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What to do with whole life insurance money now?

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  • Avatar flashdoc 
    Participant
    Status: Physician
    Posts: 6
    Joined: 07/24/2018

    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.

    #220769 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1846
    Joined: 02/11/2019

    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.

    “Never let your sense of morals prevent you from doing what is right.”

    #220770 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2844
    Joined: 01/03/2017

    I’d probably pay off the rent house and put the rest in taxable.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #220810 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 516
    Joined: 06/12/2017

    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.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #221105 Reply

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