Over Funding Life Insurance vs. Roth IRA

You need to do some more reading. Overfunding an insurance policy is last on my list of things to do.

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Does anyone have an opinion on over funding a variable universal life policy vs. a Roth IRA? I believe they both grow interest free but I like the idea of being able to get to my money in case of emergency before retirement. I also believe after 7 years of the insurance policy there is no cap on how much you can invest. The insurance policy is also sheltered against creditors.

It all seems too good to be true. Can someone help me out with this?

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If you want to go for life insurance, I would say avoid a variable universal life (high fees) and go for traditional whole life with a company like New York Life, Mass Mutual, MetLife, Northwestern Mutual, State Farm, etc. Whole life is fixed and typically have lower fees. It is not flexible though.

Using average returns, a ROTH IRA will out-gain a Variable UL. There are costs associated with the insurance death benefit, and the variable UL mutual fund shares are typically more expensive than your standard mutual funds that you would use in a Roth IRA. The guarantees that they claim for Variable Universal Life policies typically do not apply when you want to take your money out of the policy. Not only that, you are paying for that guarantee by taking less returns (hidden costs).

However, if you need life insurance and you aren't comfortable with the risk of the market, fixed whole life insurance would be a good deal. You just need to accept the fact that your returns may not keep up with mutual funds within a Roth IRA (not considering time horizon or market timing, etc.).

Bottom line is this... your situation is always unique and you can't use a one-size-fits-all answer from someone who is not licensed or registered through FINRA on a message board. Consult with someone you trust and get multiple opinions from different companies.

If you want to talk more specifics, you can leave your email and I can get in touch with you.

One option is a retirement account and the other is a rip off.

You should establish a separate emergency fund in a more liquid account if that's ultimately what you're worried about.