March 3rd, 2006 | 
Author: 
drew Kronke asked:
I am 29 years old and have my 401k maxed out and was thinking full term life or roth IRA. Which is better and why?
My financial advisor is recommending me buy a $300,000 full term policy. I still have some college loans that I suggested paying off first then putting this money towards somthing like this. He said, “I would not recommend diverting some of the money that was going towards savings to debt reduction. It is critical to start this contract now at your age, the longer we have it, the more power it provides to the overall planning configuration.” I believe this is him just trying to get this commission. any comments on this
Robby Palme
I am 29 years old and have my 401k maxed out and was thinking full term life or roth IRA. Which is better and why?
My financial advisor is recommending me buy a $300,000 full term policy. I still have some college loans that I suggested paying off first then putting this money towards somthing like this. He said, “I would not recommend diverting some of the money that was going towards savings to debt reduction. It is critical to start this contract now at your age, the longer we have it, the more power it provides to the overall planning configuration.” I believe this is him just trying to get this commission. any comments on this
Robby Palme
Posted in Insurance | 
Tags: 401k, Best Choice, College Loans, Debt Reduction, Financial Advisor, Insurance, Money, Roth Ira, Somthing, Term Insurance, Term Life Insurance
At 29, I don’t expect you to die any time soon. Your life expectancy is probably 40-50 years.
HUH? That’s like asking whehter car insurance or a CD is better. What do you need?
I am a financial planner and I would have to tell you first of all…it depends.
Your life insurance should equal 8 to 10 times your pay. If you currently do not have life insurance, term should be your first choice.
If you are looking to fund a Roth IRA, you need to be aware of the limits of 5000 with a 1000 catch-up if you are over the age of 50.
If you are planning on contributing more than the above stated amount, or you cannot use a roth ira because of income restrictions, then you might want to look at a permanent life insurance policy.
There are no limits to how much you contribute to a life insurance policy and it would in a sense, act like a roth ira.
If you are not planning on contributing more into the life insurance policy than what you could do in a roth, I would do the roth.
It depends on your needs and your goals for the long term.
By full term life insurance, do you actually mean permanent life insurance? Because, term life insurance is temporary, usually issued for 1-30 years. Many policies for term life insurance are issued for 10, 15, 20 or 30 years.
Whereas, permanent life insurance offers you lifetime protection, as long as you pay your premiums. Permanent life insurance may cost you 2-3 times more than term life insurance. It builds cash value within the policy.
If you have someone who relies on you for financial support, you may want to consider term life insurance for a period equal to the length of your need.
For instance, if you have a child that is 2 years old, you may want a 20 year level term life insurance policy to provide money to pay for your child’s college education, in case you pass away before your child graduates from college.
If you don’t have anyone who relies on you for financial support, and you have the funds set aside in your savings to pay off your outstanding debt, and pay for your final expenses, you may want to put the extra money you have an a Roth IRA.
Best of luck to you.
Your question has me confused…You are asking if you should chose between insurance or an ivenstment. I am a licensed insurance agent and I can tell you that the 2 have nothing to do with one another. Insurance IS NOT an investment. If you are speaking with someone who is trying to sell you a life insurance policy as an investment RUN!
There are 2 BASIC types of life insurance: Term, and Whole Life. A term policy is more or less “renting” insurance. It’s the least expensive way to protect your assets over a defined period of time.
For example: You buy a new house that costs $100,000. You have a 30 year mortgage on the house and thus you need a 30 year term policy with a face amount of $100,000. (that way if at any time during the next 30 years you were to die, the house would be paid for) This is a temporary policy that only lasts 30 years, which is the length of your need.
Example #2: Your son or daughter is going to college for 4 years, and you are paying for it out of pocket. You might buy a 4 year term so that in case you died while they were still in college, the insurance policy pays for their education. So term is a temporary needs insurance policy.
Whole Life covers you for life, as the name suggests. With whole life you pay a much higher premium than term for the same amount of coverage, however, you have the coverage for life. And YES whole life does build a TINY bit of cash value, but it is certainly NOT an investment.
So remember this: an IRA, a 401K etc these are INVESTMENTS designed to “create assets”. Insurance is designed to “protect assets”. DO NOT CONFUSE THE 2. From the way you framed your question it seems to me like you were asking which is the better investment, life insurance or a roth IRA. This is a no bainer, the IRA.
Keep in mind also that an IRA in and of its self is not an investment. It’s just a section of the tax code. You FUND an IRA with an actual investment… Such as a stock, or a mutual fund, etc. Bascially an IRA is just like your 401K except it’s not employer sponsored.