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Author: CMC5758 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19026  
Subject: Variable Universal Life Date: 11/6/2000 8:35 AM
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Greetings from a rookie poster. I've been monitoring (OK, lurking) this Discussion Board for several months, and have become very impressed with the wisdom handed out by Pixy and the people that take the time to contribute. Now I'd like to request some advice if I may.

I'm retiring at the end of this year at the age of 64. I intend to take a pension payout option that will continue the benefit to my wife (also 64) at 100% of the benefit over her life should I predecease her. I'm doing this as I believe the odds are that I will go first, plus there is no guarantee that the pension, once started, will be adjusted for inflation. The reduction from the amount I would receive if it were to be paid out during my life time only, is 16%.

In a meeting with a CFP this week he suggested I consider taking the pension on my life only, and provide for my wife with insurance. I agreed to at least review the option, and came away assuming I would consider Term Insurance. When I met with another advisor he said that Term would probably be too expensive and he suggest a Universal Life or more likely a Variable Universal Life policy. To me the Variable Life Policy implies a Variable Annuity for which I don't recall seeing many, if any, positive comments on this site. I'm not excited about this suggestion, but to be fair, I have not yet met with the Advisor so will be a nice guy and do so next week.

Meanwhile, I would very much appreciate any general comments and reaction to these kind of recommendations/policies.

Larry in NC
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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5502 of 19026
Subject: Re: Variable Universal Life Date: 11/6/2000 6:40 PM
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I'm retiring at the end of this year at the age of 64. I intend to take a pension payout option that will continue the benefit
to my wife (also 64) at 100% of the benefit over her life should I predecease her. I'm doing this as I believe the odds
are that I will go first, plus there is no guarantee that the pension, once started, will be adjusted for inflation. The
reduction from the amount I would receive if it were to be paid out during my life time only, is 16%.


Lets say the pension is 10,000 single life. That leaves 1,600 for the insurance. How many years will your wife live past your death? Lets say 10 years. Ten years at 10,000 gives you a policy of 100,000. Will the 1,600 buy it? Probably will so not a bad idea to investigate.

You need perminate insurance not term.

If you live another 20 years that 10,000 pension might have to be 30,000 so the 100,000 policy might have to be 300,000.

You have to work out the numbers and shop the policy with several insurance co's.

Might want to look for an insurance board and post there.





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Author: peppermintpatty Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5504 of 19026
Subject: Re: Variable Universal Life Date: 11/6/2000 9:46 PM
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Larry -

The concept proposed by your advisors is built on the premise that: (1) You might actually outlive your spouse, (2) The cost for the insurance policy will be no more than the pension payout difference between you selecting a survivor benefit & no survivor benefit. If you purchase the insurance policy & outlive your spouse you will continue to receive the higher benefit. If your spouse outlives you she will not get any pension money, but the insurance settlement will offset the income loss.

It's important to crunch the numbers to determine the total capital needed by your spouse & consider any adjustment for inflation that your pension might provide. Be sure the planner or advisor explains the process to your satisfaction, etc.

Finally, at your age term insurance is not usually a viable option. A whole life or variable universal life policy may be a better choice.

Good luck, PP

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Author: Hammerdwn One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5514 of 19026
Subject: Re: Variable Universal Life Date: 11/7/2000 12:10 PM
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The problems with the variable annuity is the high expense. If you look in the "Money and Investing" section of any Monday edition of the Wall Street Journal, you'll find a listing of many variable annuities and their expense. These expenses range from 1.50% to 2.75% which really take a bite out of your principal. For example, a 2.00% expense ratio with $300,000 invested, will cost you somewhere in the vicinity of $30,000 after five years. TIAA-CREF has much lower expense ratios, but then its fund's performances have not been what I would call satisfactory.

Hammer

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Author: sonny36 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5776 of 19026
Subject: Re: Variable Universal Life Date: 12/7/2000 8:57 AM
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When I retired at 62 I had a similar decision to make since my wife had no retirement benefits and would need some income beyond social security. I chose to take 100% survivorship which reduced my pension about 20%. What I took into considerations, was the amount of money in our tax-deferred accounts, after-tax accounts, our home, and the amount of income needed to support our standard of living. We have no life insurance, but decided to take the money we were spending on life insurance and buy long term care insurance for the both of us, thus protecting our investment accounts and our expenses. I used spreadsheets to crunch the numbers and it made more sense for us to use this approach. The age and health of your spouse plays a very big role in making these important decisions. I personally do like the idea of Universal Life or any other type of life insurance that builds cash value. It's protection you want, buy term and invest the difference. See how much term insurance you can buy for the difference in a survivors benefit versus life benefit. You will want to buy a 10 to 20 year level term with guranteed level premium. quotesmith.com can give you quotes for life insurance. I am sure there are other sites that will do this also. Any nonterm policy has a savings build up and an insurance benefit. Your premium buys you a decreasing term policy and any excess premium goes into cash value. In a variable policy the cash value or investing part varies depending how your investments are doing. The real problem is the high expenses associated with these policies. Agents and the insurance companies make more money off cash value, investment policies than they do with term insurance.
I used to sell insurance, and even started selling the concept of taking life benefits and buying life insurance to fund your spouses income needs. I quit when the company got my case about selling term rather than Variable Unvirseal Life or Investment type of policies.

glenn

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