Ask Terry Questions Universal Life Plan

Universal Life Plan

By Terry Savage on October 06, 2015 | Insurance & Annuities

Hi Terry.
I have a Roth Ira and a Universal Life Plan through American Family Insurance.
The premium for the $200k life plan is about $78 per month. I had been sending between $80 and $150 per month for my payment and investment but it got kind of tough. Life getting in the way. I have not made a payment this year to try and save some cash in the bank, having the premiums taken out of the equity in the fund. I was thinking of liquidating the plan and getting a less expensive life plan for my family. I was hoping to transfer the life plan equity to the Roth. Is that possible?
I have had both the life plan and the Roth for about 8 years. I am 52 years old.
What do you think?

Terry Says:  Whew, your financial life is way too complicated.  The first question is whether you still qualify (based on health) for life insurance.  The second question (assuming you do qualify for life insurance at reasonable premiums) is WHY you need life insurance, and for how long.  Do you have a spouse, children who you need to provide for after your death?  If so, how long a period do you need that life insurance?  If that time period is less than 20 years, then I would suggest getting a far less expensive 20-year level term policy.  (Go to or to get premium prices.)  You will be surprised at how much term life insurance you can buy for $100/month!

You cannot take qualified life insurance money and move it into a Roth IRA.  Those contributions must come from earned income. And if you have only had the life plan for 8 years, and already are borrowing against the cash value to pay premiums, I doubt there is very much cash in it.  But when you check out the new policy at one of the above sites, you will be talking to an insurance agent who will be able to see if you can transfer some of that cash (an exchange) to pay part of the first year’s premium on your new policy.

Then , BE SURE to contribute to your Roth every year.  It looks like this — and Social Security — will be your only savings in retirement.



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