I Have Variable Universal Life Ins... Should I Keep It?
- Jayson M. Thornton, CFP
- Nov 18
- 4 min read
Jayson Thornton, CFP is an award-winning Financial Advisor and host of Pocket Watching with JTÂ a financial Q&A podcast and YouTube channel. Below he answers a recent question from a subscriber:
April from AZ asks: "I have Variable Universal Life. It's for me and my 2 adult sons should I keep it or cancel and invest that $78 into something like the S&P? I still have a mortgage and a $9,000 credit card which I'm actively paying as much as I can each month at least $300 if not more. I'll have my emergency fund for 6 month fully saved in a few months.
Once I have the emergency fund saved I wanted to know if I should start a ROTH with my employer or a brokerage to see if I can find a match? I'm already getting the match with my employer on my 401."
JT: April, thank you for being a Pocket Watcher and for the question! This is a classic example of a complex financial product masquerading as a good deal. Let me be direct with you: Variable Universal Life (VUL) is just the "nastier sibling" of Whole Life, and you should not keep it.
The good news is you're already doing fantastic work following the Pocket Watcher's 7 Money Rules! You've got your Budgeting down, you’re almost done with Emergency Savings , and you're tackling your Debt Planning. Let’s clean up this VUL mess and get you firmly into the wealth-building phase.
The Pocket Watcher's Direct Answer: Cancel the VUL
You're currently paying a premium of $78 per month for a policy that is trying to mix insurance and investing—and failing at both. Here's why you need to drop this policy and move that $78 to a proper investment:
It's Overly Complicated and Expensive:Â Variable Universal Life (VUL) is a form of permanent life insurance. Like Whole Life, it's notorious for being unnecessarily complicated, having very high premiums , and being full of fees.
The Investment Component is Poor: These policies typically have a cash value component where part of your high premium is funneled each month. However, the returns are often horrifically low (think 1-3% here!) , and the insurance company often keeps the cash value if you die without using it. The true purpose of life insurance is simply to replace your income as cheaply as possible , which is what Term Life does.
Keep Insurance and Investing Separate! You will see much better results by using a sleek, simple Term Life policy for insurance and investing the difference yourself in a separate, dedicated investment account.
Your Financial Plan: Next Steps by the Rules
Your situation is clear, April. You are near the end of the foundational "security" phases and are ready to move into the "protection and optimization" and "wealth" phases.
Rule 2 & 3: Emergency Savings & Debt Planning (Done Right!)
Emergency Fund (Rule 2): The fact that you will have 6 months of living expenses fully saved in a few months is phenomenal. Keep that money safe in a High-Yield Savings Account (HYSA) as your "Debt Spiral Guardrail".
Credit Card Debt (Rule 3): You are actively paying down your $9,000 credit card debt by paying at least $300 a month. Remember, the rules say you must fill that emergency fund first. Once your 6-month emergency fund is fully funded, you must move all of your extra cash —including that $78 you save from canceling the VUL—to aggressively kill that high-interest debt. You should also ensure you have a simple, affordable Term Life Insurance policy (Rule 4: Insurance Planning) to protect the mortgage debt for your family.
Rule 6: Wealth Planning (Time to Go to Work!)
Once your high-interest $9,000 credit card is paid off, you have completed the first three critical rules. Now, we use the cash flow you freed up from that debt payment and the $78 from the VUL to build wealth (Rule 6).
401(k) Match:Â You are already making the smart move by getting the full match on your employer's 401(k). That free money is a mandatory first step in retirement investing.
The Roth Move:Â Since you are already getting the employer match, your next major step is to start a Roth IRA. This is where your VUL money should go! With a Roth IRA, you pay the tax now, but all the growth over the years is entirely tax-free when you take it out in retirement. You can start a Roth IRA through an online brokerage, as your employer is unlikely to offer it unless it's a Roth 401(k) option. Do not look for a match; the tax-free growth is the prize here.
The Power of $78: By canceling the VUL and consistently investing that $78, plus the money you free up from your $9,000 credit card debt payment, you will turn a financial trap (VUL) into a wealth-building engine (Roth IRA).
Rule 7: Estate Planning (Protect Your Legacy!)
Since you mentioned you have a mortgage and two adult sons, you are now building a legacy, and you must protect it (Rule 7).
Estate Documents: This planning is a gift to your family. You need a basic set of essential documents: a Will (to direct where your assets go) and a Power of Attorney (to let a trusted person manage your money and health decisions if you are too sick to speak).
Beneficiary Forms are the Final Word:Â Go to your current 401(k) and any future Roth IRA or life insurance policies and make sure the beneficiary forms are accurate. These forms override your Will. If you forget to update them after a major life change, the money will go to the wrong person.
You are in control, April. Financial freedom is not about making one big transaction. It's about building new money habits, and watching your pockets. Your next step is to go to www.PocketWatcher.net and follow the Pocket Watcher 7 Money Rules!
About Jayson Thornton, CFP is the founder of Thornton Financial and host of Pocket Watching with JTÂ where he answers your financial questions. To learn more or submit a finance question go to www.PocketWatcher.net
For press inquiries, contact Jayson Thornton, CFP at PocketWatcherJT@gmail.com or 314-776-9076.