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Question for the Money Doctors

Question submitted on Mar 20, 2014.

Question

I'm a 48 yr old married male(two kids 18/15) and I have a $300,000 whole life insurance policy that costs approx $500/month and I have been paying into it for about 10 yrs. The current cash value of the policy is approx 50k and I'm considering cashing in and investing the 50k on my own. Tell me why that might not be a good idea. I have a 600k IRA and $1mm term policy through my employer THANKS !

Answer

The reason you may not want to cash in the policy is three-fold: 1) the cash value can used to pay the premiums, 2) you could always borrow from the policy while maintaining the death benefit and 3) many times, cash value of whole life policies have guaranteed rate of return (2-3%) which is great for a very safe investment. I am more of a fan of term-life policies myself but this is some food for thought.


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