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What to do with whole life insurance money now?

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  • What to do with whole life insurance money now?

    Hello. About 15 years ago I was sold a Cash Value Life Insurance policy. Now that I know more I want to get out of it, but am having trouble deciding what to do with the 150K in the investment portion.  We are just over the basis so there will be minimal taxes due if we pull it out now.

    I am 42, have a stay at home spouse, maxed out 401K, back door Roths, HSA, and 100K in taxable account.  Student loan paid off. No debt other than mortgage on primary residence (273K at 3.6%) and mortgage on first home which is now a rental property (135K at 4.6%).

    Would you pay off the mortgage on the rental property with this chunk of money? It's only 4.5% but it is guaranteed, and I could then roll the mortgage payment into my automatic deposits into taxable account. Or would you invest in the taxable account? Or do something entirely different?

    Thank you for your thoughts.

  • #2
    If it is between taxable or a mortgage at 4.6% I would opt to pay down the mortgage.  However you could argue either way.

    Do you have kids?  529 accounts?  Assuming it will not derail your retirement goals.

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    • #3
      I'd probably pay off the rent house and put the rest in taxable.

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      • #4
        If you have kids and no college savings, I’d use the cash value to jump start 529 Plans.

        if no kids, I’d use the cash value to pay off the mortgage.

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