Getting an ILP PLAN from AIA

[limster]

Just want to share that I just surrendered my AIA Achiever recently.

Bought it 8 years ago.
Premium paid $48,000 for 8 years ($500 monthly)
Surrender Value $51,321.39

The charges are too high and I will not recommend it to anyone.

I just realised you are lucky to get your money back, check out this guy, also hold AIA Achiever for 8 years, lost money:

By the time I surrendered this policy in Feb this year, I had been holding this policy for 8 years and 1 month. That’s $9,700 poured in. But the withdrawal value was only about $8,900! Even if I had just put the money under my pillow for the past 8 years earning 0% interest, I would have been better off with an extra $800.

http://www.my15hourworkweek.com/2014/04/27/money-mistake-19-aia-achiever-plan/

 

[Keverus]

erm isnt this obvious? Insurance companies are not charities.. its still all about profits and revenues at the end of the day. The insurance market is already a bit saturated since almost everyone has some kind of insurance already, so of course they need to come up with new ding dongs and whistles to get people to pay for something else

ILPs has actually been in the market a long long time, sadly.

 

[Keverus]

Just want to share that I just surrendered my AIA Achiever recently.

Bought it 8 years ago.
Premium paid $48,000 for 8 years ($500 monthly)
Surrender Value $51,321.39

The charges are too high and I will not recommend it to anyone.

i think you're lucky to get more than your capital. lol. most ppl bleed dry under ILPs.

 

[parchiao]

Think the CAGR is closer to .84% per year.

(51,321.39/48,000)^1/8 - 1 = CAGR.

That's pretty stunning though, knowing the actual figures.

Such comparisons don't make much sense. Premiums on an ILP would include the expense elements such as management fees, administrative fees, insurance element and agent fees. Those figures offered by index fund pushers have not included the term insurance element and other fees. ILPs for sure will not provide for better returns relative to most other investments. I think the difference will look, well, different if a proper comparison is made.

 

[Perisher]

Such comparisons don't make much sense. Premiums on an ILP would include the expense elements such as management fees, administrative fees, insurance element and agent fees. Those figures offered by index fund pushers have not included the term insurance element and other fees. ILPs for sure will not provide for better returns relative to most other investments. I think the difference will look, well, different if a proper comparison is made.

What might the other fees be?

 

[anfielder]

Such comparisons don't make much sense. Premiums on an ILP would include the expense elements such as management fees, administrative fees, insurance element and agent fees. Those figures offered by index fund pushers have not included the term insurance element and other fees. ILPs for sure will not provide for better returns relative to most other investments. I think the difference will look, well, different if a proper comparison is made.

Somewhat agree, people generally forget that the insurance coverage is not free, and on top of that the riders are expenses which don't go into the investment.

However, aside from insurance charges, the other charges are extortionate and more importantly, avoidable.

• Right off the bat a huge chunk of the first 5 years premiums goes towards commission.

• Admin charges are $60/yr (for Prudential) - works out to a whopping 5% of your annual premiums if you're paying ~$100/month.
• Fund sales charges, another 5% of your annual premiums.
• Fund expense ratios (~2%/yr on the entire portfolio value)

With such a huge handicap, it's not hard to conclude that it will be better to BTIR.

 

[limster]

Such comparisons don't make much sense. Premiums on an ILP would include the expense elements such as management fees, administrative fees, insurance element and agent fees. Those figures offered by index fund pushers have not included the term insurance element and other fees. ILPs for sure will not provide for better returns relative to most other investments. I think the difference will look, well, different if a proper comparison is made.

Faced with data of actual ILP returns (1 example was 0.84% CAGR and another was negative CAGR)), you are now throwing up a smokescreen that you cannot 'compare' ILP returns with returns of other investments

The only people that will be CONvinced by your smokescreen are the ignorant and gullible, and as I've said before, ILPs are suitable products for the ignorant, gullible and lazy.


As for those who are not ignorant, gullible or lazy, they can look at the actual CAGR of ILP, read books like Random Walk Down Wall Street, and decide whether ILP will actually help them 'save' for retirement, or whether it just helps the agent get his new BMW / Mercedes.

