Announcement

Collapse
No announcement yet.

Inappropriate Whole Life Policy of the Week

Collapse
X
Collapse
First Prev Next Last
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • This should be illegal.

    Comment


    • Today's edition. Northwestern Mutual. Why does it always seem to be Northwestern Mutual?






      Your website and blog is very helpful! My wife and I have just realized we have made the same mistakes as many others that have found your site. Our situation is a little bit unique in the fact that our NW Mutual agent left the company and started his own business. We had invested probably close to 100K over 7 years and only have a cash value of around 70K. He said we could move this over to Mass Mutal and get better dividends and a lower borrowing rate. After realizing he is just filling his wallets again with our money, we want out! We took our NW mutual accounts paid up at his advice and started funding a new mass mutual policy. Luckily, we had only put about 7 months worth of premiums at this point (about 15K), the cash value is basically nothing. From reading your site, we think doing a 1035 exchange on the NW mutual money and getting a variable annuity and letting it grow up to our basis and then cash it out. For the mass mutual account- I am not sure what to do with this? Should we continue to fund it for a while and then do the same thing? Is there a way we can carry over the loss on this for tax purposes? Could we do a 1035 exchange with both and have a bigger loss?
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

      Comment




      • Why does it always seem to be Northwestern Mutual?
        Click to expand...


        Haven't you seen their commercials?  Apparently their financial planning involves building a pool

        https://www.youtube.com/watch?v=JDE-fju7i9Q

         

        Comment







        • Why does it always seem to be Northwestern Mutual? 
          Click to expand…


          Haven’t you seen their commercials?  Apparently their financial planning involves building a pool

          https://www.youtube.com/watch?v=JDE-fju7i9Q

           
          Click to expand...


          I bet the guy in the commercial that could afford the pool is a NML agent and not a client.

          Comment


          • Pretty fantastic marketing department eh?
            Helping those who wear the white coat get a fair shake on Wall Street since 2011

            Comment










            • Why does it always seem to be Northwestern Mutual? 
              Click to expand…


              Haven’t you seen their commercials?  Apparently their financial planning involves building a pool

              https://www.youtube.com/watch?v=JDE-fju7i9Q

               
              Click to expand…


              I bet the guy in the commercial that could afford the pool is a NML agent and not a client.
              Click to expand...


              Where are the customers’ yachts?

              http://awealthofcommonsense.com/2015/02/10-great-lines-customers-yachts/

              Comment


              • Somehow I feel better knowing people other than doctors get suckered into these suckers too:

                First off, thanks for writing about whole life policies. I'm not a
                doctor but as a first year investment banking analyst, I was sold a
                whole life policy because I didn't know any better. The policy is for
                a $225k death benefit. I started paying in October 2010.

                My monthly payment is $166.63 plus a $30 rider that I didn't realize
                was the cost of an ALIR and NOT part of my monthly payments. My
                dividends have also been going towards buying additional paid up
                insurance. So overall I've paid $14,996.70 in monthly premium payments
                and $2,700 for that useless rider for a total of $17,696.70.

                I'm now 30 and the cash value is $11,836 and I'm trying to figure out
                what to do with this at this point.

                Helping those who wear the white coat get a fair shake on Wall Street since 2011

                Comment


                • We had some NWM agents aggressively trying to recruit my classmates as we were graduating medical school.  At the time, I knew there were a lot of things I didn't know about finances, but everything they were selling seemed like a bad idea.  Luckily, I was busy towards the end and never sat down with them again.  The only reason I met with them was because one "advisor" was my neighbor, which I didn't find out until a tree from my backyard fell on her place.

                   

                  The second pitch I got was from an "advisor" who I knew from college.  I told him that I wanted to get disability insurance because they had a reasonable rate.  He sets me up with disability but then gives me information on a variable life policy.  Again, I was in the mindset of trying to move and didn't want to make a huge commitment about something I didn't read about, but when his pitch was "Allen Iverson had one of these policies so he would be set for life," that's when I knew it was garbage.

                  Comment






                  • Today’s edition. Northwestern Mutual. Why does it always seem to be Northwestern Mutual?






                    Your website and blog is very helpful! My wife and I have just realized we have made the same mistakes as many others that have found your site. Our situation is a little bit unique in the fact that our NW Mutual agent left the company and started his own business. We had invested probably close to 100K over 7 years and only have a cash value of around 70K. He said we could move this over to Mass Mutal and get better dividends and a lower borrowing rate. After realizing he is just filling his wallets again with our money, we want out! We took our NW mutual accounts paid up at his advice and started funding a new mass mutual policy. Luckily, we had only put about 7 months worth of premiums at this point (about 15K), the cash value is basically nothing. From reading your site, we think doing a 1035 exchange on the NW mutual money and getting a variable annuity and letting it grow up to our basis and then cash it out. For the mass mutual account- I am not sure what to do with this? Should we continue to fund it for a while and then do the same thing? Is there a way we can carry over the loss on this for tax purposes? Could we do a 1035 exchange with both and have a bigger loss?

                    Click to expand...


                    At my large academic institution, NWM has infiltrated like the plague.  They are somehow given access to graduating residents, so much so that some departments allow them to give presentations to the group as a whole.  Since I've started here I've literally had 5-6 different NWM advisers contact me after being given my name/contact by my colleagues to set up an interview.  I politely decline each time but its insane how entrenched they have gotten here.

                    Comment


                    • Here's one posted on the Bogleheads forum:
                      In the course of righting the life insurance ship, I've reviewed the whole life policies that were purchased for me years ago by my parents. I'm now covered by adequate level term life coverage into my 50's, with conversion options available at that time if I need.

