Hi Money Minder,
I’ve been hustling to pay off a chunk of credit card debt (finally got my budget in order and feeling good about it). I have a whole life insurance policy with a cash value of $7053.49. Should I cash it out to tackle my debt without canceling the policy altogether? And will I face any tax consequences if I do this?
Thanks for your advice,
Debt Slayer
Farewell
Response from THE MONEY MINDER:
Hello There,
Congratulations on working hard to pay off your credit card debt and being in a good place with your budget moving forward. In regards to your whole life insurance policy with a cash value of $7053.49, it’s worth considering taking that cash to pay down/off your debt, especially if it means you can become debt-free sooner.
However, it’s important to understand the implications of withdrawing cash from your whole life insurance policy. If you decide to take out a loan against the cash value of your policy, it won’t be taxable. But if you surrender the policy and take the cash value directly, you may face tax consequences depending on the amount you’ve paid into the policy versus the cash value. It’s advisable to consult with a financial advisor or tax professional to fully understand the potential tax implications in your specific situation.
Taking a practical approach, weigh the pros and cons of using the cash value from your insurance policy to pay off your debt. Consider factors such as interest rates on your debt versus potential growth within the policy, as well as how surrendering the policy may impact your long-term financial goals. Ultimately, make a decision that aligns with your overall financial strategy and ensures you remain on track towards your financial objectives.
All the best from THE MONEY MINDER in your journey towards financial stability and debt freedom. Remember to approach this decision with careful consideration and seek professional advice to make an informed choice.
