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Roth IRA v/s whole life insurance, which is better?

I am frustrated with my current investment company that helped me set up my whole life insurance account. They have double charged me and added fees and hidden charges. In 2 months, there have been over $200 in extra charges or extra drafts to my account. This is in addition to the monthly premium I pay for my life insurance. I have heard that a roth IRA is better than whole life insurance, is this so, and why? If I were to die, will my wife be able to have access to that money? is there early withdrawl fees if I die before retirement age? I can't trust my current financial advisor, and I don't know where to turn. My credit union does not handle IRAs. HELP? James W, I didn't want to badmouth the company I am using, but it is one of the ones you mentioned.

Public Comments

1. There are very few high quality whole life insurance companies out there. If you really want whole life I would have it with Northwestern Mutual or Mass Mutual. You should have at least 8 times your annual income in life insurance and I would recommend starting a Roth IRA as well.
2. I have a Roth IRA and whole life insurance for different reasons. First, the Roth. The tax advantage is you don't pay any taxes on it - ever. You can withdraw the principal at any time. You can't touch the interest until you're 59 1/2, but if you die before then, your beneficiary gets the money. Whole life pays lots of money right away if you die. The Roth has to be built up over the years and you'll only get out of it what you put in plus interest. If you want to leave someone a lot of money when you die and don't have time to build up funds in a Roth, get whole life. Definitely get another financial advisor. Report yours to your state's insurance board. I have some of my IRAs at a local bank in the form of certificate of deposits (CDs) and at Vanguard.com in the form of mutual funds and money market accounts. I don't pay a penny to any financial advisor. They're in the business to make money off of yours. That's how they get their commissions. Keep that in mind.
3. My dealings with financial advisers have been fruitful..for them! What you need is a new interest..dealing with your OWN finances. Why did your adviser pick a whole life policy? To pay himself a commission. WL commissions are typically 100% of first year premium. If you're paying $200/month for the policy X 12 = $2400 commision for your "finance" guy. A few years down the road, they'll have a new product and you'll "outgrow" your current policy and he'll "advise" you to transfer your policy the something else and pay himself another commision. Any mutual fund he puts you in is around 6% commision plus advisory fees (typically 1% year) for as long as you're in that mutual fund. Couple years down the road he'll "adjust" your accounts and make another 6% commision. All these commisions will create a drag on your earning potencial that could cost you hundreds of thousands over a life time. If you're making any money from these clowns it will be a testament to your earning power, not their investment savy. Go buy some book from the bookstore about basic investment. Call some company like Fidelity or Vanguard that has brokerage accounts and set up your IRAs, come up with a plan after YOU determine what's best and STICK WITH IT. Spend a little time on this. Busy? make time. Read my blog, I wrote and article about insurance as an investment. Good luck.
4. Whole life policies are not the best retirement vehicle for the same reasons you gave. They charge lots of sales commissions and fees. The main benefit they provide is tax free earnings growth and insurance, but you can buy a much cheaper term life insurance policy rather than go for whole life. A Roth IRA will allow you to have tax free retirement savings and you can find no-load (meaning no sales commission) and low-fee options to invest in. Roth IRAs take post-tax contributions (meaning is it not funding with pre-tax money), but allow no current tax write off but you do not pay income taxes or capital gains taxes on the earnings. You can withdraw from your Roth IRA for education, hardship, first-time homebuying and medical expenses, but you have to prove the conditions to the IRS. Even so, you will have to repay yourself. Roths IRAs are also tax free upon distribution if you are over 59 1.2 years old. I would recommend in this order: 401k or 403b (pre-tax contributions) once maxed out, go to Roth IRA, once maxed out or if you don't qualify, Traditional IRA, then only if you have tons of disposable income and a well diverisfied taxable portfolio, only then look for annuities or insurance like whole or universal life.