My husband and I both have $60,000 life insurance policies with "The Rock" called "variable life". It has a portion of the premiums we pay going into life insurance, building cash value AND an investment portion to build into about $250,000 once we fulfill the policy. I have done research on this and I can't decide if this is a good thing or not!! My agent says that I can take up to 10% of the total investment value tax free after 59. I can also borrow against the cash value for 1% per year. My main question is, would I be better off taking the $80 a month and investing it Foolishly? Their returns have been great- about 25% and I still want life insurance, but should I get a $200,000 term life policy for $300 a year and invest the rest?? Also, we just bought a big house and we will be starting a family soon. If this is a good thing, I will be doing the same thing with a larger policy. As far as retirement goes, my husband will have about 1 million in his retirement account when he retires. I don't know if this will be sufficient or if I should worry about the variable life policy as a retirement tool. It provides a form of tax deferred savings, and we need tax strategies and tax deferred earnings very badly. Any help would be appreciated.
krisandrich,You might want to visit the Fool's insurance folder where there has been a lot of discussion about such life insurance contracts. Without knowing many more details about your current situation along with your short term and long term objectives . . .there's no way anyone here can do some kind of analysis and say just what might be "best" or that's appropriate for YOU. Policies, like the one you have with Pru, can work very well as PART of one's total insurance and investment portfolio. From the amount you're paying into the policies, it suggests your not highly over funding the policies. These policies work best if you can afford to do that, AFTER . . . . you take advantage of things like 401(k)s and IRAs. Since you already have these policies in place and may suffer a surrender charge if you were to cash them in, it may be best to consider just keeping them and adding additional coverage in the form of term coverage just as you're thinking about.Note: There no way for us to know if you're really dealing with a good experienced agent who is willing to put your interests ahead of his/her own. Just keep in mind that an "agent" of ANY company has pressures to SELL their own products. If you keep this in mind at all time, you should be able to recognize if and when such an agent is trying the SELL you something. If that Pru agent isn't able or willing to help you get the term insurance from one of the more competitive companies, then you might want to find some other good experienced agent/broker who will.I know this is not the kind of answer you were looking for, but I hope it is of some help.
Given your statement that you will be buying a house soon I assume that you are less than 30. I strongly recommend that you first determine the amount of life insurance you need and then decide which type of policy is best. Insurance as an investment without the need for the protection is not the most efficent tool. Make sure you first buy enough protection, use taxed advantaged savings, ie IRA and 401(k)plans, and then look to cash value insurance.I hope this helps
THANKS FOR THE ADVICE. THE TRUTH IS THAT WE HAVE ALREADY MAXED OUT THE 401 (K)'S AND THE IRA'S. WE STILL NEED SOME TAX STRATEGIES. GIVEN THIS INFO, DO YOU THINK THE VARIABLE LIFE IS THE NEXT BEST THING??
It is a good idea to over-fund these policies?? That is interesting.. I didn't know that! What else do you know about them?? We have already maxed out the 401(k)'s and the IRA's. Given this, do you think the variable life is a good deal? I still need tax strategies!
krisandrich: "It is a good idea to over-fund these policies?? That is interesting.. I didn't know that! What else do you know about them?? We have already maxed out the 401(k)'s and the IRA's. Given this, do you think the variable life is a good deal? I still need tax strategies!"You may want to peruse the Insurance Board here on TMF. These issues have been discussed alot. In particular, there is an older post from "FoolWAM" that is very thorough in outlining when these kinds of policies begin to make sense. You should be able to find it with a search.Regards, JAFO
You may want to peruse the Insurance Board here on TMF. These issues have been discussed alot. In particular, there is an older post from "FoolWAM" that is very thorough in outlining when these kinds of policies begin to make sense. You should be able to find it with a search.Alan McKnight aka FoolWam posts his criteria in several posts on the Insurance board. Here is one of his posts:http://boards.fool.com/message.asp?id=1040016000276004..IF
krisandrich, you asked:<< It is a good idea to over-fund these policies?? Variable contracts work best when they are "over-funded".<< What else do you know about them?? >>What can anyone begin??? There's a lot to know and certainly there's too much to really cover well in a place like this. Suffice it to say that you're dealing with a LIFE INSURANCE CONTRACT and these contracts should only be used if you have a need/want for any life insurance coverage.<< We have already maxed out the 401(k)'s and the IRA's. Given this, do you think the variable life is a good deal? I still need tax strategies! >>A variable life contract can certainly be a "good deal" IF it's a good fit to you and your situation(s), goals and objectives. You sound like you could be a very good candidate for a variable contract. To get some good tax strategies, you should probably hire a good experienced financial planner . . . . and one who is also very familiar with life insurance contracts. Such a financial planner along with your accountant and attorney can be a great help to you in finding acceptable tax strategies. Yes, there'll be some cost, but that cost will far outweigh the benefits. Unfortunately, what I am suggesting is not the Foolish way.As others have suggets, you may want to review some of the posting in the Fool's Insurance Folders.
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