Overall I think this is a fair point, in that many readers may well be able to self-fund a decade or two from now. One of my main hesitations in recommending term+self-funding is that it requires fairly complex and proactive action on the part of your future self. People’s values and priorities change a lot over time, and procrastination is already so common in cryonics; I don’t trust me of 10 or 20 years from now to actually get around to setting up and funding a trust even if I have the money.
Maybe people who have made being a cryonicist a major part of their identity and have already been committed to it for a decade or more don’t need to be worried about this, but that is not the majority of people who sign up for cryonics, and it certainly doesn’t include me.
it seems to me that it is pretty easy, over the course of 20 years or so, to plan to save up a few hundred thousand $ to self-fund after that point.
Forgive me for making assumptions, but from your site activity I get the impression that you’re a software engineer. My mom and sister, who are signing up with me, are a teacher and a young adult author, respectively, and they live in an area of the US where salaries are relatively low. Even though they keep their monthly expenses super low (they own their house wholesale, rarely eat out, and don’t have expensive habits), saving $10,000/year for 20 years is definitely non-trivial, especially since my sister is planning to have kids.
Separately, I feel uncomfortable relying on my savings plan to work out. I was on track to save a couple hundred thousand dollars in the next few years, and then my company pivoted and laid me off, and then the pandemic happened, and I ended up having a net-negative year financially. I would hate to put myself in a position where my term policy expired, my insurance premiums had doubled or more, and I couldn’t afford to self-fund.
If that doesn’t sound easy then it is not so clear that cryonics is for you
This rubs me the wrong way, and I’m not sure I understand your point. Perhaps this can be resolved by my response to the following:
IUL isn’t solving the problem because you still have to pay the money in expectation
This isn’t actually true. If I live to be 85, the total amount I pay in IUL premiums will only add up to about half of my death benefit amount. See my math here for more examples. Presumably the explanation here is that the insurance carrier makes up the difference (and more) from its returns on investing your premiums.
Plus there’s a huge difference between having $100,000 extra dollars on hand at any given time, and having ~$50 available every month. It feels to me a bit like the difference between buying and renting – sure, if I rent for 10 to 20 years I will eventually have spent enough to cover the cost of a house, but I may well never have been in a position during that time where I could afford to stash away a lump sum of half a million dollars. Also, I will have had ~$90,000 more in liquid assets available every year, which I value.
---
Finally, if I do end up able to self-fund, I can always just cancel my IUL policy. The premiums I paid in the meantime will be two or three times what I would have paid for a term policy, but unlike with a term policy, I can get cash out of my IUL policy if I surrender it. I’d guess that the surrender value wouldn’t make up the difference in premiums, but it’s not nothing.
All these are great points! You’ve updated me that the IUL solves a real problem.
The thing I felt (and still feel) that you aren’t acknowledging is the investment returns on savings—with the IUL, the insurance company will invest the money and take all the upside; whereas if you save it yourself, you can keep that upside. In the linked post you assume a 0% return on savings.
I did run through a few scenarios with nonzero rates of return. The IUL doesn’t come out ahead in expectation, but it seems to have been designed well enough that if you want certainty, it wins:
Scenario A: $320/month saved for 15 years at 7% grows to $100k in those 15 years. Then you’re done. (Obviously that 7% rate of return comes with substantial risk, so you have a chance of not being at 100k at that instant; but you still have 5 years to solve the problem before your term runs out!) This has a high chance of solving the problem in 20 years instead of 60, and you still have the rest of your life for that investment to keep growing. That said, it’s still a risky strategy and I haven’t accounted for the cost of the term life premium.
Scenario B: $88/mo for life (your IUL quote). You will reach $100k at the 60-year mark as long as you average a 1.5% rate of return; at 2% you only need 54 years; at 3% it’s 46 years. Again, a risky strategy.
IUL gives you a certainty of death benefit with a relatively low monthly premium. The cost is basically all your upside, which is substantial, but like you said, I think it’s probably worth it for people who have the problems it solves.
