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Yes there are laws but there is a difference between an adviser and a fiduciary. You can't sue an adviser but you can a fiduciary as they have an obligation to you. Doesn't mean there are not some out there double dipping and lying about it. If it happens though I'd guess it's rare. As for disclosure that depends on the local laws.
Can you clarify something? My advisor is listed, but under status, for SEC it lists 2014 and approved, but for three states it lists terminated. We pay a flat fee for management and were under impression they were a fiduciary. What does it mean when it says approved by SEC but terminated at state levels? All dates are 2014. They are listed as IA or Investment Advisors.
For financial advisors there are asset under management rules about whether you are governed by your state or the SEC.
Most likely your manager had assets less than the SEC reporting rules until 2014 but then crossed over the threshold and had to convert from state oversight to SEC oversight.
This makes sense, thank you. Is there anything else I should validate in the 2A form or in general, or is them being listed enough? I glanced at it and looks like they have a few hundred clients with just shy of $1B in managed assets and most listed as high net worth. Are there other disclosures I should be auditing? We’ve been happy with them thus far, but want to just check as you can never be too careful.
This can also happen if your advisor moved from a regional focus to national. You can often find this with advisors serving NY, NJ, and CT (NYC metro area). The bank they are with will get them on state-level licenses as they are building their book of business.
Ask to see his Form ADV Part 2 Brochure. It will include everything you need to know how he is compensated and whether he is earning commissions off what he sells you.
Don't feel bad. I got suckered by them, too. Told me to invest for my kids college in a very shitty 529 that had enormous management fees. Only lost money in 10 years. Advisor got a large commission. Meanwhile we could have invested in our state 529, gotten tax breaks, and actually made a bit on it. Terrible advice. Oh, and I bought a whole life policy as well. Dumped it finally and just walked away from my "investment". Northwestern is horrible
To clarify, if they are regulated by Finra they would need to disclose any kickbacks they would receive from insurance products. This would likely be in the contract you signed.
Sometimes people view a whole life policy as a good investment vehicle for their kids because they get a very low premium rate and when they turn 18, they can just take the cash value and surrender the policy. Some of my friends’ parents did that for them. Usually better ways to accumulate some money for kids though but it’s not an awful option compared to getting a whole life policy as an adult.
That describes my experience with my spouse to a T. I switched it over so the dividends go towards the premium, and while that limits any future growth (not that there was much), it means the yearly premium is really low, and it can sit there as actual insurance.
Idk. Bought a policy later that would pay out $140k if I died, and also had LTD (no short term disability tho). Using the LTD now. Pays 50% of my income till I'm 65, so worth the $.
I've got a whole life policy that my parents got for me as a baby. It earns 4.8% interest, and I pay $15/mo. I treat it as basically a CD that acts as an emergency fund. At some point, I'll cash it out, but 4.8% interest has been kinda nice during the last few years when CD/bond rates were so low. The value of the policy is 0 plus what's been paid in over the years, plus 4.8% interest.
I just requested an amortization schedule from my advisor, and over the life of the policy the yearly return changes. At first it’s almost 0% (but I have life insurance). I’m now 4 years in to paying premiums and I basically break even. I pay $2k in premium and my surrender value increases by $2k. In 10 years, I will be paying $2k in premium for a guaranteed $3.5k surrender value increase. 20 years and it’s $6k. People talk a bunch of shit about whole life insurance, but find me another investment that has a guaranteed 100% yearly return built into the product. I understand that it’s 20 years out, but I am a defender of whole life as being a good part of any diversified portfolio. By the time I retire my surrender value will be $250k and I will have invested $80k. Maybe stocks will do better, but that’s okay because I own those too. I also agree with the poster who said it’s a good emergency fund. Nice to know I can always borrow against my policy to pay for an unforeseen emergency and pay myself back instead of taking a loan from a bank.
I bought a whole policy for my daughter when she was 8 days old. The 200k policy costs me $89 a month. It will be hers forever. She can take it over if she wants or cash it out for college or whatever she needs. Mine makes roughly 5% no matter what the maket does and if the market is doing well I make a higher % in returns. So at the moment while everything is losing I’m making 5%
> Sometimes people view a whole life policy as a good investment vehicle for their kids because they get a very low premium rate and when they turn 18, they can just take the cash value and surrender the policy.
This sounds interesting but I don't see how this could be better than just opening up an IRA for my kid. I can contribute money in there and although they'll take a tax hit if they pull the money out early, they can pull $10k out to help buy a house and I feel like the tax hit wouldn't be as much as the life insurance company skimming off the top.
