Ask Terry Questions 770 Accounts

770 Accounts

By Terry Savage on April 26, 2015 | Insurance & Annuities

Can you give your opinion on so-called 770 accounts and what you think of them as an investment for retired individuals? Thanks..

Terry Says:   Do you think you’ve found the “golden goose” or the secrets of the very rich?? Think again!  This is just a twist on a very old tax provision (IRS Code 7702) that allows you to borrow money tax-free  out of a cash value life insurance policy.

There are limitations on how much you can place inside an insurance policy to grow versus the amount of the death benefit.  So you can’t stash away too much compared to the death benefit — and remember you are paying annually for those mortality charges that cover the insurance aspect (death benefit) of the deal.

Yes, you can borrow money tax-free from the insurance policy.  But at what rate?  And does the policy have a fixed rate, or is it variable — subject to market changes.  If you’re taking money out to “earn” money in another investment, then you might get caught as rates rise.

You know why these policies are being touted?  Because the insurance agent gets a huge commission on the sale of the policy that lets your money grow, and be borrowed out of the policy.  Who do you think is really making money on these “770” deals??



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