sailingcat36
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You do not say what country you are from however I will assume you live in the United States when answering your question. To begin with, If you place your money with a bank or an insurance company (assuming you are talking about cash value of policy), you are not investing. You are simply "lending" the institution YOUR money. Where do you think they will invest the money in order to pay you the rate of return they are guaranteeing?
Banks and insurance companies will "INVEST" in mortgages, car loans, credit cards, US Treasury instruments, businesses, corporate bonds, stock market, mutual funds, real estate, etc. And, once again, it is YOUR MONEY they are investing.
Let's look at this from a tax point of view. First of all, you are lending these institutions your AFTER TAX DOLLARS. Simply put, if you lend or invest with after tax dollars, you have less to lend or invest. Let's assume you're in a 25% income tax bracket that translates to you lending or investing $0.75 out of every $1.00 you earn. If you have a state income tax it's even less.
You question assumes a "LONG TERM" investment. In the investment banking world that means you are willing to invest your money for at least 10 years. If this is the case, I would suggest you consider "INVESTING" your money on a pretax basis.
If your company offers a 401-k plan by all means join it. You can invest up to 15% of your annual income in the plan and it is deducted from your pay check BEFORE TAXES. Another advantage is that most companies will match a portion or all of your investment dollars. For example, suppose your company will invest in your 401-k, $0.25 for every $1.00 you put in. This is a no brainer!! You've made a 25% RETURN without doing anything!!
If your company does not offer a 401-k you can set up your own ROTH Individual Retirement Account (IRA) You then instruct the company how much you will invest each month and where the money goes and, like the 401-k it will be deducted before taxes.
Currently you can invest up to $4,000 per year if you are under 50 years of age. At 50, you can invest up to $5,000 per year. And remember, what ever you invest is 'PRE TAX DOLLARS." There are some differences since the passage of the Pension Protection Act of 2006.
About life insurance. DO NOT purchase whole life insurance or any form thereof. Consider only TERM LIFE INSURANCE for yourself and family members. In a 1961 case, the US Supreme Court held that "cash values" of life insurance policies are nothing more than an OVERPAYMENT of premiums. Nothing could be truer.
Remember, banks and insurance companies are investing your money at an average rate of return of between 9% and 13% conservatively. Why shouldn't you get that kind of return?
Here's a conservative example. Lets assume you invested $100 a month in a 401k or Roth IRA from age 25 to age 65 (40 years). Lets further assume your 401k and IRA was invested in a conservative mutual fund and that fund earned an average return of only 9%. by the time you were 65, your monthly contributions totaling $48,000 and earnings would have an accumulated cash value of $425,225. And, we are not taking into consideration stock dividends or splits. In reality, your $100.00 per month investment could be worth well over $1,000,000.
In closing, before you do anything with your money, search the web for information. Educate yourself!! Then consult with a qualified financial consultant(s). However, before you turn over your money to him/her, get referrals and other professional opinions!! |
Suzanne: YPA
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I agree with "Sailing," but would add several points:
1) insurance should never be viewed as an investment. This was the common selling point when Universal Life policies became popular in the '80's -- and look what happened there.
2) you need to ask yourself who you're saving money for: is it you, or your loved ones? If you need the money for yourself, best to look into traditional investments; stay away from annuities. If you want to provide for your family after you die, think about either term or whole life insurance; stay away from UL's or VUL's. Proceeds from these policies are non-taxable and cannot be attached by your (or their) creditors.
I hope this helps. |
Joe the Expert
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With a Bank all of your interest is TAXABLE and you are paying the Overhead for all of those branches and people in those branches with lower interest on savings. Banks are good for short-term mony (3 Years or Less).
Insurance Companies are the safest companies in the world with the safest products and their best products are TAX DEFERRED with No restrictions on the amount you of Dollars you can put in. Put $100 Million Dollars in and earn Tax Deferred interest if you want. No Restrictions. Independent Agents pay for there own office expenses so the insurnce companies don't have the huge fixed overhead costs banks do. They pass these savings on through lower cost policies and Highest Interest Rates on Annuities. Long-term money is their specialty.
The Best SAFE MONEY products are the following:
1. Immediate Annuities - For Guaranteed Monthly Income for Life, Joint Life or for a Period of Time: Go here to learn more - http://www.jdsannuities.com/immediate_annuities
2. Fixed Index Annuities ------Where your account value does NOT Decline in Value. -----Where the Credited Interest to your account does NOT Decline in Value. -------Where the interest you earn each year is based ONLY on the Upside of a Stock Index (You would accept a Cap on the Upside of say 8% in exchange for not having your account decline in value, wouldn't you???? I know I would!!!!) The Cap varies by company & annuity and is usually guaranteed for 1 year. Other crediting methods are also available. To Learn more Visit: http://www.jdsannuities.com/index_annuities
By the way, the way the insurance company is able to vary the interest you earn which is based on a stock index is by the use of a derivative for the interest part only.
3. Fixed Deferred Annuities - Where you have a wide selections of multi-year guaranteed rates or for 1 year, 3 years or 5 years. most are 5 to 10 year products. To Learn more and see most of the rates for yourself visit: http://www.jdsannuities.com/annuity_rates
To view the overall website for Annuities visit: http://www.jdsannuities.com |
mbrcatz
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Oh, PLEASE!! Neither is a good option, but if you have to choose something, take the bank. There you get 2-3% return on your money. Insurance companies don't give you ANY guaranteed return.
You're better off still putting some $$ into a mutual fund, a stock index fund has low costs and will outperform both the bank and the insurance company, over the long term. |
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