Should I purchase a whole life insurance policy? (I am close to retirement)
"First of all, congratulations on being in an incredible financial position.  you have done well. So let's look at the investment side first.   If you put 400,000 in a decent index fund at an average 8% growth, and add 75,000 every year, in 10 years you'll have about $1.95 Million, $800k of which is capital gain (more or less due to market risk, of course) - or $560k after 30% tax.  If you instead put it in the whole life policy at 1.7% you'll have about $1.3 Million, $133k of which is tax-free capital gain. So the insurance is costing you $430K in opportunity cost, since you could have done something different with the money for more return.   The fund you mentioned (Vanguard Wellington) has a 10-year annualized growth of 7.13%.  At that growth rate, the opportunity cost is $350k.  Even with a portfolio with a more conservative 5% growth rate, the opportunity cost is $178k Now the life insurance.  Life insurance is a highly personal product, but I ran a quick quote for a 65-year old male in good health and got a premium of $11,000 per year for a $2M 10-year term policy.  So the same amount of term life insurance costs only $110,000.  Much less than the $430k in opportunity cost that the whole life would cost you. In addition, you have a mortgage that's costing you about $28K per year now (3.5% of 800,000). Why would you ""invest"" in a 1.7% insurance policy when you are paying a ""low"" 3.5% mortgage? I would take as much cash as you are comfortable with and pay down the mortgage as much as possible, and get it paid off quickly. Then you don't need life insurance.  Then you can do whatever you want.  Retire early, invest and give like crazy, travel the world, whatever.   I see no compelling reason to have life insurance at all, let alone life insurance wrapped in a bad investment vehicle." I'll start by saying that if this is being explored to scratch a specific itch you have then great, if this was a cold call it's probably safe to ignore it. Certain whole life products (they vary in quality by carrier) can make sense for very high earners who are looking for additional tax preferred places to store money.  So after you IRA, 401(k), etc options are maxed out but you still have income you'd like to hide from taxes whole life can be a potential vehicle because gains and death benefit are generally exempt from income taxes.  Be on the look out for loads charged to your money as it comes in to the policy.  Life insurance in general is meant to keep your dependents going without having to sell off assets in the event of your death.  People may plan for things like school tuition, mortgage/property tax for your spouse.  If you own a business with a couple of partners it's somewhat common for the partners to buy policies on each other to buyout a spouse to avoid potential operating conflicts.  Sometimes there can be estate planning issues, if you're looking to transfer assets when you ultimately pass it can make sense to form a trust and load cash in to a whole life policy because death benefits can be shielded from income tax and the estate tax calculation; the current estate tax exemption is about $5.5 million today (judging from your numbers you might actually be close to that including the net value of the homes).  Obviously, though, the tax rules are subject to change and you need to be deliberate in your formation of the trust in order to effectively navigate estate tax issues.  You seem to have a very solid financial position from this perspective it looks like your spouse would be in good shape.   If you are specifically attempting to manage potential estate tax liability you should probably involve an financial planner with experience forming and managing trusts; and you should be very involved with the process because it will absolutely make your finances more complicated. There's nothing new about Whole Life Insurance. The agent stands to earn a pretty hefty commission if he can sell it to you. I don't think your assets warrant using it for avoiding the taxes that would be due on a larger estate. I don't see a compelling reason to buy it. "Disclaimer: I work in life insurance, but I am not an agent.   First things first, there is not enough information here to give you an answer.  When discussing life insurance, the very first things we need to fully consider are the illustration of policy values, and the contract itself.  Without these, there is no way to tell if this is a good idea or not. So what are the things to look for? A. Risk appetite.  People love to discuss projections of the market, like for example, ""7-8% a year compounded annually"".  Go look at the historical returns of the stock market.  It is never close to that projection.  Life insurance, however, can give you a GUARANTEED return (this would be show in the 'Guaranteed' section of the life insurance illustration).  As long as you pay your premiums, this money is guaranteed to accrue.  Now most life insurance companies also show 'Non-Guaranteed' elements in their illustrations - these are non-guaranteed projections based on a scale at this point in time.  These columns will show how your cash value may grow when dividends are credited to your policy (and used to buy paid-up additional insurance, which generates more dividends - this can be compared to the compounding nature of interest).   B. Tax treatment.  I am definitely not an expert in this area, but life insurance does have preferential tax treatment, particularly to your beneficiaries. C. Beneficiaries.  Any death benefit (again, listed as guaranteed and maybe non-guaranteed values) is generally completely tax free for the beneficiary. D. Strategy.  Tying all of this together, what exactly is the point of this?  To transfer wealth, to accrue wealth, or some combination thereof?  This is important and unstated in your question. So again, without knowing more, there is no way to answer your question.  But I am surprised that in this forum, so many people are quick to jump in and say in general that whole life insurance is a scam.  And even more surprising is the fact the accepted answer has already been accepted. My personal take is that if you are just trying to accrue wealth, you should probably stick to the market and maybe buy term if you want a death benefit component.  This is mostly due to your age (higher risk of death = higher premiums = lower buildup) and how long of a time period you have to build up money in the policy.  But if a 25 year old asked this same question, depending on his purposes, I may suggest that a WL policy is in fact a good idea."
