Key insights
- An individual is seeking advice on managing a fully paid whole life insurance policy with a substantial loan against it. The policy's dividends barely cover the loan interest. The advisor is likely biased towards keeping the policy active. The individual is concerned about tax implications of surrendering the policy. This scenario highlights the complexities and potential drawbacks of whole life insurance as an investment vehicle, but has limited impact on the broader US equity market.
about 7 years ago I opened up a whole life policy. I was ignorant to investing at that time. I had a nice chunk of cash and didn't want to just put it into a savings and I had just had a kid.I wanted to protect my family. I had a friend of friend work with New York Life. I fully paid off the policy within like 3 years. knowing I was going to take a loan of the money I put into it for a new house. probably could have done something better but again, I was ignorant. Now, I have lime 6k in dividends I can pull, cash value is like 13k. I do have like 30k loan with with interest. I get a dividend every year that barely covers just the interest.
I really don't want to let the policy lapse and get hit with a big tax bill. of course my NYL advisor doesn't want me to close the account. I still can't figure out what to do. Since opening the policy I have started an ira, hysa, term life with another company.
If I don't want to keep the policy what are my options?