OT: Life Insurance

[patdog]

It really helps if you have your own business and can employ them there. You'll have to pay Social Security taxes on their earnings, but it's still a very good deal. You could also file returns for them reporting their mowing or baby sitting income, pay the self-employment tax, and fund a Roth with those earnings, or you could pay them for work performed around the house, and report that as well. For all of these, they need to actually do the work, and the amount you pay them has to be reasonable.

 

[patdog]

Capital gains taxes are generally 15% (unless you're in a really high tax bracket in which case they go up to 20%). Plus 5% state tax in Mississippi. But you only pay it on investments you sell. You could have $1,000,000 in unrealized gains and pay very little taxes (on the dividends, also at capital gains rates).

 

[Bulldog from Birth]

Withdrawing money from a whole life policy cash value is NOT a tax free event!! The only money that is “tax free” is the money up to the amount of what you paid in premiums. Any withdrawal from a whole life policy above what you paid in is a gain, and it IS taxable. But that’s the same for any regular old investment you make.

 

[Jeffreauxdawg]

It looks like everyone that is not selling WL agrees anyway. The good folks at nerdwallet break it down well for us. Basically outside of the people with estate planning issues around large estates and/or leaving a business to one child without stiffing to the others, it's just too expensive. I am not sure how anyone can argue annuities, whole life, or emu eggs are good investments outside of the handful of super wealthy, 10+ children having, long term guaranteed income needing, ornithological farming, business owner crowd.*

It's 10x the premium for a 30 year term.

https://www.nerdwallet.com/blog/insurance/what-is-the-difference-between-term-whole-life-insurance

 

[1msudawg]

Why do your kids need life insurance? Answer is, they don't.

Because life insurance policies for kids aren't just life insurance. They build retirement income and catastrophic injury illness protection. The one i have on my son will pay over $100,000 if he gets cancer or gets seriously injured. When he is 30 he will have over 30k for a downpayment on a home. He will also have over 100k in retirement income at 66. And at 66 he will have a million $ life insurance policy all for $157 a month for 18 years. If he wants to keep paying on it it will be more.

I did it for his future. Not mine. So, yes. Your child down need, and can use a policy.

 

[1msudawg]

There are also return of premium term policies. Insurance companies like those because they aren't paying the face amount back, and they get to invest your money for 20-30 years, and you get 100% of your premium back. Or you can choose to have a fully paid policy for a smaller face amount.