Whole Life Vs High Yield Savings With Capital One (Real Numbers)

In this video today I'm going to be doing a full on case study side by side comparison, looking at all of the numbers to help you make a decision. Now I don't want my values and beliefs to interrupt how you process whether you're going to fund a whole life insurance contract and save money that way or save your money in a high yield savings account. So I'm going to try and keep it as neutral biased as possible. I'm not going to inject any opinions, I'm simply going to share the numbers and then whenever I do share an opinion, I'll go ahead and let you know. My name is Denzel Rodriguez, your personal finance geek of the 21st century. Let's dive in. So taking a look at the whiteboard here is the situation. We're looking at a 28 year old male who's going to be saving $20,000 a year and is deciding where he wants to put that money. So presented him two options. What I did, we're in 2025 as I'm recording this video and helping this individual out. What I did was looked at a pretty popular high yield savings account by Capital One. Capital One has a high yield savings called the 360 Performance Savings Account. And I just googled and looked at the historical interest rate on that account for the last 10 years so that we could project and look out 10 years to see where does my money perform better based off of historical interest rates on a high yield savings account. And then with Whole Life looking at a company called MassMutual, I'm looking at projected interest rates for the next 10 years. Now I could have also gone back to 2015 and looked at the historical dividend rates. Now I can tell you looking back dividend rates were actually stronger. So I figured let me use today's dividend interest rates with this particular company. So I will sort of underperform on the Whole Life side on purpose because the reality is dividends are not guaranteed when it comes to funding a whole life insurance contract. But it's about as close to guaranteed as you can possibly get with any asset out there simply due to the historical evidence that a company like MassMutual has been paying dividends for over 100 years plus. So when you're saving money in a whole life insurance contract, the way you're earning dollars is in the form of a guaranteed interest rate and a non guaranteed interest rate. If I was to go back in time 10 years back with MassMutual, they were paying a guaranteed rate of 4% versus today, that guaranteed rate with this specific design is at 3%. I believe it might be a little bit higher than 3%. So in this example, I'm, I'm completely like underplaying and also taking into consideration that we're in 2025. So he's, this is what his policy will most likely perform at, which is why I didn't use historical performance back then. So that's kind of just giving you some context. Now. I'm going to present two different options that this person can do with the high yield saving, which is he can either save $20,000 a year every single year, like clockwork, and all he'll have is the savings account. With a whole life insurance contract, you're immediately at an advantage when you look at all of the benefits that come with whole life. So not only are you getting this, what's called a living benefit, called cash value, and this is the performance of the whole life insurance contract with MassMutual funding. 20,000 a year, the starting death benefit is $777,254 in the first year. By year 10, that number would have increased to $1.3 million. So there's immediately an advantage that whole life has over the high yield savings. For the same dollars. I put 20 grand in, I have 20 grand. And whatever interest I earned that year, minus taxes, whole life, I put in 20 grand, I have less than 20 grand. But I also have a death benefit and I also have living benefits. So to try to make it a little bit more apples to apples comparison, what I'm also sharing with the client that they could do is like, here's what your high yield savings could potentially look like looking at historical performance. And instead of putting in 20,000, instead of saving 20,000 just in the savings account, we can take as little as $75 a month. So I kind of did a $1 million convertible term life insurance contract where we can get a little more death benefit, but also accounts for the increasing in that same time frame. So about a million dollar death benefit life insurance contract called convertible term, not whole life, cost him about, say 75 bucks a month. So that's $900 per year. So instead of contributing 20,000 into the savings account, it would be $19,100 and then $900 going into term. So to make this easier, what I'm going to do is actually break this up into a, into a series of videos showing what it would potentially perform at having a convertible term plus a high yield savings using the same dollars, same dollar amount versus putting in 20,000 a year into a whole life insurance contract and comparing their performance there. In this video, we're just going to look at 20,000 saving in a whole life, 20,000 in a high yield savings, and specifically capital 1360 performance. So according to my research on Google, I was able to find the historical rates that Capital One was paying out. Now here's the thing. These numbers aren't going to be perfect because it depends on when the rate was actually paid out and for how long did those numbers stay in a year. So for example, in 2015, did the number stay at 1.9% or did it grow to 1.9% or was it maybe higher than 1.9% and it went down down to 1.9% and maybe lower and then finished off at 1.9%. So those rates can change monthly inside of a whole life insurance contract. Whatever your declared dividend rate is in that year, that rate stays the same for one whole year and will only change one time per year. So there's a little more consistency in what you're going to earn. Okay, now we're just going to assume starting off from 2015, that we earned 1.9% and I earned that for 365 days straight, which is highly unlikely. But I'm still, we're just saying this is what it'll probably perform at. So 2015, 1.9%. You deposit 20 grand in over an entire year, you'll