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Should I cancel or continue Whole Life Premiums

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  • Should I cancel or continue Whole Life Premiums

    I'm looking for some advice - I'm unclear as to what my next step should be. While I obviously can't go back in time - I am questioning what to do moving forward. This is a 10 pay whole life insurance policy- premiums (9,400 annually) are paid for 10 years and the investment (and death benefit) carry on indefinately (the whole part). I have attached the in force illustrations showing the guaranteed investment returns. This is where I would like some advice please. Better to exchange, let it ride out, or surrender?

    A little background:
    My wife and I are both high earners in a high COL area.
    My wife (1099) maxes her solo 401 k
    I max my 401k with an employer contirbution
    We both are doing back door roth conversions and have been contributing since our residency years
    We have appx 190 in a taxable brokerage acct - managed by out commisioned advisor
    We have 90k in 2 separate real estate syndications
    Opening a 529 now that we are expecting our first child
    Our cash reserves/emergency funds are funded including a down payment
    We have term life 1m each - planing to upgrade, disability, malpractice, umbrella
    We have 400k in student loans at 3%
    We are two years into our whole life insurance policies. We were recommended to buy them by our advisor - we didn't know much at the time. We were told that we this was the next best thing after retirement accounts have been maximized. Not arguing the merits of this - wondering more what to do now. The policy has 8 more years on it as it is a 10 pay.
    I've contacted several agents to determine if elibility to transfer to a VA is worth it - seems all the fees have gone up considerably.
    I attached an in force illustration showing reasonable returns moving forward?
    Any help would be apprecaited - I would be happy to pay for advice if anyone has a good recommendation.
    Thanks in advance - this community is fantastic!
    Attached Files
    Last edited by Smith589; 07-29-2021, 04:27 AM.

  • #2
    “We have 400k in student loans at 3%
    We are two years into our whole life insurance policies. We were recommended to buy them by our advisor - we didn't know much at the time. We were told that we this was the next best thing after retirement accounts have been maximized.”

    1. Get rid of it.
    2. Get rid of your advisor.

    Perhaps I messed up the above order.

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    • #3
      Originally posted by Smith589 View Post
      We are two years into our whole life insurance policies. We were recommended to buy them by our advisor - we didn't know much at the time. We were told that we this was the next best thing after retirement accounts have been maximized. Not arguing the merits of this - wondering more what to do now. The policy has 8 more years on it as it is a 10 pay.
      I've contacted several agents to determine if elibility to transfer to a VA is worth it - seems all the fees have gone up considerably.
      I attached an in force illustration showing reasonable returns moving forward?
      In force illustration was not attached, important for determining your cost basis and how much you are underwater. Almost certainly need to surrender (cost is your tuition to school of WLI hard knocks) or a VA exchange to use your capital loss. If going the VA route you don't need an agent (who will put you in a commissioned product). Use a low-cost VA like Fidelity which costs 0.25% on top of the MF ERs and have multiple index funds to choose from.

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      • #4
        You don't have an adviser. You have a parasite who is sucking you dry. This is a terrible product for you. Never should have been sold. I cannot imagine a scenario under which you should keep it.

        Suggestions:

        Dump your insurance salesperson.

        Yesterday.

        Never buy anything from them again and do not pay them to manage your assets or pay commissions on your trades. Clean and immediate break.

        Going forward, use that money to pay down your loans rather than on whole life premiums

        Post your question on bogleheads where some of the insurance experts can opine as to whether there is any way to salvage this nightmare. I doubt it but check

        The best you can do is probably to 1035 to a low cost annuity, like Fidelity, hold until the value equals your basis, then cash out tax free. This assumes you have some surrender value at this point. You may not.

        Alternative is to cash out now, take whatever you get and be done with this mess.

        Comment


        • #5
          Fire your insurance huckster.
          Decide whether you want to DIY your investments. You could start with WCI's book(s). You need the info to make an informed choice on a financial advisor anyway.

          Comment


          • #6
            We are in essentially the exact situation - at the time 1st year out of residency (dual physicians), no dependents, combined 500k student loan debt, maxing out our 403b and adding about 24k into an after tax brokerage account. This was all before we found WCI and Bogleheads. We are now 3 years into our 10 year policy and looking to figure out the best course of action (in addition to firing our Financial Salesman). We have about 20k in the policy with a surrender value of 10k. We were suggested to stop paying the excess premiums and only fund to cover the minimum costs of keeping the policy open for the next 7 years by the funds already in the account. After 10 years, there is no surrender fee gap and we can take the full amount out. I honestly haven't even been able to find much information on doing this.

            Over the past year we have completely updated our finances, taken full control thanks to WCI and Bogleheads as well as several great books. The last thing we are working on is finalizing getting rid of this whole life policy. Our solution, and what I would also recommend, is to just cut the losses, surrender the policy, and chalk it up to a hard lesson. That way we don't even need to worry about this anymore and be done with it.

            Interesting Fact 1) Direct quote from our financial salesman when I confronted him on this policy a few months ago, and asked why he hadn't suggested a backdoor Roth instead - "It's doing essentially the same thing....the backdoor Roth isn't any better than (the whole life policy)".

            Interesting Fact 2) The financial salesman was someone we picked up after our medical school sponsored him to come to a lunch session, which is why I am currently working with our current residency/medical school to develop lectures to prevent this from happening to anyone else.
            Last edited by derauqsmd; 08-03-2021, 08:07 AM.

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            • #7
              On the upside, these are small values. The premiums are accelerated, but the cash value and death benefit are small.
              Even at age 64, your cash value of $286,338 will be too small to move your needle.
              These policies had value in the 1980s when interest rates were high....another vehicle to protect the large dividends from taxes. At today's interest rates these policies don't work.

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