if i max out my 401k and i need life insurance is a universal life policy a good vehicle to get ins and growth

Public Comments

1. Whole Life Insurance is about the worst investment in the world. Buy term life and invest the difference in bonds or something.
2. Why do you want to get extremely expensive insurance and paltry growth rolled into one product, when you can get extremely cheap insurance and pretty good growth, in two different products? Is the convenience worth that much $$ to you??? SET THE GOALS FIRST. Then match up products to goals, AFTERWARDS.
3. No, do them in 2 different accounts. I have never been a fan of combining investments & insurance. They each serve a different purpose so they should be held separately. Open up an IRA if you qualify, then you can take the extra deduction on your taxes. Then get a life insurance policy.
4. I would buy term for your insurance needs and invest extra money in a Roth IRA. If you're maxing out your 401K and a Roth, you're saving too much: Spend some money and live a little! Put money in a money market and go on vacation somewhere cool. Unless you can find a UL policy with preferred rating and very low fees, I don't think they make good investments.
5. Congradulations on having the problem that I consider to be a very good one, making too much money!! First off lets talk about why you are maxing out your 401(k)? Here is a history lesson, we are in a historically low tax rate invironment, and unless congress does something to keep it that way, we are looking at taxes going up in the next four years.... not only that we are dropping the number of tax brakets from 6 (currently highest at 35%) to 4 (with a high of 39.6%)! Chances are that you will be in a higher tax bracket when you retire than you are currently if the bulk of your retirement income is coming from you 401(k), because every dollar you take out of it is taxable at what ever income bracket you fall in. Example... if you are earning $150K+ you are in a 35% tax bracket currently, if you are planning on keeping that salary in retirement, you will not be droping lowering your tax liability, in most cases you will be increasing your liability, (all the deductions you currently enjoy such as child dependents, home interest payments, ect are probably not going to be there any longer to help you lower that tax bite.) So in affect you will be minimizing your total disposable dollars. Here is what I suggest to my clients who are in your situation (being able to maximize their 401(k) or other pretax plans), IF you are a W-2 employee only contribute the maximum required to get the maximum match from your employer, so if they match $0.50 on the first 6% you contribute, contribute 6% to get the 3%. DO NOT contribute a penny more. Also depending on how close to retirement you are (I will assume you have 15 years or more) you should be pretty agressive with this money as you need the long term protection of the market for this money. IF your employer does not match any of your contributions... do not put a dime into their plan, go out and open a Traditional IRA where you can have unlimited choices of where you can put your money, and get the tax DEFERRED growth that way. What appears to be needed in your plan is a diversification in how your money is going to be taxed in retirement. This is where your question is heading in the right direction. The IRS gives us three tools and ONLY three tools that will allow you to get tax free money in retirement: 1) Roth IRA, this is for people who have 20 or so years until retirement, they definatly wont be touching the money before age 59 1/2 and they qualify via income. For a single person the cut off is making $114K per year (but the phase out for contributions begins at $99K; married couples filing jointly the phase out begins at $156K and no more contributions at $166K). The contribution limits on this is also only $4K if you are under 50, $5k if you are over 50. (2) is Tax Free Municiple bonds; these are primarily for individuals who are right at the retirment age and need tax free income right away as well as preservation of their capital. (3) Cash Value Life Insurance; this broken into three types: a) Whole Life (b) Universal Life and (c) Variable Universal Life. To answer your question regarding wether or not universal life insurance is a vehicle to get insurance and growth. The answer depends on how disiplined you are about paying the highest premium choice. I just did two life illustrations, one on a Universal Life and one on a Whole Life. The universal life policy premium is just over $8K per year (these are both illustrated for a 35 year male non-smoke; this is a worst-case senario for a healthy non-smoking male with no serious health issues), and the whole life's premium is just over $12K per year. The growth difference is when you decide to retire, the Universal Life policy will payout $17K per year for 20 years where as the whole life policy pays out $34K for the same time period. Also if the insured lives to their Life Expectancy of 82, the Universal Life policy has a death benefit of $486,686 were the whole life policy has a death benefit of $803,117, even after taking out twice as much money for 20 years! Now if you want to compare that with buying term and investing the difference: Here are a few things to consider... you will always need the life insurance... the original reason for the life insurance will change, but the need will always be there... even Bill Gates owns life insurance, as does Waren Buffet... and even Susie "I am moron" Orman. And they don't own term. So when you talk to someone who tells you to buy term and invest the difference ask them what happens when your term comes up... answer is the premium goes through the roof. So I am going to use the whole life policy as the comparitive policy to buy term and invest the diference, as I think it does the better job of the two policy options at getting the insurance coverage and the growth you were looking for. So if we look at the whole life and the investment assuming an 8% rate of return on your investments: Up untill age 71 (incidently if your investing the difference into a pretax plan, you would have to take Required Minimum Distrubutions at this time) your buy term invest the difference does quite well compared to the cash value account in the whole life. But from that point on you investment is getting a negitave return. Also lets take a look at what your side account would be at age 65: $681,182. Compared to the $619,376 in the cash value account. But here is the kicker, if you wanted to get $34K a year from that side account, how long do you think it would last? It will only last 19 years and then you have nothing. Your also, going to be paying $13,000 for your life insurance! Now if look at the life expectancy numbers: the cash value is $560K ahead of where your side investment account is and your would be paying $92K for insurance. This is obviously not the way to go. My recomendation would be to find a good life insurance agent who knows how each type of life insurance policy works, how you can use them to your advantage and then how you can use other investment accounts as well. My guess is that if you are able to max out your 401(k) you don't qualify for a Roth IRA and you need something that is not for the average person... which is where the whole idea of buy term and invest the difference is targeted. You need something that will allow you to save as much money for retirement as possible, and that will allow you to take it out in a tax effiecent manner.
