High cash value whole life insurance

[EconDiva]

So...

I have a friend who I consider to be savvy financially as he is frugal and works to maintain multiple streams of income.

He's 37 with 10 years in at company that's paying him a $4500 pension at retirement and bringing in a salary in the $150ish range.  He owns 2 rental properties (one he rents out to students and the other he Airbnbs).  He also has a brokers license. 

I just have a job :)

Lately he has really been encouraging me to (1) buy property, which I am deciding this year if it makes financial sense for me to do or not.

On the other hand, he has also really started pushing me to consider purchasing a high cash value whole life insurance policy.  I really know nothing about insurance policies outside of my employer provided health, life and short term disability policies.  He states that it is a tax free way of forced savings with an added advantage of being able to borrow from the policy without penalty. 

I haven't begun to do any research on this but posting here to get any opinions/insight/thoughts was the first thing that came to my mind.  When I spoke with him about this last night his opinion was that I should only contribute to my employer match for my 401k, then max a ROTH, but after that, should consider putting a huge chunk into one of these types of policies (I was considering maxing out my 401k soon after I get the ROTH maxed).

[Goldielocks]

If you are only looking for tax advantaged saving strategies, there are quite a few better areas to put you money before this type of fund.

The reason these life insurance products provide value is for other benefits, that suit unique situations (e.g, transfer of money to others either before or after death), or for people that have maxed out all the other better savings devices.

[Dicey]

Once you research the cost/fee/commission structure, your mustachian hairs will curl. Does this guy sell insurance on the side, perhaps?

[EconDiva]

Once you research the cost/fee/commission structure, your mustachian hairs will curl. Does this guy sell insurance on the side, perhaps?

Nope, he doesn't sell any insurance. 

He basically told me to do my own research on it and we could talk about it more.  But in his opinion it was better than doing a 401k due to taxes on a 401k.  And lower fees than say an annuity.  And no penalty on withdrawals which could be made at any time.  Those were the main things I remember him saying about it.

[Bobberth]

Cash value life insurance is a favorite sale to real estate investors, especially those who think they are high powered real estate investors. Here is a recent thread on Bigger Pockets that had many comments both for and against. Sadly, the salesmen and OP just happened to ignore my well thought out and reasoned post and kept going back to the Ugh-hungh and Nugh-ungh fight.

Lots of bad information & comparisons by the salesmen in the thread. They like to take the benefits of after tax investments and compare them to the drawbacks of pre tax investments. They also like to throw around the term Tax Free as much as possible when it really isn't-just like how you ended up using it incorrectly in your question.

It basically comes down to those that do this are the smartest people ever and everybody else is just dumb.

https://www.biggerpockets.com/forums/519/topics/435284-is-whole-life-insurance-a-smart-investment-to-diversify

[EconDiva]

Cash value life insurance is a favorite sale to real estate investors, especially those who think they are high powered real estate investors. Here is a recent thread on Bigger Pockets that had many comments both for and against. Sadly, the salesmen and OP just happened to ignore my well thought out and reasoned post and kept going back to the Ugh-hungh and Nugh-ungh fight.

Lots of bad information & comparisons by the salesmen in the thread. They like to take the benefits of after tax investments and compare them to the drawbacks of pre tax investments. They also like to throw around the term Tax Free as much as possible when it really isn't-just like how you ended up using it incorrectly in your question.

It basically comes down to those that do this are the smartest people ever and everybody else is just dumb.

https://www.biggerpockets.com/forums/519/topics/435284-is-whole-life-insurance-a-smart-investment-to-diversify

They're not tax free?

Obviously I need to do my research on this.

[Spork]

My opinion is always: Buy insurance for what you need insurance for.  Buy investments for increasing net worth.  But don't try to mix them.

For most of us that are building wealth, term life insurance just makes sense.  When you are young and don't have a lot of assets, you may want to make sure your spouse/kids do fine if you were to die.  You might want them to have a paid off house, paid education and/or a few years worth of income to get up on their feet.  But the thing is, if you're investing and living the mustacian way -- at some point you just have enough money to do this on your own.  Term life is what gets you from point A to point B.

Bottom line: Any investment that requires pages of explanation due to complexity is probably not worth your time.  Maybe at some point you (or I) will be savvy enough to understand the benefits ... but until then just avoid it.