Whole life in most instances is a very bad plan. It's marketed as a life insurance policy wrapped in an investment but it does neither very well. The hidden caveat of whole life is that the investment goes away if you die.  Say for example I have a $100,000 whole life insurance policy and over the years I have paid in enough to have a $15,000 cash value on the policy. If I die, my family gets $100,000 and the cash value is lost. With term life you can get a substantially higher amount of coverage for a smaller payment. If you invest the difference you end up not only with better coverage, but a better cash value from the difference if you don't die (which is what we all hope for anyways). As JackiYo said, your insurance should be designed around replacing lost income/value.  You should get 10x your annual income in term life insurance. &gt;Better for you and for me, yes, but not for the disadvantaged without benefactors. That's the situation I was in.   That wasn't exactly my point. I'm all for helping people, and social security does help people, and I am very happy it helped you - I'm not disputing that.   What I'm saying is that what you got from social security is not as good as what you would have got from a $500,000 - $1,000,000 term life insurance policy. For people in there 20s, in good health, that kind of policy should be $20-$40/month, which could easily be bought with the money we otherwise spend on social security. (Now... whether parents would actually be responsible enough to buy term life insurance and put money towards retirement if we didn't have social security is a WHOOOOOOOOOLE nother discussion.)  That's all I'm saying - I'd rather buy term life and invest for my own retirement because me and my family will come out ahead of where social security will put us. I'm really not a financial wizard, and I have to believe that this type of plan would work well for everyone else, too. Why do people take out life insurance on their children? They do so largely because it's being sold to them.  The insurance companies generally push them on the basis that if you have to pay for a funeral and burial, the cost would devastate a family's finances.  In some rare instances that might actually be true, but not generally. Should I take out a policy on my child? Generally no.  When they sell you a policy they have to dance around a catch-22 - if you have enough money to afford the 'cheap' life insurance, then you have enough money to pay for a funeral and burial that's probably not going to happen.  If you don't have enough money to pay those expenses in the rare case that a child does die, then you really can't afford the insurance, even if it's only 'pennies a day for peace of mind.' And why would schools send these home to parents, year-after-year?  The schools are paid a commission.  It is not much more than a fundraiser for them, just like school pictures. Am I missing something? Yes, in fact, you could be making money hand over fist if you were willing to prey on parental insecurities.  Just set up a stand outside the hospital and get parents who are just about to deliver to sign up for your amazing insurance plan in case the tragic occurs. "One reason is because car insurance is mandated. Mandated insurance means the government is forcing people to purchase it, which also means that everyone must have the opportunity to purchase it at a reasonable cost, even if the insurer would normally not choose to insure them. In mandated industries, risk pools are formed which means that as a whole, lower risk members partially subsidize higher risk members. In mandated industries that have a large risk variance, the insurance system would break down if everyone was charged their ""fair share"" because high risk members would be unable to afford a policy. (This is even more prominent with health insurance than car insurance because the difference in risk is vastly greater.) On a positive note, perhaps you may get a warm and fuzzy feeling knowing that you are helping out others ""in need""." Term life insurance makes sense if you will have a need for money if someone dies.  If you (and your brothers) do not have enough money currently for a proper burial for your father, then you might consider term insurance to cover this.  If you already have the money to cover this (or can save for it in a short amount of time), then you are better off financially to not purchase the insurance. Estimate what you think it will cost for a burial, then determine if you have this money available to you.  If you already do, then don't purchase the insurance. If you do not have this money available to you, then you can look into a term life insurance policy on your father.  You definitely do not want a whole life insurance policy.  This will cost many more times what a term policy costs.  A term policy is a policy with an expiration date. For example, let's say that you determine that you will need $10,000 when your father dies for the funeral and burial.  You could get a 10-year policy on your father for $10,000.  Over the next 10 years, besides paying your premiums, save up $10,000 ($1,000 each year) in some type of savings/investing account.  Hopefully, your father will still be around 10 years from now, and you won't need the insurance policy anymore, because you will have saved enough to cover the costs when the time comes.  Doing this will almost always cost you less than getting a whole life policy, which never expires, but has much higher premiums. There are also 20-year term policies, which will cost more, but will give you more time to save up your fund.  The costs for these policies depend on your father's age, so get a quote for both and decide what will work for you. "There are two types of insurance: whole life and term. I don't recommend whole life insurance, because you are insuring against something that will happen, your death. Maybe you could buy it if members of your family have a history of outliving the averages. This is called ""adverse selection."" Term is different: it insures against your UNTIMELY death. Many people I know take term insurance for the X years until their last child leaves college, or some other well defined ""term."" They don't want to die before this term but will be satisfied with the insurance as a ""consolation"" prize." Here's an easy 2 question test: (1) Is there anyone who relies on your income for their general welfare? (2) Is it worth the premium amount to you to make sure they aren't left out in the cold? If you can answer yes to both questions, buy (term) life insurance. "anything whole life has a value (sometimes known as ""cash value""), which is the value you get if you surrender the policy to the insurance company (ie. cancel the policy).  I'm not sure i'd sell another person/company a life insurance policy on myself though.  Kinda creates a bad incentive problem."