Long story short, I was young and was making a really good income well above the average at the time. I was single and all, and my financial advisor suckered me into a life insurance policy with a dividend scale payout. The plan was to have a retirement savings plan / "tax shelter" in which I can borrow against my cash value as collateral and pay interest to the bank. That way, I wouldn't have to pay income tax on the amount that I borrow from because my tax bracket is already so high. When I die, the payout will cover whatever I owe if I were to borrow.
I don't want to say how much I pay for the premiums, but it's a pretty big chunk of my salary (like 10%). Even worse, the dividend payout sucks compared to inflation and my estimated premium offset keeps getting delayed year after year...
Fast forward today, I'm outpaced by inflation and growing number of high salaried workers and housing costs. I currently own an apartment which is really love living in, but I would ultimately want to just buy a house as both a residency and long term investment and not have to deal with strata and all. Unfortunately, I live in Vancouver, and houses here are super expensive. I'd like to purchase the best house I can possibly get because I feel a good roof over my head is personally life's utmost importance.
All said, I do plan to get married very soon and maybe have kids, so it would help protect my eventual family in a forward thinking perspective. But I just don't know if I should bother keeping my life insurance policy because it's eating so much of my capital. I could just borrow against my cash value, but geeze... with the wild swings in the world today, who knows what's going to happen 20-30 years down the road honestly. Borrowing against my cash value will also mean I'll be paying prime + x interest rate, which I think is around 4.x% to the bank. I think my dividend payout might be able to cover that interest though.
So if I surrender my policy, I think I'll lose maybe 6-7k of my premium. I've been contributing to it for around 5-6 years now, and I'm 35 years of age.
Can you guys let me know what your thoughts are? Should I borrow against my cash value, or just surrender it, or any other alternatives?
Submitted November 22, 2021 at 12:36AM by gtd_rad https://ift.tt/3r44jyF
