- Thread starter
- #21
ROTH Vs Permanent Insurance (More Specifically, FIUL)
- Thread starter lementex
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- 4,132
Why do you need to roll anything?
You've kinda went from what options to new with new money, to capturing old money. Two different animals.
You've kinda went from what options to new with new money, to capturing old money. Two different animals.
Ok, time to slow down and get all the facts before you do your "friend" some harm. If you aren't even sure what he is invested in, it's time to put on the brakes.
Personally, I'm of the mindset that you max out your retirement plans before you start funding something like a participating whole life or EIUL. Others will disagree. I just don't think you use life insurance IN PLACE of an IRA. There's absolutely nothing wrong with having permanent life insurance. Just not in place of a qualified account.
That's my two cents.
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- #24
I agree 100%. That was my initial thought. I came here to see if I was missing anything to convince me otherwise.
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I go 100% the other way. I recommend clients maximize their match (assuming it's 50% or better on their first dollars) but not a dime more in qualified plans beyond the match, and I tell them why. Once they wrap their arms around the unconventional wisdom of it, most clients concur.
Even though we differ in our approach, I would be interested in your reasoning.
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- #26
My personal opinion is to max out ROTH first, followed by a fixed UL/WL product, then 401ks and the like. But that's only because I'm conservative with money and think avoiding taxes with all legal ability is a prudent game plan. Of course its the client's money and he/she has final say, but that's just my 2 cents.
I don't necessarily disagree with contributing only to the match. I've used that approach before to use those extra monies elsewhere when it makes sense. However, when it comes to a Roth, if a person is within the income limits I recommend they max it out. A few reasons for this. One, it's tax-free income down the road (at least based on current tax law). Additionally, there is no required distribution as with other qualified accounts which allows it to accumulate even more. Also, I believe that over a 30+ year period a well diversified equity/bond portfolio will outperform a life insurance policy as it relates to pure growth.
With that said, I have absolutely no problem using life insurance as an alternative to savings and an income source for those who have the means to properly fund these policies. In the scenario of this thread, the person makes $45k and doesn't have any extra discretionary income to fund a life insurance policy after funding the Roth. At 25 and single, he is more a candidate for term insurance if any. The main purpose for life insurance is to replace an income if someone is dependent on that income. In this thread, the person doesn't have anyone who would suffer financially if something were to happen to him. At least not that I could tell. And yes, there are other reasons why people should and do buy life insurance. LGilmore points out a great reason, insurability. That's why it's important to sell term insurance with a carrier who has great permanent products, such as Ohio National.
Lastly, it's hard to argue with the legacy of life insurance. A person can pass on a large amount for pennies on the dollar. However, when we are talking about using life insurance as an alternate income source, we really aren't using the life insurance to leave a legacy, but instead to provide an income (assuming the person lives long enough to use that feature). Once a person activates the income feature from a life insurance policy, the death benefit begins to decrease. And I know you know that, just pointing it out for the OP.
Again, those are my personal feelings on the subject matter. That doesn't make me right and you wrong. Just a different approach.
- 15,041
Nothing wrong with that if done for the right reasons. Primarily for the riders.
Although, I bet it is inside either a fixed annuity or more likely a CD or money market.
I don't think we're that far apart. I don't even think of Roth in the same paragraph as traditional qualified plans. I agree with Ed Slott, who says permanent life insurance and Roths are the two golden nuggets of the tax code.
- 11,298
You can fund your Roth IRA with IRS approved strategies.
Annuities (fixed, index and variable) are approved.
Is it suitable? As long as you are showing a MATERIAL reason why it is more suitable compared to other choices... which is what VolAgent is alluding to.
A variable annuity without any living benefits is just a very expensive mutual fund.
There are no additional tax benefits for funding your IRA (or Roth) with an annuity. As long as you - the agent/advisor, and the client both understand that, now you present the case as to why to fund your IRA with an annuity.
Living benefit riders are a good reason - like step ups and lock-ins for the life of the contract. Lifetime income riders are also a very good reason.
Index crediting methods with safety of principal is another good reason.
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