Anonymous
Is it a valid strategy/right mindset to treat whole life policies as the high yielding bond component in investment portfolio/short term needs (downpayment for house/wedding etc)?
Turning 25 this year and I currently have 2 whole life policies that is being passed down to me (parents bought them when i was 1). Death/TPD coverage (100k + 50k) is irrelevant to me as I have a 1mil death/TPD term life till 75 yr.
Although I'm a strong believer of BTIR, the IRR appears to be really good (3.5 - 4.4 %) based on current surrender values and the projected (non-guaranteed) values in 5/10/even 30 years - much higher compared to fixed-income instruments currently available.
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Hey there!
Life policies do give a guaranteed value but do note that 3.5 - 4.4% is a projection. And also, you may want to see them as a protection tool instead of a income generating tool because thats the main selling point: protection. The cash value is really a way to complement your retirement needs in the future and cashing out will terminate your plan. Also, it will be something you will want to cash out upon retirement instead.
Whether to cash it out or not will largely depend on whether you'll like to continue paying for it based on your existing budget. I will strongly suggest you to separate out your different pots of income generating instruments to meet your different objectives based on your differing time horizons.
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