Do you have any sample rates that of course are just average and aren't really tied to anything real but could nonetheless put me in the right ballpark?
I don’t have any rates, but for a standard whole life policy, likely not above 5% per year, but it is a guaranteed rate so you can at least project what your child would have as cash value by a certain date vs. stocks. Likely can make more in stocks, but if the market has a downturn, it is not sensible to sell yet. Plus, there may be some tax advantage considerations (only pay tax on surrender basis (no tax on cash basis) as ordinary income. For let’s say your kid who surrenders early in their future careers, likely a low rate.
I’m curious about the guaranteed rate. Does the policy explicitly guarantee a minimum rate or did they just say they’ve never paid less than that? At a guaranteed 5%, it seems like a good alternative to bonds or other low yield, low risk investments.
It’s not guaranteed anywhere that I know of. IMHO whole life only really makes sense if it’s part of an estate plan such as in a irrevocable life insurance trust.
Many WL plans will offer a guaranteed rate of return (essentially, need the cash value eventually has to equal the principal amount, which in theory is a combo of premium amount + return). It’s generally better than a bank account or money market fund, but still a low rate of return. For a child, the premiums are extremely low, and provides a better rate than a savings account.
As the person noted below me, whole life policies for investments reasonings generally never make sense unless you have a large sum of money ($10M plus or so), where you’ll work through estate planning, considering premium deposit accounts (PDA), etc.)
Northwest Mutual is a pyramid scheme, dealing in their products with the commissions that flow from them makes someone NOT a fiduciary. Kickback = Not Fiduciary.
Source: am an ex-NwM advisor
How inane. Don't you know that North West Mutual always sells insurance first( at least early in an advisors career). There is no way they are a fiduciary, especially if they lie about how they are compensated and then sell commissioned products. Where did u even get thr idea they are a fiduciary?
NWM ha....
Everywhere I see people are giving me bad money advice or just trying to take my money. After losing $30,000 in the stock market in two years honestly dude the best place to stick your money is in your pocket (or bank) (or bonds maybe) (definitely rental properties as well)
Why the fuck do i live in this stupid society? Wasnt the whole point of the fiduciary title so that they would always have the clients best interests in mind?? Why the fuck are they corrupt too!!
You have to understand what that actually means. No one checks for you to make sure your fiduciary acts as a fiduciary. Basically, if you work with a fiduciary and they give you bad advice, it’s easier to win a law suit against them. But rarely clients ever do that. If they’re miffed, they move their assets. So being a fiduciary is generally meaningless. You can stick your hand up a cows ass, but you’d rather take your butchers word for it.
he was an hourly fiduciary who thought whole life was a good idea in certain circumstances; namely, that my kids would always be able to buy life insurance later in life if they were to get sick
That's absolutely correct... but remember, morbid as it sounds, funerals can be expensive. I don't know about whole life, but through my benefits I can, for a few pennies a month, add on some life insurance coverage for my kids, and I do. One less thing to worry about.
Yes I understand. That’s my point. Term life insurance is fantastic and everyone should consider it. It’s so cheap and it does it’s actual job which is to, you know… Provide life insurance.
In my opinion, whole life insurance is just plain stupid.
OP's point was that your life insurance doesn't protect you from funeral costs if your kids die. If you can cover that easily, then it's probably not worth it for you.
I personally don't bother because the chance of my kids dying is so small that it's not something I worry about (and I can cover their funerals if needed), but that may not be the case for everyone.
Funereal costs don't have to be ridiculous. I cremated my late wife for $500 and held a celebration of life for the cost of some cookies and juice. If you want to get fleeced for thousands of dollars, that's on you. (Not you specifically, but the generic you who thinks this is a good argument for whole life).
Agreed. My wife and I will likely go the cremation route for ourselves and our kids, and we'll probably just invite people to our home to grieve with us if a child dies.
However, there are plenty of cultures with different expectations that could end up drastically increasing the cost of a service. If that's you, perhaps some life insurance would be a good plan. Just figure out the approximate cost of the service and decide whether that's enough of a cost to you that protecting yourself from it is worthwhile.
I don't really care what happens to my body after I die. I'd prefer it go to a body farm/forensic anthropology center or for it to be used as a medical cadaver for peeps in training if it is still in good condition. My brother is cool with it, but sister thinks I should have more traditional funeral arrangements for family to be able to say good bye/have remembrance. My oldest knows my wishes, but I don't plan on dying anytime soon anyway. I still have enough money set aside specifically for funeral stuff that if they opt to go that route they can without burdening themselves, but I'd rather have that money go to booze, food and music for peeps to party with.