earn $380. Now the other thing that I did was factor in the tax rate. Let me know in the comments your opinion on 22%. I could have gone much higher. Depending on what state we're in, could be as high as 30, 28%. So according to Google, the number the average ordinary income tax on interest income was anywhere from 10 to 37%. So it could be as low as 10, could be as high as 37%. So I try to go somewhere in the middle and I use 22%. That's going to be the number that I'm using. So as you can see, I show the interest earnings on one end, I show total growth of the account and then I'm minusing 22% right here on this column here. So Instead of having $380, you would net 296 once you pay tax out of that account and you paid every year. So we're not using other dollars to pay that tax difference. We're just working with $20,000. On the whole life insurance side, your money is growing tax deferred and can be used tax free via policy loans or withdrawals up to your cost basis. So I don't have to account for taxes inside of the whole life insurance contract on here? I do. On the high yield savings. Alright, so as we can see, 2015, 1.9%, 2016 was 3.7, 3.7 and you start to see a little fluctuation. 1.9, 4.35 as low as 0.30 goes down to 0.40 again in 2022, 2023 starts to jump up, 3.3, 4.35, 2025, it's down at 3.7. And we could probably make a healthy assumption that that 3.7 might go even lower as interest rates start to go down. So over a 10 year period, contributing 10, contributing 20,000 per year every year like clockwork, your money would have grown to $262,634.42. When you minus taxes year over year, that that amount is more like $252,585.81 versus on the whole life side, 10 years of performance, we're looking at about $231,587. So we can see here that just looking at the cash value performance, the living benefit, it underperforms a high yield Savings from Capital One. Looking at the last 10 years of historical interest rates that were paid out, assuming that I got those rates for the whole year. So if we did 252, 585, 81 and minus 231,587, there is a 20, almost $21,000 difference in cash liquid available and that's after minusing taxes. So you could say that's a pretty significant difference over just a 10 year period. We can say, all right, from a cash performance standpoint, if you're confident in capital one and their ability to pay you a steady interest rate in the neighborhood of, you know, three and fours and you know, high twos, high ones, then you can make the assumption over the next 10 years my me saving $20,000 in a high yield will outperform the living benefit cash value performance inside of a whole life. What do we lose by contributing 20,000 to a high yield savings that I gain with a whole life? With a whole life, I get a $777,000 tax free death benefit. In the event anything happens to me, my family, in this case, this young person is in a serious relationship. So we can say potential wife in the future that this person's wife would be taken care of and his mom and dad, brothers, sisters, leaving behind a large death benefit. And then we can see that over 10 years, that death benefit didn't stay the same. It increased all the way to $1.3 million. Right. So it increased along with this living benefit. And in the event, over the next 10 years, if this person becomes terminally ill, chronically ill, develops any serious illnesses, the death benefit could be accelerated and they could receive a portion of that death benefit to help with medical expenses and things like that. On the high yield savings side, the only thing I have to work with and look at is simply the net dollar amount that's in the savings account. So if I have an emergency, if I have a very, very expensive medical procedure to save my life or something like that, this whole entire savings account could get completely drained. Whereas in a whole life it could make up for that, that difference. So in your case, when you're looking at this and you're deciding where do I put dollars that I want to preserve, that I want to have, that's guaranteed to be there, where I can earn some kind of interest on a guaranteed basis, what are my options? When we look at all of the options, right? If you're, if you're watching this series is really building from a few other videos I did where I showed a whole life versus treasuries or bonds. When you're looking at where can I store money safely and it's going to grow and it's going to be liquid and available for what, emergencies, unexpected expected expenses. That's typically why we save money and also for a future expense that we intend to have or money that we may want to give, right, that we want to bless people with. Safest places are what savings accounts, money markets, bonds, treasuries, gold and silver, whole life insurance contract. These are all places where I can store money and I'm going to earn something. I don't know what that something is, but I'm going to earn something. And I also forgot to say CDs. CDs is also on that list where you're always going to be earning something. You're just not going to know what that is. Out of all those options, the whole life insurance contract is the only vehicle that can provide a guarantee growth rate, a guaranteed growth rate and a non guaranteed dividend on top of that guaranteed growth rate along with a death benefit. So you're getting these multiple benefits for the same dollars. In the Next Video, Part 2 of this I'm then going to show. All right, let's make this a little more apples to apples comparison. Let's show whole life where you have the death benefit and funding a high yield savings the same 20 grand, but instead we're going to take $900 and purchase convertible term and have a one million dollar death benefit. So at least we have a somewhat of an apples to apples comparison where you're saving money and you also have a death benefit protection plan over the next just ten years. Stay tuned. Denzel Rodriguez again, personal finance geek, 21st century. If you'd like me to run your numbers just like this, hire me for coaching. We can work together on a one to one basis and possibly have a whiteboard session as well. With that God bless talk.