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Hello Folks,
I have read this thread and I must say that I find it funny when I read posts amongst insurance agents that you guys are very blunt and sometimes mean to one another in a humorous way. I just wanted some thoughts.
I haver for about 10 or so yours considered buying a permanent policy. I was shown illustrations if I invested $2,000 a month or so and how I would be able to withdraw loan free etc., etc., etc.. I read a few books about investment grade life insurance particularly Be Your Own Banker and the book where the gentleman suggests taking equity out of your home and investing it in insurance. I forget the name of it.
The other book you're thinking of is titled "Missed Fortune".
I have found these concepts interesting and considered doing some of them, but I wanted to secure my pension first. I bought 5 additional years called airtime which for me was a good thing. I did that and then started placing money in a 403B again. My wife recently had a baby so I bought some term life insurance, but I also bought long term care insurance for us as well.
Now at 54, I am considering if I should buy permanent insurance not for me, but for my wife. I will retire in 7 years. She will receive a survivors benefit from my pension, plus anything in my 403B, plus she has her own 401K. She will be 40 this year. I was thinking that perhaps I should have her save money through permanent insurance instead of her 401K because of the tax implications. She would be taxed on my pension benefit, my 403B and her 401K. I was thinking that a permanent policy might help her be shielded from Uncle Sam's taxes. I am thinking that she will work at least to age 55 if not until 60. That would give her at least 15 years to contribute to the policy. She would not have to take out a distribution right away. We are not eligible to contribute to a Roth IRA because of income restrictions.
One idea to consider is setting up 72t distributions from your regulated retirement plans and have the payments go into a life insurance plan. It must be done with a seasoned life insurance professional who will structure the policy to maximize cash value accumulation and minimize the death benefits. And the death benefit would be a great plus for your situation.
My concern about the policy is what if something happened and she could not make the contributions, such as she gets laid off later on or physical ailments.
With physical ailments, a policy with a disability waiver of premium would let the premiums continue to be paid by the insurance company. Unemployment is a different situation.
Also, is 15 to 20 years really enough time. I had my son take out a whole life policy when he was 26. He is single, has a little girl and is very,very disciplined. He just contributes to his regularly and does not pay too much to it. The premiums come out of his check and he does not know the difference. He works for the government in a civilian job and he also has Roth account with his TSP which he has been contributing to since he was 19 and had joined the military. He has a long horizon for his policy to really benefit him.
Take a look at policies that are a 10-pay, 20-pay or until age 65. There may be an affordable combination with these, instead of committing to a 'lifetime pay'.
I just wanted to know folks' thoughts on me having my wife discontinue the 401K and start a overfunded whole life policy for retirement. We have a 6 month old right now so the need for insurance is there, but our incomes are really good so we could get along fine if something happened to the other ok. She has a policy through her job and I have one with my job and with Prudential so we would be fine. I am solely looking at this through the retirement window and taxes.
If you think that income taxation is going to go up... then why continue to fund a retirement plan that will increase your tax liability? At least anything above a decent match. (A decent match being 50% or higher of whatever you are contributing to the plan... to the maximum match.)
You will need a seasoned advisor/agent to help you with any or all of this.