Is UVL valid option for couple who can not invest in ROTH IRA?

Question

Hi,

we are considering investing into Universal Life , or Variable Universal life, or Whole life insurance. We can not invest into ROTH IRA due to income level. We are both 35 years old and are looking for this to help us make it between 55 when we would like to retire and 60 years of age when we can pull money from our 401k and IRA.

Are these good options or should we stay away from them considering the fees?
THanks

Answer 1

You should definetly stay away from life insurance as a way to invest for the future. Even if the cash value invests in securities, they have high fees that is deducted from the assets of the cash value. Plus, if you were to die someday, you lose all the cash value. If you are looking to buy life insurance, then buy a 20 year or a 30 year term.

What I suggest is invest in Traditional IRAs. You will pay taxes on withdrawals on the gains and the contributions you made tax-deductible. You will not owe taxes on the contributions that you did not make tax-deductible. In 2010, you can roll it over to a Roth IRA. Its only 3 years away and any withdrawals after age 59 1/2 are tax-free from a Roth IRA. I strongly recommend that you invest systematically. That means you invest the same amount every month. If you understand the Dollar Cost Averaging concept, by investing every month, you lower the cost per share.

Answer 2

Depends on the insurance needs, first of all. You need to compare what the cost of the insurance is compared to a straight term policy. Then see if you can find a way to compare the actual investment returns.

UVL's have massive commissions for the agents, compared to anything else they sell. Typically, your cash balance after 12 months is $1.00. Literally. Only after that can your money start to grow.

Is there anything under the sun you can think of, where you could create your own business? It only needs to be marginally profitable, but you could use that to set up a SEP IRA and funnel as much cash as possible from the business into that.

Do you have any kids? Do you really need that much insurance?

You should seek out a fee-based financial planner. One where you pay him directly for his time spent in working with you. Not one who is paid on commission based on what products he can steer you into.

I'm assuming you've completely maxed out your 401K contributions too? Even if you're past the matching, if your income is too high to do an IRA, you still get the tax advantages. I know people say use 401K to the match max then go to a Roth, but if you can't do a Roth, keep going on the 401K til you can't, then look elsewhere.

Heck, in your position, you could even look at real estate. Your gains can be leveraged, since you'd finance the bulk of any purchase, and using 1031 exchanges, you can avoid paying gains taxes for decades, and potentially through your own death (your heirs inherit real estate at it's stepped-up value, what it's worth on the day you die). If done right, and with a good management company, you can lose money on paper, save money on taxes, pay someone else to manage it, and just build a portfolio.

Answer 3

Since you are only 35, you have 20 years before you might need this money. It makes more sense to make regular equal payments (use the "term life" premiums!) into an aggressive growth mutual fund. You will average 10-12% growth over a period that long, and are more likely to come out way ahead over the insurance option.

The indicating evidence for this is that the profit for the selling agent is much higher on the insurance than the fees are on a reasonable mutual fund...

Answer 4

Don't buy a truck from a shoe store. Don't buy an investment from an insurance company (with one exception, those who are retired and very risk adverse & require some type of guarantee). You will gain more from a good low cost, tax efficient (low turnover) mutual fund. If you want tax free investments, 35 is an ok age to start putting some money into muni bonds.

Answer 5

that is one area of remember suitable to the Roth IRA account. there is in no way any tax on it the place as there is on your 401k. This will become considerable while thinking your asset mixture. earnings producing investments are taxed on the full tax cost as would be your 401k. for this reason that is clever to take a place a minimum of a few of your 401k in earnings producing factors--bonds, LPs, REITs. The earnings from each and each of those is taxed on the full tax cost besides. Now because of the fact the Roth IRA is in no way taxed, it is likewise clever to place those kinds of factors into the Roth IRA additionally. and additionally fairness investments. What you exceeded over to point are investments exterior of those 2 automobiles. in case you have some, they might desire to be investments that is taxed on the capital helpful factors cost--fairness investments. particularly, except you're interior the utmost tax bracket that is clever to have area of your fairness investments exterior of a 401k. via doing so the whole tax bill would be decreased, tremendously once you're a protracted term investor. in case you have the least hankering to take a place a number of you funds in gold and silver those unquestionably could be interior a Roth IRA. the two are taxed as collectibles in any different case. yet another area of evaluate in regard to the 401k is that for the period of years yet to come the tax cost might particularly be greater, possibly lots greater, than it at the instant is. given which you particularly have no determination of putting non-mutual fund investments interior a 401k different than for possibly business enterprise inventory, it particularly does make experience to take a place Roth IRA funds in business enterprise shares fairly than mutual money. yet be careful. that is particularly tempting for many to invest with their Roth IRA account tremendously short term procuring and advertising which in any different case may well be taxed on the full tax cost. that is an excellent thank you to shrink that cost of the Roth account. Be in basic terms a sprint careful. make investments interior the likes of MCD, WMT, JNJ, BDX, KO, etc. or possibly ETP with its 8% dividend or PAA with its 7.5% dividend. and don't make investments it in fewer than 5 distinctive agencies.