Zoltar & Whole Life Insurance: An Alternative Asset Class Even During a Down Stock Market

Aaron Schindler

July 15, 2022

Schindler Financial Newsletter Q2 2022

June 2022 - Many times over the years I have passed by these fortune telling machines in the food courts of the New York State Thruway stops. You put in a buck and out comes a little card with your fortune. I’ve often thought that if Zoltar could instead predict our financial wealth and the best paths taken to achieve that wealth, the line for Zoltar’s advice would snake back to the rest rooms.

Here’s a financial tip on the future from my own past, two decades ago when I began my career as a Financial Advisor: Buy Whole Life Insurance for yourself and your adult children. It is one of the only assets that I know off that can simultaneously protect and supplement one’s wealth even in a stock market downturn.

Zoltar Part 1:

From Photojournalism to a 20-Year Career in Finance: Zoltar & Whole Life Insurance as a Fundamental Rock of Wealth
The Past Utility of My Whole Life Insurance as an Asset While Alive: My Big Bundle of Cash Value Savings with Bond-Like Returns that is Guaranteed to Grow Even in a Down Stock Market

Zoltar Part 2:

The Future Utility of My Whole Life Insurance as an Asset While Alive: Retirement Income & Long-Term Care Funding
How to Use a Hybrid Whole Life Insurance Policy to Fund Long-Term Care Expenses. You Can Potentially Design Your Policy to Surrender It & Have Your Premium Returned
How a Whole Life Insurance Death Benefit Can Pay in Full Even in a Down Stock Market
Should You Purchase a Whole Life Policy for Your Adult Children?
How to Schedule an Appointment with Aaron to Review Your Life and Long-Term Care Policies and Options

Zoltar Part I:

From Photojournalism to a 20-Year Career in Finance: Zoltar & Whole Life Insurance as a Fundamental Rock of Wealth

In my 20s and most of my 30s, I was a footloose and fancy-free, single male curating and presenting photojournalism exhibits on human rights themes of the day in museums throughout America, France, Holland, and China.

My romantic relationships lasted anywhere from six months to one year. Money was enough to live comfortably. Beginning in my 20s, I followed my father’s advice to invest savings in the stock market. I knew very little about insurance, especially that life insurance could serve as an asset with built-in cash value savings guarantees that would later help me purchase real estate and might later be used as a source for retirement income.

The advent of the World Wide Web and its devaluation of the media and photography finally pushed me to recreate myself as a Financial Advisor. When I joined Wealth Advisory Group’s terrific training program in 2003, I quickly learned that becoming a Certified Financial Planner, who could help clients plan and protect their futures by building diverse assets protected by appropriate insurance, retirement, and estate plans, should be my career goal. Becoming a Financial Advisor who just managed investments wasn’t enough to give families the tools to achieve life goals through good times and bad. Just look at this year’s more than 20% decline in the NASDAQ and more than 10% decline in the S&P 500.*

Looking back at my two-decade financial career, one of my first and best decisions was to purchase a whole life insurance policy for myself and advise clients to do the same. Why, as a single male, did I have the foresight to purchase life insurance? Personally, I believed that I would eventually meet the right romantic partner and have a family that I’d want to leave financially stable when my day arrives. In theory, I believed the financial planning textbooks and how they preached the need to build diverse assets with diverse liquidity and volatility. I realized that I might need to build assets that had built-in guarantees and a low correlation to the daily ups and downs of the stock market.

So I took my ticket, figuratively, from Zoltar. I probably have cursed that choice more than a few times when my annual insurance premium came due. But I kept paying. Now, at almost 59, I’ve got a permanent relationship and am co-parenting a precocious 12-year-old. Suddenly that sometimes cursed (why-did-I-ever-buy-this-who-needs-it-in-a-booming-stock-market) permanent whole life policy has clearly become a fundamental rock of wealth that I can count on no matter what the future assuming I pay my premiums.

The Past Utility of My Whole Life Insurance as an Asset While Alive: Peaking Back at 19 Years

My Big Bundle of Cash Value Savings with Bond-Like Returns & Guarantees:

Last month, upon the nineteenth anniversary of purchasing my Guardian Whole Life policy, I requested an In Force Whole Life Illustration to see if my original goals and theories for purchasing my policy have come to fruition. Or was I just betting my hard-earned dollars on the whims of Zoltar?

See My Full Policy

Well, let’s click on policy illustration page 7 above, and study policy year 19. After paying an annual base premium of $7167, my actual net cash value has grown to $172,797. My annual internal rate of return on cash value is almost 4%. The cash grows tax deferred making my equivalent after tax return approximately 5.6% per the illustration’s assumed 28% income tax bracket..

Keep in mind that the yield on the 10-Year Treasury rarely rose above 3% over the past decade and has been below 4% for most of the past fourteen years.* So far, my annual tax deferred internal rate of return of almost 4% looks pretty good to me, especially with a guaranteed minimal rate of return ($153,355 currently) assuming I pay my premiums.

What is also remarkable is that my Net Cash Value (see Non-Guaranteed Net Cash Value Column) is expected to grow from $172,797 to $187,436 over the next year. So I pay a premium of $7,167 and should see my cash value grow $14,639, more than double the premium.

And, by the way, you might be asking yourself how can the carrier payout such a return when the NASDAQ* and S&P U.S. Treasury Bond 7-10 Year Index** are respectively down more than 20% and 9% year-to-date.

