Introduction Of How To Get Guaranteed Rates of a 3 Pay & 4 Pay Insurance Rates Guide
How To Get Guaranteed Rates of a 3 Pay & 4 Pay Insurance Rates Guide. Where we left off regarding the best options we looked at anywhere between a one to five pay scenario that one million dollar lump-sum getting into a policy and not paying a penny thereafter all non-mex scenarios so here’s our three pay and then here’s.
The cash value difference you see that the pay
Our for pay and the cash value difference you see that the pay had slightly more as we look at the time what we notice here is not a huge difference let’s look at age 85. the difference in cash value is what is just under 8 000 so before we jump to the internal rates of return let’s look at the guaranteed values this assumes a guaranteed interest rate on dividends is going to say dividend interest rate a guaranteed interest rate of three per cent.
If you saw the first video we talked about the difference between a dividend rate and the net internal rate of return granted the guaranteed rate here is three per cent that is never what I will earn when I look at the internal rates of return you can kind of see that just concerning how long it takes to get my million dollars back.
Three pay million in takes 10 years
There’s my three pay million in takes 10 years how about over here pay a million in I get it just about year nine I’m positive there so it takes much longer based on the guaranteed rate so let’s take a look at the different values here and I want to scroll down to age 85 what was your difference on the non-guaranteed values let’s go back to the three verse four pay difference by age 85 was.
What just about eight thousand dollars going to the guaranteed rate or guaranteed values I see 1.662 compared to 1.695 so let’s do the same thing and put the cash value difference column in here there we go so initially we see the first three years the guaranteed values are stronger with a three pay this is how much less money. You Can Also Read 40 Year Old Person Insurance Lawyer And Policies In 2022 Case Study.
I have in cash value with the for-pay why I have less in the first three years is because I still have to pay another 250 000 in I got the 1 million and faster over here then there’s my premium same thing over here this is good to look at with lump sum scenarios if you intend on looking at a premium offset to know if your value will always go up.
What’s the cash value difference here by age 85 it’s not 8 000
When I look at the guaranteed rate only with no dividends do things continue to climb up does my cash value continue to appreciate only look at looking at the guarantees in this particular case yes so with no dividends just the three per cent gross guaranteed rate can support the base premium and I have enough left over where my cash value continues to appreciate.
How about over here with the for-pay same thing is true very good and then once I go reduce paid up it gets much better but what’s the cash value difference here by age 85 it’s not 8 000 it’s about 33 000 and again depending on my age funding amount gender these very these values can vary here but you will see a difference.
When looking at the guaranteed values compared to the dividend values so let’s take a look at some internal rates of return shall we so let’s first look at why don’t we start with the guarantees then we’ll go back to where we left off with or what we left off with so guaranteed values here make that a little bit better beautiful annual IRR and average IRR annual internal rate of return.
Hit three per cent the four pay is a bit stronger
I often like to refer to that as that’s what I’m earning year over year a nice question to illustrate is what did you earn last year in the s p 500 market hit a home run I did 30 per cent great what did you’re average out over the past 30 years I earned an average of seven or eight per cent same thing here annual IRR isolates what I’m earning year over year average IRR takes into account all of the years so.
I can look at my 10-year average 20-year average so on and so on so as I look at the internal rates of return keep in mind that the guaranteed rate on this product is three per cent does it ever hit three per cent the four pay is a bit stronger so let’s focus on that the annual IRR will be the strongest and you will notice a jump once we execute a reduced paid-up option.
There the IRR takes a nice jump about 100 basis points quite nice same thing over here it’s a little bit more but what do you notice regarding the annual internal rates of return beginning year eight let me get those columns captured beginning year eight annual IRR 2.49 2.49 if we were to look at the one payment to pay three pay for pay and five pay they’re all.
The death benefit will not increase
The same and it does depend on the company and product I select this is guardian’s same product apples to apples when we execute a reduced paid-up option a nice way to illustrate it is the playing field is the field is levelled whatever cash value I have based on the age that’s going to purchase me a certain amount of death benefit based on a guaranteed rate no dividends accumulating.
The death benefit will not increase if I’m only looking at the guarantees but when I go reduce paid up there’s no premium due I’ll see that my annual internal rate of return it’s only based on what I have in cash value that’s exactly what this formula is based on and the growth rate what is it growing by year over year and it is identical the average IRR is not because.
That’s based on my overall cash value growth factoring in the early years and such and because I’ve got more money in the for-pay you will see the average internal rate of return is higher with the for-pay example so let’s go down to where we have been going age 85 1.54 on the average internal rate of return compared to over here 1.46 so that’s what you averaged out safe liquid tax-free area to position money.
The 2022 dividend interest rate 5.8
This is an absolute worst-case scenario we’ve always seen the products do better than this but it is good to look at this as so absolute worst case scenario based on your age health rating right there are factors that could impact this and make it look better or worse term rider expenses are one of them let’s look at the IRR based on the present dividend rate here.
We go so this is based on the 2022 dividend interest rate 5.8 5.65 percent three pay versus for pay now everyone wants to look at all of this some people do because the first objective is maximizing the policy value cash value death benefit then the next objective is putting the money in use we’re going to look at that in the next video leveraging the policy and such and really what to look at here too there’s the annual and average what do you notice as time passes same thing in year eight the annual is level out.