Continuing my recent run of deeply tedious LR posts I have a question for anyone with knowledge of variable life insurance policies. I promise I will make up for it with something inflammatory soon.
So 'a friend of mine', flush with the prospect of making real money for the first time a couple years ago, got talked into buying a policy and funding it pretty heavily. He paid in $20K all sold. Had he bothered to google these policies he's have realized they're a dumb investment for someone of his age and their prevalence is almost totally explained by the huge premiums they pay to salesman. But he didn't.
The policy is now 3 years old and he hasn't paid any premiums for over a year since quitting his job. The policy isn't going to lapse anytime soon because he overpaid so heavily at the start and the cash surrender value (c. $7-8K) is gradually climbing though that's pretty meaningless due to a huge cancellation penalty that only falls away after 10 years and, if I understand it correctly, the fact he's be taxed on the proceeds at income rates plus a 10% excise tax.
Anyone know of a way to extract any value from a policy like this or should he just let it run and console himself with the fact that if the worst happens before the policy lapses his wife'll get rich? Is there any way to roll some value into something a little more straightforward and suitable to his situation like an IRA?
"Are you sure we're going fast enough?" - Emil Zatopek
So 'a friend of mine', flush with the prospect of making real money for the first time a couple years ago, got talked into buying a policy and funding it pretty heavily. He paid in $20K all sold. Had he bothered to google these policies he's have realized they're a dumb investment for someone of his age and their prevalence is almost totally explained by the huge premiums they pay to salesman. But he didn't.
The policy is now 3 years old and he hasn't paid any premiums for over a year since quitting his job. The policy isn't going to lapse anytime soon because he overpaid so heavily at the start and the cash surrender value (c. $7-8K) is gradually climbing though that's pretty meaningless due to a huge cancellation penalty that only falls away after 10 years and, if I understand it correctly, the fact he's be taxed on the proceeds at income rates plus a 10% excise tax.
Anyone know of a way to extract any value from a policy like this or should he just let it run and console himself with the fact that if the worst happens before the policy lapses his wife'll get rich? Is there any way to roll some value into something a little more straightforward and suitable to his situation like an IRA?
"Are you sure we're going fast enough?" - Emil Zatopek