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Message
re: Over Funding Life Insurance vs. Roth IRA
Posted on 11/8/13 at 12:51 pm to Teddy Ruxpin
Posted on 11/8/13 at 12:51 pm to Teddy Ruxpin
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.
1
Posted on 11/8/13 at 1:38 pm to tirebiter
There is so much wrong with this thread. What happens if the market shits the bed and his premiums go up?
Posted on 11/8/13 at 1:44 pm to Broke
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.
The problem with the internet is that most of the information is based on marketing/sales people. I'm looking for some hard facts.
Posted on 11/8/13 at 2:07 pm to kyledavis
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.
Posted on 11/8/13 at 2:20 pm to Broke
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.
Posted on 11/8/13 at 2:24 pm to kyledavis
I wouldn't ever ask my insurance guy to give me investment advice. But that's just me.
Posted on 11/8/13 at 2:42 pm to Broke
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......
Posted on 11/8/13 at 3:09 pm to Broke
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.
Can't say I am a big proponent of using Roths for savings accounts for emergencies nor pre-retirement living expenses, though.
Posted on 11/8/13 at 3:21 pm to tirebiter
I responded to Kyle
Posted on 11/8/13 at 3:39 pm to kyledavis
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.
You should establish a separate emergency fund in a more liquid account if that's ultimately what you're worried about.
Posted on 11/9/13 at 11:36 am to kyledavis
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
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
Posted on 11/9/13 at 11:38 am to Bama98
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...
Posted on 11/9/13 at 12:27 pm to Sdento1
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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