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"My financial planner has told me to take the Single
Life option (maximum money to me) and invest that
$5,000 in a Variable Universal Life (VUL)Policy. He
says that if I pay into his policy for about 12 years,
I would not have to pay anymore (policy would be paid
up), and the benefit to my wife (annuitized) should be
more than she would have received (about 30k/year) if
I choose the Joint/Survivor option."

What I hear is your FP is selling you a product he will make money on and it may not be the best investment for you or your wife.

I would want to know what the cost of the investment (load) is, the cost of the insurance portion, the cost of surrender and time needed before the surrender fee goes away.

I would also like to know the return history of the investment within the VUL. I would like to know if there is any guarantee that after 12 years of $5,000 invested per year that your payout would be $5,000 per year and for how long this stream of $5,000 would continue.

If I was to invest $5,000 per year, I would select an S&P 500 Index fund. Over the past, an Index fund on average will return about 12% per year and if you invest $5,000/yr, this will grow to $120,000. If your wife then draws 4% per year which is a conservative value, she would receive $4,800 without touching the principle and her draw would grow as the principle grows. If the principle grows at 12%, her 4% draw at the end of the next 12 years would be $12,100 and the principle would be $300,000.

This does not take income taxes into consideration which would not impact a VUL investment.

I doubt that your FP will be guaranteeing the return. If he is guaranteeing that your wife would definitely be assured $5,000/year after 12 years of investing $5,000, then this might be a deal that would be worth further evaluation.

BGP


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