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Inappropriate Whole Life Policy of the Week

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  • Probably the same way the rest of us do. We start hearing WL is crummy and then we check our statements and realize they're right, it is crummy.
    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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    • It’s pretty impressive to realize that so quickly. I didn’t know if one of your posts got to her, she heard a podcast, or what.

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      • This one elsewhere on the forum:
        Thanks for any thoughts-Was sold a variable life policy in 1993 at age 37. Paid premiums for about 10 years-a total of 150,000. Have had 3 million of life insurance since. Account now has balance of 160,000 and I no longer need the policy.

        Yup. 24 years. $10K in gains after 24 years. I calculate that out as 0.56% per year.
        Helping those who wear the white coat get a fair shake on Wall Street since 2011

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        • Yes that true but what about the value of a 3 million life insurance policy for 24 years?

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          • I have Term life insurance but my insurance agent (Northwestern) is always trying to get me to purchase Whole Life. I have a lot of term and recently called him about reducing my term insurance, because my own personal savings/retirement is growing, and all he wanted to talk about was converting me to WL.  At the start of the call, I even mentioned "I need to cut out some of my Term insurance because I am tired of paying so much money every month". He says "that's a great idea but we need to sit down and talk about WL.  Once you get a taste of WL insurance, you are gonna want more".  Which means he completely ignored m point at the start where I said I am wanting to reduce how much I pay monthly.  Any time someone tries so freakin hard to sell me a product, I automatically assume they have an underlying motive (i.e., high commission)

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            • I have Term life insurance but my insurance agent (Northwestern) is always trying to get me to purchase Whole Life. I have a lot of term and recently called him about reducing my term insurance, because my own personal savings/retirement is growing, and all he wanted to talk about was converting me to WL.  At the start of the call, I even mentioned “I need to cut out some of my Term insurance because I am tired of paying so much money every month”. He says “that’s a great idea but we need to sit down and talk about WL.  Once you get a taste of WL insurance, you are gonna want more”.  Which means he completely ignored m point at the start where I said I am wanting to reduce how much I pay monthly.  Any time someone tries so freakin hard to sell me a product, I automatically assume they have an underlying motive (i.e., high commission)
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              Do you know if the term policy(s) are competitively priced?  I Find it somewhat difficult to believe that they are given Northwestern's pricing reputation.  I would consider shopping around for carries with similar ratings for a policy that suits your need.  There is zero reason to imo to pay extra to be aggressively marketed by NW for WL that you appear to not want, nor need.

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              • Latest story (this one in my regular life, not online life):
                Colleague 1.5 years out of medical school with $400K in student loans at 6.8% and 7.9% being sold whole life insurance as a retirement plan by a physician transitioning his career into financial services. The scheme is calling the insurance policy a "LIRP" Life Insurance Retirement Plan. Using this book to make his case: https://www.whitecoatinvestor.com/is-a-zero-percent-tax-bracket-in-retirement-a-good-idea/
                Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                • Today's submission:
                  First time commenter! Came looking for some knowledge and have spent the last few days, several hours each day researching and reading through the comments section.

                  So where do I start…..I guess like many here I was naïve to investing and got linked up with a “financial advisor” for Guardian through a friend. Had several meetings with him before I pulled the trigger on anything. He “advised” me that I should diversify my money and open up a ROTH IRA and a Qualifying Whole Life Policy (Whole Life 99). I started the ROTH IRA before starting my WL because I wanted to do my own research into WL polices due to me being unfamiliar with them. I wish I would have found this blog before I pulled the trigger on the WL. The ROTH IRA he set me up with is doing well. I started off only putting $50 into it to start, just a 1 time payment. Then after a while I put $100/month and then raising it to $150 currently. Even with putting in such a small amount I do have gains but obviously they are not substantial. I will probably just max it out this upcoming year from here on out.

                  The question more or less comes with my Whole Life Policy. Attached to the whole life I have 2 riders. One being the “Paid Up Additions Rider” and the “Long Term Care Rider”. My Premium if about $2800/year, $240ish/month. I am in a “high risk” career so I took that into consideration when talking to my advisor about options.

                  I initially had the policy for about $4800/year, 400ish/month. I opened the policy originally in late 2014 and then switched it to the lower premium less than a year later. Being new to my career field I was not making much money and while I could afford the higher premiums I did not feel comfortable paying that much for the forcible future. I was a single with no dependents at that time. We lowered the death benefit which brought the premiums down but also slowed down the increase in cash value, which I was fine with. Now in my career I am making more than double what I started off making so I have no issues paying the current $240/month premiums until either I break even or beyond to keep the cash value increasing. My situation now is I will be getting married early 2018 and we are looking at having kids soon after. I did get a current Inforce Illustration of where I am sitting now. I have about $10,000 paid into premiums and have about $2000 cash value. I did know going into the whole life that the cash value in the early years was going to accumulate a lot slower. He was straight up with me. He gave me a Inforce Illustration even before we put it into affect so I could see how things would change over time as far as Guaranteed and Non-Guaranteed Cash Value increases went. Even with the lack of return in the early years it seemed like a good investment-He did explain it is a long term investment hence the “whole life” name. I was fine with that because I wanted to use it as a retirement tool. At the time I did not know there were better options that would bring me higher returns.

