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Investing/Strategies / Retirement Investing
|Subject: Re: money market alternatives||Date: 6/23/2011 1:41 PM|
|Author: tjscott0||Number: 69175 of 76237|
I wonder if a single premium whole life insurance could be the answer.
WHILE the recent Tax Act effectively axed many tax shelters, it hardly touched the tax breaks provided by life insurance. In particular, the single-premium policy has emerged as a popular taxadvantaged investment: You make a single payment up front - usually a minimum of $5,000, but in practice often $50,000 or $100,000 or more - that buys you a chunk of life insurance and an investment fund that appreciates tax-free as long as you keep the policy in force.
There are two basic types of contracts. In a single-premium whole-life policy, the insurer guarantees your principal. Some companies fix the initial return - current rates range from 7 to 8
1/2 percent - for a given duration, usually one to three years. After that, returns fluctuate at the company's discretion, although they are supposed to reflect prevailing market rates.
Single-premium policies are also pitched as a way for retirees to increase their tax-free estate, and still have access to their money. For example, a 60-year-old woman who pays a $25,000 premium
today with the USAA Life Insurance Company would get a policy with an initial death benefit of $54,500; after 10 years, at a net return of 8.81 percent, the cash value of the policy would stand at
$58,179 and the insurance portion at $67,488. Any money received from a policy loan would not affect the taxability of Social Security benefits.
USAA Life Insurance Co.'s whole-life policies have been ranked No. 1 by insurance analyst A.M. Best Co. The life insurance policies had the best dividend history out of more than 50 leading insurance companies and generated the most cash-value return for policyholders. The rankings were published in a recent issue of Best's Policy Reports.
I admit that I'm scratching my head on how they are able to pay 7 or 8% on the cash value.
Anybody out there heard about dividends on single premium life insurance policies?
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