BTID 2026 worked example: a healthy 40-year-old, $500k coverage, year-by-year math at three return rates.

Section 1

The setup.

A healthy 40-year-old male non-smoker shops $500,000 of 20-year level term life insurance. Top-rated competitive carriers (Banner Life, Pacific Life, Protective, Pennsylvania Life) quote the policy at approximately $55 per month in 2026 pricing, subject to standard underwriting outcomes. The same buyer evaluates $500,000 of whole life insurance from a top-five mutual carrier (Northwestern Mutual, MassMutual, Guardian, New York Life, Penn Mutual), which quotes at approximately $620 per month with illustrated dividend scale at current declared rates.

The monthly premium delta between the two products is $565. Per year that is $6,780. Over 20 years held in cash, the cumulative delta totals $135,600. The BTID strategy redirects that delta into a low-cost broad-market index fund (Vanguard Total Stock Market ETF or equivalent) via automatic monthly contribution. Three return assumptions are commonly used in BTID analysis: 5 percent real (conservative), 7 percent real (historical long-run average), and 10 percent nominal (close to the long-run nominal return on US equities).

This worked example anchors at 40 rather than 30 to be more representative of the typical life insurance shopping age. The math at 40 is less dramatic in BTID's favour than at 30 because the compounding window is shorter and the absolute term premium is higher. The conservative anchor produces a more honest test of whether BTID dominates whole life in the typical case rather than the most favourable case.

Section 2

The year-by-year ledger.

All dollar figures shown in hundreds for table readability; actual values are 100x the figures shown.

BTID columns assume $565/month invested monthly at the stated annual return, compounded monthly. WL CV (whole life cash value) projected at current illustrated dividend scale; actual cash value can be materially higher or lower depending on dividend scale persistence. Term rates from Policygenius broker data; whole life from top-five mutual carriers.

Section 3

The wealth differential at year 20.

At the end of year 20, the term policyholder who has invested the difference has accumulated brokerage assets of approximately $160,000 at the 5 percent real return assumption, $196,000 at the 7 percent real assumption, or $274,000 at the 10 percent nominal assumption. The whole life policyholder has cash value of approximately $115,000 (sensitive to dividend scale assumption).

The BTID-versus-cash-value wealth differential at year 20 ranges from $45,000 (5 percent return) to $159,000 (10 percent return), with the central case (7 percent real) producing approximately $81,000 in favour of BTID. The death benefit during the 20-year window is identical at $500,000 either way; if the buyer dies in year 8, year 14, or year 19, the survivor receives the same death benefit regardless of which product the buyer chose.

The trade-off after year 20 is permanent versus no coverage. The whole life policy continues with permanent death benefit and growing cash value past year 20; the term policy expires. For households whose dependent coverage need extends past age 60 (the term expiry age for this 40-year-old buyer), the loss of coverage matters. For households whose dependent coverage need ends at retirement (children independent, mortgage paid, retirement adequately funded), the loss of coverage is immaterial.

Section 4

Compounding $565 monthly at three rates.

Cumulative wealth from $565 invested monthly, compounded monthly at the stated annual return.

Historical equity-market return data from Society of Actuaries and Vanguard published research. Historical 30-year rolling real return on US equities has averaged 6.5 to 7.5 percent.

Section 5

Tax treatment of the BTID brokerage account.

The realised return on the BTID brokerage account depends on the tax treatment of the chosen investment vehicle. A taxable brokerage account holding broad-market index funds incurs annual taxation on distributed dividends (currently taxed at qualified dividend rates of 0, 15, or 20 percent depending on income bracket) and on realised capital gains at sale (long-term capital gains rates of 0, 15, or 20 percent plus 3.8 percent net investment income tax for high earners). Annual fund distributions reduce the realised compounded return by a small amount.

A Roth IRA holding the same investments has no annual tax drag and no taxation on qualified withdrawals after age 59½. The 2026 Roth IRA contribution limit is $7,000 per year for buyers under 50 ($8,000 for buyers 50 and over). A typical 40-year-old who is also able to fund a 401(k) at the employer match level and the IRA at the full limit has substantially more tax-advantaged contribution capacity than the BTID delta would consume.

For the BTID strategy to fairly compete with the tax-deferred cash value growth inside whole life, the BTID delta should be invested first in available tax-advantaged accounts (401(k), HSA, IRA), with any excess flowing to taxable brokerage. The after-tax compounded return inside a Roth IRA on the BTID delta is meaningfully higher than the equivalent return in a taxable brokerage account, which further widens the BTID advantage versus whole life.

Section 6

When this worked example does not apply.

The worked example assumes a healthy 40-year-old male who actually invests the difference. The economics shift materially under different conditions. A 40-year-old female buys term at roughly 20 percent lower premium for the same coverage, increasing the BTID delta. A 40-year-old smoker buys term at 2 to 3 times the standard premium, reducing the BTID delta. A table-rated applicant (elevated cholesterol, BMI, blood pressure, family medical history) buys term at 50 to 200 percent above standard, materially reducing the delta.

A buyer who genuinely does not invest the difference (spends the cash flow on other consumption) produces dramatically worse outcomes than the BTID worked example. The whole life policy in this scenario serves as forced savings discipline that the buyer would not otherwise maintain; whole life cash value of $115,000 at year 20 is meaningfully better than zero brokerage account. For genuinely undisciplined buyers, the whole life path may produce better lifetime wealth than the unrealised BTID alternative.

The disciplined BTID buyer with the right tax-advantaged vehicle choice produces materially better outcomes than the whole life buyer at the historical return assumptions. The undisciplined buyer should either commit to automation of the BTID contribution (removing the discipline requirement) or accept whole life as a behavioural accommodation rather than a math optimisation. The right product for each buyer depends on which of those characterisations describes them honestly.

Section 7

Caveats and sourcing.

Term rates from Policygenius broker quote data for healthy 40-year-old male non-smokers. Whole life rates from top-five mutual carriers (Northwestern Mutual, MassMutual, Guardian, New York Life, Penn Mutual). Whole life cash value projection based on current illustrated dividend scale; actual cash value subject to dividend persistence under NAIC Life Insurance Illustrations Model Regulation. Death benefit tax-free under IRC §101; cash value tax-deferral under IRC §7702. Historical equity market data from Society of Actuaries and Vanguard. This page is educational content, not insurance, tax, or investment advice.

Frequently asked

Common BTID worked example questions.