NASDAQ Composite Index

S&P U.S. Treasury Bond 7-10 Year Index

Take a look at the guaranteed cash value growth. My guaranteed cash value will at least grow from $153,355 to $163,870. So I pay a premium of $7,167 and my cash value will at least grow $10,515, almost 150% of the premium. Many policies are actuarily designed for accelerated cash value accumulation after year six or seven. In earlier years, larger portions of premium are allocated to administrative costs, fees, and death benefit.

*Product guarantees are backed by the financial strength and claims-paying ability of the issuing company.

^{©All rights reserved, 2022, by Robert Lovenheim & Aaron D. Schindler CFP®}^{*www.yahoofinance.com
**S&P U.S. Treasury Bond 7-10 Year Index}

Schindler Financial Newsletter Q3 2022

July 2022 - Here’s a financial tip on the future from my own past, two decades ago when I began my career as a Financial Advisor: Buy Whole Life Insurance for yourself and your adult children. It is one of the only assets that I know of that can simultaneously protect and supplement one’s wealth even in a stock market downturn.

In Part 1, we discussed the “past utility” of Aaron’s Whole Life Policy as an Asset including how he’s building a:

Big Bundle of Cash Value Savings with Bond-Like Returns & Built-In Guarantees
& Leveraged His Policy to Invest in Real Estate.

We will now discuss Aaron’s potential “future utility” including:

Using his Whole Life Policy to Supplement Retirement Income While Alive
Using a Policy to Fund Long-Term Care Benefits While Alive
How His Policy Should Pay a Full, Income Tax-Free Death Benefit Even in a Down Stock Market
& What Age Should You Buy Whole Life Insurance for Yourself or Adult Children?

Zoltar Part 2: The Future Utility of My Whole Life Insurance as an Asset While Alive: Retirement Income & Long-Term Care Funding

How to Use Whole Life Insurance Cash Value to Enhance Retirement Income Even in a Down Stock Market:

Whole life insurance policy owners can access their cash value through policy loans, dividend withdrawals, or both.*

Enhancing one’s retirement portfolio with whole life insurance cash value can give you permission to enjoy other assets, either by spending them down or holding on to them in the event of a market decline.

I might spend down my other assets first in retirement and leave my whole life insurance policy’s cash value as a last resort asset if I desire to preserve the policy’s maximum death benefit as a legacy for my girlfriend and her daughter.

However, in the event of a market decline during retirement, I might choose to take whole life cash value first rather than selling equities or real estate in a down market to fund my future retirement lifestyle. Why sell stocks at low prices if you have another source of liquidity? I might want to hold shares of stocks, particularly those counted on for dividend income, Can we count on Zoltar to predict the next market decline, particularly during our retirements?

How to Use a Hybrid Whole Life Insurance Policy to Fund Long-Term Care Expenses:

You can now purchase a hybrid life-long-term care policy that offers both a death benefit and long-term care benefit. You can also purchase a whole life insurance policy with a long-term care rider. In both cases, you can spend down some of the death benefit to fund potential future homecare and other qualified long-term care expenses.

Did you know that the U.S. government says that someone turning 65 today has a 70% chance of requiring paid eldercare services in their remaining years? The New York State Department of Financial Services says annual long-term care services in the New York City metro area can easily reach $145,000 a year and last 2.5 years. And the average cost and length of Alzheimer’s care is much higher and longer.**

The Whole Life Insurance Death Benefit Will Pay in Full Even in a Bad Stock Market:

And lastly, take a look at how the death benefit has grown from $500,000 to approximately $535,000 in year 19 of page 7 of my policy illustration below. Upon my death, the carrier isn’t going to pay less than $500,000 even if stocks and bonds have taken a beating. And your beneficiary’s death benefit is income tax free. Would you rather inherit an investment portfolio that is 20% down or a full tax-free death benefit?

See my full policy

At What Age Should You Purchase Whole Life Insurance? Maybe Your Parents can Assist with Premiums?

If you recall, this footloose and fancy-free male purchased a policy at age 37 when I changed careers and became a Financial Advisor. If I had known about whole life insurance, I would have purchased a policy in my 20s. Multiple clients who own whole life insurance policies have pushed their adult children to purchase policies while they are young and healthy. The younger and healthier you are, the lower the premium. In some cases, parents are funding premiums for the first couple of years. Looking back at their own policies, they want to see their adult children and grandchildren protected and help them build an asset with guarantees. They also know that there is a good chance that policy dividends can be used to pay annual premiums after 20 to 25 years. Why not have the option to stop paying premiums by the time you hit your 40s or 50s?

I suggest purchasing a policy anywhere from ages 20 to 50, again, while healthy and able to be underwritten. I would not count on Zoltar.

Schedule an Appointment to Review Your Life & Long-Term Insurance Options:

Please feel free to contact me to schedule an in person or Zoom meeting to review your insurance options and current policies at
917-715-2233 or aschindler@royalaa.com.

^{*Please refer to the notes in Aaron Schindler’s linked Guardian While Life 100 Inforce Illustration, April 27, 2022 andBuilding an Effective Retirement Portfolio with Whole Life Insurance, The Guardian Life Insurance Company of America, Pub 4821 (07/11), 2011-2431. Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.}

^**^{Long Term Care: The Cost of Long Term Care in New York | Department of Financial Services (ny.gov)}