When Life Insurance Agents Post on LinkedIn
I recently came across a life insurance sales agent promoting his various methods of structuring a whole life policy on LinkedIn. He was posting the benefits of his policy designs as opposed to the traditional “buy term and invest the difference” approach espoused by most financial planners. With some pushback, a litany of insurance sales reps chimed in, often displaying an ignorance of basic financial planning strategies and the various tax implications involved.
Let’s cut through the noise, break it down, and see what’s really happening by examining his highest performing example. We will simply compare his best performing illustration to putting the same money into an S&P500 index fund, assuming a low cost index fund is always available, using a standard 0.03% expense ratio deduction, reinvesting dividends, using historical data from 1960-2025 (other scenarios will be addressed in the “sequence of returns” objection toward the end). Some of the more interesting bits are highlighted.
Whole Life Insurance (Non-Guaranteed) vs. S&P 500 Index Fund — Actual Historical Chronological Sequence (1960–2025 with 0.03% expense ratio)
Both use the exact same $20,000 premium/contribution schedule for Years 1–7, then $0 thereafter.
Cumulative Internal Rate of Return (IRR) is calculated identically in both scenarios as an annualized value (all prior premiums as beginning-of-year outflows + end-of-year value as inflow if surrendered/liquidated).
Stability comes at a cost
Key Age-100 (Year 60) Summary
- Insurance Cumulative IRR: 4.207112% (smooth path + death benefit)
- Cash Value: $1,471,471
- Total Value on Death: $1,529,689
- S&P500 Cumulative IRR: 10.067016% (higher long-term return but with real-market volatility)
- Cash Value: $33,771,398
The passive investment results in an additional $32,299,927!
But, But, But… What about my objections?
A slew of insurance agents immediately jumped on some early comments trying to point out how the licensed fiduciaries don’t really understand the original post or the value of whole life insurance.
What about taxes?
There are multiple factors at play that would determine the tax impact of the investment scenario.
If the investor is using an IRA/401(k) and is eligible to deduct the contribution, that effectively frees up the additional tax savings to invest as well. There are, however taxes due when funds are eventual withdrawn, which can be significant.
If the investor is able to contribute to a ROTH IRA (possibly using backdoor or Mega backdoor strategies to contribute the $20,000 in our scenario), the ROTH IRA not only grows on a tax deferred basis, but also distributes funds in retirement tax free. Some early withdrawal options may also be available without adverse taxes.
If the investor is simply contributing excess cash to the index fund investment in a regular, taxable brokerage account, only the dividends will be taxed from year-to-year.
Selling holdings that have appreciated in value will most likely only trigger more favorable long-term capital gains tax rates.
Borrowing against invested funds typically results in no taxes at all, but can incur borrowing costs. Most life insurance agents recommend borrowing against cash values in their policies which also incurs borrowing costs.
One beautiful tax benefit of holding shares long-term, that many insurance agents forget, is that there is a step-up in cost basis at death, meaning, heirs could receive the value of the shares, if sold, without incurring capital gains tax, or simply keep the shares with the new, more tax favorable cost basis.
What about the sequence of returns?
It’s interesting that many insurance salesmen jump to “sequence of returns risk” as some kind of get-out-of-jail-free card, when their own policies typically start off with a sequence of negative net returns.
We did run multiple scenarios with the S&P500 historical data, and the funny thing is, if you stack the returns from worst to best, or from best to worst, you end up with far more money at age 100 than when using the chronological sequence. Of course, there could be scenarios where there is a prolong downturn (like the dot-com crash) at the most inopportune timing mathematically possible, that would result in less favorable outcomes, but there can certainly also be scenarios that turn out far better, even by an order of magnitude. Either way, the whole life insurance illustration was presented as a long-term accumulation scenario, not illustrating any income (which would drag down the IRR due to the added borrowing costs).
What about Income?
The investor can access the funds in a few different ways during life. A direct liquidation and withdrawal can be taxed at more favorable long-term capital gains tax rates, rather than the higher income tax rates.
Alternatively, an investor could borrow against their funds at relatively low rates, keeping their funds fully invested, via margin loans or a Securities Backed Line of Credit (SBLOC). Clients at Life Story Wealth Planning may be able to add a debit card to a passively managed brokerage account for ease of access to margin on demand. Other strategies could involve selling out-of-the-money call options to generate additional income, though this strategy introduces multiple risks. If structured properly, even box spreads might enter the conversation as a low-cost means of access to cash without selling the investments. Most life insurance agents recommend borrowing against cash values in their policies which also incurs borrowing costs.
What about fees?
The 30-year term policy would be swapped for a lower cost, shorter-term option. It would reduce the amount received by heirs in years when the coverage is no longer in place. We have a 34 year old who recently purchased a $500,000 20-year term for only $21/month.
Conclusions
Insurance companies have to turn a profit to stay in business. Insurance agents get paid commissions for selling policies. All of this overhead cost comes out of your pocket, and compounded over a lifetime, erodes what should be multigenerational wealth into a meager retirement income trickle.
In our example, the insurance policy buyer is losing access to an additional $1,577,179 at age 70. That’s a very expensive insurance policy. If it is not touched, by age 90, he is missing out on a potential $8,571,408. By 100, it’s in another world, $32,299,927 lost by buying an insurance policy as an accumulation vehicle.
Life insurance is meant to transfer risk efficiently, not for piling up cash. As a risk transfer tool, it is tremendously helpful in dealing with estate taxes, loss of an income earner, wealth transfer, buy-sell agreements, and much more. Due to complexity and costs, costly insurance products should be considered with a team of financial planning, tax, business, and estate experts when there is a clear need to mitigate specific risks, not just a laundry list of “benefits” being peddled by salesmen.
Disclaimer / Disclosures:
This is a hypothetical educational illustration only.
- Insurance data: Exact figures taken verbatim from the agent’s original policy illustrations (Non-Guaranteed Assumptions / 100% of Current Dividend Scale). Original screenshots of the illustration data referenced can be viewed here: Google Drive Folder
- S&P data source: Aswath Damodaran’s NYU historical dataset of actual S&P 500 total returns (price appreciation + reinvested dividends), calendar years 1960–2025 (exactly 66 years), with a realistic 0.03% annual expense ratio deducted each year. Policy Year 1 maps to calendar 1960; Year 66 maps to 2025.
- Scenario: This uses the real chronological order of returns — no reordering. It shows what would have actually happened in history with the exact sequence of market returns. Stacking returns either worst-first or best-first both result in higher age 100 account values, so chronological data was selected for illustration purposes.
- Fees: A realistic 0.03% annual expense ratio (typical for a low-cost S&P 500 index fund) is deducted from each year’s gross return before growth is applied.
- Cumulative IRR calculation: Identical methodology to your whole life insurance tables — premiums treated as outflows at the beginning of each year, portfolio value as inflow at the end of the year if liquidated. Solved precisely using numerical root-finding.
- Key facts: No taxes, trading costs, inflation, or withdrawals are modeled in either scenario. Past performance is not indicative of future results. Index funds have high volatility and no guarantees. The whole life policy offers a death benefit, contractual guarantees, and dividend stability that the index fund does not. This comparison is an educational illustration only and is not investment advice or insurance advice.
- Original LinkedIn post accessed on March 31, 2026: https://www.linkedin.com/posts/dbladeford_wholelife-iul-lifeinsurance-activity-7444129425555730432-0plc