                  Comparing the initial Inforce Illustration(2014) to my current one (2017) I am above where I should be as far as Net Cash Value under the non-guaranteed category. It states that I should be around $1,358 cash value but due to higher dividends being paid out I am right under $2,000. As I pen through the current Inforce Ill. I will break even at the 14 year mark (10 years from now). With the initial policy in 2014 I was due to break even at the 9 year mark. Obviously due to the policy change that changed. Under the guaranteed section I will break even at 27 year mark. That 27 year mark will put me right at my retirement time frame. That kind of upsets me due to the fact that it would be a terrible investment my entire life that I would have nothing to show for.

                  I met with my advisor this week and picked his brain a little after reading the blog the past few days. Talked about the surrender aspect of the policy and other options out there. He reminded me that it is a long term investment/insurance policy and the company has been on par with paying out the non-guaranteed amounts. It does show that he was right and they have been on par or have paid more than their projected dividends. He also stated there is no surrender fee/charge. I did call Guardian directly and they said the same thing. They will pay out the cash value to me if I decide to surrender it.

                  I guess I am looking for advice. I have no problem paying premiums as long as this thing even outs and puts me in gains side by the 14/15 year mark. I also have no problem keeping the policy until retirement or even after retirement. The thing that has me nervous is if the company is not doing well then they are not going to payout the non-guaranteed amounts/dividends. My advisor told me that he has never seen dividends not be paid out. That somewhat reassured me but figured I’d come here and see what you guys think. Obviously it’s not the best investment looking back but I am willing to stick it out if down the line it’s worth it.

                  I have read about you guys recommending doing the 1035 exchange into a Vanguard Variable Annuity. Is this something you would recommend for me. Take the $8000 loss at this point and movie it over to the VA. Would you recommend me keeping it in there and letting it build back up or pulling it out right away and claiming it as a loss on my taxes? Also my advisor said that with VA’s you usually have to be a certain age to open it depending on the company. Any truth to that? Also does Vanguard still offer the no fee set-up and surrender?

                  I apologize for the long comment. Once I got typing I just kept going. Thanks in advance for any advice and help. Feel free to ask anything if it will better help with you guys giving me advice.

                  Bottom line: Put in a whole life policy as a retirement account before he was even maxing out a Roth IRA. Financial malpractice.
                  Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                  • I have told [my NML advisor] we are holding off on any more policies etc until I can go out and do some research on my own. I have found them to be much more expensive than other options.  He, of course, responds to me about coming in and he can walk us through all our options for retirement with what we want. So, my question is, Does NWML have any products that are worth while for us looking into? Are they a company we want to get in bed with more than we already are? We have maxed my wife’s 401k but not my 403b yet. I also just found out that I am eligible for a government backed 457 plan through my school. Our agent has talked in the past about having assets like a 401k/403b that are pre-tax and then having other assets that are post tax dollars (cue the whole life policy we almost bought into). It was something about balancing tax implications with respect to the market or something like that. To be honest I didn’t really understand. We do have some old roth IRA’s through them that we don’t contribute to anymore. 

                    This one from another thread on the forum. Good example of how NML agents sell the WL policy as some sort of Roth IRA, meanwhile these guys weren't even maxing out Backdoor Roth IRAs.
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                    • I forget to update these as often as I should. Here's one from today. Sold as an emergency fund and a college savings plan to a couple that wasn't maxing out 401(k)s, much less 529s. Still well underwater after a 7 year bull market.:

                      We were sold $500K policies back in 2010 prior to having
                      kids. I was 34 and my wife 29. Subsequently, I was duped in 2014 into
                      converting part of a Guardian term policy to whole life, so we are now
                      the not so proud owners of 3 whole life policies.

                      Total annual premium on these policies is $14,400. We've got $70K in
                      cash value in the policies, and we've paid in somewhere around $95K. I
                      started to realize that whole life is not what I thought it was or
                      sold a few months ago. My wife and I wanted to make a few home
                      improvements and asked my agent if we could take out some of the cash
                      value. Mind you, I was sold these policies with the thought that they
                      could be used as an emergency fund that I could access whenever or
                      even a way to save for my kids' college. My agent informed me that I
                      could access the cash, but I had to pay it back with interest (8%).
                      Yikes!

                      I started thinking about all the money we have dumped into these
                      policies, and here we are cash poor with maybe a 3 month emergency
                      fund and neither of us maxing out our 401k's. All this time, I could
                      have been putting that money into boosting our emergency savings,
                      saving more for our kids' college funds, and maxing our 401k's plus
                      possibly backdoor Roth IRAs. Needless to say, I was mad at myself and
                      the agent for selling me something I didn't need. I furhter thought,
                      why would he sell two people in their early 30s with a lifetime to
                      invest in an ultra conservative investment, when we have a lifetime to
                      invest. Plus we wound up missing an extended bull market
                      (2010-present) where our money could have grown substantially well in
                      index funds. UGH!



