Life Insurance is NOT an Investment
Updated: Jan 9
It's not that I am totally against purchasing whole life insurance (or any of the weird variations of life insurance), it's that there are roughly 4 billion better ways to invest your money than spending money on life insurance premiums...Here are a few of the things you should do BEFORE even thinking about whole life insurance:
Funding a savings account with an amount that's reasonable for your situation
Fully funding your 401k (investing $19,500 per year, $26,000 if you're over 50)
Fully funding a Roth IRA ($6,000 per year, $7,000 if you're over 50)
Funding a 529 for your child's college education, if that's your thing
And before you tell me that you bought an insurance policy because you can borrow against it or because it offers a cash payout - think about that. You are sending money to a company to hold for you so that you can borrow against it later? Or so that they will pay you a cash value for it later?
That’s a glorified savings account and keeps you from using the other investment vehicles to their fullest potential. (You can also borrow against your 401k and there is cash value to all of the accounts listed above. If you’re going to “borrow”, borrow from yourself!)
Again - I’m not saying that whole life insurance is a bad idea (it is, but that’s not my point). I’m saying that you should look at your WHOLE financial situation - everything you purchase, everything you call an investment - and make sure that it is the best use of your money. And whole life insurance never will be.