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Subject:  Re: IRA/401(k) or VUL and too much money Date:  8/24/2000  1:23 PM
Author:  JAFO31 Number:  24318 of 88051

motrennoc: "My wife and I met with the financial planner from her office yesterday. We've both recently finished our medical training and now finally have "real" jobs with a total gross income of 260K a year. We were hoping to at least put some savings into a 401(k) or IRA but were told that we couldn't due to our high incomes. (I guess a person could have worse problems.) The financial planner recommended a Variable Universal Life policy (which of course he sells) as a way for us to invest and at least let our investment grow tax free. As he worked it on paper the fees to the ins (company) would be less than the tax to the IRS and it seemed to make some sense. The fact that we could remove the money at less that 59 1/2 years old was attractive too. I'm, of course, planning on doing some foolish (should that be Foolish?) investing on my own as well. I'm pretty new to investing and retirement planning and would appreciate any thoughts you fools may have."

First, congratulations to your and your wife on completing long years of schooling and post-shool training.

Second, congratulations on finding TMF.

Third, take a deep breath. You can take a little time to understand your options before making a lont-term commitment.

Fourth, I never heard of iincome being too high for a 401-k. I am aware that there is some kind of testing WRT to highly compensated employees that may set the limit lower than otherwise. In addition non-deductible regular IRAs are available to anyone with earned income. Furthermore, as doctors I suspect that you may well be self-employed, which would open many other doors to you (but I do not know enough to really explain).

Last, there have been numerous good discussions about VUL over on teh Insurance board. Do a search and then do some reading. In my experience, many of the insurance salesman generally gloss over the downsides of VUL. Do you need insurance? How much? Do you realize that you are essentially making a lifetime commitment in order to obtain the best benefits of a VUL? The VUL is unlikely to be the source of any significant funding for current consumption for at least 15 years, so do you have those plans covered? Do you realize that the best benefits of a VUL come when significantly overfunded? etc. There are numerous insurance pros over on the other board; I beleive that FoolWAM and TTRoberts have done a good job with these questions; MikeMatheson and libc (of late) have also contributed, IMO. There is also a wonderful post by a consumer who really studied and analyzed VULs.

Hope this helps. Regards, JAFO

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