what else to do?

[mrose1120]

Hi all,
new to the boards..
I'm a 27 year old who is always looking to invest more.
Currently I have a 401k which I max out each year, a whole life insurance policy mainly as an investment for later. I have a good amount of money in savings and I keep a daily budget of savings.
My biggest question is the ROTH IRA. I want to do one but the Adjusted income thing gets me curious, I'm not sure if I qualify and if i do, how long can I put into it and is it worth it.

Any recommendations are well appreciated and looking forward to learning and saving/investing!

[jIM_Ohio]

You could invest in a traditional IRA (everyone qualifies), come tax time if you qualify for a Roth, you could convert or recharactorize the contributions prior to filing your tax return.

I would do this before sending money to the life insurance (whole life) policy.

[disneysteve]

a whole life insurance policy mainly as an investment for later

My biggest question is the ROTH IRA. I want to do one but the Adjusted income thing gets me curious, I'm not sure if I qualify and if i do, how long can I put into it and is it worth it.

First, a whole life policy is not an investment, or at least not a very good one. Check the terms of yours. If you are past the period where there is a big surrender fee, get rid of it and replace it with term insurance and invest the difference.

As for the Roth, if you qualify, I would do it, even if it is only for a couple of years. You need to earn under 114K if single, 166K if married filing jointly.

[mrose1120]

out of curiosity, why would I do that before the life insurance?

[maat55]

out of curiosity, why would I do that before the life insurance?

.

What you should have is term insurance. Which is much cheaper than what you have, then invest the difference. Whole life policy's are one of the worst investments there are.

[Exile]

First, a whole life policy is not an investment, or at least not a very good one. Check the terms of yours. If you are past the period where there is a big surrender fee, get rid of it and replace it with term insurance and invest the difference.

I second that emotion. It's almost criminal the way that whole life insurance is touted as an investment. I would also go so far as to say that if you're married and a DINK (double income, no kids) and intend to stay that way, I would question the need for life insurance at all, including term.

Of all the covrages to cushion unexpected expenses, the most important kind of coverage is health insurance. At a your age it's also likely to be affordable.

A possible exception to my admonition against life insurance is if you're buying a home. Even then, compare the rates of just plain mortgage insurance vs. term insurance to see which is cheaper.

And BTW, mrose1120, I admire your attitude and diligence about savings, especially with your 401(k). I hope that I don't sound patronizing but not many people your age take such a long range approach view about their future.

[jIM_Ohio]

First- I don't agree a whole life policy is bad, I just think using it as an investment is bad.

Second. you want access to money without a lot of rules, fees, restrictions or qualifications. A Roth IRA gives this to you and there are better places for investments before insurance products are considered.

Whole life policies make sense if you get them at a young age. They are cheap when young (cheaper relative to term rates when older). Thus- if you think you will need some life insurance when age 65 or so, it may be cheaper to get whole life while in 30's relative to a new term policy when you are 65.

We have a whole life policy for a modest amount (25k each spouse) to cover basic end of life expenses- it was cheaper to get the 25k whole life policies around age 28 than term if we were to renew the term policies we bought at same time (we have 300k 20 year term purchased on the same day). The cost to renew the term then was much higher than the cost of permanent insurance when younger.

The goal would be to have the whole life policy pay for itself when the 20 year term expires.

Third- back to you- you want to invest more? Use a Roth, then use a taxable account. The flexibility provided in terms of liquidity will outweigh the taxes paid.

[disneysteve]

if you think you will need some life insurance when age 65 or so, it may be cheaper to get whole life while in 30's relative to a new term policy when you are 65.

it was cheaper to get the 25k whole life policies around age 28 than term if we were to renew the term policies we bought at same time (we have 300k 20 year term purchased on the same day). The cost to renew the term then was much higher than the cost of permanent insurance when younger.

I'm kind of surprised to hear you say that. You could have gotten a 30-year term policy for the same coverage amount for a fraction of the cost of the whole life policy. That would take you to age 58. Invest the savings on the premiums every month for 30 years and you'd have more than enough set aside to cover end of life expenses when you ultimately die. And you wouldn't need to bother renewing the policy at age 58 because you'd be self-insured by your investments at that point.

By the way, do you still have only 300K of insurance? Is that still enough now that the twins are here?

[maat55]

I think you need to sit down and take a hard look at what your getting for your money in the WLP as apposed to what you could get with term and invest the rest.

My in-laws had a WLP, and after the class action suit, they only got back their premiums. They thought, that it was a good investment, now they live on SS.

[mrose1120]

hi everyone, thanks for the array of responses!
I am a bit disturbed to hear the mainly bad reviews about the WLP, as the research I did when purchasing it (May of this year) and all things were good. I have paid my first premium and as was mentioned in following threads, It can pay for itself after about a 20 year mark, and the premiums are very much affordable for someone my age.
In regards to the ROTH IRA and if I can qualify, I have trouble figuring out my MAGI is it? I don't want to just state my annual income and what not here, but I am within hitting the 114K in possibly 2-4 years, possibly less and hitting the 101k within a year if things at work go well. This also doesn't include possibilities of bonuses. I just don't see how its a great investment if I say, put in 1 year of max contributions and then can't do it anymore. A regular IRA sounds good too.

Thanks again everyone

[LivingAlmostLarge]

Whole life can be an investment product. I've read a lot about it from people who are invested it in, and it can make sense. BUT it depends on what you make, how much you have in investments, etc.

A guy on a message board I read makes about $400k/year and does a variable life annuity because of tax purposes. They had a major discussion about it and it appears that as you make a lot of money it makes sense.

I couldn't follow all of the tax ramificiations but apparently there are reasons when you should be using life insurance as a means to pass on wealth.

Not necessarily true in the OP's case.