The other day, on the radio, I heard a discussion about TIAA CREF’s Universal Life Policy as a retirement vehicle for high earners (those who max out 401K and have sufficient emergency funds and saved for kids college)
The main advantage was a way to get payments tax free from the policy after retirement, or pass along tax free to heirs after death. The expert (from TIAA CREF) suggested 2 ways of saving in the policy. One was a lump sum - usually emergency funds because the policy has no surrender fee and you can withdraw your principal without taxes (appreciation will grow tax free but taxed if with drawn). The current rate is 3.8% with a floor of 3%. Its not FDIC insured but TIAA CREF has a good rating.
The other option is to put $s that might have gone into investments, into the policy. The advantage here is you get a death benefit that protects the family in the event of death/disablement and also sets up funds that appreciate tax free and can be withdrawn tax free.
This is what I understand at a high level and it seemed interesting as we have $300k sitting in short term municipal funds earning 1% (federal tax free) that I would love to see earn 3.8%. We also have about 50K or so excess funds after both 401k and 457b are funded (about 100k between DW and me). We could probably put some into a policy insuring DW as she has the steady income (i have a sole proprietor consulting business). We do have $1M term policies on each one of us that would pay off the mortgage and the kids’ education (and then some) leaving only living expenses and some retirement expenses for the surviving spouse to manage. We are also fairly close to our RE target (we have $5.5M in assets and I estimate current expenses without mortgage run around $130K. Mortgage still has another 7 years which is also roughly my RE timeline. Hopefully the $5.5M would have grown to $7-8M by then.
Does anyone have experience with this product? Bases on assets listed above I feel we can start being more conservative since almost $4.5M is in equities and only about $1M is in cash and a rental condo (rented out and covering expenses).
Thanks for the insights in advance!
The main advantage was a way to get payments tax free from the policy after retirement, or pass along tax free to heirs after death. The expert (from TIAA CREF) suggested 2 ways of saving in the policy. One was a lump sum - usually emergency funds because the policy has no surrender fee and you can withdraw your principal without taxes (appreciation will grow tax free but taxed if with drawn). The current rate is 3.8% with a floor of 3%. Its not FDIC insured but TIAA CREF has a good rating.
The other option is to put $s that might have gone into investments, into the policy. The advantage here is you get a death benefit that protects the family in the event of death/disablement and also sets up funds that appreciate tax free and can be withdrawn tax free.
This is what I understand at a high level and it seemed interesting as we have $300k sitting in short term municipal funds earning 1% (federal tax free) that I would love to see earn 3.8%. We also have about 50K or so excess funds after both 401k and 457b are funded (about 100k between DW and me). We could probably put some into a policy insuring DW as she has the steady income (i have a sole proprietor consulting business). We do have $1M term policies on each one of us that would pay off the mortgage and the kids’ education (and then some) leaving only living expenses and some retirement expenses for the surviving spouse to manage. We are also fairly close to our RE target (we have $5.5M in assets and I estimate current expenses without mortgage run around $130K. Mortgage still has another 7 years which is also roughly my RE timeline. Hopefully the $5.5M would have grown to $7-8M by then.
Does anyone have experience with this product? Bases on assets listed above I feel we can start being more conservative since almost $4.5M is in equities and only about $1M is in cash and a rental condo (rented out and covering expenses).
Thanks for the insights in advance!