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  • Deciding on a VUL plan

    Hello,
    My current employer offers a 401k but does not match anything because my employer offers a pension at retirement. I can use the pension in 2 ways: single participant or married participant with 2/3 joint ownership. My financial advisor has proposed a VUL Permanent Life Insurance plan. He states the 2 biggest reasons he proposed this was for the following:
    1. Pension Max- Says I can draw my pension as a single participant (more money) since the VUL has a death benefit for my spouse if I die.
    2. Access to Money prior to 59.5 years of age. - I told him I would like to retire at age 55 and since my employer does not match into 401k, my advisor wants me to use the money I am putting toward 401k into a VUL so I can have access to money at age 55.

    Im very hesitant on this change and could use some advice if its the right decision to make. Is there something else I could do that makes more sense such as buying term life and invest into mutual funds?

  • #2
    financial advisor wants you to buy a VUL because he's a VUL salesman

    if you need a financial advisory, you want one that you actually pay for advice, not one that makes money by selling you stuff

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    • #3
      Oof.

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      • #4
        Originally posted by mboston View Post
        2. Access to Money prior to 59.5 years of age. - I told him I would like to retire at age 55 and since my employer does not match into 401k, my advisor wants me to use the money I am putting toward 401k into a VUL so I can have access to money at age 55.

        Im very hesitant on this change and could use some advice if its the right decision to make. Is there something else I could do that makes more sense such as buying term life and invest into mutual funds?
        you should be so thankful you found this website. get away from this advisor. you get access to all of your money in a 401k in the year you turn 55 as long as you are with that employer and quit no matter what it is invested in. You don't need to have it in a VUL to access it at age 55. Buy term life and invest in low-cost (expense ratios of .20 or lower) mutual funds both inside and perhaps outside of your 401k

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        • #5
          Start contributing to the 401k.

          Stop listening to the "advisor".

          The best VUL plan is having no VUL.

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          • #6
            Separation from service after 55 waives the 59.5 requirement.

            Did the advisor explain the pension to you? It doesn't sound right.

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            • #7
              You can access money in a taxable account at any age, even prior to 55. Sounds like you might also lose the tax deferral benefits of a 401k. If I were you I would invest in your 401k, buy term life insurance (if you don’t have life insurance already or need it), and then invest excess money in a taxable account, assuming other tax advantageous opportunities (backdoor Roth, HSA, spouse 401k/403b) are being filled.

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              • #8
                wow...
                I sincerely hope that you misunderstood your advisor, because what you're relayed here is terrible advice, on all counts.
                Employer's match is nice but ultimately not very important.
                If it were, none of us self-employed docs would have a 401k plan - where not only are we not getting a match from anyone - we have to match others AND pay admin costs.
                As others said, 401k and term life ins if you need it.

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                • #9
                  Originally posted by sourshoes View Post
                  Separation from service after 55 waives the 59.5 requirement.

                  Did the advisor explain the pension to you? It doesn't sound right.
                  it's not separation from service after 55. It's separation in the year you turn 55. So you can be 54 when you separate and you get access to all of the 401k funds penalty-free

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                  • #10
                    No.

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                    • #11
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                      • #12
                        You are getting great advice on this forum. Run away from any advisor that suggests any form of whole life insurance

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                        • #13
                          nay, nay, 1000 times nay!!!

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                          • #14
                            Originally posted by sourshoes View Post
                            Separation from service after 55 waives the 59.5 requirement.

                            Did the advisor explain the pension to you? It doesn't sound right.
                            He explained it but I also read through my benefits package to verify. I get 52.8% of my last years salary if I stay with this company 32 years. (the percentage declines if I leave sooner. Vested after 5 years). I can take the full 52.8% as a single participant meaning if I die, my wife gets nothings after I die. Or I can take a 2/3 joint ownership where I take 66% of the 52.8 offered to me and if I die, my wife will also get 66% of the 52.8% until she passes.

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                            • #15
                              Run away from this guy. You can do both your pension and the 401k, correct? or just one or the other? If its just one I would still go with the 401k unless you are certain you will stay long enough to make the pension worthwhile.

                              I will get a tiny pension from NYC from my teaching years- like yours I'm vested but it will be a small amount because I only stayed there 6 years. I still put in money in the tax deferred option (TDA- their version of a 401k) while working there. The TDA grows at a 8% now, guaranteed never to fall below 7.5% unless they rewrite the law. When I started getting disability and life insurance, the salesman tried to get me to buy whole life instead of term (I only bought term), then annually attempted the sell WL, including asking me to move my TDA into it. When he still tried to convince me after I said "dude, you think you can beat 8% guaranteed with whole life?" I confirmed he was FOS and told him to buzz off. Do the same to your "friendly advisor".
                              Last edited by billy; 11-15-2020, 06:40 AM. Reason: spelling

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