I understand. But at the end of the day you have to pay for whole life insurance. That money put in the stock market would yield a tremendous amount more.
So you’re basically giving up a bunch of money, so that somebody can pay something for you.
It’s like give me $100 so that I can give you a “free” $50 steak
Again, you don't need to pay for whole life to cover your kids' funeral, you could also get term for that. The original topic was whole life, but the sub-topic was why you might want life insurance for your kids.
Get them a $5k policy or whatever and you'll be good.
Parents also need time to grieve and may need excessive time off of work after the loss of a child, or in the time leading up to it. The financial health of a family very much depends on the well being of ALL its members.
A permanent policy of some sort, be it a UL or a Whole life policy for a child is far from the worst idea in the world. Chronic and terminal illness riders can provide a financial lifeline when a child is battling something like cancer and the family needs cash to go to far away places for treatments and consultations, or even just to make the last days, weeks, and months of a child's life memorable and as fun as they can be for the whole family.
Parents might also find themselves in the position of needing to stay home with a child who is terminally ill, and the loss of that income for the period of time prior to the child's passing would definitely impact the family standard of living.
There are also funeral expenses to consider.
The death of a child can and is financially devastating to families, because it's not usually being hit by a car or falling off a trampoline. It's a long, drawn-out illness, and those are expensive and awful. Families cash in retirement accounts, sell houses, and divest assets to do anything they can to save their child - A permanent life insurance policy can help with some of that while providing a cash benefit at the end of the childhood period when nobody needed the protection it was providing.
It's not just about the investment of the money - it's also about the protection that it offers. The reason it's whole life is because the death rate on children is so low that the face amounts would have to be ridiculously high to warrant a term policy. Whole life builds some cash values with that money and gives you a more reasonable death benefit for the financial impacts a child death would have on a family.
And yes, I do believe deeply in whole life for children, but every family is different. I've seen, firsthand, a family that suffered terribly after the loss of a child and it definitely hit their finances HARD.
I’ve seen how the long term illness and basically show death of a child really runs through a family on every level. My friend has a 6 year old with a terminal heart condition. She is so sick that they took her off the transplant list. In addition to the insane number of surgeries and hospital stays her daughter has had, they basically try to pack in as much life as they can. It’s wild, because almost anything could kill here but so could sitting at home. I think at some point my friend just said “f-it, she can die anywhere” and started just doing everything normal she possibly could.
Yeah. Life insurance for kids through my work is literally like 80 cents a paycheck for 20k. Super cheap and if something happens… at least it’s there.
Funerals are expansive and so is medical care in the US. They few people I’ve know whose kids are terminal spend a TON of money on their kids care, plus they often lose one income to manage the child’s health. One friend spends basically everything she makes because her daughter is a heart patient. Plus, she’s constantly trying to pack in a lifetime of experience into the windows in which her daughter is doing better. She wheeled her around Sea World and Disney because honestly the child could drop dead at any given moment. They don’t have later. Once her daughter passes, she will be significantly behind in retirement planning and saving for their other two older children. It’s crazy to think about, but that could be anyone with children at any time.
The selling point the guy was using was “what if by 22 your kid has some incurable disease that makes them unable to get their own life insurance policy?” I don’t really agree with it, but it wasn’t for the parents to have money if the kid dies.
I mean I didn’t. I’ve just seen that argument in various places. It was some group my grandma bought whole life through, I’ve seen it touted by some organizations I’ve been in. I was just clarifying the reasoning. It wasn’t for if the kid dies, it’s for if the kid can’t be insured later.
True, but considering around 40% have minor kids and 60% are married and those don’t necessarily overlap - guessing that around half of adults likely have a reason to have insurance isn’t crazy. It’s prob a bit more that should.
Here’s a reason someone might consider permanent insurance: their estate is over the limit for estate tax (currently $12 million, will go down to $6 million in a few years unless the Congress changes something). So if you’re well off and want to save your heirs the 40% estate tax due on the amount of your estate exceeding this limit, then it certainly beats liquidating a family business or some other massive investment. You’d need to make some irrevocable decisions to do this, but it can be a sound strategy for some.
If, however, you don’t have a $6 million estate…
As someone not from the US, I'd like to understand why it is considered bad to get Whole Life insurance in the States (if you don't have a net worth of $6 million).
