What’s the better financial vehicle in which to leave a charitable donation when I pass away? Should I purchase a CD / Annuity, or use a Whole Life Insurance policy instead?
Well, the answer depends on your age, your health, and how long you live – the latter of which we simply do not know.
John is a healthy 70 year old male. John has $100,000 liquid that he doesn’t need to live on, and want to make sure this money goes to his church upon his passing.
If John took that $100,000 in cash and placed it in a single premium whole life policy, it’s estimated that day one John’s death benefit would be a little more than $158,000. That would be an immediate increase in his gift to the church by $58,000, or 58%.
Sample Single Premium Whole Life Illustration for 70 year old male
If John instead placed this money in a long term CD or annuity at a guaranteed 3.0% interest rate it would take sixteen years, or when John reaches 86, before the balance of the account reached $158,000.
At 3.0% interest it would take 16 years for $100,000 to become $158,442
Another option, although a little riskier – would be utilizing both a CD or annuity, and Whole Life on a Forever Pay plan. In this case, the annual premium for $158,000 in whole life would be around $6462 a year. An annuity paying 3.0% interest, John could pull the whole life premium from the annuity for 21.11 years, or until age 91. If John passes away before age 91, his gift would be the $158,000 death benefit plus the remaining balance of the annuity. What if John lives past age 91 and can no longer afford the whole life premiums? That’s certainly a risk, but the safety net is that he could trigger the reduced paid up provision in the policy at that point.
Sample whole life illustration for 70 year old paying premiums annually
Annuity payout illustration. 3% return on $100,000, withdrawing $6462 annually.
