Should Whole Life Insurance be Sold as a Personal Pension Plan?

You see articles like at www.advisorone.com, touting the fact that high net worth individuals should be using life insurance programs to fund retirement.  Its like watching a scary movie.  Don't go into the room, don't do it.

Once again, you see something like "penalty free distributions before age 59 1/2".  This is not accurate.  You only can distribute the money if you surrender the policy.  Once you surrender the policy, you pay taxes on any gains.

If you don't surrender the policy, you must pay for the cost of life insurance.  In addition, they mean that a loan is a "tax free" distribution.  Read about that concept in Does the Loan on a Whole Life Insurance Policy Constitute Tax Free Retirement?

This article does have some good coverage of various topics.  However, in general I would say high net worth investors should take stock in companies, purchase real estate property, use life insurance annuities or anything that keeps the investment separate from insurance.  How is creating an account whose sole purpose is dedicated to paying for high life insurance premiums good for asset protection?

This post was reposted from http://finlit.biz/life-insurance/should-whole-life-insurance-be-sold-as-a-personal-pension-plan/, originally written on January 31st, 2013.