No. of Recommendations: 0
The decission to max out the 401(k) is a good idea. When considering the issue of life insurance one should first determine the amount needed. This is expecially the case if you have small children or dependents who rely on your income.

After you determine the amount of insurance you then may wish to determine the length of time you will need the coverage. If it is simply income portection - then you may take the youngest child's age and project forward through college.

If you have a high income or income potential and anticipate building an estate of any size you may have a second need for life insurance, estate tax funding.

If you determine that you have a long term need for live insurnace then term insurance may not be your most economical alternative.

One other issue not discussed thus far is a risk management tool provided by a cash value policy. If one practices the buy term and invest the difference and also owns disability insurance they often feel very good about their situation.

However, if the individual were to become disabled yet live continue to live into retirement the buy term and invest the difference strategy would be at risk. There would no longer be an income sufficent to invest.

Whole life insurance provides a waiver of premium option which would pay the insurance as well as the investment portion of the premium in the event the insured is disabled. Thus, the individual in the earlier example would have a cash value from which to draw on during his/her retirement.

Inconclusion, the individual should purchase the correct amount of insurance on the most economical basis given their time horrizon and utilize the most efficent savings tool available. At the same time their is a place for cash value insurance for certain situations and to manage specific risk.

I hope this helps

Don
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement