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Question for the Money Doctors

Question submitted on Jul 23, 2012.

Question

I am a 26 year old male and married with a six month old daughter. I''m currently going into my senior year as a full time business student with a double major in finance and accounting. Unfortunately, I have not taken any personal finance classes and I am perplexed about term or whole life. I have read good and bad about both, but I am leaning towards whole life despite the high fees. Here''s my thing, I was in the military for six years so I am qualified for USAA. They gave me a quote for $83 a month for whole life until I am 112. I am in great shape and great health, which is why I don''t want term because I feel like I am throwing money away($24/month). Even if the returns only equal the fees, isn''t it better to have access to that money. I mean once I am of retirement age, my dependents shouldn''t really be all that dependent anymore and I should be able to cash out? Therefore, my life insurance premiums will bolster my other retirement savings. Right?

Answer

First and foremost, THANK YOU FOR SERVING!!!

Given your age, debts, right now the BEST is to take the money and buy TERM!!!

The reason for the term is to protect the family NOW. Use the difference in a 401K, or pay down ebt, or start a Roth IRA (probably the smartest choice) or a 529 plan.

Believe me the insurance is what you need for an emergency. Putting it in a Roth makes it grow tax free, and after the account is open 5 years you can withdraw the deposits in theevent of an emergency tax free.

I''m licensed to sell term, whole life, etc. the commission on term is the least but it''s what I have my clients do because it''s the RIGHT THING.

In the interim kiss your wife and child.


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