overfunded Universal Life Insurance Contracts for retirement

[Mary pj]

I've just finished reading Douglas R Andrew's book"Last Chance Millionaire". His investment strategy is to overfund a Universal Life Insurance contract, minimizing the death benefit, let it sit for 15 years and the insurance company will invest it and get 8%, so you've tripled your investment all tax free. You'd live off the interest for 10 years and then borrow off it for the remaining 20 or so years until death. It sounds too good to be true. Has anyone analyzed this? His website is www.missed-fortune.com for anyone that wants to research this.

[SteveinMN]

I wonder at which insurance company Andrews worked...

- Universal Life is not an efficient investment vehicle. First, do you need that death benefit, minimized or not? If you don't, why pay for it at all? If you do, UL is an expensive way to get that coverage.
- Second, life insurance companies aren't exactly E-Trade or Vanguard. They'll invest your money but they certainly will take their cut for doing so.
- Third, they're guaranteeing an 8% annual return? On top of their take? I want in on that.
- Fourth, the numbers in the example don't add up for a lot of people. If I'm, say, 55, and I buy the UL policy and put money into it for 15 years, I'm now 70. I live off interest till I'm 80 and then borrow against it for the next 20 years? Now I'm 100. Maybe. Meanwhile I could have invested my own money in a tax-advantaged retirement plan without all the friction of death benefits or an intermediary managing my money Then there's the question of paying back the net after the death benefit is subtracted from what you borrowed. Perhaps it works if you start earlier, but for Reasons 1-3, I don't think it will.

Is it lunchtime yet? I smell lunch meat.