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  • Whole Life Insurance

    I read the WCI book and it tears WL insurance plans apart, but my financial advisor keeps saying the book is "outdated" and doesn't discuss the "newer policies." He works for a large firm and seems like a trustworthy guy, however everywhere I read says these plans are a bad idea. Wanted to get additional input to see if there is something that I am missing.

    His pitch to me was that this should be thought of as a bond which is more more stable in the event of a market crash. Furthermore, I can expect a 5% return in a "low risk" investment. I have some money in mutual funds with him as well, so this is supposed to be a more "stable" investment. He states that if I ran in to trouble down the line, I can pull from this account as opposed to my other investments without taking a hit, which many of his clients did this past March in response to Coronavirus. He also says that I can use this to pay for Long Term Care at the end of life if needed... which he says the "WCI does not account for since it's a newer concept."

    He gave me a book to read, "The Power of Zero" (by David McKnight), which I don't even want to open after reading some quick reviews online which all state that the entire purpose of this book is to sell WL insurance plans. He thinks WCI is a like "WebMD" in our world and I shouldn't be relying on it.

    He also gave me a Morningstar report on WL policies, which essentially equates them to bonds. The report says that these WL policies are advantageous if invested in while young and held for a long time. Returns are basically equivalent to bonds, but provide the additional advantage of tax sheltering and the absence of drawdowns. I assume theres no bias to this Morningstar report, making this policy seem more attractive... but then begs the question if I should even be investing in bonds or other fixed income accounts (especially at a young age, but this policy would not be beneficial if not invested early and held for a long time).

    My story (if it helps) is i am 28, surgical resident, no kids and no wife. Plan to have kids eventually, and thinking paying term will make more sense when I get to that point.

    Just looking for some unbiased advice, any help would be appreciated.
    Last edited by bp7; 01-19-2021, 11:29 AM.

  • #2
    With this statement "My story (if it helps) is i am 28, surgical resident, no kids and no wife", you sound like you won't have a ton of discretionary money since you are a resident, and also you have No need for life insurance due to no dependents. Stick to the basics, don't get fancy, stuff money away tax deferred, pay off debt, build a an appropriate emergency fund worth 6 months of expenses and don't commit to making any long term payments that are not absolutely necessary.
    Scott Nelson-Archer, CLU, ChFC
    303-953-0263 Direct / [email protected]

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    • #3
      Your financial advisor is also a salesman. Continue to say no to whole life and I wouldn't waste my time reading any books he recommends. Do yourself a favor and invest in your own personal finance and investing knowledge and get to the point where you can cut ties with this guy. Never mix insurance and investing.

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      • #4
        oh man. Glad you wrote here. So, what company does your advisor work for? Keep in mind, with almost 100% certainty your advisor is really a sales person.

        It's not just WCI who says whole life is terrible. Just google it. Dave Ramsey, etc. Whole Life isn't really a bond but if you want to think about it that way you can, but then the simple difference is that the premiums you have to pay on the plan are FAR more costly than a bond index fund.

        BTW, I say this as someone who used to work for a company that sold whole life insurance products to people such as your advisor/sales person, who then would sell them to folks like you. I didn't even fully understand our whole life products there!

        The WCI book is outdated but things have gotten worse since then. Thanks to the SECURE Act, it's much easier to buy these products within a retirement plan, for instance.

        Don't do this. Better, fire your advisor (simply just stop talking to him). If you buy the whole life, let me know because I'll let my former colleagues know to thank you for helping them put their kids through college rather than your own kids (if you end up wanting them).
        Last edited by JBME; 01-19-2021, 02:36 PM.

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        • #5
          RUN. run far away from this salesman,err "advisor". Especially with no kids or wife; term life is all you would need ONCE you have a wife. You have no dependents, if you die does anyone need money to support themselves after your death? If you want to lock in a "in case I become uninsurable" policy, get a 30 yr term life which you can always drop later.
          Just for curiosity sake- ask how long it is until you break even on the policy - i.e when you will actually start seeing some of that "guaranteed gains". I bet its well over 10 years. Ask him also what his commission on selling you that policy is. See how friendly he really is.
          Do you still have student loans? Take whatever you were about to pay this person and pay off your loans- you'll get a better guaranteed bond like return doing that instead of buying whole life.
          Last edited by billy; 01-19-2021, 02:04 PM. Reason: spelling

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          • #6
            Originally posted by bp7 View Post
            He works for a large firm and seems like a trustworthy guy
            Oh, that's all we need to know then.

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            • #7
              I made the mistake of putting a few hundred thousand dollars into a WL policy over a 5 year period once I was done with school/residency. I knew hardly anything about the topic, and the salesman frequently used financial lingo that I was unfamiliar with. However, he was my Dad's friend, and my Dad even purchased the same policy himself years ago, so I trusted him, and didn't think it was necessary to do my DD. 7 years after my first premium payment, my cash value was still significantly lower than my policy premiums, which totally confused me. Once I began researching how this could be, I found WCI (and some other great resources), I followed his advice and asked for in force illustrations and spent hours studying my policy and how it worked. Needless to say, I lost a lot of money, and that's not including the opportunity cost of having put that money in an index fund instead. $250k could have been ~$500k had I just thrown it in a taxable brokerage account index fund, but instead I was staring at $166k cash value after 7 years. It was very depressing. However, the silver lining is that I have spent the last 3 years reading and studying everything I can about personal finance, tax law, investing, etc and I have made very good decisions since that time. There are plenty of resources (WCI and Ramsey do it best) explaining how you lose money with whole life policies so I wont recap, but I have yet to read a scenario where it was a good decision.

