Is an IUL a good investment when I’m 24?

I’ve been paying into a IUL with National life insurance since March. I was introduced through a friend who is also an issuance agent. At the time it seemed like a really good idea since I was new to investing and wanted some securities for my future and my families future. I am now having second thoughts because I feel the fees over the long haul won’t be as beneficial as investing in an index fund or target date index fund. I understand you can’t tell me what to do directly but I’d really appreciate your insight. Please help with educating me, thank you!

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Your friend made a nice commission off his sale to you, and put you into a terrible, under performing investment. If you need life insurance, buy term life insurance. Then invest the rest of the premium in index funds inside of your tax advantaged accounts (IRA and 401k).

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Thank you! I needed all of those and I wish I’ve seen them sooner. Would be it be best to pull out ASAP and eat the fees? Or is there a correct time to pull out of this “investment”?

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I would take a look at your options and try to do the math. But generally I think it’s not a good idea to “throw good money after bad”. i.e. if you need to keep paying into this insurance policy for 10 more years to make it “worth it”… imagine if starting today you put those premium payments into an actual investment. It’s “worth it” immediately and the growth after 10 years will likely be huge. So without knowing the details, it may be a good idea to consider it a sunk cost and cut your losses.

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I was in the same exact situation as you about 6mo ago (except it was my “financial advisor” not a friend who sold me the policy). Jeremy is right. They made a nice commission off of you and it will underperform simple index funds. The more time went on the more confused I was about what I even bought and how the policy was structured. I decided to stop paying and just let the policy lapse about 6mo in, losing the money I put in. But to Jeremy’s point, don’t throw good money after bad, so I would say just get out of it or stop paying and let the policy lapse.

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Understood, thank you for you input! Would it be best to put the money I was putting into the IUL into an etf, like VOO, or into a target date mutual fund?

Yes, exactly! :slight_smile: (Although beware not all target date funds are target date INDEX funds. Make sure you look for a low expense ratio, under 0.2%)

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Thank you for all the feedback and information! Should I split my investment cash with and index fund and a mutual fund or just stick with one?

I just read up on your article “ Seven reasons to put 100% of your portfolio in a target date index fund” and I think I got my answer! I’d still love additional comments if you have any to give. I appreciate you answering my questions and your help with educating me!

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I stand by that article! I really think it’s an optimal way to invest… any splitting of your investment is likely to just add complexity without increasing the expected return.

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Jeremy, what if the financial advisor told me that the money would be invested into an S&P 500 account so seems a lot of like what you’ve explained to in your IG posts, the money would not be in a Roth IRA fixed or variable account, but it would be locked in an indexed (hybrid) account? They said it was tax advantaged cash accumulation in an insurance policy. It sounded good to me since I had heard you explain this type of investment as the way to go. They offer IUL’s, but if we did not want an IUL right away, they mentioned the life insurance 30 year term LB (living benefit) would roll into an IUL after 5 years.
They guarantee we never lose our money, rate of return 6%-18%c income for life/index market, and protection probate…

FYI I have the fidelity Roth IRA started earlier this year b/c I met you. No I didn’t take adv of the course Black Friday deal because I don’t feel like I have time to myself to do. Is it on my own time once I swipe or do u actually have set times? If this info is someplace on here, no I didn’t look either :laughing::woman_shrugging:t4::raising_hand_woman:t4::grin:

They said it’s a *Roth IRA indexed S&P 500 fund

I just noticed your story of Ian and Robert. And I wrote it down myself… if they cap the growth @18%, and the market does well over that for 5 years straight… my money won’t grow as fast as it would’ve in the index fund :anguished:… I noticed you have numbers in the 30 percentiles… that happens? We’re those real numbers? Is 18% a lot. Because I noticed you also mention that the market having a steady 10% growth is why am indexed fund is guaranteed to make us millionaires (if you put in the max each year, for 40 years)… I guess that’s why I thought the 6%-18% was good growth numbers. :woman_shrugging:t4:

I guess I need to ask the financial advisor why they cap it @18% if it’s a Roth IRA S&P index fund … which I think he would probablyi try to sound good like he was trained and give me some kind of believable reason which I would then take. :woman_facepalming:t4::unamused:

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The bottom line is that you’re in an insurance product, not a real investment. And your financial advisor isn’t a financial advisor. He’s an insurance salesman. By definition, over time insurance products have to underperform the market, or else the insurance company wouldn’t be profiting and would go out of business. I would never invest in an insurance product. :slight_smile:

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Before we bought this house in Jan 2019 we had Primerica. :woman_facepalming:t4:. 3 years! Their premiums kept going up a little for term LI. It was about $100/yr. we had to create a better budget for a move and to pay off student loans quicker… so we eliminated them. They weren’t happy. Also you are correct about renting and buying a home. A home is a mediocre Investment or like a small child… it needs things. So you can’t really invest AS MUCH as you would if you didn’t have that home or child. And I’m not making an excuse lmao! I have 4 kids. Just saying. We are in the middle of family life new home and wanting to look out for the future… :woman_facepalming:t4:. It’s coming in a little more clearly now. But everything your saying has been making sense. It especially all makes sense after I was almost thrown in the lions den… Thank you.

Now that I think of it depending on the numbers. Renting a home can also be like having a child. So that example went for both owning and renting a :house_with_garden:. I think everyone favors the smallest rent or not owing on their home. If you are thinking of investing you def have to budget and that’s thinking long term. Lifestyle changes def have to happen. And maybe that’s what gets people who haven’t invested… so wrapped up in life and purchasing things for the present…