Originally Posted by
Verdell
I think we make money, via lower imputed income taxes. I think the crux of the difference is that the current Term insurance is handled differently tax-wise than the GVUL. Tax laws are different between the two types of life insurance plans, and the GVUL *appears* to be more advantageous taxwise for our application.
And, Metlife makes some scratch on the 2.25% fee on deposits from those who choose to do so.
Someone more bored than me should run a spreadsheet of what it looks like to "invest" the saved imputed income tax dollars into the GVUL investment vehicle. Basically, zero out the change in imputed tax, put the extra into investments (taking the 2.25% hit on it), effectively paying in the same amount of dollars as the current Term plan. It'll only amount to a few hundred (maybe thousand when older) dollars invested a year, but I'm be curious what the final theoretical number would be.
I’m planning to run that illustration when I get some time. For easy math let’s say my current imputed is $1150/yr in income. Let’s make math easy and say marginal tax rate is 30%. Current plan is costing $350/yr in taxes. The GVUL imputed drops that to $350/yr and a tax bill of $105. So a $245 difference a year in my cost for the same coverage (subject to go up in each 5year age band). Now, if I put $245/yr into a 4% investment, minus a 2.25% fee… at a guaranteed 4%, for 27 years, and adjust the imputed amount to be the difference… what would that be? What about the investment options, after fees? Gotta run the math.
I don’t see any pilot hurt by going GVUL. The investment side becomes do you want to “be your own bank”, build a cash value to keep paying the premiums when you retire, or just save in taxes for the rest of your career. Enrolling makes complete sense, the rest needs some time with a spreadsheet and everyone’s numbers and outcome will be different.