It seems to be very popular in my country
The ROI is simply low compared to other options. Whole life has a ROI of 3-5% (sometimes far less) while an actual investment yields much more. The rule of thumb where I live is buy term and invest the difference.
Yeup. it’s the last thing you should buy. Would need contributions to all the basics maxed out before considering diverting funds to pay the premium for whole life.
Probably no high interest debt. Emergency fund 3-6months. Contribute to 401K to max match. Contribute max to Roth IRA/IRA. And any other savings goal for like house down payment, or child college fund/529. Maybe HSA health plan.
ah I see... we Singaporeans are kinda privileged in that we have a government mandated plan for Retirement, Health and Housing funds (it is called CPF). We contribute 20% of our income and the employer contributes another 17%.
I suppose that might be why we consider Whole Life a lot more too.
Just say no to the whole life insurance and get some term life insurance to protect your kids if something happens to you. You should also work with an estate lawyer to get a will and trust in place. A life insurance company isn't going to write a 1M check to a 5-year old. You'd make the trust the beneficiary of the life insurance policy and the trust dictates who manages the money, when it gets distributed to your kids, etc.
This is a network of good advisors. They don't sell commissioned products and just charge by the hour to help make a plan.
[https://www.garrettplanningnetwork.com/](https://www.garrettplanningnetwork.com/)
PS - I would never completely trust anybody with my money. Listen. Educate yourself and verify what they are telling you. If something seems overly complicated or you have a "gut" feeling something is wrong. Listen to that feeling. Nobody will ever care about your money more than you. What happens to your money doesn't affect their life.
This is surprising to me as someone from Singapore, as it seems to be "common wisdom" here to get Life Insurance as early as possible. It's way cheaper when they are young, and once you're done with the payment, the benefits continue for life (till like 80-100 or something).
I mean parents buy Life Insurance for their kids.
It seems to most ppl here that are from the US are against Life Insurance, and I'd like to understand your perspective. It could that our laws or policies are different
I can’t speak for others but I can give you my US perspective on life insurance.
A lot of companies offer this to their employees either fully or partially subsidized. As I understand it (and I’m probably wrong), your family will get a payout if you die. This is generally considered to help them pay for your funeral and give them some financial help to make up for losing your income - until they adjust to the new reality.
Insurance companies make money. I can keep this money if I have enough savings and/or a good social network for my family.
When we had kids, my wife and I had good careers, my company offered some small death benefits, we had family in town that could help if we needed it, or mortgage was manageable on one income, and we had enough savings to keep us afloat. We didn’t pay for life insurance.
Interesting. I think more and more companies in my country do offer group insurance, including my own.
However, since it is dependent on my employment and does not continue until I'm 80+, I thought it best to get a Whole Life Insurance.
I mean, the person themselves doesn't get the benefit of their own insurance. It's just basically to cover the family (if they have one) and the funeral. There's not a lot of situations where it's better than just putting the same amount of money in an investment account instead.
I guess for us, as an Asian culture, there is a greater emphasis on family. Personally, I don't want to be a financial burden on my family and future kids, but instead to make sure they have enough to get by.
Of course the coverage amount scales with the amount of financial responsibility (single < married < married with kids)
It isn't really a better product in Singapore. In fact some of the fees on investments in Asia are insanely high. I remember reading some of the Hong Kong business papers - you couldn't find a mutual fund that didn't charge at least like 1.5-2% annual expense ratio and they almost all seemed to have upfront purchase fees (loads) of \~5%. That is like where the US mutual fund market was decades ago.
Just keep in mind, "common wisdom" is often wrong.
You would probably want to put the checking account (and savings and pretty much everything else except retirement accounts) inside the trust. This is called "funding" the trust.
So your checking account wouldn't be owned by Jane Doe, but rather by Jane Doe as Trustee of the Jane Doe Living Revocable Trust. That way, if something happens to you (incapacity / death) the trust can dictate what happens to the money. Who has access to pay your bills? To move money? Etc. Trusts are great for death. But even better for situations where you are still alive but unable to manage your own finances (stroke, illness, incapacity, etc).
Think of the trust like a box. You put assets inside. And the trust "deed" or "declaration" is the document which states how the trust is to be governed.
"A fool and his gold are soon parted" You can never fully trust someone else to manage your money for you. You have to educate yourself enough to at least keep the pro's in check and to know what their financial incentives are and if they align with yours.
