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What to do with inherited whole life policy?

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  • What to do with inherited whole life policy?

    Hey everyone, wanted to get some opinions on what to do with a whole life policy that my grandfather set up for me. Details as follows:

    - opened in 1990

    - 40k benefit with current cash value of $7,400

    - cash value increase of $330 last year which is ~4.5% yield last year

    - $192 annual premium. using last years dividend will cost me $55 to keep another year (so effective yield of ~3.5%)

     

    I'm 31 and 6 months into practice. I am maxing out a 401k, 457b, HSA and have contributed $5500 to a backdoor Roth for 2017. I still have about 200k in student loan debt that is refinanced into a private loan at 4.1%.

     

    I know it's a small policy, but wondering if that money would be put to better use elsewhere? So do you think I should just keep it? Put that money into spousal backdoor Roth? Put it all towards student loans? Other suggestions? I'm trying not to let the fact that the policy is through NWM make me want to dump it ASAP :-)

     

    Thanks in advance for your awesome responses!

     

    Chris

     

     

     

  • #2
    Tough call, because the policy's old enough now that it is actually beginning to generate some positive returns.  If you have need of life insurance, I'd be inclined to keep it (although $40k isn't much coverage).

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    • #3
      I don't know. $7400? I'd probably tell Gramps "thank you," cash it out and move on. Do you really need the $40K coverage?
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • #4
        Cash it out.

        The 3.5% "return" on $7k and the $40k benefit isn't worth having to revisit every year, recalculate, redecide.

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        • #5
          Cash out imo. You can earn more than 3.5% and a $40,000 death benefit isn't worth that. It's run its course imo.

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          • #6
            Jim,

             

            Definitely do not need the coverage. I took it over at 26 and up until this year had been making enough in dividends that I was only paying about $10/year to keep it.

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            • #7
              Cash out. No brainer, IMO.

              The title of the thread is slightly misleading. When I read it, my first thought was, "Geez, I thought that when you died, the life insurance policy died with you." I understand where my thinking was wrong, now that I have read the scenario.

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