Life Insurance

But tax code lets you basically use the whole life plan as an unlimited contribution roth IRA from which you can withdraw at any time. That is the consideration for me.

Yes.

You can’t contribute to a Roth if you make over $100k.

But even if you make Itera-type money, you can contribute to a Traditional, then immediately convert it to a Roth. This makes sense, because you can’t deduct the Traditional IRA, but you’ll still get taxed on any withdrawals. (Of course, the nondeductible contribution is a return of capital, and isn’t taxed.)

But be careful–if you have other IRA’s, you can’t just convert the nondeductible contribution. (Best resource–google “backdoor roth” and click on the Bogleheads link.)

I’m not an insurance expert. But you can’t just contribute an unlimited amount of money into a VUL and get a “Roth IRA with a death benefit”. Look up the rules for a Modified Endowment Contract. That will limit how much money you can contribute.

Permanent life insurance as a tax shelter really only makes sense if you’re in the 35 or 39.6% tax brackets and also subject to other taxes (AMT or NIIT). Other than that, it might make sense just to stick with regular old taxable accounts.

Long time lurker, I finally signed up for the June 2015 exam so I felt it was time to signup. As someone who has worked the last few years in advanced insurance planning for ultra high net worth clients I might be able to offer some advice, though I am far from an expert. The question as to whether life insurance is worth it and if it is, then which should I get is answered “it depends”. I have seen some terribly structured insurance products, but I have also seen some that were phenominal. First off the only 2 types of life insurance I have seen actually work are term and variations of UL. Whole life is too expensive and has no flexibility. You can get better rates and guarantees out of a UL policy. The first question you have to answer is why are you getting life insurance? Is it to off load risk? For a tax free shelter? Provide an inheritance? If it is to just offload risk you are better off going for term. If it’s the latter two you need to find an insurance expert, not just someone who has been in insurance for a long time. I mean someone that can design a policy that is tailored to your situation. As has been stated most generic policies that the insurance companies offer are garbage. The reason for that is they are designed with the insurance companies best interest in mind, not yours. The next major question you have to honestly answer is your current/future earnings. If you think you are going to make $250K+ a year you can put some amazing structures in place. If you are under that you can still get some great products, but the insurance companies won’t be as eager to work with you. As greenman72 said, you can’t just contribute an unlimited amount of money into an insurance product. He was also correct that it makes more sense for the higher tax brackets. We worked on policies that had a minimum face value of $20M, with the real sweet spot between $50-100M. In my opinion unless you know a real insurance expert you are better off sticking with regular taxable accounts. I have seen a lot of people that have been taken advantage of in this industry, there are a few of us who are trying to change that image but over all the majority of the insurance industry is shady.