Expert: Willard R. Brumbaugh, LUTCF - 6/8/2009

Question
I am 43 and my wife 38 both working. My fin & insurance agent advising me to buy Whole life (for me & wife) by contributing minimum to 401k and redirecting rest of money to buy life insurance. Is this good strategy too use life insurance for retirement and kids education (two kids 8&5)planning?. Is it a good strategy to buy insurance for kids( Indexed life). What will be best product (whole life vs. universal) for me and wife?.

Answer
Dear Sreedhar,

As far as your advisor has gone, he has given you good information. Here are some of the reasons why:

1. 401(k)s do not save on taxes in the long run for those that have been successful savers.

2. Reportable income at retirement increases the likelihood of taxation of one's Social Security Income.

3. In the event of premature death, a third of your 401(k) is likely to go to the government. None of the life insurance benefit need go to the IRS.

4. Equity (surrender value) in one's Permanent life insurance policy, unlike mutual funds and bank accounts, does not reduce college financial aid when filing a FAFSA form.

Be sure to read my article in the April issue of InsuranceNetMagazine on pages 20-21. You can find a link to the magazine on my webpage.

Both Whole Life and Universal Life are good policies. It is difficult to choose one over the other. An argument could be presented that some of both would be a good idea.

Willard R. Brumbaugh, LUTCF
(888) 792-2379
www.willardbrumbaugh.com