Ask Terry Questions Roth IRA and Union Pension?

Roth IRA and Union Pension?

By Terry Savage on March 01, 2024 | Wild Card

Hi Terry, I make sure to listen to you at noon on wednesdays on WGN Chicago and your Friends Talk Money podcast. Here’s my question. My mom took out a $5,000 whole life insurance policy for my son when he was born in 1986. She paid the small monthly premium until 2014. I am now the owner of the policy and have been paying the premium since 2014. Currently, the death benefit is about 18K and the cash Value is about $4,800. He is now 38 years old and in a Union at work and has other life insurance thru the Union.

He is married but has no children and doesn’t plan to. I would like to cash out this policy and put the money in a Roth in his name. I’m pretty sure he doesn’t even know that he has this policy. Can I set up a roth for him without him knowing? The only reason I don’t want him to know is so that I can invest it in an S&P index ETF and let it grow over time, say the next 10 years, and then let him have access to it when he really needs it. Is there a way to do this? Thanks for your help with this! Regards,

Terry Says

That’s a clever idea — and I see no reason why it wouldn’t work. The life insurance policy is a real loser. But do ask about any tax implications for cashing it in.

So if you had his SS number, and if he had earned income, and since that amount is below the annual limit, it could be put into a Roth IRA for him.

BUT, here’s my real question. Why isn’t your son doing some financial planning for himself and his wife?? Why isn’t he saving in his own IRA (and if he is– then you might put him over the limit with this contribution!) And why keep it a secret from him — instead of making it a learning experience for him??

Just something to think about!



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