6. do not do that. Put your money in a cd, at least the money is still yours and not th banks. but find a better rate than the bank they are out there. do not buy any cash value, you will be sorry
7. Universal life insurance is not a good life insurance product. A portion of your premiums pays for the insurance and a portion pays for the cash value. As years goes on, the internal cost of the life insurance goes up. That means less and less of your premiums is going into the cash value. Eventually, you will start noticing your premiums going up. At most, the rate of return you will get on the cash value is 4%. If you ever wanted to take money out, you have to borrow the cash value and interest will be charged on the loan. If you surrender the policy someday, you will pay surrender charges. When you buy a universal life policy, you have two death benefit options. Option "A" is where your death benefit will NOT include the cash value when you die. Option "B" is where your death benefit will include the cash value when you die, but you have to pay more premiums than Option "A". Most people who have Option B switch to Option A because the cost of the insurance goes up and the premiums will be too expensive. As you can see, the cash value never belongs to you. You are paying your own money and throwing most of it away. What I would do is get a Roth IRA and max it out. Lets say you put in $4000 every year for the next 10 years. Your total contributions is $40,000. Given the past performance of the stock market, the value of your portfolio may be greater than $40,000. Under the IRS rules, you can withdraw your contributions out any time without paying income taxes or penalties. So a Roth IRA gives you flexibility. After age 59 1/2, you can withdraw the entire balance out without paying any income taxes. I would also setup an emergency fund. If you don't have one setup, I would look at money markets. They have an average rate of return of 4-5%. You can put in as much as you want in there. As for life insurance, I would get a 20,30, or 35 year term. That way you are paying just for the insurance and nothing else. I had a client who own a variable universal life policy until I revealed the truth behind the product. I showed him all the facts from the policy. After that, he said this life insurance sucks. He was paying about $1856/year for just $100,000 coverage at age 36. At the time I was showing him the facts about his life insurance policy, he was 56 years old. He had about $14,000 in the cash value. If he bought a 30 year term at age 36, it would of cost him only $330/year. At age 56, he does not qualify for a 30 year term. So I gave him a 20 year term with $100k coverage and his annual premiums are $1270. His monthly savings is $48.83. I open a Roth IRA for him and he invest $50/month. With a 10% rate of return, in 10 years he will have about $10,327. With the cash value in his VUL, I did a 1035 exchange and move it into a variable annuity. There was $1000 surrender charge, so only about $13,000 was invested. He doesn't contribute into it since it requires a minimum of $250 to buy more shares. About a year after doing all this, the client had $13,740 in his variable annuity and $640 in his Roth IRA. Keep in mind, he had no retirement savings before I met him. Now he's building something to retire on. Even though its not much, its better than what he had in his VUL policy.
8. Hell no. You have to be a complete idiot to buy a universal life insurance. The rate on them really sucks. They try to fool you with a hypothetical 10% rate, but in reality, you only get less 4% on them! Life insurance is not a tool to build investments. It is a tool to protect your income in case you die so that your family can comfortably live on. As for that idiot who says Bill Gates have life insurance, he DOES NOT have life insurance because he doesn't need it. If he dies, his family will continue to be paid forever from his business and they will get millions of dollars and still be able to maintain the same life style. Here's a history lesson for you, the stock market has historically perform at a 12% rate of return in the past 25 years.
9. Term life is better. Invest the money you save in other investment vehicles like mutual funds. Figuring out the true costs and expenses of universal life is difficult. The costs of term life and mutual funds will be more transparent, and you'll have an easier time finding low cost insurance and investments.
10. Probably not. It is something to consider in yoursituation, but someone in your position should pay a fee-only advisor to get an unbiased opinion. Every agent on this forum has their own biases and that's what you get in the real world too. If you rely on a whole life that is paying dividends, you are putting a large part of your retirement on the experience of only one company. If you buy a universal life, the adjustable mortality and administration costs often have more control over your cash value than any declared interest rate. Most of the "buy term invest the difference" crowd on this forum only know how to play that one song, and that's why there is mis-information about option A and B, etc. The only way you will get a straight answer from someone who isn't trying to sell you something is if you pay them upfront for their advice and they give you the ability to execute their advice elsewhere.
11. If you bank on life insurance being a good way think again....and when avald says u need life insurance always is 100% wrong, unless u will always have debt. but it looks like that is not your case. Life insurance is mainly for income protection for your family. Think of this...why don't you have a savings plan with your car insurance? Because you do NOT put the two together, so why put savings and life insurance together? And if you die, all the money you paid into that policy is gone....you do not get any unless you choose one of the more expensive options in a universal. So buy term, and find a vehicle that generates a way better rate of return (an insurance policy averages about 1.5%) this is a fact so do this...READ THE INSURANCE POLICY CONTRACT AND LOOK FOR WORDS SUCH AS....OR,....MAY ...NON-GUARANTEED....OPTION A OPTION B PLAN 1 OR PLAN 2. As far as me trying to sell? no way...I am telling the truth, because i found out the hard way. My parents thought just like you, and they lost over a $100,000.00 because a cash value joker didn'ttell them the truth. As I tell my clients...IF YOU DO THE RIGHT THING, THE MONEY WILL COME. I am tired of some companys taking advantage of people like my parents. that money is gone forever, except in the insurance companies pockets.