Should I invest in a Roth IRa or Variable Universal Life Insurance Policy?
I have a 401k/ Not married, no children, but my advisor says it is wise to invest in a variable universal life policy while I am young (the premiums are lower) so it builds cash value to aid in retirement plus I will have the death benefit for later on when I am married and have kids. Susie Orman thinks this is a bad idea and that 401ks and Roth IRAs are the way to go. Other people think differently. I am confused on what to do and wonder if people who have actually signed up for a Variable Universal Life policy have actually seen the cash value results when they have retired. My illustration shows about $600,000 cash value when I am 70- that is with a 12% return. I am wondering if I should go with this policy or use the $200/month it would cost to fund this and invest it in a Roth IRA instead or put more towards my 401k. Any serious advice would help!
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First of all, your age ? If under 35-39 UL is a good deal, mortality charges are minimal, and you should be able to stop payments in 20 years easily, and still have the full benefit death insurance.
12% return is ridiculous long term, look at some 7% to 9% numbers. This is more likely. Also what is the guaranteed interest rate of the particular policy you expect to buy ? What company, etc. ?
The Roth is good also. If you have a few extra bucks, do both !
But the insurance should not be $200 a month, too much ! Who are you doing business with ? For $200 a month, you should be able to do both if you are in the age bracket I am guessing.
Sounds like your financial advisor is an insurance salesman!
Met Life, NY Life, or Prudential maybe ? Get away from him !
I would go with the Life Insurance, because you can borrow against it later, while you are alive, and you are paying a lot less for a bigger return, but you won?t get to enjoy it (the ?final? return), but your family will be well taken care of. I?m sure there are a lot more pro?s and con?s.
Invest in your IRA, Roth IRA and/or 401K. Pay attention to the costs of whatever you choose to invest in. In the beginning go with funds that have low costs ? Vanguard is a good place to look ?
Whenever you need insurance, buy term. You don?t want to be paying for insurance that you don?t need ? you have no wife or kids to be concerned with at the present. You only need insurance to replace your income so your family is taken care of if you die. Insurance is not the best investment method for a young person.
Source(s):
Average Joe who accumulate $1,000 K plus by prudent stock and bond investments over a lifetime.
6 years ago
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