"life insurance is hands-down the easiest and lowest-impact way to pass wealth on to the next generation. . . . If you’re retired, your adult children should be paying the bill for you."
Can anyone explain the math and/or logic behind this to me?
Can anyone explain the math and/or logic behind this to me?
What the author didn't explain is that life insurance is a way to avoid inheritance tax. Depending on circumstances, it's cheaper to pay an absurd amount of money for an insurance policy, because the payout to the beneficiaries is taxed differently than a straight-forward inheritance, and thus might, after taxes, result in a better payout.
Assume they have paid of their debts, maxed out their 401k and Roth IRA contributions and they have extra money to invest for retirement. If they put it in the stock market they will pay income taxes and any dividends they receive, which they don't have to pay any taxes on life insurance so I see that. But it still seems to me that life insurance is a bet on when I die and if they are not dependent on my income I don't see why they would want to take that bet.
I am 57 and I can get a 20 year term-life insurance for $5k/year with a payout of $250k. If I outlive the policy that is $100k in sunk costs and the next term life policy will be even more expensive.
Whole life makes even less sense at my age. The only way this makes sense to me is that if you had a whole life policy that you started wen your kids were younger and now you are retired and can't afford the payments do you cash it out? Well, if I cash it out then maybe I end up spending it or the nursing home gets it, but if my kids take over the payments then they get the benefit (unless the nursing home still takes it.)
This still assume I bought whole-life 20 years ago which everyone at the time told me was a sucker's bet so I'm still not sure that this makes any sense.