Some tips for investing in a 770 account include checking the interest rate closely, comparing different policies and comparing loan rate terms, as recommended by Fox Business. Investors should also be wary of plans that look too good to be true.
The 770 account is named after the 7702 IRS code, which is a tax code that oversees life insurance. The code essentially allows plan holders to withdraw money from their life insurance, as long as the withdrawals do not exceed the plan value. The withdrawals themselves are not taxable, as they are essentially borrowed from future payments. Withdrawals carry interest, but the interest goes back into the account. Although withdrawals are not taxable, interest on the money is.
There are several advantages to having a 770 account in an investment portfolio, as listed on Daily Finance. Insurance carriers guarantee the balance of the plans when all premiums are paid, which helps shield money from market fluctuations. Loan repayment from the accounts are not subject to restrictions, and the limits to how much money can be placed into the plan tend to be high. It is also possible to borrow money and pay it back quickly and still collect interest, which helps the money in the account build up over time.
Because a lot of the benefit of having a 770 account lies in the tax free access to money while building up interest while borrowing money from the account, it is important to consider the interest rate when choosing a plan, especially when using the money to take out a loan. If the loan rate is fairly similar to the plan interest rate, there is little point to borrowing money from the plan. It is also important to carefully review loan rate terms when borrowing the money to take out another loan, as current rates can fluctuate. Contractual rates are usually better options, as they are bound by contract and cannot go up in the future.
It is also important to compare different account options and review the terms. Investors should steer clear of any deal that seems too good to be true and run their options by a qualified professional before committing.