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Eric Said:

Which is best option for investment for tax saving? I need to invest 10k? How about PPF or TERM INSURANCE?

We Answered:

Term Insurance? That is not an investment. A term policy expires and is worthless unless you die.

Whole Life is called an investment by people who sell it or people who got scammed into buying it, but Whole is considered by most financial people as a scam. You get your money back (if you don't die), but they don't pay you any real interest on your money if any.

PPF? is that a pension protection thing? That sounds pretty shady as well.

Why don't you sit down with a Edward Jones, A.G. Edwards, Charles Schwab, type investor and work on a plan with them. If you need to invest $10,000 this year or every year they can help you with the best tax savings and even a deductible investment (Traditional IRA or Fed. bonds).

Keep adding to your investment over the years and you will make a ton more than paying whole life insurance.


Also, if you don't have a spouse and/or kids you may not need much life insurance... Try to think of who you support now that will not be supported if something should happen to you.

A lot of people are over insured... if you can imagine.

Jonathan Said:

Are "Return of Premium" policies taxable?

We Answered:

If you took medical deductions in the year the payment was issued, the IRS will assume that deduction includes your premium and will now want tax on the return of premium. Hopefully, this is not the case, or if you did take medical deductions, you have your old tax return showing that the deductions did not include your LTC premium.

You need to respond to the IRS stating that you had a LTC policy, never received a tax benefit from deducting the premiums, and that the money you received is a return of premium based on the claims history of your policy group.

That should do it. You can understand why the IRS is asking for tax, since if you didn't pay tax on your premium (if you deducted it), the refund of part of the premium would be taxed.