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I have been told by a financial guy that if I invest 100 thousand of my home equity into an indexed universal life (s&p 500) with level term and minimum death benefit I would gain an average of 8% on my money over the long term. My money would compound tax free and I could access it via policy loans that are only 3% which is much lower than my tax liability would be and I would never deplete the money. I am guaranteed 3% but capped at 12% on the earnings of the cash value and any interest on any outstanding loans would be corrected by the cash values in the policy. He said I should also pay off my credit cards and car loan. Another thing I should do is save about 3 months of my current income for emergencies instead of using credit cards ever again. I plan to take out an interest only motrgage at 6% to maximize my tax deductability and lower my mortgage payment. According to this plan if I wanted to I could pay off my house much sooner if I wanted to and spend about $1000 less a month.

2007-02-03 18:42:22 · 4 answers · asked by Anonymous in Business & Finance Personal Finance

Also if I should die the death benefit would pay off my mortgage plus extra. He says it is my best interest to not pay off my mortgage because when I retire in a few years I need to maximize my tax deductions for my IRA withdrawals. The last part is that I need a living trust for estate planning. Is this a wise financial plan?

2007-02-03 18:48:11 · update #1

Another thing he mentioned is because my motgage is a 100% deductable I'm really only paying 4% on the interest after taxes based on a 33% tax bracket combined federal and state. Also the cost of insurance would be the same as a term insurance payment and investing in insurance would pay a lot more than a taxable investment.

2007-02-03 18:51:45 · update #2

4 answers

The question comes down to how much you trust your financial advisor. Did you choose to consulting him because he was an expert in the field? What's the point in seeking the advice of an expert and then ignoring it.

2007-02-03 21:07:36 · answer #1 · answered by gerrifriend 6 · 1 0

Get a new financial guy, The salesman makes out like a bandit and you get screwed. They salesman gets 10% or more of your money and you get locked into a deal that will cost you to get out of.
You get ordinary income down the road when you are in a higher tax bracket. You can never get tax favored dividend and capital gain treatment. You will tie up the home equity that could be used for better purposes.You are giving up all of the upside potential above 12% for a guaranteed 3% which makes no sense.
Find a financial guy that doesn't sell anything and that will give you an independent analysis of different investments that could give you better results.

2007-02-03 22:46:42 · answer #2 · answered by waggy_33 6 · 0 1

you may, yet I agree that is an noticeably undesirable theory. your position fairness loan will fee you 8, 9, 10% interest. So only to interrupt even, you should make enuf (interior the marketplace) to make the interest fee on your loan. And the marketplace averages 8 - 12% a year. it really is over the lengthy time period. in the course of the 2000 - 2002 bear marketplace, the s&p500 lost 40 5% of that is fee. and no matter when you're making funds interior the marketplace, you nevertheless ought to pay capital gains (taxes) in this earnings. If it develop into me, no way may I take my domicile fairness & make investments in a suffering inventory marketplace. i'd take my 25k fairness & attempt to get rid of PMI.

2016-11-25 00:13:28 · answer #3 · answered by ? 4 · 0 0

Run from this guy. He's trying to screw you. If you can't afford the house then sell it. Otherwise you risk losing the house and the equity. Insurance products disguised as retirement vehicles are notoriously bad investments. They have very high commisions and are very difficult to get out of should you decide to do so. The penalties for withdrawing are laughably high. Good luck with what ever you decide.

2007-02-04 07:37:19 · answer #4 · answered by Paul 1 · 0 1

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