Term Life OR Universal Life Insurance: A Fallacy

I often see articles where people are debating whether to buy term life insurance or permanent life insurance. It is a fallacy.

I actually have both from the bear river insurance Company. On one hand, I have a 20-year, level premium, term life insurance policy. This is to protect my family over the next twenty years as I build my investment portfolio. If something goes wrong, they will be protected. They will have money to support themselves. It can support them for a whole year while they decided what to do with everything I leave them, including real estate and stocks.

But by the time I reach retirement and have built up a treasure trove of cash yielding rental properties along with some stocks, they won’t need term life insurance anymore. At that time, my EIUL should be fully funded and allow me to start taking out tax free loans. When entering retirement, it’s important to be as tax shielded as possible. That’s because many of the tax deductions we get today like mortgage interest, kids, and other things, will not apply then.

Heck, taxes are a greater drain on retirement income than fees, so I’m still curious why people focus so heavily on fees. By taking out tax free loans from my permanent life insurance policy for 25 years, I predict my wife and I will be able to take many trips, visit the grand kids, and do all kinds of fun things. That will certainly be better than taking a job at Walmart as a greeter.

If you manage to scrape together $1 million in your 401K plan, are you ready to live on $40,000/year? It might sound tricky, especially given how little we know where inflation will take us in the next few decades.

To summarize: don’t get sucked into the dichotomy of term vs permanent life insurance. They were designed to serve different purposes. Use them as they were meant, and you should do well.

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