I was at an event yesterday and learned a bit about life insurance policies. I’m still a bit on the fence about them but I wanted to know if any of you have one and are you using it as part of your track to retirement?
I tend to think of life insurance and retirement planning as two completely separate things. I know that there are whole life plans which combine both, but I’m skeptical for a number of reasons.
First, the guarantees. Having worked in financial services and knowing how some of these products really work, I know that these ‘guarantees’ included in whole life policies aren’t as advertised. My other issue is around fees. When I compared whole life vs. term policies and factored in the fees of both, I decided to go with term and invest the difference in payment toward retirement. For me, the 1 – 3% that I’ve saved annually in fees seems much better than the alternative.
Thanks, Antoinette. That’s a question we get frequently here at Sum180, because the just when you think you know which option will protect your family, they give you another choice. And, Kelby, we agree wholeheartedly that term is the way to go because of costs.
You need term life insurance for the period of time during which you want to protect your partner/family, before you’ve had a chance to build out your financial picture fully. When you first get married or have children, that is a 25-30 year policy ideally. Luckily, the premiums for term are pretty affordable for most people.