Life insurance vs 401k

My work provides me 150% of my annual in life insurance, approximately 75k. If I were to pass away, that would enable my spouse to continue to pay the mortgage on our home on our current pace. Our principal is about 1000/month and we pay 300-400 extra per month on top to reduce the principal aggressively. Especially important at our ages (I'm 42 and she is 54).

I invest aggressively in my 401K at 6% of my income because I get 100% match up to 5%, so really 11%. I don't plan for Social Security or Medicare to be solvent by the time I retire.

 

Stick to your plan for quickly posting of your credit card debt. Maximise your 401K or another tax deferred contribution regardless of whether you have an employee match or not. The IRS 401K contribution limit for 2016 is $18,000. Dump the whole life insurance policy immediately. If you have someone that depends on you, or you want to pay for your own burial, keep some term insurance. If its only for burial the policy can be a very small policy.

But here is the real advice @2ski4life7. The WORST place to seek investment advice is on an internet forum. The SECOND WORST place to seek investment advice is from any advisor that has anything whatsoever to sell. Insurance, mutual funds, stocks...doesnt matter. If they have a product to sell their advice is tainted because they need to make a living. Find a fee paid financial planner and pay for what it's between his or her ears. If they say to buy something then go out and buy it with the absolutely lowest fees you can find. Trust me on this. My college degree was finance and I spent a bit of time with a regional investment bank (pink sheets), a brokerage house, and did various other jobs in financial services. I got out because fee paid advisors are the only ones that truly have only the clients interests at heart but its very, very, difficult to get started and build clientele. Everyone else in the industry is just a salesman painted up to look and sound like an expert. Its a predatory business.

 

Blowing out the debt should be your #1 right now. You'll never feel better, and never look at things the same when it's gone.

As part of that effort, ditch the whole life and the term both, apply towards the debt. When you are responsible for someone else, then buy term. You can shop online for rates/various companies, then deal directly with a quality agency. Also, check if you could up your term via your employer for a better deal. I used to have 5x my salary for 1/3 the cost outside. If you go outside, 20 yr fixed is what you want to look at to protect against the rise in age related rates.

While dumping debt, since you have no match on your 401, suspend all savings, hammer the debt.

Debt gone........

Build a 6 month cash reserve in something simple and insured. Like short CDs or whatever will get you a few pennies. It's not an 'in and out' fund, it's a reserve.

Retirement.........

While your company does not match a 401k, you still have a tax deferral, so it's not terrible. But I'd fully fund a Roth first. Got more to save? Pump it into the 401k. Fill that up? Move to other investments.

Now I'm only speaking of consumer debt, ie everything except a mortgage, which almost all of us have to have, at least for a while. And I'm only speaking of retirement related to the Roth/401/other.

You'll still want to save for other things, travel, purchases, etc etc. That's all good. Just avoid the debt noose and have a stable and consistent saving method IN A LOW COST PROGRAM (like Vanguard) and you'll do fine.

Remember, when you marry, you can double the Roth savings by opening an account in the spouses name. Regardless of their income level.

 

If that's a good investment your brothers and sisters should be happy to pay.

 

...^^^... Sign up for "Dave Ramsey" courses and it will change your life for the better IF you follow his simple strategies. I am a pretty good financial planner and I got a ton of ideas from Dave Ramsey and his common sense ideas.

There are no quick fix miracles ... just some good planning .... insurance may not be the answer now. 401K depending on employer's contribution and your taxes. Take the Dave Ramsey course ...

From what you said and your age (given you have continued good heath) ... forget insurance salesmen for now and get rid of that higher interest credit card debt and pay those C/C bills monthly. C/C interest is usually the biggest killer to you financially and that high APR is compounded very quickly too.

Then look for other investments .... and insurance later (please no high commission or high fee annuities ).

There can be any exceptions to any plan, i.e. declining health reasons to not wait on insurance, 0% APR credit card debt reason not to pay immediately. So any plan can have unusual circumstances, just balance any plan with your specific needs and taxes and what you (specifically) want to accomplish.

The young planner (like yourself) who does a good job now ... will be the financial survivor in the future.
.

 

Roth first since you don't get a company match. Then if you go over 5500/yr you can open a 401k which has a limit of I believe 18,000 per year. If you ever work somewhere and get a match for your 401k I'd put money into that since its free and not dependent on whatever it's invested in doing good. I would talk to a financial person. They may be able to figure out if the tax savings now on the 401k will be more beneficial since you make a pretty good bit of money. But if you go with a Roth the taxes are paid before the money is invested and taxes won't be paid on it later. Who knows what the tax rates will be in 30 yrs, surely not lower than now.