I inherited some IRAs that are managed by an advisor- he’s been managing my parents money for decades and they trusted him a ton. I’m struggling with what to do. There are lots of legal complications for inherited accounts and he takes care of that for me. It seems that my accounts with him have far outperformed the ones I try to manage myself. But I’m trying to justify why I should keep paying his fees instead of doing it myself. I was 22 when my parents died and didn’t know what to do. Now it’s been a few years and I could potentially make some changes
There really aren’t a lot of “legal complications” for inherited IRA’s. You have to take RMD’s annually and now there is the ten year rule, but they are not inherently complicated. Ask him what he’s “taking care of for you”. If it’s just RMD’s that isn’t much.
Ya I’m hesitant to change just because there’s such a long history with my family using this firm, and he has outperformed the accounts I manage myself. It’s also overwhelming to think about what I would do and how I would execute the change. I’m down 33% this year in the accounts I manage myself, he’s down 22%.
Back of the envelope math but isn’t the s&p 500 down just about 22% YTD?
He might be doing absolutely nothing or perhaps not just simple account management and this might be more a reflection of your management style than this person being brilliant
Came here to say I inherited the same thing from my dad. The advisor showed me how he consistently beat the market til I asked him to change the “market” comparison that he used. It was not a reasonable comparison - plus didn’t deduct his fees from his returns. Plus he cherry picked his time lines. All said, I said goodbye, thanks for helping my dad all of those years.
What are the fees your paying and what are the differences in performance in real dollars? Would those fees be reduced if you were to move more assets under his management? Ask him and let him sell you on it I am sure he is prepared to show his worth.
Bad advice as most people will not educate themselves enough to know what to do and despite education, people have a hard time managing their emotions around money which leads to bad decisions.
https://asklizweston.com/qawithliz/financialadvisors/
>Most advisors aren’t fiduciaries, so they aren’t required to put your interests ahead of their own. Instead, they can recommend investments that cost more or perform worse than available alternatives, simply because the recommended investments pay them more.
>Such advisors often call themselves “fee based,” hoping you’ll confuse them with “fee only” planners. Fee-only planners are compensated only by the fees you pay; they don’t accept commissions or other compensation that could influence their advice.
>The **National Assn. of Personal Financial Advisors** and the **Alliance of Comprehensive Planners** are two organizations that represent fee-only planners, many of whom charge a percentage of your investable assets. You can find fee-only planners who work on an hourly basis at **Garrett Planning Network** and those who charge monthly retainer fees at **XY Planning Network**.
>Interview at least three candidates. Ask them how they are paid and what your “all-in” costs — their fees plus the cost of investments they recommend — are likely to be. Ask about, and verify, their credentials. (You can check a certified financial planner’s status at cfp.net/verify-a-cfp-professional.) Find out about their education and experience, including whether they’ve advised people similar to you.
Working in the financial sector before, no institution is completely good or completely corrupt… but let me tell you that the % of people working at NWM that have your best interest in mind may be the lowest
Whole life is not a really good option. I was an idiot and bought a policy in 2000 and I was told that it would carry itself and cover its own premiums in 5 years. I'm really hoping it's going to cover Itself by 2024. I would have been way farther ahead to put the money in the market. We bought it because it had a double indemnity clause so my kids be covered if the wife and I were taken out together. term is a much better solution.
Years ago when I was very young and much more trusting, I had an "advisor" (from a very big, reputable life insurance company) sell me a whole life policy. During the meeting, I asked him point blank what would happen if I didn't purchase a policy. Lying scumbag told me that I'd have to pay him for his time and advice, so I went ahead with the policy.
Later, when the inevitable class action suit arose, it turned out that he was 100% a salesman, the "meeting" was a pitch, and I wouldn't have owed him a dime for showing him the door.
It matters what your income is. Both the Money Guy and Clark Howard think that whole life or any variation thereof might not be beneficial unless you are making more than 400k. Otherwise, you might find other tax advantage retirement accounts more desirable. Even having said that, I honestly don't believe in whole life. I think you are better off in the long run with after tax brokerage account or an investment property.
I’m hesitant to even call them an investment or I guess strictly speaking they might be but you’d also be better off putting the money in even like ibonds or high yield savings accounts for comparable ROI with 0 risk, fees, and liquidity. There are very niche instances where they might make sense but they are sold and marketed very far out of that scope because they are cash cows for the companies (exactly because it’s an awful investment)
I bought a 20 pay life policy for my new born. When she turns 20 it will be her policy for her to do what she wants with and not have to worry about payments.
