Universal life insurance for Americans that can't TFSA?

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
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thrashertm
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Universal life insurance for Americans that can't TFSA?

Post by thrashertm »

What does the forum think about the strategy of over funding a universal life insurance policy as an alternative to a TFSA, since a TFSA is not advantageous for Americans - http://www.financialwisdomforum.org/for ... 0&t=118085. Does anyone have insight as to the investment potential into a $100K UL policy w/ an $800 annual premium - i.e. how much cash you can sock away in there and put into mutual funds?

Here's a good summary of the tradeoffs of using a UL policy in this fashion - http://www.fladvisors.com/blogs/financi ... nce-policy

Apparently the Canadian govt will be tightening up on UL policies soon - http://www.insurance-journal.ca/2013/09 ... x-shelter/

Thanks
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kcowan
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Re: Universal life insurance for Americans that can't TFSA?

Post by kcowan »

I don't see buying life insurance if it is not needed for other reasons. Insurance salesmen know all about the tax sheltering effects of their policies. And they have been very liberal in Canada owing to the lifeco lobbying efforts.

But your links suggest that such advantages might be getting reduced. And the cost of making investments inside a policy are offset by the high MERs of such investments.
For the fun of it...Keith
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6miths
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Re: Universal life insurance for Americans that can't TFSA?

Post by 6miths »

I would be a 'no'. It's such a tiny policy I can't imagine that the premium is going to go very far against the high costs involved with such policies. If you need insurance, go with term and invest the difference. You may have heard that somewhere before. Insurance agents have been talking about 'the benefits being so great that the government is going to take them away' for the 30 years that agents have been pitching these to me and I'm sure long before that as well. And unlike TFSAs, these things are pretty much totally inflexible although I'm sure the agent would say that is not so because you can borrow against them and this is a great 'feature' - sure it is!
thrashertm
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Re: Universal life insurance for Americans that can't TFSA?

Post by thrashertm »

Thanks for the feedback. I should have mentioned in my previous post that the funds to be invested in the insurance policy would be AFTER maxing out the RRSP. Failing that it seems like the next best bet is using an unregistered brokerage account to hold US denominated stocks/ETFs like VT.
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Re: Universal life insurance for Americans that can't TFSA?

Post by OhGreatGuru »

There are a number of threads on life insurance, independent of the TFSA side-issue. The general opinion seems to be that whole-life, universal life, or other forms that have an investment component are poor "investments" due to the returns. That most people who need insurance should only buy term insurance. And that the other types should only be bought if there are other considerations such as estate planning.
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