Should I open a whole life insurance policy or a 401k first?

For most people it is best to buy term life insurance and invest the money they save in a 401k. Life insurance plans that builds up a cash value like whole life, universal life, et cetera are rarely the best choice. Financial consultants who push whole life insurance are interested in lining their pockets with big commissions, not making you money. If you look at financial sites not run by insurance companies, they are almost unanimous in recommending term life insurance. Look at big name sites like Yahoo,CNN, Motley Fool SmartMoney.com and Kiplinger's, and they all recommend term life insurance for most people. However, you will find many websites out there that promote whole life insurance and disparage term life insurance. They are almost all run by insurance companies. Insurance companies make more money from these policies and it is in their interest to push them. Whole life has the advantage of having a built-in savings program, but you lose a lot of money to high commissions. It is usually better to buy term life insurance and invest the money you save in an IRA, 401K, or mutual fund. There are, however, rare cases where whole life is better and these are discussed in the articles below.

Sources: Term vs. Whole Life Articles:

http://www.fool.com/insurancecenter/life/life06.ht...

http://finance.yahoo.com/insurance/article/101749/...

http://money.cnn.com/pf/101/lessons/20/index.html

http://www.smartmoney.com/insurance/life/index.cfm...

http://www.kiplinger.com/basics/archives/2003/03/l...

General Information on Life Insurance:

http://www.fool.com/insurancecenter/life/life.htm

http://finance.yahoo.com/how-to-guide/insurance/12...

http://money.cnn.com/pf/101/lessons/20/index.html

http://www.kiplinger.com/basics/archives/2003/03/l...

I need more info. Do you a family and a mortgage? How old are you?

If you are young and don't have much financial responsibility than a 401K is first thing you need. By investing early you let the money work for you. If your employer matches contributions than invest at least to the matching portion.

If you are middle age, have kids, and mortgage, and sole wage earner than you need to get life insurance. Term is usually the best coverage for your money. Get the policy amount that is 10X yearly income or loan amount which ever is more. If you can place some money in the 401K account.

I recommend you to try this site where onel can compare quotes from the best companies: http://cheap-insure.info/index.html?src=3YAhjyshUX...

RE :Should I open a whole life insurance policy or a 401k first?

I met with a financial consultant who told me that the 401k is the last thing I should start. She says it makes more sense to open the whole life which compounds 8% return on my money yearly and pays a yearly dividend. Which is smarter to do first?

Follow 9 answers

A lot of people say don't invest in whole life -- put that amount of money in an investment account that lets you have more choices later, rather than locking it into the whole life. Then buy term life which is much cheaper.

The advantage of 401K is that the money goes in before you pay income taxes, and it could reduce your overall income taxes. Also, some companies match 401k contributions, which is free money.

Your financial consultant is an idiot.

A whole life insurance is one of the WORST investments there is.

I am an economics major...1 semester from MBA.

Find another consultant.

They call it whole life because you throw you money in a hole.

If you'd like a more rational plan, that is not clouded with commission motives, send me an email.

You are being suckered. Whole life is NOT a good deal for most people - only for the "advisors" who pocket big fees from it. If you need life protection, consider level term life insurance and start that 401(k) ASAP.

For free insurance quotes

if your young i'd risk the whole life, since your rate's will be cheaper....but like all insurance you have the baby boomer generation that could crash it and take your money, so invest your money personally

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