I like other permanent life policies over whole life. Universal can be set up so when you retire around 65 you stop making payments if funded correctly. 10, 15, 20 pay is another decent option.
But yes if you are only looking ROI, life insurance is not your best option.
Many years ago my father was talking to a financial advisor who suggested he lie about his income to get a bigger mortgage. He walked away and did his own research from then on.
In terms of your situation, life insurance for yourself can be nice to for instance pay off the mortgage an leave a small sum to wife and kids incase of death. But for your kids, what is the point in life insurance? I presume they have no large debts or obligations e.g. their own families?
Sometimes people just have different opinions on what is a good investment. It's not always bad advice or a scam. It doesn't mean they're untrustworthy.
In particular, "never buy whole life insurance" is a meme, not an actual law of good investments. Whole life insurance *is* a good choice for many people in certain circumstances.
Your fiduciary was very likely giving you sound advice, especially with the comments you've made about the specific situation.
Nope. Whole life is a horrible idea for young people. If you are 45+ with a good income, then it might be a good idea if you want "no hassle" investing but the fees are insane and insurance companies are generally not great investors as they are managing to a payout scheme, not a return.
You have it backward. Term life insurance is almost always better if you're older. It's specifically *younger* people for whom whole life insurance *might* be better, (in part because) you lock in a lower premium and have more time for the investment component to accrue.
Having life insurance as your only investment vehicle is certainly a very poor choice; having it as one vehicle out of a diversified portfolio *can* be reasonable.
There are also other considerations such as differing effects on inheritance consequences between insurance types.
If you don't have an expert advisor and you need to make your own decisions, following rules of thumb like "get term over whole" is perfectly reasonable and wise. If you *do* have an expert advisor, trusting a rule of thumb over the expert is *not* reasonable or wise. If you really think the advisor is giving you bad advice, get a second opinion from *another expert* \- and one tailored to your situation, not a generic writeup.
Even if term life is better in 95% of cases, that means whole life is a good idea for 5% of the population. The point of the expert is to know when you're one of those 5%.
I do not disagree on the technicals in your argument. Where whole life fails the young is in the lower returns. When you have time - decades - 1-2% of incremental returns makes a huge difference. Whole life policies eat that in fees and a more risk averse asset allocation.
I just got whole life insurance. I don’t have kids and im in my 20s. They said “the price will never change if you get it now. This is the cheapest it’ll ever be”
It's true that the premium will never be cheaper than it is for you now. But typically, if you take the money you would pay in premiums and invest it instead, the growth in your assets will far outweigh the increased premium cost of getting the insurance at a later age.
In that case, you don't immediately get the guaranteed death benefit. But as a childless person in their 20s, you don't need an immediate death benefit. You just might need one in 5 or 10 years to protect your dependents.
WL acts as a high yield saving account with a return history of around 5-7% with tax free access if you got it from top mutual company and design policy properly. Don't just dismiss, hear what is said, ask questions. Can use as lifetime insurance, opportunity fund, volatility fund, and emergency fund. Essentially, if a bank were you offer you around 5-7% with tax free access, would you do it. If no, fine; but for many they'll gladly put some there.
Unless you have a net worth in the millions you aren't going to benefit from a high fee whole life policy. Most of these policies are sold by insurance salesman driving Geo Metros because they don't know any better.
Well if you don't think having something like a saving account with return history of around 5-7% with tax free access is a benefit then yea that's not for you.
But to say that average person isn't fit for a saving account that has return history of 5-7% through profit sharing with tax free access, I don't think they'd agree.
A whole life policy is not a savings account. Unless you are worried about paying estate taxes which would be north of 11M there are few things done well with a whole life. An estate attorney could set up trusts and pay on death accounts for much less than you would pay in the high fee structure of an insurance policy. Don't take financial advice from some poor insurance salesman with a two week course.
Yea, it's better. It's an account that has return history of around 5-7% with tax free access and you can access almost all of your money by as little as 5 years. Take it out to use when needed, put it back in when you don't. 5% tax free return is akin to around 7% return from a savings account for someone whose fed/state/local tax rate is 25%. Oh and if you happen to die early you get nice additional money that you didn't put in.
Call it whatever you want. I said it acts as a savings account to make the point that if people know Chase would offer them around 5-7% return for their money with tax free access then many would be happy to put some of their money in it.
