Over Funding Life Insurance vs. Roth IRA | Page 2 | TigerDroppings.com

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tirebiter
LSU Fan
ATL
Member since Oct 2006
5199 posts

re: Over Funding Life Insurance vs. Roth IRA


quote:

You can have your ROTH funds liquidated in a matter of days.



While that is true, what if the account holder is a big risk taker and starts contributing when market valuations are high and experiences little growth thereafter? Then the market declines say 35%, and he/she needs the money for an emergency? That becomes an expensive funding mechanism.

It's like a recent thread when someone was asking about rolling/converting a 401k balance from a former employer to a Roth and a responding poster thought explaining the supposed Fed tax impact as if that was the most important thing to consider yet with no consideration of so many other meaningful things that could affect the person's converted assets in later years. Potentially lose creditor protection, what are the poster's goals/timeframe, state tax or not, when retired state tax or not, retiree state income exemptions or not, is this for legacy purposes, spouse/no spouse, children/no children, etc, etc infinitum.

Then again, this is merely a message board.







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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
56737 posts

re: Over Funding Life Insurance vs. Roth IRA


There is so much wrong with this thread. What happens if the market shits the bed and his premiums go up?





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kyledavis
Member since Nov 2013
734 posts

re: Over Funding Life Insurance vs. Roth IRA


I understand that this is just a message board. I like to hear the different opinions. I talked to my CPA and he felt it may be a good option based on my situation. I'm sitting down with my insurance guy on Monday to get the details ironed out. I've already sent him a list of questions to discuss based on my research on the internet.

The problem with the internet is that most of the information is based on marketing/sales people. I'm looking for some hard facts.






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ds1tiger
LSU Fan
Closer than you think
Member since Apr 2006
243 posts

re: Over Funding Life Insurance vs. Roth IRA


I've always strayed away from using life insurance policies as investment vehicles. As someone said earlier, they typically underperform. I'm more comfortable picking a good fund in my ROTH and riding it for the long haul. But, I'm not an expert by any means.





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Alltheway Tigers!
LSU Fan
Baton Rouge
Member since Jan 2004
3181 posts

re: Over Funding Life Insurance vs. Roth IRA


quote:

There is so much wrong with this thread. What happens if the market shits the bed and his premiums go up?


There are no required premiums after the first year. There are minimal first year premiums, guideline premiums and what not.

Overall, if the market tanks, then you will have to decided to dump the policy or not.

Another point to consider: Surrender charges on VUL products tend to be nasty. Look for low cost or no cost VULs. They are out there.






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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
56737 posts

re: Over Funding Life Insurance vs. Roth IRA


I wouldn't ever ask my insurance guy to give me investment advice. But that's just me.





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kyledavis
Member since Nov 2013
734 posts

re: Over Funding Life Insurance vs. Roth IRA


quote:

I wouldn't ever ask my insurance guy to give me investment advice. But that's just me.


I'm not sure I should be taking financial advice from a guy name broke either......






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tirebiter
LSU Fan
ATL
Member since Oct 2006
5199 posts

re: Over Funding Life Insurance vs. Roth IRA


If you are responding to me I did not "advise" anyone to buy/not buy insurance nor invest/not invest in a Roth. I have yet to see him state he actually needs insurance, too, moreso he wants better investment performance. My point is people should really think things through and make a sound financial decision on what otherwise could be a costly short or long term mistake.

Can't say I am a big proponent of using Roths for savings accounts for emergencies nor pre-retirement living expenses, though.






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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
56737 posts

re: Over Funding Life Insurance vs. Roth IRA


I responded to Kyle





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Brian Wilson
LSU Fan
Member since Mar 2012
1156 posts

re: Over Funding Life Insurance vs. Roth IRA


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.






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Sdento1
Member since Aug 2013
26 posts

re: Over Funding Life Insurance vs. Roth IRA


No, this can be a great idea. The pro is that you can grow money tax free. When you put the money in it is not taxed, it grows tax free, and if you do it for over 10 years you can take loans against the policy by withdrawing an income. Loans are not taxable. You can use this with participating whole life.variable universal, or indexed ul....
Con: don't put all your eggs in this life basket, use it as a retirement strategy,
Con: you have to make sure it is funded correctly
Make sure you know somebody who does and it does it well
Also.if you die you lose the cash value to the ins. Company, but your beneficiaries usually get a larger tax free death benefit.
I would do this, Roth IRAs,...if you qualify and an employer plan and real estate---
My thoughts!
I own an insurance company and do this currently and recommend it to the right clients- I would say you need to make a decent income (100k) more and not a ton of debt....
Once again this is not for everybody, but it is the only tax free plan out there...hope that helps






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Sdento1
Member since Aug 2013
26 posts

re: Over Funding Life Insurance vs. Roth IRA


There are fees with Roth IRAs too!! There are fees with anything...get past the fees- only talk with experts about this- this is a guaranteed 5-8 percent--Roths have historically been better, but that is not guaranteed...





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LSUgolf04
LSU Fan
Member since Aug 2009
255 posts

re: Over Funding Life Insurance vs. Roth IRA


quote:

There are fees with Roth IRAs too!! There are fees with anything...get past the fees- only talk with experts about this- this is a guaranteed 5-8 percent--Roths have historically been better, but that is not guaranteed...



Don't forget 20% surrender charges, guarantees that only apply if you leave your money with that life insurance company, etc.

If it sounds too good to be true, then it probably is. I am in Insurance & Financial Services, and variable ULs are typically not very good. Stick with Mutual Funds in a ROTH and/or Dividend paying Whole Life. Term for large death benefits for cheap rates.

If you have credit card debt and/or unsecured debt with high interest rates, pay that off before you start investing in anything.






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