 

[reinphd]

What can $240,506 get one when one is 65 years old? probably a SLK benz and one would be too old to drive that car during that age? 240 506 is not even enough for retirement!

insurance is supposed to replace one's income if one were to pass away during the working years of their life. Upon death, insurance is supposed to add into the assets that can be distributed. Given the lower amount paid monthly, I don't think term insurance provides the ability to add into one's assets when one is in their 80s and 90s? Most term insurance expires at 60+ years of age.

Bro, of course we can't do s*** with just $240k when one gets to 65 years old. That is just a relative amount compared with the ILP. If we look at a tier higher (again relative comparison with the ILP):

With ILP, $176k (investment portfolio in ILP) + $100k (death) = $276k upon death if you're stressing on what remains for our loved ones.

Buy term and invest the rest, $240k (my own investment) + $100k (death. don't forget this is covered under the term plan that I am buying. you have term plans for GE that cover till 65,75,85. you can check the term plans. heck more cheaper) = $340k 'upon death' to pass on to loved ones. The amount beats the one with ILP anytime no?

I like ILP because of its flexibility; you can vary quite a no. of stuffs.

Comparing reinphd's explanation:

"For quitting now and getting a term to cover the same and doing self investment and at age 65, I would have the results ($500/year for term, $1.5k self-invest in etf with 7% return):
Insurance premium paid: $18,500
Investment: $240,506 (factoring in the charges i use for SCB)
"

To summarize (At age 65):

ILP: Insurance charge = $32,339, investment portfolio = $176,503
Buy Term and invest the rest : Insurance charge = $18,500, Investment portfolio = $240,506"

Assuming one were to pass away at age 70 years old, investment portfolio probably contributes less than 300k to one's assets. That ILP would have contributed much more to one's assets that can be distributed to one's kids.

During times where business are bad, the death payout from the ILP would actually even out or lessen the lost of profits from a business and the death payout isn't taxable at all.

Think long-term...i.e. now till death, not short term like now till retirement.

I was quoted $856/year to cover till 75 years old for $200k of TI,Death,TPD,CI. $2k/year ILP subtract that sum will leave me with $1144. Invest that till I am 75 with a CAGR of 7%, it gives me $430k. Add that to the $200k payout for term when i uplorry... $630k? Have not calculated how much can ILP give me by age 75 but I am pretty sure, not as much.

Like I have mentioned, this $630k is relative to the ILP. Total amount could be much more by setting aside larger amount for investment.

Cheers

 

[reinphd]

Such comparisons don't make much sense. Premiums on an ILP would include the expense elements such as management fees, administrative fees, insurance element and agent fees. Those figures offered by index fund pushers have not included the term insurance element and other fees. ILPs for sure will not provide for better returns relative to most other investments. I think the difference will look, well, different if a proper comparison is made.

You're right that the cash returns for ILP will not beat the self invest route but even if you include in the insurance portion compared to buy term invest the rest, the TOTAL cash payout upon death for the ILP still will not beat the total amount of investment portfolio + term payout for death =(

I have factored in the $5/month fee, the 1.5% fund manager fee, the increasing rate of insurance charges base on /$1000 coverage for age band (sum up for death, CI and TPD) and the percentage of allocation to portfolio (eg 50%, 55%, 80%, 100%, 105% thereafter).

Even with the extra 105% increased which may seemingly be better (like free extra money why not?!), it still can't catch up to the 'buy term and invest the rest' strategy lol

Cheers

 

[Perisher]

Parchiao actually doesn't have a strong case against index investing... Dunno why he just can't stand this lazy man's way to invest.
The signal I'm getting is he rather people don't invest at all and put $$ in bank than do BTIR if they don't know or bother to study investment.

 

[parchiao]

Parchiao actually doesn't have a strong case against index investing... Dunno why he just can't stand this lazy man's way to invest.
The signal I'm getting is he rather people don't invest at all and put $$ in bank than do BTIR if they don't know or bother to study investment.

