AboutWillard R. Brumbaugh, LUTCF Expertise I have answered many questions regarding 401ks, IRAs and annuities as well as life insurance.
I have been counselling against most Qualified Plans since 1994.
Experience Ranked in the top 5 in retirement catagories at Askme.com most of its last 2 1/2 years. Organizations I belong to:
National Association of Insurance and Financial Advisors-California
Inland Empire Estate Planning Council
Education/Credentials Life Underwriters Training Council Fellow
Question What would be the procedure to cash in whole life insurance policy & rollover to Roth IRA?
Answer Dear Cheryl,
What you have described are two separate actions. Roth IRAs, just as traditional IRAs, require earned income. How you acquire the funds to deposit into a Roth IRA is not a concern to the government just so long as there is earned income to justify the deposit.
In order to use the cash value of the life insurance for the purpose of funding the Roth IRA, there are two things you might do. You could surrender the policy, in which case if the surrender value is greater than the premiums paid you would be taxed on that gain, just as you would with any other income that you would put in a Roth IRA .
Secondly, you could borrow against the surrender value of the policy. In this case you could avoid taxation of any gains by keeping the policy in force till your demise.
In either case you are limited to an annual maximum of $5,000 or $6,000 if you are over the age of 50.
Willard R. Brumbaugh, LUTCF
www.willardbrumbaugh.com
