Originally posted by Probzilla:
I have I look at it all the time. It basically come down to this. in 13 more years when I have invested around 11k into it I can cash it out for 19k or cash it out for 15k and keep the life insurance at it's current level which is about 60k.



This seems pretty bad. The only good thing is that the amounts are not that significant in terms of retirement planning. How much a year are you paying for this?

Advice is cheap and on this subject I have some hard won experience â??? even though I am a physicist, not an investment planner.

If I were you this is what I would do:

1. Terminate this policy immediately and take whatever cash value it has.
2. Open an IRA account and deposit the entire amount. You can deposit up to $3,000 per year (I believe it increases to $3,500 per year starting in 2005). Your money will now grow tax free. If your annual taxable earnings are under $45,000 per year ($65,000 if married) you can deduct the entire IRA contribution from your federal income tax. This could be worth up to $1,000 in your pocket at tax time.
3. If you need the life insurance coverage, purchase an inexpensive term policy.
4. Every year from now on deposit in your IRA at least the amount you would have spent on the crappy whole life policy you have now. If you can, deposit right up to the limit â??? especially if you can take the deduction.
5. Be happy! When you turn 65 and need the money, you will have a seriously healthy account to draw upon.

Hereâ??s some numbers for you. If you start your IRA account this year with $3,000 and only invest the $850 / year you are spending now on whole life, in 13 years you will have between $27,000 to $44,000 in your account assuming an average rate of return of 9% to 15% (I manage to see at least 15% a year with my investments). With the same rate of return, if you make the maximum contribution, you will have between $125,000 to $188,000 in your account in 13 years.

You will also have significant tax savings each of these years if you meet the income limits (refund check). Enough to partially fund your next year IRA contribution.

Get on Google and search on â??IRA Calculator.â? Play with it. Learn.

Whole life is the worst scam the insurance companies have ever come up with. It really has no place in any serious retirement plan.


Post the actual payments and the current cash value of this whole life policy and I will run some real numbers for you. Do you meet the deductable IRA contribution income limits?

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