Converting Whole Life Insurance to a Roth IRA
I am getting ready to cash out my whole life policy. I am going to put $5000.00 in a Roth IRA. Will I have to pay taxes on that money first? I am being told “no” by my local accountant who freely admits she doesn’t know “a whole lot” about Roth IRA’s. She does, however, assure me that since I paid the life policy out of my paycheck, I will not be taxed when I open a ROTH.
I plan to name my daughter as beneficiary, with my grand-daughter (3 weeks old) as the back up beneficiary. I am ok doing that? (Not skipping a generation?)
Permalink Submitted by Nadeem Salem on Thu, 2011-10-06 15:37
Wondering why you would be considering this move in the first place. You do have tax advantages in the whole life that one could argue equal the Roth. Also,depending on your age, you might have more liquidity keeping the money in the whole life as there are no age limits for accessing this money. If the whole life policy is with a participating, direct non-recognition company, any loans might offer other advantages.
Your decision might be best for you depending on circumstances but i would caution that there are many advantages specifically with whole life that make it a viable asset to own