A Universal Life Dilema....

[zmcpherson]

The reason that I am looking into this policy is for a few reasons

1 - It is tax advantaged. You might say, "Well so are Roth's!" ... Im 27 and making a decent chunk of money, and Im hoping by the time Im 30 I no longer qualify for a ROTH and normal IRA's just dont seem worth it.

2 - It doesnt count as an asset or income. So when I do start cashing in on it I dont have to report it to the IRS.

and 3 - My 20 year old cousin died in a freak accident last year. Crap happens and his family definitely struggled to cover everything. The $700 a month plan provides a $1m dollar death benefit, and at age 55 i take out 65k a year till I die, plus my family still gets a death benefit.

Im sending an email to the Aviva lady about the participating/non-participating WL right now, thanks for the heads up.

Does anyone find IRA's better then UL's or WL's? Would my money be better suited in an IRA/Term Life combo?

 

[briko3]

The reason that I am looking into this policy is for a few reasons

1 - It is tax advantaged. You might say, "Well so are Roth's!" ... Im 27 and making a decent chunk of money, and Im hoping by the time Im 30 I no longer qualify for a ROTH and normal IRA's just dont seem worth it.

2 - It doesnt count as an asset or income. So when I do start cashing in on it I dont have to report it to the IRS.

and 3 - My 20 year old cousin died in a freak accident last year. Crap happens and his family definitely struggled to cover everything. The $700 a month plan provides a $1m dollar death benefit, and at age 55 i take out 65k a year till I die, plus my family still gets a death benefit.

Im sending an email to the Aviva lady about the participating/non-participating WL right now, thanks for the heads up.

Does anyone find IRA's better then UL's or WL's? Would my money be better suited in an IRA/Term Life combo?

All an IRA means is that it's tax advantaged and you pay income taxes on anything you pull out later in life. The government basically lets your invest income tax free. As far as being good or bad, it depends more on what's in it. You can put businesses, real estate, annuities, etc. in it. It doesn't just have to be stocks and bonds.

The benefit to the life insurance is that you can access the money without paying taxes in the form of loans against the policy. What's really going to be important is lapse protection and how the loans are levied against the policy. Some are wash loans, some are participating loans and some are neither. You also need to make sure this policy NEVER lapses or you will get hit with phantom income and a (potentially large) tax bill on all the loans you took out.
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I guess what I'm trying to say is make sure your agent knows about this stuff and discusses it with out or find another agent that is more knowledgeable.

 

[zmcpherson]

IRA's are tax deferred and Roth IRA's are tax advantaged which is just one reason why Roth's are better then IRA's. You cant deduct Roth IRA's from your yearly taxes like you can IRA's but with IRA's you end up paying capital gains, interest, and dividends on everything that has accrued when you retire. Just not everyone is eligible for a Roth

The more and more I read on whole life and universal life the more I think I am just going to do a Roth and maybe look into a low premium permanent life insurance (term seems silly at my age)

What happens to my Roth IRA if say, 5 years from now I dont qualify for it anymore? Am I forced to roll it over to an IRA or would I just start an IRA from that point and let my Roth sit?

*edit - I cant find one person on the whole of the internet that likes permanent life over term life (Im excluding sites like Aviva and all the fake sites that are most likely linked to financial groups). This is insane.

 

[Arthur Rudnick]

*edit - I cant find one person on the whole of the internet that likes permanent life over term life (Im excluding sites like Aviva and all the fake sites that are most likely linked to financial groups). This is insane.

You need to sit down with an independent life insurance agent who represents multiple carriers. You obviously have no idea what you're looking for and you need to have your options in front of you.

Term, U/L or W/L? This is not auto insurance and should not be purchased over the internet.

 

[VolAgent]

*edit - I cant find one person on the whole of the internet that likes permanent life over term life (Im excluding sites like Aviva and all the fake sites that are most likely linked to financial groups). This is insane.

People who like permanent life insurance generally don't run websites about it for two reasons. One, they get drowned up by the *** gurus like Suze Orman and Dave Ramsey. Two, the IRS catches wind and changes the rule. At my first agency, they told me stories about the ads in the Wall Street Journal before the MEC rules went into place. People use to stuff permanent insurance full of cash and avoid paying taxes on the gains. So the IRS limited how much can be put in. They have done this twice, first was TAMRA back in the 70s.