Ah yes, failing to acknowledge that wasn’t a rhetorical choice, just a failure of my economic literacy. I don’t have much to say other than that this seems correct on all counts :)
Overall I think this is a fair point, in that many readers may well be able to self-fund a decade or two from now. One of my main hesitations in recommending term+self-funding is that it requires fairly complex and proactive action on the part of your future self. People’s values and priorities change a lot over time, and procrastination is already so common in cryonics; I don’t trust me of 10 or 20 years from now to actually get around to setting up and funding a trust even if I have the money.
Maybe people who have made being a cryonicist a major part of their identity and have already been committed to it for a decade or more don’t need to be worried about this, but that is not the majority of people who sign up for cryonics, and it certainly doesn’t include me.
Forgive me for making assumptions, but from your site activity I get the impression that you’re a software engineer. My mom and sister, who are signing up with me, are a teacher and a young adult author, respectively, and they live in an area of the US where salaries are relatively low. Even though they keep their monthly expenses super low (they own their house wholesale, rarely eat out, and don’t have expensive habits), saving $10,000/year for 20 years is definitely non-trivial, especially since my sister is planning to have kids.
Separately, I feel uncomfortable relying on my savings plan to work out. I was on track to save a couple hundred thousand dollars in the next few years, and then my company pivoted and laid me off, and then the pandemic happened, and I ended up having a net-negative year financially. I would hate to put myself in a position where my term policy expired, my insurance premiums had doubled or more, and I couldn’t afford to self-fund.
This rubs me the wrong way, and I’m not sure I understand your point. Perhaps this can be resolved by my response to the following:
This isn’t actually true. If I live to be 85, the total amount I pay in IUL premiums will only add up to about half of my death benefit amount. See my math here for more examples. Presumably the explanation here is that the insurance carrier makes up the difference (and more) from its returns on investing your premiums.
Plus there’s a huge difference between having $100,000 extra dollars on hand at any given time, and having ~$50 available every month. It feels to me a bit like the difference between buying and renting – sure, if I rent for 10 to 20 years I will eventually have spent enough to cover the cost of a house, but I may well never have been in a position during that time where I could afford to stash away a lump sum of half a million dollars. Also, I will have had ~$90,000 more in liquid assets available every year, which I value.
---
Finally, if I do end up able to self-fund, I can always just cancel my IUL policy. The premiums I paid in the meantime will be two or three times what I would have paid for a term policy, but unlike with a term policy, I can get cash out of my IUL policy if I surrender it. I’d guess that the surrender value wouldn’t make up the difference in premiums, but it’s not nothing.
All these are great points! You’ve updated me that the IUL solves a real problem.
The thing I felt (and still feel) that you aren’t acknowledging is the investment returns on savings—with the IUL, the insurance company will invest the money and take all the upside; whereas if you save it yourself, you can keep that upside. In the linked post you assume a 0% return on savings.
I did run through a few scenarios with nonzero rates of return. The IUL doesn’t come out ahead in expectation, but it seems to have been designed well enough that if you want certainty, it wins:
Scenario A: $320/month saved for 15 years at 7% grows to $100k in those 15 years. Then you’re done. (Obviously that 7% rate of return comes with substantial risk, so you have a chance of not being at 100k at that instant; but you still have 5 years to solve the problem before your term runs out!) This has a high chance of solving the problem in 20 years instead of 60, and you still have the rest of your life for that investment to keep growing. That said, it’s still a risky strategy and I haven’t accounted for the cost of the term life premium.
Scenario B: $88/mo for life (your IUL quote). You will reach $100k at the 60-year mark as long as you average a 1.5% rate of return; at 2% you only need 54 years; at 3% it’s 46 years. Again, a risky strategy.
IUL gives you a certainty of death benefit with a relatively low monthly premium. The cost is basically all your upside, which is substantial, but like you said, I think it’s probably worth it for people who have the problems it solves.
Ah yes, failing to acknowledge that wasn’t a rhetorical choice, just a failure of my economic literacy. I don’t have much to say other than that this seems correct on all counts :)