Hi Money Minder,
Hey there Money Minder,
I’m a 26-year-old guy, single with no kids, and I like to think I’m in good health. I see insurance as a way to invest and grow my income. Here’s the breakdown of my financial situation, and I’d love to hear your thoughts on whether adding this strategy to my investment portfolio is a good move.
Income (sales)
2021 – $180,000
2022 – $580,000
2023 – $650,000
2024 – $700,000 as of now
Based on my current setup, without expanding my business further, I should make around $600,000 in a slow year and $1.2 million in a good year. I do plan to grow my team and implement more systems, but let’s assume I stay where I am for now.
Assets
– $415,000 in a self-managed taxable retirement account (mostly VOO)
– $275,000 in a managed account
– $150,000 in real estate equity
– $70,000 in Crypto
– $60,000 in Cash
The VUL I’m looking at is a $3 million policy with Prudential, costing about $5,000 per year in fixed fees, which is roughly 65 basis points.
The minimum funding contribution is $9,600 per year, but I can put in up to the IRS limit, which I think is $115,000 per year. I was thinking of contributing around $20-25k per year. The money can be withdrawn tax-free (more like a loan), but with a low 1% interest rate, which is practically free money compared to what I would pay in taxes. Plus, who knows what income tax rates will be in 20-30 years, making it hard to predict.
For me, it’s just another way to diversify my portfolio, and $20k a year won’t impact me much right now. I’ve seen a lot of negative talk about life insurance on Reddit, but not many success stories. I’d really appreciate your advice and opinion on my situation.
Farewell,
Seeking Financial Wisdom
Response from THE MONEY MINDER:
Hello There,
Hello,
It’s great to see that you are thinking ahead about your financial future and considering different investment options. Your detailed outline of income and assets shows responsible financial planning. When it comes to VUL insurance, it’s important to weigh the pros and cons carefully.
A VUL policy can indeed be used as an investment vehicle, providing tax-deferred growth potential, and a death benefit. However, it’s essential to consider the fees associated with the policy, as you mentioned the $5,000/year fixed fees. Make sure to understand all the costs involved and how they may impact your overall returns.
Additionally, the idea of borrowing from the policy can provide a source of tax-free income, but it’s crucial to be mindful of the loan terms and interest rates. While the 1% interest rate may seem low, make sure to compare it with potential investment returns to see if it aligns with your financial goals.
Regarding the Reddit posts bashing life insurance, it’s true that not all insurance products may be suitable for everyone. It varies depending on individual financial circumstances, goals, and risk tolerance. It might benefit you to seek advice from a financial advisor who can provide personalized guidance based on your specific situation.
In conclusion, adding a VUL policy to your investment portfolio can be a strategic move if done thoughtfully. Ensure you understand all the details and implications, consider how it fits into your overall financial plan, and seek professional advice if needed. Best of luck with your financial journey!
All the best from THE MONEY MINDER.
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