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Made a Mistake with Northwestern Mutual in Medical School. Help!

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  • Made a Mistake with Northwestern Mutual in Medical School. Help!

    I am 30 and have been an attending for a little over a year. In the last year of medical school, my school allowed NWM to come give a lecture to our class for "financial advise." Hook, bait, sinker for me. Luckily, I during residency I only bought term life insurance and disability insurance from them. At 29, I finished residency with around $39K in my 403b. The NWM financial advisor talked me into a few things I need some help with.

    1. He talked me into transferring that 403b to a traditional IRA deferred variable annuity with a front end fee design. I had no idea what this meant at the time (luckily I have now read the white coat investor book, listened to all of the podcasts, started reading the WCI and bogleheads forum, and started reading the boglehead books). The fee was 4.5%!!!! It appears from the contract that there is no surrender fee. From what I have read, I can transfer the IRA Annuity to an individual 401K (trying to do a backdoor Roth IRA this year). Are there any other problems I should forsee before proceeding?

    2. He talked me into slowly converting my term policy to a whole life policy. Luckily I chose to only do $240K at first have only been making payments for 12 months. I am in it about $3600 and have a cash value of $400. I already wrote him an email asking him to convert it all back to the term policy. He wrote back trying to talk me out of it and wanted to "meet up" for 30 minutes to look at some videos and statistics. I said no please convert it back to the term policy. I am currently only paying $42/month for the term policy to 80 which is currently a $760K policy. He has not responded and its been 3 days. Should I look at cancelling the term policy too? I feel like that is a good rate but I have definitely been wrong on a few things.

    3. He talked me into own occupation disability insurance. I do not think this was necessarily a bad decision. I bought the first  batch of $3145 in residency (I pay $141/mo) and the second batch of an additional $5075 when I became an attending (I pay an additional $105/mo for it). So its $8220 of coverage for $246/mo. I have declined further increases. From the podcasts, I understand the NWM does not offer the best "own occupation" coverage because its really only physician specific not specialty specific. Luckily I am an Internal Medicine physician so its not as big of a deal for me. Should I also look into completely cancelling the disability policy and looking elsewhere, or is this a good deal?

    As you can likely tell, I am very flustered with NWM. I feel like the wool was pulled over my eyes. My financial advisor seems like a really nice guy, but being a nice guy doesn't mean he had my best interests in mind or that he knows what he is doing. I am severing all investment ties with him, but the bigger question is should I sever insurance ties as well?

    I am on the right path now. I want to do this on my own from this point forward. I find it interesting and I can't get enough material read about it (actually I would rather listen). I actually listened to the WCI book on by audiobook (Audible app) and that was fantastic. Thanks in advance for your help!. I really appreciate it.

  • #2
    Stories like this make me sick to my stomach. I'm very sorry you had to go through this.

    I wouldn't use NW Mutual at all. I think you can find better options for disability and I don't think you really even need life insurance at this point unless you have dependents that you didn't mention.

    Comment


    • #3
      Sorry to hear about your situation, I know that can be stressful. Unfortunately, your story is not uncommon, and many others have gone through your situation.

      1. Yes, back to a 401k should be your primary goal for two reasons. One, get it out of the high-cost annuity (confirm twice that there are no surrender penalties). Two, an IRA rollover would only make Backdoor Roth IRAs messy going forward. So the 401k route looks good assuming it was a 100% rollover IRA.

      2. Converting it back to a term policy will simplify your next step. However, you can stop the bleeding (see what I did there? a doctor pun) by limiting the amount of whole life insurance. If you can't get the advisor to respond (which is horrible), call NWM directly. There are ways to get out of whole life insurance; I was hoping to include a link here. I thought Dr. Jim wrote an entire post on making this transition, but I can't track it down at this moment.

      3. Don't cancel the policy outright! Go find an independent insurance agent who can shop numerous companies. Plenty of great options on the recommended insurance agent page (https://www.whitecoatinvestor.com/websites-2/insurance/). Wait for them to find you a new policy or maybe they confirm you do have a good policy before you cancel your current policy. Heaven forbid you cancel that policy out of anger and then go down the next day and cant work for an extended period. Keep the policy as is until a new policy is in force.

      Comment


      • #4
        So sorry, but you have found comfort in the fact that you didn't get hurt as badly as many. I recommend an independent 2nd opinion from a life/disability agent from the sponsor page. If you'd like to know who I've vetted and am comfortable with, send me a p.m.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #5
          To add insult to injury, Nortwesterm Mutual's definition of "own occupation " is crappier than other companies that offer true own occ.

          Don't cancel any of the insurance, disability or life, until you have other insurance in place. Term4sale.com should be able to show if you're paying a reasonable rate for your term life insurance. Most docs with loans, a spouse and kids should probably have about $2-3M in coverage for 20-30 years. If you find that your rate at NWM is reasonably competitive, you probably should keep it (and stick to term) since NWM is in pretty solid financial shape.

          One of the brokers advertising on White Coat Investor can help you get better disability insurance with true own occupation coverage. But please keep your current policy until you get something better in place.

          Comment


          • #6
            It is my opinion that NWM (or their agents) often acts a predator and one that targets physicians, in particular. (I do not hear/read similar stories nearly as much from New York Life or Mass Mutual.) For the agent, soliciting docs in residency or while in med school is like fishing in a barrel.

            It also seems that medical schools and medical centers allow NWM agents access to their residents without due diligence or vetting (let alone any shred of responsibility), to prey upon their residents. I wonder if this is actionable. If one case were filed, there is a good chance that word would reach medical schools far and wide, and we would never hear of a NWM agent having unfettered, even assisted access to residents in the future. Just thinking aloud....

