From some cursory research, I’ve found that the story I’m about to tell you is pretty cliché, but here we go anyway.
When one of my buddies graduated from college, he got a job at a wealth management firm and started hitting up all of his friends to come in and meet about financial planning. I was one of the ones that bit and wound up with a Penn Mutual whole life insurance policy. I honestly didn’t (and still don’t) understand all of the implications or alleged benefits of it, but the guy my buddy worked for seemed to make a lot of sense at the time, and I tend to be very trusting.
Anyway, for the last 4.5 years, I’ve been paying $98 per month for this $100,000 policy. The more I hear that these policies aren’t very beneficial, and the more I think about how much I'd have today if I had just saved that money instead, the more I want to get out of it and just put that money into a roth every month instead. However, the sunk cost fallacy mixed with my general financial illiteracy has me reluctant to pull the trigger in case it’s a bad move and there are long-term benefits I just don’t understand.
Can anyone advise me on whether or not it makes sense for me to just throw in the towel? Also, if I cancel, will I get any money back?
-Policy values per the account website today:
Net death benefit: $100,411.32
Base face amount: $100,000
Guaranteed cash value: $1,998
Net cash surrender value: $2,073
-Some background on me in case it helps:
I’m 29, almost 30. Single with no dependents but will likely be engaged in the next year or two. We’re undecided on kids. Earn around $45,000 working part-time while in school; will shoot back above $70,000 when I finish next year. My only investment right now is my 401k, but plan on opening a Roth IRA in the near future.
I'd hate to eat the loss, but am more than willing to call it a "stupid tax" if it means I can make that money work for me more efficiently in the future. Any advice you can provide would be very much appreciated. Thanks!