[Robert C]

My wife and I recently started variable universal life insurance policies. We are paying about $600 a month toward the policy on top of what we are each contributing to our 401k plans. We are both under 30 yrs. old, and are trying to get a good start on our retirement. Should we be investing in IRA's or something else instead? We both supported ourselves before we got married, so do we even need life insurance right now since we don't have children yet? Our advisor works for New York Life, and he's telling us that the variable universal policy is the best first step. I feel like he is just trying to maximize his commision instead of doing what's best for us. I know, we shouldn't have gone to an insurance salesman, but he was recommended by a close friend. What should we do?Combined, we make $85,000/yr. I contribute 6% to my 401k, and my wife contributes 1%. We are homeowners, not renters. Other that that, we don't have any other investments.

[SexyTrojan]

Don't you get life insurance through your jobs? How is putting $600 a month into life insurance going to benefit you? You can get a much better policy through you work benefits for much less money.

[GoodTimesMakingMoney]

How much do you make? What other savings do you have? Are you going to be in a high tax bracket forever?Dave Ramsey provides great advice for what you should fund first, second, third etc. I am guessing VUL may be close to last or second to last on the list. It should still be on the list, but not a #1 priority for anyone EXCEPT your captive, New York Life agent that will get to pocket 40% + of your first years commission, I mean premium.I wouldn't cancel anything until you paid another $600 to a fee based financial planner to put together real plan for you and your wife. That way, you can see if VUL does make sense. Then it is up to you to talk to your New York Life insurance agent (don't call them an advisor).

[Jack N]

I was an insurance salesman myself about 10 years ago. I was selling a lot of the VUL as it was a hot item back then. And you're right, we were (and probably still are) driven by the high commission coming out from that particular product. Just so you know, the first 2 years of your contribution will be going towards the commission and other expenses to open your account. So don't count on withdrawing from it during that time, because your surrender value is close to nothing.Back then I also convinced myself it was the best investment ever because of the tax shelter when you"withdraw"your money a the time of retirement. Couple years later as I grew up in the financial world, I discover it wasn't necessary true. The VUL provides you with a limited numbers of funds, therefore you will lack of choices.You might also find that the premium of the insurance portion on a VUL is higher than a premium for a term life. And remember that too much fees (insurance, mutual funds, etc..) will reduce your investment gains and over the long term, instead of earning the 8% typically used, you might be reduced to a 7% or 6%.Remember that you can only receive either the money from the insurance or the money from the invesment, not both. So I think you and your family will be better protected if you were to keep the insurance separated from the investment(s).Since the Roth IRA came along, you will still be able to withdraw your investments gain tax free after the age of 59 1/2, and your contribution anytime without being tax or penalty. Of course, there is a limit of how much you can contribute into the Roth ($4k in 2006), and your adjusted gross income must be less then $160k if you and your wife file jointly.As always, the rule of thumb of an investor is to diversify his/her investments to reduce the risk. If that $600/month is high to you, you should consider changing the policy and reduce it to $300/month (because you're still convinced VUL is a great product for you) and use the remaining $300 to another investment type such as a Roth.

[JAW]

No, life insurance of any kind is not appropriate if you don't need it. If someone does need life insurance I recommend a term policy (cheaper&more coverage). I used to work at a life insurance company and it is ridiculous what agents make on commission. The advisor may be a complety trustworthy person, but he is thinking about his bottom line not yours. Put the money in a Roth IRA, and you will be far better off in the long run.

[pathialen]

Rather than variable it is better for you to buy whole life insurance. It would be one time investment.