Payingforschool:MarkA in quotes..
"Just show me how someone , when he/she dies...at whatever age, can be guaranteed (using my example) $1,000,000?"
Agreed, life insurance is the only thing guarenteed, but there is a cost. And that is what I am trying to figure out. If you are the wage earner and people are dependent on you, you would be stupid not to get it. At that point, it is not an investment it is for insurance only. If you have NO need for it, then it comes down to whether it is a good investment."
---Yes, I agree that the cost has to be considered...you wouldn't pay $100,000 a yr for $1MM in LI....Thats why I said that you would have to qualify at standard rates or better.
"How do you know when one will die? And 10% is not relevant....its not guaranteed and it may not be in the risk frame of the person. "
You gave me a quote of 10k per year( sounds like a guess), I chose 10% (my guess) based on 25 year time frame and stock portfolio-index. The risk frame in our comparison is based on whether to buy the life insurance at 10k a year or to invest it (acutally to keep in IRA, which is equivalent to 14k at a combined fed and state tax rate of 30% (10k / .70). If that is the case the risk frame is high = stocks.'
---you shouldn;t assume the premium is coming from the IRA. Nor should you assume the person wants to have that money invested in the market. If so, the a VUL could make sense and thus come very close to your 10% ROR.
"(Ofcourse, if one wanted to compare investments in the market, then you would have to compare with a variable life policy to make it apples to apples."
Yes that would be a diff comparison with a diff premium and death benenfit??
"If this person dies tomorrow...or if in the next 10 yrs....the return on premium can't be beat! If he dies in 30 years....he is still ahead simply because the payout is guaranteed to be $1,000,000 tax free and estate tax free....this doesn't even include (which you didn't either) the additional benefit of RMD at an age 30 years younger! "
"I would agree if you die the next day or, you win(not the way i want to win). I didn't mention the RMD because the non-spouse beneficary would be required to empty out the account within 5 years at quite a high tax bracket due the large amount in the IRA. Reason is because IRA owner would be dead at 61 and not be in RMD until age 70+. "
---No, Thats NOT correct...The IRA would not have to be paid out in 5 yrs....it can be paid out over the beneficiarys life expectancy!
A big problem we are having here is you are making assumptions based on YOUR beliefs and YOUR scenario for facts based on a complete stranger (ie my 60 yr old example...which actually is a real person and real scenario).
The fact is I fully understand the goals/objectives of this person and he was more than willing (and knowledgeable) to buy the life insurance. This has NOTHING to do with 10% historic market rates.