Thanks. .

 

does anyone know if while on long term mil (read: I am paying the premiums) if those spreadsheets of coverage dalpa put out are premiums paid by pay period or month?

 

Seems like the biggest downside of the investment option is that there’s a 2.5% load up front. But wouldn’t your tax free withdrawls (up to the cost basis) more than make up for this and make it better than a taxable brokerage account? Full disclosure, I’m not great at Math.

worded another way, wouldn’t this be better than investing the same chunk of money in a normal taxable brokerage account?

 

Don't view it as an all or nothing vehicle. Diversify, diversify, diversify. Some in taxable, some in tax sheltered even of those earn a little less is a good thing. The hard part of the question to answer is how much the government is going to steal from you when you are "retired".

 

Diversification is great, as long as the vehicles/investments you are in are actually good. The GVUL at best provides minimal tax savings, likely actually provides a tax penalty, and charges a 2.5% fee.

No thanks. I’m happy to take the imputed income savings and invest elsewhere.

 

You nailed it. A small income tax deduction for a 2.5% fee on after tax investment that is subject to income tax is not appealing when the alternative is a no fee investment that is subject to capital gains tax. I think too many overlook the impact of income vs capital gains tax on the earnings. That doesn't even consider the GVUL investment performance relative to its mutual fund or ETF counterpart.

If you are investing purely for stable yield, the baseline of 4% interest with a 1.5% guarantee falls well below the 5% money market rates currently available. Even with the income tax savings, you end up ahead on the outside.

DYODD, YMMV
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I had MetLife run an illustration for me. If I put in $250 a month into the freedom 2050 fund (age 65 retirement) and no more, meaning let premiums pull from principal, at an assumed 7%ROI (after load) I'd have roughly $250K at retirement in the cash balance side. Right now it's about $9800/yr from 65-69 to keep the full GVUL value, remember is 2500x top CA rate. The rate goes up exponentially post 69. My $125/PP would fund me to 72-75 depending on market return and where pay rates go for the full face value. Now, if I took the difference in just imputed income, at age 38, and invested what I "don't pay" for imputed it came out to keeping full coverage until maybe 70 in this freedom fund (really just a 7% ROI post load). Used it just to try and find a middle ground on investment returns. There would still be an ability to pull a good chunk of change tax free at retirement and let the policy fail. Is it worth it? Ehh, haven't decided. Everyone's financial picture is different but the option exists where it COULD make sense. Someone retiring in the next few years would need roughly $50k to keep insurance from 65-70:years old. The $250k/-50y trend to $10k retiree life is separate so that still exists. Just depends on who or what depends on you at retirement vs what you assets already protect vs liability/legacy.

 

In my mind, for most pilots, I don't see a need for life insurance past retirement age. By the numbers I'd bet that most pilots will have enough money to be self-insured even before 65, but the value of the employer-provided insurance with just a reasonable tax bill makes it make sense for most people to keep the GVUL until retirement. But past that at $9800/year I don't see the value in keeping the GVUL past retirement if you are already a multi millionaire. I think if I ever did invest in this I'd want to take my own money out at retirement and invest it some other way as opposed to exhausting it to pay premiums on a life insurance product.

 

If post retirement life insurance is the objective, look into a 20 year level term policy. $1.2 million will be roughly $300/mo for a healthy 55 yo pilot. That keeps you covered until 75 AND provides additional coverage on top of the GVUL years.

 

glad to see others have the same thought process. By 55 I plan to be done needing term with my kids out of the house and college paid for and enough assets for my wife to be able to live the same lifestyle in perpetuity. For some, not the case. Had an illustration run for curioutisty, and running the math some taxes could be avoided, but capital gains in a brokerage, without a 2.5% load... I'll just say "ehh". I've made my decision at this point and will save on taxes either way.