I have Whole Life Policies - now what?

[Aj]

So, unfortunately I came across WCI only a few years ago and was already well on my way down the Whole Life Insurance track.  So, I need help (from folks other than my insurance agents) with understanding how to maximize what I currently have.

Married, 2 kids; almost 50yo.  Have twenty year old insurance policies - 3 Northwestern (NWM) mutual (Term 65) policies, 1 NWM variable comp life policy, and a Guardian whole life policy for a total of $3 million in coverage (premium ~$48K) and a Cash Value of $600,000.  I also have a term policy for $500K.

My thoughts / Questions (would love your comments):

1)  The NWM Variable comp life policy (8.4K yearly) with a death benefit of 760K could be replaced by a cheaper term policy; I could move almost 8K annually into an investing account.

2) The three Term65 NWM accounts and the Guardian policy are all 'growing' the cash value through dividends/growth - And the return is quite decent, at this point  (I know that I could've done better by investing separately and having term policies).  In the last 2 years, the ~$96K premiums have increased the cash value by $132K (while the death benefit has gone up, etc).

a)  I feel that at this point this is a conservative investment and am considering holding onto these policies until age 65.

b) All the policies are 'paid up'.  Would you recommend having the policy self fund itself or continue "investing" more?

c)  What is the best way to access the 'cash value' upon retirement, without affecting the value of the death benefit?   If you had these policies, what would be the smartest way to utilize them?

Thank you for your comments.  You won't hurt my feelings by being brutally honest - Lol!

AJ

 

 

[jfoxcpacfp]

To be brutally honest   , yours are not questions that can easily be resolved on a forum thread. You'll get opinions but not objective advice that will give you the information you need to make a logical decision, particularly considering you are 20 years in and pushing age 50. There are too many interconnecting parts and missing information.

Btw, "feeling" that an investment is conservative (whatever that means) has no bearing on whether it actually is. With this much money at stake, I honestly believe that a financial checkup or an hourly engagement with a fee-only CFP would be worthwhile.

[VagabondMD]

Gosh, that sounds so complicated. It sounds like you need a financial check up by someone who is experienced in getting people out of these policies to show you what the alternative is.

"Term65" sounds like a deceptive term for non-term life insurance!

[The White Coat Investor]

No reason you can't start the discussion/education on a forum thread even if you end up seeking some professional help anyway. Sometimes you do need professional help, but professionals are usually quicker to recommend it than DIYers.

Why not start by figuring out what you own?

For example, you say you own "whole life policies." As near as I can tell, you only own a single (Guardian) whole life policy along with a NML "comp life" policy (some sort of blend of term and permanent), and three term policies. More details here:

https://www.northwesternmutual.com/products-and-services/life-insurance/life-insurance-products-at-a-glance

Chances are good you'll want to keep the whole life policy after 20 years. As for the rest, an honest review of your life insurance needs and a comparison of what you could buy now versus what you already own with an independent insurance agent seems like a good idea.

http://whitecoatinvestor.com/how-to-dump-your-whole-life-policy/

If those Term65 policies are really 65Life policies (as I suspect) then they are also whole life policies and there's a good chance you want to keep those as well. If you do end up keeping all your whole life policies and that covers your insurance needs, then maybe you don't need any term at all and might even want to get rid of the comp life policy.

But start with really understanding what you own and what your current insurance needs are and what you would do with the money if you weren't putting it into whole life insurance.

[Hatton]

Another piece of the puzzle is do you have other investments?  How much insurance do you need now?  Are these policies a major portion of your net worth?

[Aj]

THANK YOU ALL FOR REPLYING!!!  For some reason I wasn't notified of replies (probably did NOT press a button somewhere).

They are 65 LIFE (Wholelife) policies; not term65 (must have been smoking crack that day when I wrote that.  Sorry for the confusion).  :P

Thus, I have 4 whole life policies (3 NWM, 1 Guardian), 1 NWM Variable life policy (~whole life with a variable component based on the market) and 1 Banner term policy.

1)  Johanna, Vagabond - thanks for the reply.  It is complicated and I need to and will go to a fee only CFP.

2) Hatton1 - thanks for the reply.  I do have other investments.  Several of them have NOT worked out (invested in an imaging place, bought a LOT of shares in a syndicated hospital, and a private equity opportunity - apparent 'no-brainers' that very much required a brain.... ugh!).  However, a few decisions have worked out so far (5 rental properties etc).  Interestingly, on retrospect, the whole life policies have grown steadily (though conservatively) compared to the other failures.

3) Rex - thank you for your detailed response.  Very helpful. Will ask for the in-force illustration of each policy and will go from there.

4) James WCI - As always, thanks for your insight.  Your links were very helpful.

For now I plan on:

a) Getting more info on my policies to understand them better (especially how to maximize usage of cash value and how to utilize the policy effectively when I retire).

b) Since I am currently making enough to maximize my retirement plans, I will likely hold onto my 4 whole life policies, but monitor them with independent help (fee only CFP).

c) As my income decreases (getting tired - delivering babies at 2 am is not what it used to be), I will reassess ways to stop funding the policies (as they are paid up) and focus more on my taxable brokerage account.

Thank you all again.

AJ

[Craigy]

Having a lot of cash value policies out there is a good problem to have.  Yeah they are not the best "investment" but it appears they have at least been some store of value for you, money that you have not lost or otherwise spent.  Good luck!

[Craigy]

Rex wrote:

The idea that money would have been otherwise lost or spent is false. Agents typically like to use that forced savings argument but it’s been shown over 80% lapse/surrender. He would have saved/invested the money either way.

Click to expand...

Seriously?  OP returned and specifically said that he's made several large investments that were losers.

For many, many people, money in the bank is money to spend.  If people suddenly stopped having to pay into social security, is it safe to assume that everyone would begin diligently investing that money?   

I'm not going to stand behind insurance salesman scare tactics, but the fact remains that even though these policies probably weren't great investments, at least he has something to show for it after all these years.