Bought Whole Life Insurance 1 year ago and think it was a bad decision – was it, and what should I do now? Please help.
Opinions welcome of course, however I’m really looking for some answers to the questions below to help me understand things better, plus any solid guidance anyone can offer.
Background: I’m 31, single, make $134k (6k monthly take-home), have a 13 year old child, and I do not own a home. About a year ago my son’s paternal aunt raved about these two (young) guys who would sit with you and go over your finances, goals, retirement, investments, etc. all for free and give you advice and options. I can usually grasp things quickly, but retirement options, investments, stocks – I just have never been able to really ‘get it’ and have felt perpetually stressed about it.
Fast forward, they ensure my TSP (work for government) is at 5% in an L 2050. Suggested I fund 1% into a separate Roth IRA (haven’t yet), and leave my savings because I am working toward a downpayment for a home and have it in a HYSA. For a year now I’ve paid $400 for a Whole Life ONE Policy with a net death benefit of $415,194 and $15 for a Term 80 (payment gradually increases as I age until I hopefully make it past 80) through NWM. They called it a ‘safe bucket of money,’ said I ‘need money that is not market correlated and want 60 months of a “play check” when I get to retirement,’ and that I will use it during the down markets in retirement. My main goal of it was retirement,
Questions:
If I surrender the policy, will I get any of the $4800 I’ve paid in premiums, or just the $139 net accumulated value it has? Ouch :/ They have no surrender fee.
If I wait until the net accumulated value closely matches the premiums I’ve paid (which will take many years I imagine), will the tax I pay end up with me losing a lot anyway? Is it heavily taxed at any point, or is it similar to the tax you pay when you take from a traditional IRA?
If I die, no matter how much I have in it or have taken from it, my son will still receive the full death benefit correct? In addition to what’s leftover from the investment part of it?
What do they get out of it? Say realistically I end up with… 450/500k at age 70, I’ll have paid almost half that in premiums at 192k, and they keep those… though I suppose there is also the death payout of 415k. However even though I’m obviously ‘gaining more,’ I am likely still losing because of how much I could be making investing in something else, I imagine.
Holy shit – do I have to pay this until I croak to keep it active? I need to ask.
Say, again, it adds up to 450k at 60/70, could I get there plus MORE faster if I put that 400 toward my TSP each month while it’s more aggressive? Or a Roth IRA outside of work in case I leave my job?
Possible next steps:
Leave it as is.
Surrender and eat the loss.
Surrender later when payout is closer to what I’ve paid in premiums.
Some other option?
Goals: Retire with a lot of money to support myself through aging and cover cost of facilities if I need them, and hopefully to have a lot of fun and travel, and to leave my kiddo assets/a large chunk of money for himself and any potential kids even if he’s comfortable and can support himself.