Also vanguard has a pretty good selection of funds and target date funds that take a lot of the guesswork out of risk and diversifying you just pick the timeframe you want to retire. Also vanguard had pretty low fees and most funds don't require a lot of money up front to open an account.

 

I'll second the index funds and target date funds for anyone that doesn't want to get involved in investing beyond mutual funds. Super low fees and they'll adjust as you get closer to retirement. Maybe not for those that want to chase the hottest funds but you may do just as well while spending your time on more important things like trolling around on forums like most of us.

 

As some have suggested, and in case you missed it...
take Dave Ramsey's Financial Peace University

 

We just started working with a no-commission financial planner. $1800 for a year of coaching, goal setting, advice, etc. Best money we've ever spent.

 

...^^^... It's the common sense bible of financial strategies and financial planning ... that motivates most people because it is spoken in very simple and straight forward terms. Dave Ramsey has nailed it.

The funny thing is I know several CFP's (1 with a PhD in personal finance) that are tops in their field .... and they get a lot of their info from Dave Ramsey's courses and use them as guides in their financial presentations to their clients ... lol

 

I am in the process of buying term life since I just had a little one. Nothing major just enough to make sure wife or I are comfortable and able to pay for collrge. We purchased our home with a 15 yr mortgage and are sitting on a nice cash reserve for any stormy weather.

My question is does anyone with term have health riders attached to it? For $6 a month it seems crazy not too.

 

What are the riders for? I have 10 times my income in term for 20 years and have health insurance. I'm not sure what you would need to add onto your life policy but if paying extra makes sense to you go for it. If you're talking about a burial rider for children that's understandable in order to not have to cover any potential funeral expenses.

 

Not sure if your able to read this.

 

Term ALWAYS AND INVEST THE REST!
Do NOT, I REPEAT, DO NOT BUY A UNVIERSIAL PLAN.
Not sure what the interest paid is? What .01% and if you want to BARROW FROM YOUR "OWN" MONEY, YOU GET CHARGE LIKE 7-8% ON YOUR OWN CASH VALUE!?!?!? WTF!!!

Term and put the rest in your 401k and if you are planning kids start a college IRA.
And if the don't got to school, fuck 'em and use it when you retire.

But that is all contingent on your employers matching amount.

Spend $100 and speak with a financial adviser, listen to Dave Ramsey.

 

You should look into long term disability insurance. Depending on your financial status. Depending on your age also long term care insurance if you're over 60

 

That's what I was thinking but not sure what that going to cost.

 

I'm one of the lucky ones, my job automatically contributes 5% equivalent to my 401k without me having to put a single cent of my own money in. Plus I'm already 100% vested so everything in there is mine. But I just started contributing 3% of my pay on top of the automatic funding so I can boost the numbers a bit.

I figure that all I have currently are my utilities and the equivalent of HOA fees. Mortgage, student loans, and truck are all paid in full, and I only have minimal cc debt which gets paid off every month. Makes things SO much easier on the financial planning front

 

If you're debt free you should be contributing 15 % towards retirement. The 5% is just gravy on top. If you can be disciplined you'll retire a millionaire

 

Term insurance: once that term is up it's gone. A lot of people use this because the payment are low so they can use what's left to invest. I don't recommend it period. Just invest all to your retirement.
Whole life: guarantee pay out.
i work for a funeral home, Imo think of it this way, even though you don't have any kids think about your brother and sister mom and dad. Will they have the funds to pay for funeral exspense in case some freak accident happen. Now most of not all funeral require payment up front now. We've turn over so many cases to collection and that does effect your credit scores. An average funeral cost depending on service is around $2000-10,000. It can Be had for cheaper cremation without any service $1000 under. Getting life insurance at a young age is good for a few reason. if you don't smoke your premium is lower, your young so you have no health issues, all these contribute to a lower premium. As you get older it harder to get insure and premium is high. Everything is based off of age and health condition.
So, if you care then get it while your still young and healthy. Unless your parent bought life insurance already for you then you don't need to worry. Remember life insurance is to help those in need when you pass. Hell even your friends can buy it. Life insurance can be an investment to someone who buy it but not the other way around because your dead.

 

If you die whole life keeps the cash value. Dumb investment if you call it that.