Should we keep paying the premiums for a whole life insurance policy and let the cash value grow until year 10, or do we get out now and invest the difference and hope to recoup the losses?

We purchased a whole life insurance policy at age 33 with high premiums to use as an investment for retirement. We are four years into the policy. Upon further research, I am not sure this was the best decision. I understand the penalties and fees for surrendering the policy to obtain the cash value are high. Do we keep paying the premiums and let the cash value grow until year 10, or do we get out now and invest the difference and hope to recoup the losses?

Retirement, Investing, Insurance, Life Insurance
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2 weeks ago

Personally, I like to see my clients buy insurance for insurance, and investments for investments. 

If you look at your policy from a stricly investment point of view, at this time you have a loss.  After the policy has been in force for years and years you may have an IRR on your cash approaching 5%.  But if you look at this as strictly insurance, and the policy paid out (meaning the insured died) the IRR would be huge.  

To answer your question:  As with any insurance policy, you are paying for coverage.  When your auto policy renews after 6 months, you don't look at the money spent as lost, do you?  No - you paid for needed insurance.  That's the issue here.  The question becomes "Do I have the right insurance for my cirumstances?"  If you are maxing out your retirement plans and looking for another opportunity for tax-deferred growth, and have an insurance need, this is a good choice.  If not, and you have no health issues, I would consider replacing this policy with term insurance and investing into your retirement through IRAs work employer-sponsored plans.  

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