racelariParticipantStatus: PhysicianPosts: 18Joined: 03/10/2019
I thought I should add to this really long post as I myself am a victim of whole life insurance and would love to see how far this thread goes. Hasn’t been a post for many weeks now as well. Would also be interested to hear stories of getting out of whole life policies- I might just start that thread!
Anyway, I fell victim to the Northwestern Mutual war machine of selling whole life despite having student loans after I became attending physician. Unfortunately my wife who is also a physician let me handle the finances and I dragged her down with me. The salesman was a friend of mine from high school. I know he is a good guy and deep down he believes he is doing the right thing by selling this crap. However when I had my first attending job the wife and I were $360K in student loan debt. We were trying to save and my buddy thought this would be a great savings vehicle and because we are great savers he thought we would be able to complete the whole life insurance policy until 65 years old. We each took out a 1 million-dollar policy paid up at 65. Premiums were about 14,000 each per year. At first such a large “investment” was not a big deal given our high income.
However the lifestyle creep came in big time in the form of the big doctor house and having 2 kids. We bought a 1.2 million-dollar house but luckily we had saved to put 20% down and got a great interest rate of 3.5% fixed. However the escrow payments were $6600 per month given I live in NJ. This became a financial burden when we had our first child. We were able to limit our spending to keep up with the life insurance payments. However, then came the 2nd kid, and with my wife out for 3 month maternity I had to borrow against the whole life insurance policy. I realized paying 8% on this type of loan was stupid and so I took out a 0% APR credit card which I was able to pay back. It was at this time that I seriously considered dropping both policies. However, my financial “adviser” had convinced me since I took a small whole life policy on my first kid I should take one out on the second kid (I know I’m stupid).
I then thank God read Jim’s book and realized I had lost a tremendous opportunity to pay down loans and had lost crazy money on the whole life. I’ve now 1035 exchanged my wife’s policy into a variable annuity at Fidelity and its cost basis is $92,000 and the actual cash value transferred is 67,000. I’m about to do the same for my whole life insurance policy as my premiums are paid up until this month. Cost basis of $72K and current cash value $50K. I will let the annuities grow to its cost basis and then cash in on the annuities. Meanwhile our student loans currently sit at $170,000. I am ashamed that I my loans would have been totally gone if I had not purchased these whole life insurance policies.