Thanks for the responses everyone, really appreciate it!! Stinky - a couple of follow up questions and comments:
Presuming that you're a 33 year old male, non-smoker, in the "preferred" (that is, second best) risk category, you could purchase a $800k term policy (which is the net amount of insurance coverage that you have now) with premiums guaranteed to be level for the next 10 years for less than $24 per month. That compares to the $160 per month you're paying now. Were you to purchase a new level term policy and then lapse the VUL policy, you would reduce your cost of insurance by ($160 - $24) X 12, or $1,632 this year.
Yes, but is comparing term to VUL really apples to apples? While I'm not arguing VUL is a good investment vehicle VUL has tax deferred investment growth and low interest loan which term doesn't correct?
--- The horrendously high fees on the VUL policy will continue to gnaw away at your surrender value, every year. And I expect that the situation will get worse as you get older
I think a lot of this depends on the fees. Max fees and 0% growth yes the money runs out at age 63. Max fees and 7.35% growth does not ever 0 out. I feel like it's also important to look at withdrawals, as the whole selling point of a VUL is tax deferred growth and low interest loans. As background, the original plan was to let the money sit for years and withdrawal later in life using loans. My current income covers expenses. I do wish that I had not signed up for this policy in the first place, but I still don't know if it's worth loosing a bunch of money to income tax by surrendering the full policy.
--- The tax burden upon surrender may continue to grow, as the policy surrender value might continue to grow for a while if the investment gains on the policy exceed the fees
Yes, this is a concern because every year this thing grows the income tax implications upon surrender also grow. It would be about an $18k tax which is brutal but it will only get worse assuming it continues to grow.
Anyway, I appreciate the thoughts. I think it really comes down to is it better to cut my losses and loose $18k or more from the income tax, or let this thing sit and hope the fees don't change. I suppose the potential negatives of increasing fees could easily exceed $18k over time.
Presuming that you're a 33 year old male, non-smoker, in the "preferred" (that is, second best) risk category, you could purchase a $800k term policy (which is the net amount of insurance coverage that you have now) with premiums guaranteed to be level for the next 10 years for less than $24 per month. That compares to the $160 per month you're paying now. Were you to purchase a new level term policy and then lapse the VUL policy, you would reduce your cost of insurance by ($160 - $24) X 12, or $1,632 this year.
Yes, but is comparing term to VUL really apples to apples? While I'm not arguing VUL is a good investment vehicle VUL has tax deferred investment growth and low interest loan which term doesn't correct?
--- The horrendously high fees on the VUL policy will continue to gnaw away at your surrender value, every year. And I expect that the situation will get worse as you get older
I think a lot of this depends on the fees. Max fees and 0% growth yes the money runs out at age 63. Max fees and 7.35% growth does not ever 0 out. I feel like it's also important to look at withdrawals, as the whole selling point of a VUL is tax deferred growth and low interest loans. As background, the original plan was to let the money sit for years and withdrawal later in life using loans. My current income covers expenses. I do wish that I had not signed up for this policy in the first place, but I still don't know if it's worth loosing a bunch of money to income tax by surrendering the full policy.
--- The tax burden upon surrender may continue to grow, as the policy surrender value might continue to grow for a while if the investment gains on the policy exceed the fees
Yes, this is a concern because every year this thing grows the income tax implications upon surrender also grow. It would be about an $18k tax which is brutal but it will only get worse assuming it continues to grow.
Anyway, I appreciate the thoughts. I think it really comes down to is it better to cut my losses and loose $18k or more from the income tax, or let this thing sit and hope the fees don't change. I suppose the potential negatives of increasing fees could easily exceed $18k over time.
Statistics: Posted by acarroll26 — Mon Sep 09, 2024 5:50 pm — Replies 11 — Views 748
