Financial Advisor | Personal Finance & Lifestyle | Yakezie Forums

Hey everyone!

  I feel so stupid admitting this- but a year or two ago I opened a Roth IRA and later a Life Insurance policy with my friend's dad who works for a financial group.

 I'm 25 with no health problems…do I need a Life Insurance Policy, even a small one? 

Also, can anyone share what the average sales charge is for Roth contributions?  I don't know if I'm getting duped on this, and if I am being overcharged, is is possible to move your Roth elsewhere?  

I really should have considered this sooner, but I was naive and didn't think to consider these things.  It's great to be contributing from age 23, but if I'm going to be putting money aside, I want it to be maximized!  Thanks!

Our Roths are with Vanguard–love them!

As for life insurance and wills….my husband and I keep looking at each other, knowing we need to do something about it but not getting anywhere. Can't help you much there!

I used to be a financial advisor and got out of the business for reasons similar to this!  I don't know your entire situation, but you probably do not need life insurance. Unless someone has co-signed for a car/house/ or personal loan then you really don't need it.  The only time it would be helpful is if you bought a small policy now with and it there are guarantees for you to be able buy more in the future regardless of your health.

As far as the ROTH IRA, GREAT IDEA.  However, I assume you are purchasing "A" shares from your friend's dad.  This could cost you up to 5.75% of the contribution up front (criminal).  There is also an annual fee of $25-$50 for "maintenance" (again this is crap). 

I would keep it simple if I were you and look at transferring the account to Fidelity!  This would be free, it is easy, and they have great fund choices with no up-front fees!  You will need to open up a Roth IRA at another company, complete an ACAT (account transfer form), and send it to the company where it is currently held.  This is the cleanest way to transfer the money.  Hope this helps

Travis

http://www.financialmoneyspot.com

As for the life insurance policy, do you have a cosigner on your student loans?  If no, ditch it. –> or mortgage, if you have any

Excellent advice JT! PF bloggers should be able to give these sort of advice whenever asked for.

Even if you both are working, it doesn't hurt to pay for life insurance. specially if its employer backed group life policy. don't forget to put beneficiary and nominee in case you both meet with accident together. Even if mortgage is low, going from two income to one income put pressure on the repayment.

Thank you for your answers everyone!

We live in a home with a mortgage and bills that either of our incomes we could live off of. It would be tighter on my income if he passed away though.

Will give this all some more thought.

Post edited 7:32 am – October 3, 2011 by Jeff Rose

FrugalBeautiful said:

Hey everyone!

  I feel so stupid admitting this- but a year or two ago I opened a Roth IRA and later a Life Insurance policy with my friend's dad who works for a financial group.

 

 I'm 25 with no health problems…do I need a Life Insurance Policy, even a small one? 

Also, can anyone share what the average sales charge is for Roth contributions?  I don't know if I'm getting duped on this, and if I am being overcharged, is is possible to move your Roth elsewhere?  

 

I really should have considered this sooner, but I was naive and didn't think to consider these things.  It's great to be contributing from age 23, but if I'm going to be putting money aside, I want it to be maximized!  Thanks!

Shannyn,

If you're comfortable doing yourself, then as the others have said, you shouldn't pay much.  Maybe $30 a year tops for an IRA fee, but most of the online brokerages will do it for free.  

If the advisor is actually helping you with your choices, then a small fee is probably worth it.   Having been in the business for almost 10 years, then my hunch is that the advisor stuck you in some mutual fund with a load attached to it and you'll never hear from him again.   I hope I'm wrong, but I've been in the business too long and see otherwise.

Regarding the life insurance, you don't need it.   I guess you could justify if it was less than $10 month to keep it in case you suddenly became uninsurable later on – unfortunately, I have seen that happen a few times to rare and unpredictable medical conditions. 

Hope that helps!

Update:   I just saw that you are paying $40/mo for your insurance?   Is it term, and if so, how much is the face value? 

I have this inkling suspicion that you were sold some type of permanent policy, whole insurance perhaps?  If that's the case, then drop it.  You definitely don't need it. 

Post edited 3:35 pm – October 3, 2011 by Roger the Amateur Financier

Hunh, very interesting discussion.  It seems like the Roth IRA issue is under control, so I'll toss in my two cents on life (and related types of) insurance:

First, it's probably a good idea to get disability insurance.  Life insurance is good, and definitely something you should have if you have those who depend, in whole or in part, on your income.  But, there is also the risk of losing your ability to work while still remaining alive, and so having insurance to cover that possibility is also important.  (Sorry to sound morbid, but considering out topic of conversation, it can't really be helped.)

Also, when trying to calculate the needed amount of insurance for your policy, it's tempting to assume that your spouse will be able to continue pulling in the same income after you are gone, but you shouldn't count on it.  With physical issues they could suffer (hence our disability insurance addition) and the mental state they may be in following a death like that, it's better to take the cautious approach and assume that any income dependent on your and your spouse's continued work will disappear, and to make your calculations based only on the monetary needs of the household (with some consideration for any investments you might have available, particularly if you are approaching retirement and getting ready to live off that money, anyway).

Lastly, I've heard a number of different estimations of how much insurance you should shoot to get, from as little as one year worth of income (just enough to funeral costs and other final expenses, particularly recommended if you are single and have no dependents) to twenty times your annual income (if you want your dependents to have enough to invest to completely replace your income at a modest rate of return of 5%).  My thoughts?  It's probably better to shoot for the moderately high end of the scale; maybe not twenty times your salary, but a good five to ten times your salary coming to them from a term life insurance plan should provide your loved ones with a fairly comfy cushion in the event something happens.  (It would also be a pretty good idea to review your insurance needs on a semi-regular basis, and possibly add new term policies to your mix if needed to keep up with inflation or an increasing lifestyle; as Jeff touched on, the level of insurance required by a young couple sharing a studio apartment is much less than that for a family of five with a sizable home in the suburbs, in both income multiple terms and pure size.)

Again, sorry to get morbid there at times, but it's hard to discuss life insurance without talking about, well, what causes those pay outs.  Besides, better to be open about it now, than to leave your loved ones (or yourself) struggling later.