What to do with Whole Life Policy

[Guest swf83]

I am 29 years old, two children, and have a very stable executive position with a great company.

 

I have a Whole Life Policy that my dad bought for me when I was little. Current death benefit is $215,000, current cash value is $35k

 

I actively contribute to my 401k at about 9% of my annual salary.

 

My thoughts are to surrender the whole life policy, which earns about 4% internal rate of return annually, and up my 401k contributions to the max.

 

This would provide me with a nice cash cushion that would Let me sleep better at night.

 

Of course the Whole Life policy isn't subject to market fluctuations , but I feel like I can do better by cashing out an putting that cash towards upping my 401k contributions.

 

Thoughts?

 

[CONeal]

What if you died in 3 years?  Would your kids be fine and able to have their needs supported as they grow up? 

 

Making sure you kids are provided for if you don't make it to work in the morning, is the reason for insurance in the first place.

[Tim Eriksen]

I agree.  Take the 35k, max your 401k.  I would also get a $500,000 to $1 million term policy.  The term life insurance would probably cost under $300 for the 500k policy and ~$450 for the million, per year.   

[Parsad]

 

...Of course the Whole Life policy isn't subject to market fluctuations , but I feel like I can do better by cashing out an putting that cash towards upping my 401k contributions.

 

Thoughts?

 

I would rethink that statement...not only based on your policy.  How exactly will insurers achieve the 4% return on guaranteed whole life policies?  Alot of Japanese insurers went bankrupt back in the 90's and early millenium after rates hit historic lows, because they could not cover their insurance liabilities.  Why will we not see the same thing with insurers in the United States or Europe?  Your insurance policy may only be as good as your insurer, and no different than any other financial institution when they cannot match assets and liabilities.  Cheers!

[Guest swf83]

Thanks for the thoughts.

 

To further clarify, I do have a 30 year term policy in place. Also, the policy is with Mass Mutual, so the risk of bankruptcy is rather minute.

 

Any further comments would be welcomed.