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

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                      • Wow, this is just terrible.. The part that is really upsetting is that these agents really try to disguise and present themselves as "advisors", when in actuality, many of them are in absolutely no position to dole out investment advice - Especially putting someone into a WL policy with such a terrible return. In fact, Guardian actually has a system that they use, which is called "The Living Balance Sheet", which as I understand it, is used to try to pitch WL policies.

                        I also had a client who was worth about $5MM and wanting to take out a Term Life policy in order to satisfy a Buy-Sell Agreement for his interest in his Corp. At the time, I encouraged him to take care of his Estate Planning and to meet with an attorney in order to get all of his ducks in a row. Upon doing this, he also had a friend put him in touch with his "advisor", who turned out to be a NWM agent.. Guess what, the NWM agent was immediately trying to pitch him on a WL policy, which was around $20k/yr. Luckily, I was able to steer him away, but as it turns out, he didn't even bother to initially research this NWM agent in order to see if he was qualified, which is just crazy to me.
                        Jason P. Veirs - Life and Disability Insurance Broker located in San Diego, CA - Owner of www.InsuranceExperts.com
                        Office Direct: (619) 334-2400 | Email: [email protected]

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                        • Wow, this is just terrible.. The part that is really upsetting is that these agents really try to disguise and present themselves as “advisors”, when in actuality, many of them are in absolutely no position to dole out investment advice – Especially putting someone into a WL policy with such a terrible return. In fact, Guardian actually has a system that they use, which is called “The Living Balance Sheet”, which as I understand it, is used to try to pitch WL policies.

                          I also had a client who was worth about $5MM and wanting to take out a Term Life policy in order to satisfy a Buy-Sell Agreement for his interest in his Corp. At the time, I encouraged him to take care of his Estate Planning and to meet with an attorney in order to get all of his ducks in a row. Upon doing this, he also had a friend put him in touch with his “advisor”, who turned out to be a NWM agent.. Guess what, the NWM agent was immediately trying to pitch him on a WL policy, which was around $20k/yr. Luckily, I was able to steer him away, but as it turns out, he didn’t even bother to initially research this NWM agent in order to see if he was qualified, which is just crazy to me.
                          Click to expand...


                          relationships count for a lot in life.  sometimes positively, sometimes negatively.  reputation is important, but reputation with the right people counts for more. 

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                          • Today's Edition: Some jerk putting a resident into WL insurance that isn't maxing out a Roth IRA and presumably has hundreds of thousands in student loans.
                            I definitely thought I was being a smart cookie when I met with a financial adviser in my PGY1 year to handle the “money stuff”. Started putting $200 per month in Roth IRA (good!) but my NWM adviser (no credentials on website when I checked yesterday) also talked to me about term life insurance (I think good; $33 per month with 800K+ total death benefit) and “65 life” policy that although I don’t speak insurance I think this is the whole life insurance I need to steer clear of. I’ve been putting $200 per month on his recommendation (total death benefit 178K) into that for 19 months now. I think I am early enough that it makes sense to get out now, plus I can just put the money into my Roth IRA as I should have been.
                            Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                            • Lol, I just got the following email from the guy who sold me my term life insurance in residency, and has been trying to convince me to "upgrade" to whole life ever since: "

                              "I thought you would be interested in the following story from The Wall Street Journal.

                              Dow Cuts Loss in Half After Tumbling as Much as 1597 Points

                              https://www.wsj.com/article_email/asia-pacific-stocks-fall-to-kick-off-the-week-1517790854-lMyQjAxMTI4ODAwNTUwOTU2Wj/

                              For those of you that have taken my advise and have balanced stock market investments and real estate holding with whole life insurance, not one whole life policy holder has lost any wealth.  In fact all have gained wealth during this time. The key is diversification. Whole life builds tax advantaged cash value year to year without having to report increase for that calendar year as well as other benefits.

                              For those with Guardian term life, you are able to upgrade a portion or all of term life to whole life without medical review."

                              Thankfully I found this site years ago, and obviously will not be using his services anymore.  I knew I would leave his services when he also tried to get me to convert some of my old job's (pre med school, worked for NYC) tax deferred comp (with a guaranteed 8% growth) into his "investments"- when I asked how he can beat 8 percent guaranteed, he threw out some "built in advantages of whole life".

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                              • By email today:
                                WCI

                                I'm glad you're out there as a reference that I can point others to.

                                My colleague has an advisor at Northwestern Mutual who apparently is working with him to convert his term life into permanent life insurance. I started telling him why you say this is a bad idea.

                                To me, the worst part of the situation is everywhere else the money can go instead. He is year three out of training like me, and I believe still has 200 to 300k left of student loans. I believe he's doing our 401k/PSP, but after I told him about what a Backdoor Roth is, the advisor discouraged it saying that it increases chances of getting audited!

                                If only advisors could be held accountable for malpractice!
                                Helping those who wear the white coat get a fair shake on Wall Street since 2011

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