re: My Whole Life Ins. situation and advice request

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I've said it before and will say it again: the amount of complexity in these WL/UL/VUL policies makes me never consider them. Financial complexity inevitably grows with adulthood -- this is one territory I'll intentionally avoid bringing more twists into the financial arena.

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I think that is one of Warren Buffet's rules. If it takes more than a sentence or two to describe, it probably has more loopholes and variables than you want to mess with.

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Was told this was a good way to go because I own two companies, one of which I had a SOLO401k with that had to be closed when I sold 49% of the company to a new partner. The SOLO401k was moved to an annuity.

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So even putting aside the ridiculousness of yours and the OPs policy, I'm really confused about this.

Why wouldn't you just rollover your SOLO401k into an IRA?

I had whole life, term life, and supplemental disability that was sold to me when I finished training 10 years ago. All with guardian. I canceled all of them when Covid first started. They were actually quite easy to deal with. Give you ample opportunity to change your mind over the ensuing couple of months as well. No pressure on their end. Sent me a big check for the cash value of the whole life as well, it was tax-free as my cost basis was much higher. I switched to just term life, and a different company for disability insurance. Pretty significant savings.

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not sure why the hell "my guy" put me in a universal variable life policy

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“Your guy” made a huge commission and can cite a sales pitch. Somehow, he convinced you that borrowing money from yourself and paying interest to them for a 2-3% return plus a death benefit that you won’t need was better than investing in a taxable account or buying real estate.

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Should I just eat the 35k loss and consider it tuition and start an IRA instead?

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This early in, almost certainly. If you have $25,000/year, you should max out a Roth IRA (through the front or back door. If you already have an IRA, break out your reading glasses). With the other $19,000, you can max out a Roth IRA for a spouse based on your income if you have a spouse and they do not have an IRA.
So with the other $13,000-19,000, do a little math. But just a plain taxable brokerage account in a total market/SPY-like fund would almost certainly give you better returns than what you have now. That’s a decent chunk of change you’re putting towards retirement- you may have access to more interesting real estate opportunities than something like a REIT which would also almost certainly outperform a whole life policy, particularly if you have a term policy on hand.

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I am over the income limit for a Roth IRA

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So contribute to a traditional IRA. You won’t get a tax break for it. Then, a day later, convert the traditional IRA contribution to Roth. Roth conversions are legal for all income levels. Congratulations, you do not owe any additional tax because you never got a tax break in the first place, and that $6,000 grows and can be withdrawn tax free at retirement for your entire life + 10 years.

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At what point in these things does the cash value typically go over the premiums you have paid

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Year 10-15, in most cases.

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So the "overfunding" aspect is not generally recommended?

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I expect to die. I expect to be very set when I do it. If I die before I am “set,” then I need insurance for those who survive me. So I want term insurance for a short term, then to stop wasting premiums on a product I don’t need. So I wouldn’t overfund a product I don’t want or need for any reason. Perhaps if you pour more money into it, you will get more back from that policy down the road. But I can just about promise that you’ll get more back if you throw the same dollars into a total market fund in a brokerage account. I can’t predict the future, but in a world where the s&p is 14ish percent off it’s all-time high, I can only imagine you can expect better returns with less hassle and fees from the market than through a life insurance policy, provided you don’t die in the next decade or so.

It hurts to make a bad decision. Don’t think of how much of the original $50K you’re losing here and how much of your future dollars you need to spend to make that $50K—>$15K look better in retrospect. Think from today forward as if that asset is worth $15,000, you never had $50,000, and you want to maximize returns from now til death.

You would probably really benefit from an hourly advisor who isn’t selling you anything but his own time. You have an easy time making money it seems- that is a very cool thing. The best path forward gets very cloudy, and there are a ton of people who want to take a small piece of your work and make it work for them. Unfortunately, they are everywhere and often come to us in the form of old friends who we trust when they’re really just peddling products they don’t understand themselves.


This isn’t saying your plan is bad or wrong. But having trained eyes look at it may help. For instance, is there an annuity INSIDE of the 401k? Because 401k fees are generally higher than IRA fees. An annuity when you are inside of a 401k at the age of 37 when there is the possibility to invest more aggressively seems odd to me.
But the ability to do a Roth conversion disappears if you have a traditional IRA of any substantial amount. And if you can open another 401k (or SIMPLE IRA), they may benefit you more or less, but sitting with someone with no financial interest in selling you a good path forward when there are so many good options would probably be worth the few thousand dollars it’s going to cost you. Will 401k fees outpace the benefit of your Roth contributions? No idea. Is moving the 401k to an IRA then starting another 401k wrong? Not necessarily.


White coat investor has a pretty good blog, but he’ll admit very openly that retirement plans for employers/business owners is complicated and outside the realm of his interest (though he did, much later, start a 401k plan and explain how he chose what he did). There’s really very few resources for the position you’re in other than learning everything about every type of account, and that takes some effort and some times.


Sounds like you’re in a great spot, though, and that you’ll watch these accounts grow pretty quickly pretty soon.