                      In reviewing my two whole life policies, I expected them to be bad and to have no second thoughts about canceling them. I've asked for in force illustrations but surprisingly they seem to have trouble getting that together. At this point, I'm trying to understand just how these numbers shake out:

                      Policy #1: $10k whole life paid up at 100, annual premium 89.60
                      34 years of premium paid in ($3046.40), cash value =$1,866.60

                      Policy #2: $25k whole life paid up at 100, annual premium 279.75
                      10 years of premium paid in ($2797.50), cash value =$1215.80

                      I've been reading a lot about this topic, and I see the examples that others list with their own policies. Somehow, my policy #1 after 34 years seems to be the worst performing whole life policy I can find anywhere. Policy #2 seems like it's (barely) a better performer. I know the prevailing wisdom around here, but does anyone have an idea of how the numbers can be THIS bad?
                      Helping those who wear the white coat get a fair shake on Wall Street since 2011

                      Comment


                      • Hey, WCI, at this point I think it would be more newsworthy if you came up with an "appropriate whole life policy." I'm guessing it would be less frequent than weekly.

                        Comment






                        • Hey, WCI, at this point I think it would be more newsworthy if you came up with an “appropriate whole life policy.” I’m guessing it would be less frequent than weekly.
                          Click to expand...


                          Oh, I meet a few people who are happy with their policy. The following is generally true for them:

                          # 1 They understood how whole life works when they bought it. (not the case for most in this thread)

                          # 2 They structured the policy to minimize the insurance costs and especially the commissions. (not the case for most in this thread)

                          # 3 They highly value something that whole life can do (usually even more than the return)- borrow against it to invest in real estate without needing to involve a bank or hard money lender, asset protection, "banking on yourself", the lifelong death benefit etc. (not the case for most in this thread)

                          # 4 They're in a strong financial position, high incomes, low expenses, no huge debts, rarely student loans at all, maxing out retirement accounts etc. (not the case for most in this thread)
                          Helping those who wear the white coat get a fair shake on Wall Street since 2011

                          Comment




                          • Oh, I meet a few people who are happy with their policy. The following is generally true for them:

                            # 1 They understood how whole life works when they bought it. (not the case for most in this thread)

                            # 2 They structured the policy to minimize the insurance costs and especially the commissions. (not the case for most in this thread)

                            # 3 They highly value something that whole life can do (usually even more than the return)- borrow against it to invest in real estate without needing to involve a bank or hard money lender, asset protection, “banking on yourself”, the lifelong death benefit etc. (not the case for most in this thread)



                            # 4 They’re in a strong financial position, high incomes, low expenses, no huge debts, rarely student loans at all, maxing out retirement accounts etc. (not the case for most in this thread)
                            Click to expand...


                            I think that there is an important distinction to be made between people who are happy and people who should be happy.  I've met a couple of people who are happy with their policy, but they really shouldn't be.

                            They're blissfully ignorant and have deluded themselves into think they made a good choice.  They have absolutely no idea about the tremendous opportunity cost associated with permanent insurance products.  The people I'm thinking of have policies that probably better than most of the monstrosities in this thread, but they would have been way better off (with respect to their own stated goals) if they just invested and bought term.  But to face that reality would be quite painful, so they remain in denial.

                             

                             

                            Comment


                            • This week's version. Guess what? It's Northwestern again. Almost a 100% loss.
                              As it seems with everyone else who has posted, my husband and I were suckered into purchasing term 80 policies and a 325k whole-life policy EACH by a NWM agent.
                              Good news. It’s been exactly one year only.
                              Bad news, we’ve still dumped over $7000 into the whole life policies alone and now have cash values together totaling a whopping $173.
                              Helping those who wear the white coat get a fair shake on Wall Street since 2011

                              Comment


                              • WCI's podcast inspired me to share our policy. I think highly unlikely we will keep the policy until death, but certain details are holding me back from canceling right away. Feedback is welcome.

                                This is an AXA 900k variable life policy sold to my in laws for my wife back in 2013.
                                Initially funded with a lump sum, then my wife has been paying $300/month into it since.
                                The value of the account is tied to various diversified stock index funds. You can see in the attachment that stocks did quite well over this 12 month period.

                                Total premiums paid (basis?) = $37,836.17
                                Policy account value = $38,756.48
                                Cash surrender value = $28,625.21 (after surrender charge)

                                PROS:
                                If you look at what they call "Insurance Costs" we are only paying $147.10 yearly for the $900k insurance, which is very cheap. However, I suspect this number is low artificially, and the real costs of insurance are tied into the other (very high) charges.
                                After the plan's 10 year anniversary, supposedly the surrender charge will hit $0 and we can access the entire policy account value.
                                Also after the 10 year anniversary, the interest for loans against the policy decreases from 3% to 2%.

                                CONS:
                                As you can see, they skim 4% off the top every time money enters the account. Ouch.
                                "Other Charges" are huge. You can see that they vary with the total account value, and roughly add up to 5% of account value per year.

                                Assessment of options:
                                1. Take the money out now. This would incur a >$10k surrender fee, and might have to do the switcheroo with a variable annuity to recoup losses.
                                2. Take the money out in 2023 without surrender fee. This means 5 more years of charges (also around $10k), but has the benefit of 5 years of insurance coverage. If the value grows enough to keep up with the charges, maybe we can sell close to basis and not have to worry about losses. Regardless, I think we should stop paying into the plan and let it support itself.
                                3. Keep paying into the policy and use it for infinite banking? No matter how many times I hear about this, I can't quite wrap my head around how it works. If we take a loan against the policy, is the 2% interest going back into our policy value?

                                Comment

                                Working...
                                X