Preamble…

There are hundreds - perhaps thousands - of legitimate uses for participating (par) whole life insurance.

Thoughtful and creative insurance and financial guides recognize par whole life as the most powerful, flexible, and versatile financial tool in the US economy.  These enlightened guides use par whole life for applications as simple as fulfilling basic family needs, as complex as the most advanced estate planning and wealth management strategies, and for every imaginable personal and business financial reason.

The most advanced among these professionals follow - and teach their clients to follow - Eurekonomics’ Money for Life Model for creating wealth and managing personal finances.  The idea that par whole life could also help solve the financial challenges faced by the Social Security System sprouted from the fertile minds of this group of insurance and financial guides.

The Hypothesis…

The premise is simple; the US Congress would exercise its wisdom (hmmm - is congressional wisdom an oxymoron?) and pass a law that required the Social Security Administration to purchase and maintain…

• a ten million dollar ($10,000,000.00) par whole life insurance policy on each member of the House of Representatives upon election
• a fifty million dollar ($50,000,000.00) par whole life insurance policy on each member of the US Senate upon election
• a one-hundred million dollar ($100,000,000.00) par whole life policy on the President, Vice President, and Speaker of the House of Representatives.

These purchases would create an immediate death benefit pool of one billion two-hundred thirty-five million dollars ($1,235,000,000.00).  The death benefit would be payable to the Social Security Trust Fund.  The US Congress would not be able to get its greed and power motivated mitts on it, as they would be prohibited from accessing this money for the General Fund. 

That’s not a lot of money in the grand scheme of things in Washington DC.  However, since…

• the makeup of the US Congress is not static and there tends to be a bi-annual 25% turnover in both the House and the Senate due to retirement, lost elections, and expulsions for criminal or ethical reasons
• and turnover in the White House is guaranteed to occur at least every eight years

one could expect the amount in that pool to grow by about 12.5% each year.  That means that the initial one and a quarter billion would become about 5 billion in twelve years, 21 billion in twenty-four years, 86 billion in thirty-six years, and over 350 billion in forty-eight years.

Here’s an even better idea.  If every US Senator and US Representative had a term limit of twelve years, there would be 100% turnover at least every twelfth year or about 33% every two years .  Then the $1,235,000.00 would grow, based on a conservative estimate, to over two trillion dollars in forty-eight years.

Now, if we inflate the amount of death benefit on new policies issued to the newly elected at the same rate we inflate the compensation and expense accounts of the US Congress, reaching a total of over eight trillion dollars in forty-eight years is a reasonable assumption.  In addition, using the dividends from the par whole life policies to purchase additional paid-up insurance would compound the total death benefit even further and achieving death benefits of over twenty trillion dollars or more in forty-eight years is a reasonable expectation.

Moreover, since the actual death benefits that the Social Security Trust Fund receives would not be subject to the whims of the US Congress they could safely be used to purchase secured debt.  The SSA would thereby retain the principle.  This would create a secure future revenue stream for the SSA.

Finally, if the US Congress would allow the SSA to use just a small percent of the current payroll tax to purchase small par whole life policies on the 51,859,000 current Social Security Beneficiaries, then the Social Security System would begin to receive accelerated death benefits as these beneficiaries die and would become solvent that much quicker.

The Real Possibility

Of course, the possibility that the US Congress would actually act in the best interest of “We the people…” or that a scheme like this that might actually work or could overcome political power brokers is about as realistic as the 7.5% year upon year returns illustrated by some insurance and investment advisors for mutual funds and equity indexed universal life insurance policies.

However, if this scenario ever becomes reality, I want to be the agent that sells the policies.

Jeffrey Reeves, youBEthebank.com

Filed under: Money, Whole Life Insurance, creating wealth, financial, financial tool, inflation, investing, investments, managing personal finances, Money, Retirement, s, saving, security, Taxes, wealth, wealth management strategies, Whole Life Insurance