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  • My IUL situation

    Unfortunately I find myself in a situation that seems all too common for someone in my position.  I am in my final year of residency and then doing a fellowship after this.  On the smart side both my wife and I have ROTH IRA which we max out every year.  My current situation does not offer a 401k.  I have an IUL policy for my wife which I'm into for almost three years now.  Annual premium of $5400 per year, cash accumulation value of a little over $8200, but cash surrender value of $0.  I guess this means that if I walk away now i'll get nothing.  From reading this site it seems like the best thing is to drop it, otherwise i'm in for the premium yearly and probably not going to see my return for a long while (or ever).  While it's a smallish part of my overall financial situation, I do feel as though I was duped, which makes it even worse.  At least I only bought one (they tried to talk us into both buying them).  I have a term policy.  Do I have this right?  Can anyone offer any advice?  Thanks.

  • #2
    Yes, it sounds as if you were duped. Fortunately, you are very early into the policy. If you are going to surrender the policy, get an estimate to see if there will be any taxable income so you will be prepared. Larry can advise further, I am sure. Check out this story of the retired neurosurgeon http://www.dailyfinance.com/2014/05/15/indexed-universal-life-insurance-rip-off-bad-investment/ - he was taken for a long ride.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Yep, you're right. I thought I remembered a situation from my licensing studies in which someone dropped a policy and owed taxes w/o getting any cash out but it was probably due to loans. My home research is not as adequate as I'd like, best to pass up posting if I'm not sure ;-)
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        Thanks so much for the advice.  I will ask for the inforce illustration from allianz tomorrow.  So would that mean that the accumulation value would pay the premiums for a while?  And If I just let it run out then I'd just be out the premiums that I've paid (about 14k right now)?  I would have no problem taking a 6k 'stupid tax' (14k paid vs. 8k accumulation if i got that back).  From what it seems my CSV is zero right now and I know I would have a hard time if i put 14k in and get nothing at all out.  Thanks again for the help.

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        • #5
          I'm sorry. I get to hear this story at least once a week. Cash value life insurance for a resident. You ought to be able to sue for malpractice but not only is it not worth the money, you won't win as they're under a "suitability" standard which means nothing.
          Helping those who wear the white coat get a fair shake on Wall Street since 2011

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          • #6
            Long time listener, first time caller.

            I currently have an IUL with annual premiums of $12K. Current total premiums of $36K and a cash value of $29K. Stupid tax of $7K. Unfortunately I apparently did a 1035 exchange from a VL in the amount of $78K for a total premiums paid of $108K. Any other option besides another 1035 into a variable annuity? James Hunt obviously advised getting out of the policy but his recommended agent did not come up with an option.

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            • #7
              You can just walk away with your $29K. The only reason for the VA exchange is to try to make some lemonade out of your ~$37K loss lemons. More details here:

              https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/
              Helping those who wear the white coat get a fair shake on Wall Street since 2011

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              • #8
                Thank you for the quick reply. I am not too worried about the $7K. It is the $78K from the previous 1035 that is currently in the IUL that I do not know how to play it. I have previously read the link you directed me to. I read it again today as well.

                gbc

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                • #9
                  I was in a similar situation. I was able to discontinue putting any money into the policy and reduce the death benefit by 25% once a year. After about 10 years of doing this I am projected to get my money back (but obviously a loss to inflation and to what it would have made if invested). Bottom line: check with the company before just dropping it completely.

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