Deceased Wife's Life Insurance Policy-Roth IRA Investing

I lost my wife 1.5 years ago and am now wanting to put her life insurance into a Roth IRA Investment. I am new to this and did not find a discussion topic quite like this. I retired in Jan 2021 and have only government retirement incomes. The life insurance I understand is tax free money with the interest earned being taxable. How do I roll this over into Roth IRA account? I like the Vanguard due to the low fees but am open to any suggestions. I also understand that I cannot put but $7,000 USD plus $1,000 USD (I am 63 years old) into a Roth account? My questions are: How do I move this money?, Can I even do this since I am already retired and do not work for pay? If there is an article on this situation, I would love to read it if you could point it out to me. Should I call Vanguard and talk to them?
I am hoping to help my grandchildren once I pass by willing this to them. Thank you for any information you can provide.

Sorry to hear you lost your wife, and I hope you’re doing okay now.

You have to have earned income, i.e. wages, to contribute to a Roth IRA.

Instead, you can invest in mutual funds & other investment products at Vanguard with the money. It would be in an after-tax account, meaning taxes have already been paid on the principal or, in the case of life insurance, no taxes were due. What is taxable are the dividends and capital gains, every year.

You could set it up so that all of those taxable earnings come to you in the form of a check, or deposit to a money market fund at Vanguard, from which you can withdraw the money to live on. That would preserve the principal amount, but give you some support. Or if you don’t need the dividends & capital gains to supplement your retirement incomes, you can choose to reinvest the div & CG.

When your grandkids inherit the fund(s), they won’t pay income taxes on it, or taxes on dividends & capital gains.


Thank you for checking on me. I am doing as well as can be expected. We were married for 38 wonderful years, and we dated for 4 years while we were in school. We have two wonderful kids who now have their own families and our oldest, our son and his wife have just had our first grandson. Also, thank you so much for this financial advice. Since I am not investing in an IRA now, can I shelter more than $8,000 into an account in one transaction or am I still limited to the $8k? God Bless you and your family.


No, you cannot. Here are some options:

  1. a taxable account at Vanguard or elsewhere. There are no limits, but all dividends (every year) and capital gains (when you sell) are taxable at capital gains tax rates (which are lower than ordinary income tax rates).
  2. 529 Account(s) for the grandson or others. Money eventually used for educational purposes will be tax free. There’s also an option to convert some of this to a Roth IRA for the beneficiary (your grandson) later. You would own this account.
  3. Fund your kids’ Roth IRAs. This immediately transfers the money to them, so they could theoretically just take it all out and spend it if they want. But if your goal is to help your grandkids, this may be a good option.
  4. Get a part-time job to earn $8,000/year, then contribute $8,000/year into a Roth IRA.


Thanks for the clarification.
God Bless.