            Comment


            • #7
              Update:

               

              I do not have a wife or children so maybe I do not need any life insurance at all.

               

              I will be looking into getting some disability insurance quotes from other providers that offer a TRUE own occupation policy.

               

              I reviewed my policy and you may be onto something. It is an Individual Retirement Annuity. What does this mean for me? Will I not be able to transfer it into a solo 401K?

              Comment


              • #8
                Its an individual retirement annuity. Does that mean I cannot transfer it to a solo 401K?

                Comment


                • #9


                  I do not have a wife or children so maybe I do not need any life insurance at all.
                  Click to expand...


                  Whether you need it or not depends upon several factors:

                  • If others depend upon you for support (parents, etc.) We have several single clients who plan to or do support their parents and need life insurance, for example.

                  • If you plan to get married and have children and have a good policy in place.

                  • If you are older and have a plan in place and plan to get married and have children.

                  Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                  Comment


                  • #10
                    The good news is you are on the path to righting where you were wronged, so kudos to you!  The one thing I never heard before with a NWM agent is how he wanted to show you videos to defend his sale.  Does he not understand the product enough to thoroughly explain it without visual aids?

                    Comment


                    • #11
                      Couple of things I can clear up for you:

                       

                      1:  NWM does not have a true own occupation definition today.  They have their medical occupation and that is it.  The way you confirm that for yourself is ask the claims department to sign a letter stating if you can't do your specialty that you were doing at the time of claim and now post disability you find yourself earning the equal or same as you were pre-disability how much will you get paid on your disability policy?  The answer will be $0.  Now that is ok but it tells you that it is not a true own specialty it is income protection plan only.  The reason many people want an own specialty plan is they have have spent years in training differing income and hundreds of thousands of dollars learning their trade and thus if they can't do that trade then that time and money was ill used.  Now in your specialty of internal med if you are comfortable with with that Not Engaged or Transitional benefit then certainly buy that but buy it from a more efficient contract at a lower cost (probably 20% lower) than what you are paying.

                      2:  Your life insurance which feels good is actually very high priced.  You have an annually renewable contract to age 80 for $760,000 of death benefit at today's age of 30 and a cost of $42 per month of cost.  Take a look on that contract for what that cost is at 40, 45, 50, 55, 60, 65 and wow...70.

                      Today, assuming great health you can get $760,000 for the following:

                      Annually increasing premium, like you have to age 100 $17

                      10 year rate lock $19

                      15 year rate lock $21

                      20 year rate lock $28

                      30 year rate lock $47

                      All but the Annually increasing rates are locked in and never change during their lock period.

                      Good luck and if we can help further let us know.
                      Scott Nelson-Archer, CLU, ChFC
                      303-953-0263 Direct / [email protected]

                      Comment


                      • #12




                        I do not have a wife or children so maybe I do not need any life insurance at all.

                         
                        Click to expand...


                        If that were the case for me, I'd ditch life insurance altogether.  Even the $30 or $40 a month you'd spend on a term policy is a waste.  That's thousands of dollars you'll spend on insurance before you ever need it.  Once you have a kid or buy a house with somebody, you can buy a policy then.

                        Having it now is like buying insurance on your insurance.  Might be a good idea if you're especially risk averse.

                        Comment


                        • #13




                          Sorry to hear about your situation, I know that can be stressful. Unfortunately, your story is not uncommon, and many others have gone through your situation.

                          1. Yes, back to a 401k should be your primary goal for two reasons. One, get it out of the high-cost annuity (confirm twice that there are no surrender penalties). Two, an IRA rollover would only make Backdoor Roth IRAs messy going forward. So the 401k route looks good assuming it was a 100% rollover IRA.

                          2. Converting it back to a term policy will simplify your next step. However, you can stop the bleeding (see what I did there? a doctor pun) by limiting the amount of whole life insurance. If you can’t get the advisor to respond (which is horrible), call NWM directly. There are ways to get out of whole life insurance; I was hoping to include a link here. I thought Dr. Jim wrote an entire post on making this transition, but I can’t track it down at this moment.

                          3. Don’t cancel the policy outright! Go find an independent insurance agent who can shop numerous companies. Plenty of great options on the recommended insurance agent page (https://www.whitecoatinvestor.com/websites-2/insurance/). Wait for them to find you a new policy or maybe they confirm you do have a good policy before you cancel your current policy. Heaven forbid you cancel that policy out of anger and then go down the next day and cant work for an extended period. Keep the policy as is until a new policy is in force.
                          Click to expand...


                          How To Dump Your Whole Life Policy


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

                           

                          Comment


                          • #14
                            Another update. I spoke with Northwestern Mutual's main office. The annuity I have is WITHIN an a traditional IRA and there is NO surrender fees. I spoke with Charles Schwab who has my individual 401K and they assured me that my account can be transferred to them and it does not have to be within another annuity.

                            I also finally got in touch with the NWM financial advisor and he informed me I cannot convert it back from whole to term insurance so I told him to cancel the policy and I would worry about life insurance later. Since I have no wife, no children and I do not take care of any loved ones, I am not too concerned currently about life insurance.

                            I have spoken with one of the recommended WCI insurance agents and I currently have gotten 5 quotes on own occupation disability insurance that we are going to talk through tomorrow. Thanks to all of you for your help!

                            Comment


                            • #15
                              Well done, @countryphysician.

                              Two things left to do:

                              1. Inform your medical school dean of the financial harm inflicted by the NWM life salesperson and recommend that they do not allow them access to the graduating class in the future.

                              2. Tell the NWM agent to lose your contact information.

                              Comment

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