Is it better to invest in the s&p 500 index(8%avg) where I can withdraw my money tax free or try and get 12%?

Question

If I try for 12% I could lose all my principal.If I stick with the s&p 500 index my principal is gauranteed 0% and capped @20%. The way I withdraw my money is via policy loan and I'm charged 2.6% that I do not have to pay back and is taken out of my account that is earning interest. I plan to invest $500/month so a Roth IRA is out of the question. This investment is tax deferred but policy loans are not considered taxable distributions so I still can qualify for social security benefits.

The investment is a 12% average over 20 years and is not guaranteed only historical returns

Answer 1

These cash value life insurance policies you are thinking of buying have high commissions and hidden fees that suck up a lot of your money. For most people it is best to buy term life insurance. Life insurance plans that builds up a cash value like whole life, universal life, et cetera are rarely the best choice.

If you look at financial sites not run by insurance companies, they are almost unanimous in recommending term life insurance. Look at big name sites like Yahoo,CNN, Motley Fool SmartMoney.com and Kiplinger's, and they all recommend term life insurance for most people.

However, you will find many websites out there that promote universal life insurance and disparage term life insurance. They are almost all run by insurance companies. Insurance companies make more money from these policies and it is in their interest to push them.

Universal life has the advantage of having a built-in savings program, but you lose a lot of money to high commissions. It is usually better to buy term life insurance and invest the money you save in an IRA, 401K, or mutual fund. There are, however, rare cases where universal life is better and these are discussed in the articles below.

Sources:

Term vs. Universal Life Articles:
http://www.fool.com/insurancecenter/life/life06.htm
http://finance.yahoo.com/insurance/article/101749/Term_or_Whole_Life?
http://money.cnn.com/pf/101/lessons/20/index.html
http://www.smartmoney.com/insurance/life/index.cfm?story=whichtype0205
http://www.kiplinger.com/basics/archives/2003/03/life3.html


General Information on Life Insurance:
http://www.fool.com/insurancecenter/life/life.htm
http://finance.yahoo.com/how-to-guide/insurance/12823
http://money.cnn.com/pf/101/lessons/20/index.html
http://www.kiplinger.com/basics/archives/2003/03/lifeinsurance.html

Answer 2

I'm guessing the 12% investment is some sort of insurance policy. How likely is it that you can lose all your principal? If it is very likely, I would want to get much more than 12% return on that amount of risk. Is that 12% average or 12% or nothing? If the S&P is really guaranteed at 0% loss per year, that is the better investment.

If you want to gamble, try the spot forex market.

Answer 3

Stick to the S&P 500 index, better returns and lower risk!

Answer 4

Dear Sir,
If I offer that you don't have to pay any tax nothing still you money will grow by 2% everymonth will you be ready to invest with me. Try me, out, I am into this line for 1 and half year. You can touch base with me at [e-mail].