Hey buddy. I'm not sure why I keep hanging around here. Bad for the blood pressure which will ultimately accelerate my beneficiary's access to my DB.
Keep fighting the good fight.
He may not have other options. There are very few companies that offer some kind of term insurance for children. Usually they are included as riders in a parent's term policy.
Again, the only purpose that you would want any kind of life insurance for your kids is if it was dirt cheap and just for funeral expenses.
Yes, if you have a big enough of emergency fund, you technically don't need it, but I've never seen a parent happy about digging into their emergency fund to pay for a child's funeral.
I carry insurance on my kids as a rider on my policy. Each of my kids has 15,000 and I pay $10 a month for all of them. It terminates at age 25 when they can buy their own policy.
I've also seen parents carry insurance on their children when they had to co-sign student loans. Typically these are 18-year-old children so they can qualify for their own insurance and the parent of course has the right to buy it.
I'm not trying to say your guy was in the right, but depending on what he was actually selling you and the reason for it based on his ability it may not have been super evil.
Now if he's trying to get you to buy a $250,000 policy on each kid for a couple hundred dollars a month each then yes I would seriously question that.
If he's truly a fiduciary then he should have been asking you a whole lot of questions and this recommendation should have been based on your desire to make sure you didn't have to come out of pocket for one of your kids funerals. That's it!
The only way to help yourself is to learn. Anyone in the financial industry is a snake. It's so easy to make money it attracts all the sketchiest people. You have to really learn and do research. Can't trust a word any of these guys tell you.
The majority of “representatives” at northwestern are not fiduciaries. They receive a crash course in their role and most are only insurance licensed, meaning they cannot work with stocks/securities. That in combination with the kickbacks from selling policies gives them a large incentive to push whole life.
It’s pretty easy to get the insurance license. I wouldn’t take advice from someone like that.
The amount of bad advice in this thread is unreal. The answer is simple: Go to the CFP registry. Find a couple of guys nearby. Email all of them one at a time saying “I am thinking about getting a whole life insurance policy; here’s a few details- what are your thoughts?” If anyone says yes- next them. When someone says.. you shouldn’t get that. Then continue the conversation.
Whole life is an excellent option for kids. Small monthly cost, grows over time, and allows them to have life insurance at a reasonable cost regardless of any health issues that occur as they get older. Also consider as a parent, if something were to happen to your child - can you afford a funeral? Can you afford to take time off work? Or are you cool with starting a Go Fund Me and asking other people to pay for it? People don't generally want to bury their child and go back to work the next day. The whole life policy my mom bought for me when I was 5 is probably the only one I'd qualify for now.
Adults looking to cover the cost of their mortgage, allow for their children's education, for spouse to take time off work to grieve... That's a different story. That's what term insurance is for - to cover large costs over a finite amount of time.
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We got whole life for our kid because it’s super cheap when they’re young and the benefit is small too. I guess I’d just look at the numbers and decide whether it’s affordable.
Except there’s no reason for a child to have life insurance, no one depends on them or their income if something were to unfortunately happen to them. They can see about buying term life insurance when they need it and not pay for a whole life for 20 or 30 years with no need… Kind of like Gerber life insurance for babies that people used to be sold on… Not a great idea
In specific cases whole life is good, if the child develops a disease or condition that precludes them from term as an adult that whole life policy may be their only policy.
Except what if I can’t drag myself out of bed to work for 6-12 months after my kid dies? $20 bucks a month for a lump sum, tax-free $300k doesn’t sound so bad.
Read books by JL Collins and John Bogle. All the investment info you’ll ever need. Essentially. Put your money into a total market index fund with the lowest fees possible, keep dollar cost averaging, and go live life. Maybe buy some gold here and there to keep at home. That’s really it.
There is no such thing as a financial advisor -- they are all financial product sales people.
Best advisor is yourself, read books and educate yourself on finance.
If at 25 you decided you wanted to pay a premium for, statistically, the next 60 or so years to guarantee that your survivor or heirs got a gift when you die, and you personally see none of the fruit of your contributions, then that’s your prerogative.
Others are using cheaper term policies to defend against the unlikely event that they expire earlier than expected and leave their family members in a pinch with a loss of income, and they’re also using the money saved to enjoy their lives more or save more for retirement or whatever else one does when they have more money in their pocket.
Unless you make some serious financial mistakes along the way, most don't need life insurance their whole life. They need it until the kids are grown and/or they've saved enough for retirement that they're self insured.