I don't have anything against index funds, I think you are the one pushing the idea that I am.

When I raise a point, I want to highlight examples and illustrations that are extremely misleading and do not present a complete picture.

I noticed that TS is now switching to buying term insurance from an ILP. This thread pretty much sums up how people can be swayed with what I think as very bad advice. Note, I have also supported that TS should never buy ILP as a first policy for different reasons.

 

[parchiao]

Faced with data of actual ILP returns (1 example was 0.84% CAGR and another was negative CAGR)), you are now throwing up a smokescreen that you cannot 'compare' ILP returns with returns of other investments

The only people that will be CONvinced by your smokescreen are the ignorant and gullible, and as I've said before, ILPs are suitable products for the ignorant, gullible and lazy.


As for those who are not ignorant, gullible or lazy, they can look at the actual CAGR of ILP, read books like Random Walk Down Wall Street, and decide whether ILP will actually help them 'save' for retirement, or whether it just helps the agent get his new BMW / Mercedes.

Can you clarify again what you are talking about? You don't seem to be able to comprehend a very simple assertion that the numbers do not add up.

 

[parchiao]

Somewhat agree, people generally forget that the insurance coverage is not free, and on top of that the riders are expenses which don't go into the investment.

However, aside from insurance charges, the other charges are extortionate and more importantly, avoidable.

• Right off the bat a huge chunk of the first 5 years premiums goes towards commission.

• Admin charges are $60/yr (for Prudential) - works out to a whopping 5% of your annual premiums if you're paying ~$100/month.
• Fund sales charges, another 5% of your annual premiums.
• Fund expense ratios (~2%/yr on the entire portfolio value)

With such a huge handicap, it's not hard to conclude that it will be better to BTIR.

Good stuff. If only people can be more objective at producing their numbers by taking such into consideration.

 

[Perisher]

I don't have anything against index funds, I think you are the one pushing the idea that I am.

When I raise a point, I want to highlight examples and illustrations that are extremely misleading and do not present a complete picture.

I noticed that TS is now switching to buying term insurance from an ILP. This thread pretty much sums up how people can be swayed with what I think as very bad advice. Note, I have also supported that TS should never buy ILP as a first policy for different reasons.

People want simplified stuff sometimes. You said we paint an incomplete picture, but the complete picture isn't far from what have said already. Do you want to type out essays of terms and conditions to tell people the full picture?

If people are really interested in the nitty gritty, we can easily put in the links and let them read into it. It's not so extreme that BTIR is bad as compared to ILP, far from it.

I also advised people to read/ask Shiny Things' thread if they really wanna get into some of the details. And yes we already mentioned that ILP charges a lot of fees, don't see why die die must break everything down into the details as though it would change the fact BTIR is better than ILP.

Overly-complicated advise also might sway people into running away from it all. I do note you are trying to help.

 

[Perisher]

When I raise a point, I want to highlight examples and illustrations that are extremely misleading and do not present a complete picture.

Can you specify an example of 'extremely misleading' that might affect the outcome of BTIR vs ILP?

 

[Perisher]

For your infor, you can clearly see many are confused or mislead by your words here if you think I'm pushing the idea you are against BTIR. You should really look at your post to see why a lot of us here are thinking you are thinking things in certain ways which you claim you are not.

This thread has kind of gone over boil, I will apologise for all my harsh words or tone of it if any. Shall not try to make you see my point of view any further.

 

[limster]

For your infor, you can clearly see many are confused or mislead by your words here if you think I'm pushing the idea you are against BTIR. You should really look at your post to see why a lot of us here are thinking you are thinking things in certain ways which you claim you are not.

This thread has kind of gone over boil, I will apologise for all my harsh words or tone of it if any. Shall not try to make you see my point of view any further.

Your point of view and the reasons for your views are quite clear even though my view does not 100% agree with yours.

I understand why you are frustrated because the guy who is supposedly 'refuting' your arguments doesn't make any sense

He has posted that he has 5-figure dividend income , but he doesn't want to share his strategy (assuming his 5-figure dividend income strategy is true), prefer instead to troll you and put up smokescreens to distract people instead of looking at the cold hard numbers like CAGR, expense ratios. Looking at all his posts, it seems that most people don't support him or simply don't understand what he is saying.

