you did? I’m at 7 years now and would like to stop the premiums. If I ask for a paid up rider and then what happens, what do you lose?
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Re: Term life Vs. whole life

Post by rockAction »

anthonypals wrote: Sat Jul 24, 2021 7:23 pm
Can you give me more info on what you did? I’m at 7 years now and would like to stop the premiums. If I ask for a paid up rider and then what happens, what do you lose?
A Paid-up Additions Rider (PUA) is essentially just a way to overfund your policy so that the cash value grows faster. With a higher cash value you get more in dividends, and eventually the dividends the policy pays out are enough to cover the premiums (I think they called it a Premium Offset).

So, the policy becomes essentially "paid off", and I no longer have to pay any premiums (at least that's what I've been told). However, I had to overfund the policy pretty drastically in order to reach the "Premium Offset" point (which we hit in Yr 7). I'm sure you can ask the insurance company about options for overfunding your policy, and they should also be able to provide you with an "in-force illustration" of what that would look like. (I'm not recommending overfunding one way or another. You'll have to take a look at the in-force illustration they provide and see what makes sense for you.)

*I'm no permanent life insurance expert. Just speaking from my own recollection and experience as a policy holder.
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Stinky
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Re: Term life Vs. whole life

Post by Stinky »

anthonypals wrote: Sat Jul 24, 2021 7:23 pm
Can you give me more info on what you did? I’m at 7 years now and would like to stop the premiums. If I ask for a paid up rider and then what happens, what do you lose?
In your other recent thread, viewtopic.php?f=2&t=354129 , you implied that you were considering buying a 20-pay whole life policy from Mass Mutual. The premium you quoted was $90 per month.

Presuming that the policy you're asking about here is the same one as in the other thread, you've probably paid ($90 per month X 12 months X 7 years), or $7,560 in premiums. I'm guessing that your cash value is somewhere in the area of $4,000. (You can confirm this with Mass Mutual.)

If you want to cease paying premiums, just get in touch with Mass Mutual and tell them that you want to put the policy on "reduced paid up" status, which will reduce the face amount and stop future premiums. With a $4,000 cash value, I'd guess that your face amount will be reduced to about $15k-$20k. That amount will likely increase slowly every year as dividends are paid, and the face amount will be paid to your beneficiaries when you die (maybe 50+ years from now, given that the prior thread said that you were 31 years old).

If it were me, I would rather admit the mistake that I made in buying the policy, surrender the policy, and use the $4k cash value for something else. But if you want to put it on paid up status, that's your choice.
Last edited by Stinky on Sat Jul 24, 2021 8:33 pm, edited 1 time in total.
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Re: Mass Mutual whole life legacy pay 20

Post by LadyGeek »

anthonypals - As noted by Stinky above, I moved your question and the replies into your original thread. In this way, members can see your situation in context and help you directly. If you have any questions, ask them here.

(Thanks to the member who reported the post and explained what's needed.)
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