Originally Posted by
PilotWombat
For those of us that have a long time to go before 65, we have the benefit of time on our side. I've calculated that at the current rates, the company's contribution to my cost basis will be about $40,000 (almost certain to go up during my career). If I were to dump about $30k in to the anemic guaranteed return investment (4% now, 1.5% minimum, I used 3%) and never add or remove another cent, I'd end almost even with the total cost basis at the end of my career, for $675 in fees. If the investment options end up being even slightly better, say, 5%, I would need significantly less to start with, about $13.5k.
That seems to me to be the best strategy if you want to take advantage of the investment profile. Put in as little as possible as early as possible so that you just barely hit the cost basis on retirement day.
The GVUL investment earnings are subject to income taxes. This sets up a false comparison such as $40,000 cost basis times 35% income tax equals $14,000 tax savings. The real comparison should be $40,000 times 20% capital gains tax equals $8,000 tax savings. You see the alternative to investing in a GVUL policy is a taxable brokerage account that pays capital gains tax NOT income tax.
A better option would be a tax efficient ETF that doesn't charge an upfront 2.25% fee and offers better returns.