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              • #8
                "Whole life is the answer...






                What was the question?"
                -- Some sales guy posing as a financial advisor

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                • #9
                  Read this whole thread if you want:

                  https://forum.whitecoatinvestor.com/...cy-of-the-week

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                  • #10
                    racelari setting you up. Spike it home!

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                    • #11
                      What actually is the purpose of the insurance? If you die , who is going to be the lucky one that gets the money?

                      if you need insurance, buy a policy for what you need, from what you state, it doesn’t look like you need insurance.

                      if you want to retire , then buy some equities or a fund.

                      Paying someone to get a worse return on an investment than you can do yourself makes no sense. Taking a loan against an insurance policy makes even less sense, than having a reserve for a raining covid day.

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                      • #12
                        Originally posted by notanotherusername View Post
                        racelari setting you up. Spike it home!
                        maybe we need to beetlejuice it for him- rikki, rikki, rikki- racelari

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                        • #13
                          ha! yes, my name is Rikki Racela, and I am a whole life insurance victim. Dude do not, do not, do not buy whole life insurance. Nor it's evil step sisters indexed universal life, variable universal life, etc. I am not as bad as Nimrod above (I'm so sorry man- losing $84K is a real punch in the junk!), but I lost $50K after paying $28k/yr in premiums for 2 WLI policies at Northwestern Mutual, sold to me by my high school buddy. He told me the same crap your "advisor" told you, that it is a safe investment, that it makes 5%, that you can use for long term care, that you can use to pay kids college, that it's tax free, etc, etc, etc. But these are half truths. It's not much of an investment when your cash value is less than what you've paid into it for years! I paid 7 years into this thing and lost $50k!!! Nimrod lost $84K!!!! unbelievable. It only makes 5% overall after you've stuck with it for 30 years! If I had invested money in the stock market, I am not guaranteed to lose money for the first 15 years, while with WLI you are setup to lose money! Also, their is no tax on cash value because you are BORROWING against it. It's like taking out a loan on your own money. And NWM had an interest rate of 8%! I needed the money when my second child was born. At 8% I was having trouble getting paying back the loan on my cash value! And keeping up with the premiums. Where did I end up with this whole life insurance- I actually took out a CREDIT CARD and was $31k in CREDIT CARD debt trying to keep up with the whole life insurance premiums.

                          and it's not just me and Nimrod- here on the forum this is other victims that have gone to WCI for help: https://forum.whitecoatinvestor.com/...cy-of-the-week

                          don't do it man. I ended up rushing through patients trying to make more RVU's just to pay for stupid whole life premiums. I had fights with my wife. I ended up spending less time with her and my kids to keep working to line my high school buddy and Northwestern Mutual pockets. Whole life compromised the care I give my patients, worsened my family life, and was the darkest part of my life and I've gone from a happy go lucky personality to hateful cynic, at least when it comes to Northwestern Mutual!

                          btw, do you have a Northwestern Mutual "advisor". if so I wrote a guest post because they seem to have a financial playbook where me and other NWM victims are sold non-true own occupuation disability, inappropriate "convertible" (and expensive) term to 80 life insurance, variable annuity within an IRA, expensive advisor led 529 plans, and taxable brokerage account with loaded mutual funds: https://www.whitecoatinvestor.com/finsmart/

                          as people said above, RUN, don't walk, from this "advisor". don't end up like me and Nimrod losing thousands of dollars.

                          PS: Morningstar is biased both ways- they write articles geared to help individual investors AND to help predatory insurance/brokerage companies. More than half their articles are analyzing expensive mutual funds with pop-up ads for these fund companies. Take it from us- I don't make any money from giving you this advice. I just don't want good docs to suffer like I did.

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                          • #14
                            Every successful con job is based upon trust. Being nice and trustworthy is how the mark is fleeced.
                            Do not buy WLI. High commissions.

                            Just what mutual funds did you purchase?
                            Not enough info. Please post it so I can have a factual basis to say, “You need to completely disassociate yourself from this salesman immediately”. Look elsewhere.

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                            • #15
                              This is all very helpful, thank you all for the advice. I will certainly be dropping my Life Insurance policy with them. Fortunately I have only had it for 8 months or so. This makes me question if he is taking my money with my Disability Insurance Policy (costs $167 per month).

                              The mutual funds I have currently with NM are:
                              -GFACX (THE GROWTH FUND OF AMERICA-C)
                              -TWCCX (ULTRA)
                              -MCFOX (FOCUS GROWTH - CLASS C)


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