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LIfe Insurance

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  • LIfe Insurance

    I have read and read the post regarding life insurance.  This is the situation.  Bought some huge whole life policies in 2002.  We paid in dearly.  About five years ago I bought term insurance and converted all the whole life policies to paid up policies that are valued today at 411,000.00.  We also have LTC policies that we bought at the time we converted all the whole life to paid up insurance.  We are now thinking about taking the 411,000.00 and investing all with Vanguard (which is what I should have done in the first place in 2002, oh well).  In addition if we cash out we will have to pay taxes on 85,000 of gain which will be about 18,000 as a one time hit.  If these were new policies this would be a "no brainer" but because they are older it is kind of a toss up.  Running the numbers over the next ten years, we think that we would be a little better off investing in Vanguard based on ten year performance using a very mid-risk approach.  Oh yea, we are about five years from retirement.  Advice to all those out there, take the time to figure out a plan while you are in your 20's, 30's, or 40's and you will be so much further ahead.  Don't trust the life insurance salesmen, Caveat Emptor!  Thanks in advance for input.

  • #2
    Get an inforce illustration on the policies, which should help you make an informed decision.

    $18k of tax on a $411,000 cash out shouldn't be a big factor in your decision IMO.

    Like Rex said, if the death benefit is important to you, it might be worth keeping them.


    • #3
      It's been 15 years.  You may already have paid for the crappiest part of the insurance policy.

      Like Craigy said, get an in-force illustration.  The money you've spent already is a fixed cost.  Look at whether you need this death benefit and whether you would purchase an investment like this going forward if you could do so from scratch (disregarding the previous money spent).