Should I surrender indexed universal life insurance policy?

[seekeroftruth0]

@vincey It sounds like you need to do some more reading on IUL vs. IRA.
It’s pretty typical for the cash value to match what you’ve paid into by year 10.
After year 10 is where it starts to get really good.

IRAs should be a part of everybody’s retirement plan, no question about it.
Just take into consideration how much taxes are growing to hike In the next 10-15 years.
Take into consideration withdrawing money tax free as oppose to paying tax on your withdrawals.
Take into consideration guaranteed compound % growth that doesn’t let up even as you take money out as a loans.

 

[vincey]

@seekeroftruth0 I do have a Roth IRA as well and more concerned with retirement savings, also don't really need the death benefit right now..

 

[lwh]

@vincey Why is surrender charge so much ?

 

[bethellens]

@vincey I think you over looked 401k and ira. How much you planning to put ira and 401k a year? If you used that money for this, iul what difference in result. second 401k is a gamble. 10k become 0 overnight. My friend had 401k, and he had 10k before covid, and it became 0 during covid.i have 401k, and i hate it. I get free contributions from my employer, not matching. Ira is nice but do you really want to be 65 enjoy the money you work hard for? Really think why work and what purposes

 

[graceabound]

@bethellens Your friend’s 401k would be worth more now than before Covid if he/she had just held it

 

[hannahjane]

@bethellens No one’s 401k lost 100% during COVID. There was one bad 9 month period and then the market took back off.

 

[bethellens]

@hannahjane Even so, it still gambles. What happened was it continued to go badly like 2008. 10 -20 percent is really bad because of the larger amount you have in there. The larger lost. I never want see i got like 1 million and half that gone over night

 

[ltcajh]

@bethellens You’re going to have a very shitty retirement with this attitude.

But don’t worry, the memories about all the time and money you wasted in your youth will probably keep you fed during lean times and you totally won’t be eating cat food.

 

[bethellens]

@ltcajh No. At least i got 401k for free, unlike rest of the people do matching. Maybe read carefully before say something stupid. Seocnd i do not need to retire i can work till 100 if i want to

 

[ltcajh]

@bethellens I’ve heard the Salmon Pate from Fiskars is pretty close to edible for humans. Let me know what you find out.

 

[ativyl]

@vincey First off switch to annual funding. You probably are underfunding it. Take a look at your in force illustration at the MEC limit. You have paid a lot of menu to be able to put money in that you haven't used. That's a waste.

The IUL for someone in the 20s is not retirement saving but an alternative to bank products for short term money. Replace car loans, home down payment, emergency fund.... It will allow you to put more in your 401k by offsetting interest and tax expenses. In retirement it gets you a taxable fixed income alternative which allows your retirement accounts to have less bonds. But that discussion is 40 years from now.

 

[cupcake26]

@vincey I am in the same exact position and have been wondering this as well. I've been paying $175 a month for nearly 8 years. 250k death benefit, 2500 surrender fee, 6k cash value. I get so many different answers on what to do its hard to know what direction to go in.

 

[hannahjane]

@vincey A Roth account achieves the advantages of tax free investment growth everyone is touting here.

Without the negatives:
- Cost and fees associated with the insurance.
- Needing to take a loan in your retirement years.

Or the positives:
- Death benefit for your beneficiaries
- An investment floor of 0%

Many people who are ineligible for a Roth (income level usually) turn to permanent insurance as an alternative that achieves the same tax free growth. When properly designed and executed it absolutely works.

Whether or not you should surrender this is up to you. I suspect your surrender period is 10 years. Ask the company for a current projection of the policy. The cash value at the end of year 10 will be your surrender value.

So the simplified math for your decision to cancel or not is:
That cash value at year 10 compared to $8300 which is the value of investing your surrender value today plus three years of $100/month investments and 6% growth during that period.

I suspect you’re better off with the IUL in this scenario and if you die during that three years it’s a serious financial windfall for your beneficiaries (ignoring the human loss part).

At year 10 do this exercise again to determine if you should keep the IUL or fund a Roth - if you remain eligible for Roth contributions.

Couple of side notes:
- While you’re calling the company, ask them for the maximum monthly non-MEC premium you can pay. To make your policy sing that is the number you should be paying.

• Reducing the face (as others have suggested) may incur a surrender charge too. Ask the company.
• Changing to death benefit option 1 from option 2 will slightly reduce your costs and is something to consider if you’re keeping it.

 

[tannerking1]

@vincey Wouldn't a straight life policy be better for someone young and isn't expected to die anytime soon? Couldn't you just get a IUL later? Maybe both at the same time?