When you find a loophole in the tax code, it is generally best not to tell the world. Fortunately, even as we tell the world, idiots like Suze and Dave tell the world we are wrong. We don't know how lucky we are sometimes.

 

[zmcpherson]

lol, I think that might be 2 arguments against it.

The point of me setting up a retirement is to ensure that I have something to fall back on 30 years from now. Are you telling me that if permanent life insurance becomes more well known/popular as a means for tax evasion the IRS might change the structure completely - Maybe set up capital gains, interest, or consider it an investment vehicle that produces income? Do you think that 30 years is to long to bank on the federal government not changing tax regulations on permanent life insurance?

 

[VolAgent]

lol, I think that might be 2 arguments against it.

The point of me setting up a retirement is to ensure that I have something to fall back on 30 years from now. Are you telling me that if permanent life insurance becomes more well known/popular as a means for tax evasion the IRS might change the structure completely - Maybe set up capital gains, interest, or consider it an investment vehicle that produces income? Do you think that 30 years is to long to bank on the federal government not changing tax regulations on permanent life insurance?

No. The pattern has always been to apply the rules to new policies, not existing policies. So, you should buy it now while the rules still favor permanent insurance.

 

[aacards8]

lol, I think that might be 2 arguments against it.

The point of me setting up a retirement is to ensure that I have something to fall back on 30 years from now. Are you telling me that if permanent life insurance becomes more well known/popular as a means for tax evasion the IRS might change the structure completely - Maybe set up capital gains, interest, or consider it an investment vehicle that produces income? Do you think that 30 years is to long to bank on the federal government not changing tax regulations on permanent life insurance?

Check out what some companies call an LTUL. That's a UL with a lifetime guarantee. It does build up some cash value, for awhile. You can also set it up to "pay off" in a set amount of time, say 20 years. It's comparable to paying your mortgage off early. You'll have lifetime coverage and at your age it's still pretty inexpensive.

 

[briko3]

IRA's are tax deferred and Roth IRA's are tax advantaged which is just one reason why Roth's are better then IRA's. You cant deduct Roth IRA's from your yearly taxes like you can IRA's but with IRA's you end up paying capital gains, interest, and dividends on everything that has accrued when you retire. Just not everyone is eligible for a Roth

The more and more I read on whole life and universal life the more I think I am just going to do a Roth and maybe look into a low premium permanent life insurance (term seems silly at my age)

What happens to my Roth IRA if say, 5 years from now I dont qualify for it anymore? Am I forced to roll it over to an IRA or would I just start an IRA from that point and let my Roth sit?

*edit - I cant find one person on the whole of the internet that likes permanent life over term life (Im excluding sites like Aviva and all the fake sites that are most likely linked to financial groups). This is insane.

You're making it more difficult than it is...and slightly wrong.

Roth: Pay INCOME tax now and no tax later.
Traditional IRA: Pay no tax now but pay INCOME tax when you withdraw it. Nothing to do with capital gains, etc.

It all depends on what you think the taxes are going to be in the future. Most of the time they're nearly a wash at the end when you've pulled all the money out (unless taxes go up)

BTW, you can keep the roth money even if you no longer qualify for it.

Also, ALL life insurance is based on annually renewable term.

 

[Norwayguy]

IRA's are tax deferred and Roth IRA's are tax advantaged which is just one reason why Roth's are better then IRA's. You cant deduct Roth IRA's from your yearly taxes like you can IRA's but with IRA's you end up paying capital gains, interest, and dividends on everything that has accrued when you retire. Just not everyone is eligible for a Roth

The more and more I read on whole life and universal life the more I think I am just going to do a Roth and maybe look into a low premium. permanent life insurance (term seems silly at my age)

What happens to my Roth IRA if say, 5 years from now I dont qualify for it anymore? Am I forced to roll it over to an IRA or would I just start an IRA from that point and let my Roth sit?

*edit - I cant find one person on the whole of the internet that likes permanent life over term life (Im excluding sites like Aviva and all the fake sites that are most likely linked to financial groups). This is insane.

Your comment on the taxation of It's at retirement is muddled and incorrect. You pay income taxes on all distributions no need to talk about capital gains or dividends.