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Should I buy life insurance for my parents as a way for me to save for retirement?

Term Life Insurance & Whole Life Insurance Discussion

Should I buy life insurance for my parents as a way for me to save for retirement?

Postby gifuhard » Sat Dec 15, 2012 10:36 am

I wanted to buy life insurance for my mom who is 48yo and set myself as the beneficiary. I was wondering if this was a good way to save for the future? Im currently 19yo and probably shouldn't even be worried about this but better to be safe than sorry. What type of insurance should I buy for her (term, whole, permanent ...) its all very confusing. I hope my mom will never die, but by the time I retire she might be or at least she will be very close. It may sound terrible but could I benefit from her death this way? Could I buy say like a 500k, 750k, 1 million dollar policy for her where I paying the premiums until her death... 20yrs... 30yrs.. 40yrs.. from now? I was wondering how it all works and if its even possible for me to do this. What would be the best route? Would I be losing money this way or would I be gaining? or should I just invest the money in a more traditional retirement manner or could I really benefit this way? THANKS!
gifuhard
 
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Should I buy life insurance for my parents as a way for me to save for retirement?

Postby dekle19 » Sat Dec 15, 2012 10:37 am

No, you should not do this. You will be losing money. You will not benefit. The person selling you the insurance will benefit. You should invest in a more traditional way.

If you buy term, and she does not die during the term, then you receive no money, and you lose all the money that you spent on the insurance. The term is usually 10-30 years. Most women in the U.S. live to be older than 78, so she probably won't die during the term, and you probably won't get any money, and will probably lose everything you spent on the insurance. On the bright side, you won't be paying the premiums 40 years from now, because at the end of the term, the insurance either ends or raises the price to more than you can afford, so you will only be paying during the term. After that, you won't have the insurance any more, so you won't be paying.

With whole life insurance, you can keep the insurance as long as you want to keep paying, and you won't lose every last penny. However, whole life insurance is so expensive that you won't be able to afford to pay the premiums for "like a 500k, 750k, 1 million dollar policy". All you will be able to afford is a very small policy, which won't give you enough to retire. Also, if you traditionally invest the money that whole life insurance would cost, you will have more money in 30 or 40 years than you would get from the insurance when she does die.
dekle19
 
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Should I buy life insurance for my parents as a way for me to save for retirement?

Postby rameez » Sat Dec 15, 2012 10:42 am

No. Buying life insurance as a savings tool, is like buying a pair of Prada heels to hammer a nail in. It will get the job done - in the most expensive, least efficient manner possible.

Run the numbers. Buying a $1,000,000 whole life policy on a woman who's perfectly healthy, and not overweight, and nonsmoker, who's 48, (btw, you'd need her cooperation to do this), might run you $700 a month. Every month. Maybe for 40 years.

Life insurance is a bet, between you and the insurance company, when the insured person is going to die. What you pay in, vs the death payout, are the odds. And just like in Las Vegas, the odds will always favor the house.
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Should I buy life insurance for my parents as a way for me to save for retirement?

Postby conwy » Sat Dec 15, 2012 10:46 am

No. Buying life insurance as a savings tool, is like buying a pair of Prada heels to hammer a nail in. It will get the job done - in the most expensive, least efficient manner possible.

Run the numbers. Buying a $1,000,000 whole life policy on a woman who's perfectly healthy, and not overweight, and nonsmoker, who's 48, (btw, you'd need her cooperation to do this), might run you $700 a month. Every month. Maybe for 40 years.

Life insurance is a bet, between you and the insurance company, when the insured person is going to die. What you pay in, vs the death payout, are the odds. And just like in Las Vegas, the odds will always favor the house.
If you are looking for money for your retirement, this is one of the worst places that you could stash your cash. I won't elaborate too much since the other posts are fairly comprehensive, but it is a bad idea.

The only reason to buy whole life insurance is for specific estate planning purposes (for your mom, not you).
conwy
 
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Should I buy life insurance for my parents as a way for me to save for retirement?

Postby storm81 » Sat Dec 15, 2012 10:49 am

Buying whole life insurance.
One of the worst mistakes a person can make.
Just don't do it.

Also know that for any significant amount of money, it would cost an arm and a leg to insure a person close to 50. You might as well take those thousands of dollars a year and put it into savings.

Subprime people buy whole life insurance. Don't be one of them.
Not sure why subprimers think of this as a way of saving.
Know that she probably has term life insurance through her work.

Why not open a ROTH IRA and save for your own future?
That money can also be used for a down payment on your first home someday.
Get that idea of life insurance out of your head - I meant that in a nice way.
storm81
 
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Should I buy life insurance for my parents as a way for me to save for retirement?

Postby vallis » Sat Dec 15, 2012 10:55 am

Do you have $500/month to buy a $1,000,000 policy that will last forever? Otherwise, are you what would you do if you bought a 20 year term....push down the steps in 19 years and 11 months?

Even still, if she lives to 98 years old, you're looking at a 4% return on your money that you don't get until she dies. Of course if something happened a week after you bought it, your returns would be in the thousands of percent.
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Should I buy life insurance for my parents as a way for me to save for retirement?

Postby ronell » Sat Dec 15, 2012 11:06 am

You're better off investing in the traditional manner.

If she buys the policy and names you the beneficiary, that's one thing.

If you buy the policy, and then she dies from a crime, guess who just became the prime suspect. You.
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