And I think its fair to describe him as trolling you or putting up smokescreens.. If he is a successful dividend investor, instead of trolling you about Indexing, he should be saying that instead of ILP, a dividend portfolio is a good alternative.


Myself, I am also in favour of a Dividend Warrior strategy (as shared elsewhere in the forum), so I am happy to tell Perisher that while indexing is good, allocating more to a 'dividend warrior strategy' is also good, while ILP is only for a certain type of investor.

 

[parchiao]

Your point of view and the reasons for your views are quite clear even though my view does not 100% agree with yours.

I understand why you are frustrated because the guy who is supposedly 'refuting' your arguments doesn't make any sense

He has posted that he has 5-figure dividend income , but he doesn't want to share his strategy (assuming his 5-figure dividend income strategy is true), prefer instead to troll you and put up smokescreens to distract people instead of looking at the cold hard numbers like CAGR, expense ratios. Looking at all his posts, it seems that most people don't support him or simply don't understand what he is saying.

And I think its fair to describe him as trolling you or putting up smokescreens.. If he is a successful dividend investor, instead of trolling you about Indexing, he should be saying that instead of ILP, a dividend portfolio is a good alternative.


Myself, I am also in favour of a Dividend Warrior strategy (as shared elsewhere in the forum), so I am happy to tell Perisher that while indexing is good, allocating more to a 'dividend warrior strategy' is also good, while ILP is only for a certain type of investor.

As mentioned before, there is no such thing as a holy grail in investing. Situations will give rise to investment opportunities that require specific strategies as mind set on the investors part. There is nothing difficult to understand here and if the person reading does not understand, then it is fair to say the reader has an extremely limited scope to investing. As mentioned before and I will say it again, I would urge people who are interested to investments should read up and appreciate the options that are available to them and not limit themselves to what others prefer to do.

 

[parchiao]

You're right that the cash returns for ILP will not beat the self invest route but even if you include in the insurance portion compared to buy term invest the rest, the TOTAL cash payout upon death for the ILP still will not beat the total amount of investment portfolio + term payout for death =(

I have factored in the $5/month fee, the 1.5% fund manager fee, the increasing rate of insurance charges base on /$1000 coverage for age band (sum up for death, CI and TPD) and the percentage of allocation to portfolio (eg 50%, 55%, 80%, 100%, 105% thereafter).

Even with the extra 105% increased which may seemingly be better (like free extra money why not?!), it still can't catch up to the 'buy term and invest the rest' strategy lol

Cheers

I think if the assumptions and variables are added to the above and clearly stated, at least a more balanced offer of idea is presented. What I was appalled at was with how some posts seems to suggest that own investments plus term will always beat ILPs, which I think is technically wrong, because a lot of important assumptions were missing in building the case. False numbers were also presented, which for me is amusing. I hope you see my purpose in highlighting those posts.

 

[Perisher]

As mentioned before, there is no such thing as a holy grail in investing. Situations will give rise to investment opportunities that require specific strategies as mind set on the investors part. There is nothing difficult to understand here and if the person reading does not understand, then it is fair to say the reader has an extremely limited scope to investing. As mentioned before and I will say it again, I would urge people who are interested to investments should read up and appreciate the options that are available to them and not limit themselves to what others prefer to do.

That's the thing, people are not interested in investing, not enough anyway because if they are, they probably wouldn't pick an ILP and not known of other things... You can't seem to get this.

We ain't limiting their choices, we just help to guide them along a generally easy better path. It's up to them to question and further their investing journey if they wish to.

Whatever gives you that idea that we are limiting them is just weird because once their investing journey in ETF begins, they will be able to know so much more just by studying ETF. Why the 30 companies, who are they, why don't buy them individually, what else can I buy etc...

It's whether one is motivated to find out more. If not, just getting a index is already a much better choice than ILP with all it's simplicity.