Ask Terry Questions Insurance policy paid automatically from IRA gains

Insurance policy paid automatically from IRA gains

By Terry Savage on January 16, 2025 | Insurance & Annuities

My wife and I recently met with a financial advisor to modify our insurance policies that met our needs 10 years ago. One suggestion he had was to change our term life policies of $750K and $500K on myself and my wife, respectively, into a lesser amount policy that would have the premiums paid from IRA gains. I’m a little nervous about this. We are 62 yrs and 58, both retired, and relying on those dividends in elder years. Are these payments subject to income tax, or is this an Indexed universal life policy? Are there other ways to pay the premiums from dividends without incurring the tax costs?

Terry Says

Whew, you have thrown me a complete stew of terms that really make no sense to me.
First question is — assuming those were 20-year level term policies — at what point do they “mature”? At that point, you can extend the policy, but at a far greater cost. But how long do you have to continue paying the same premium, how many years?
Second question is whether you think you still need those life insurance policies. Do you have enough money in your retirement accounts that if one of you died shortly after the end of the initial term policies, the survivor would have enough money to maintain his/her lifestyle — without life insurance?

You mention dividends. Term policies do not pay dividends.
You mention Indexed Universal Life — where on earth did that come from??

What IRA “gains” were you planning to withdraw?? Your wife can’t even withdraw without penalty until age 59-1/2 — and you want to keep that IRA money growing tax deferred as long as possible! Any money you withdraw from an IRA is taxable -=- defeating the purpose of retirement planning.

Bottom line: I think you have fallen into the hands of an unscrupulous life insurance agent trying desperately to ruin your retirement and pad his own retirement with a fat commission.

I’m glad you wrote to me before doing this!

My recommendation: You need a FEE-ONLY, FIDUCIARY advisor who is not trying to sell you anything! Find one you can trust here: https://www.terrysavage.com/pam-krueger-wealthramp/

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