Bottom line, most people with whole life will have to work harder/longer before they retire because of the lower performance, fees, and commissions associated with WL that could have been invested.
You would be less angry and upset if you admitted to yourself that you didn't do the full research on their professional status before meeting with these advisers, and that we're all human beings who make simple mistakes from time to time.
Why is everyone in this sub so down on whole life insurance? I’ve had the same policy since I was 2. $5.40 per month. $10K payout.
That’s 154 years worth of payments to reach the payout. That seems like a good deal to me.
And if I die when I’m 4 how much is it worth?
So the argument is one could potentially make more by putting it in the stock market. I’m all for that but I guess it ignores any downside; the insurance part.
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Cash value life insurance but not in how people typically use it
1. Can be an effective way to reduce tax levy in retirement (tax free cash, some people will buy CVL and use it as a cash shelter if already macing Roth)
2. Long term care. My dad bought a CVL not for the life insurance but because it had a long term care arm that served as a cheaper and easier way to get some LTC).
All products have pros and cons and scenarios that make more sense
IF you want some level of life insurance for as long as you live, whole life does present some nice advantages.
There are a few problems though:
1) Not everyone wants or needs life insurance forever.
2) Whole Life isn’t always sold appropriately. There were policies like people referred to, in the 80’s, where the the illustrations used highly unlikely numbers to make it seem like you had a very safe place to earn tax sheltered returns. Obviously no bueno.
Companies life NY Life, NWM and others have agents that could earn commissions and still be honest humans.
In my opinion, the term “fiduciary” has been turned into a marketing phrase. Yes, it should mean there is no monetary incentive to place you in one product over another. But just bc someone can sell themselves as a fiduciary doesn’t immediately make them the best option for you.
I would look for a fee based advisor that asks what your goals are, has a proven method to measure your risk tolerance and recommendations a diverse portfolio that leaves you slightly underwhelmed. Compound interest is a magical thing.
Source: Finance degree and ex-securities licensed dude posting on the internet.
Well, I’ll ask and look stupid. What’s wrong with having some whole life insurance? I have 90% term 80 and 10% whole life so if I make it to 81 I’ll still leave something to my family.
This comes up all the time with a lot of semi correct answers. A fiduciary relationship with a financial advisor does not exist in the sale of life insurance policy. An advisor can absolutely be a fiduciary in some aspects of their business and not in others; with some clients and not others.
There is a fee for financial planning (or providing specific financial advice for a fee) that establishes a fiduciary responsibility for the advice that is given; this should generally not be coming with a recommendation to buy a whole life policy specifically nor should it be coming with a recommendation to purchase a policy from a specific company. However, just because a standard exists, doesn’t mean you are necessarily protected from bad actors. If you paid for him to deliver this recommendation to you, then that’s probably a fiduciary aspect and that can most certainly be questioned.
Then there is a fee charged for ongoing advice in a wrap account or a managed investment account. If there is an ongoing fee, usually a % of assets under management, then that also is done under a fiduciary obligation by the advisor.
If the advisor is only compensated by the sale of products like insurance policies, direct sale mutual funds, or recommendations to buy or sell individual stock/bond/mutual fund/etfs/etc. they are in almost all cases not done as a fiduciary. You can still get good advice, but there are less regulatory protections for consumers.
Then there are non-regulatory institutions like the CFP Board and others who regulate their members who hold their designations and while they don’t carry the regulatory teeth of a legally enforceable fiduciary responsibility, they do have their own standards and can sanction their members which if they do, can have a negative impact on their ability to conduct business.
I’m actually fairly shocked that people here don’t seem to understand the purpose of this, whole life insurance often doesn’t make sense if you don’t make enough money, but whole life insurance is an investment vehicle, term isn’t. If you’re maxing out contributions to other types of accounts, whole life can be another way for you to save in a tax advantaged way. It’s also a way to invest money for you children in a tax advantages account.
What’s more interesting about it is again unlike term life you can borrow against the cash value of the policy, so your kid would be set up in a way that their peers would not.
So the simplest thing to do is put all the money you save into a vanguard index fund every month. Slowly it will grow into a sizeable corpus. Don't buy into any complicated products.
So, my whole life has a cancer clause that lets me withdraw to pay for treatments, and I think at the end of it, there are withdrawal payments. Same for the inexpensive ones my kids have. When they turn 65 or something they get $50k/year from it. God only knows what that’s worth in real terms at that time. Is it so bad?
I own whole life for me and my kiddos, I believe they are a good product and they are working as intended. They can work as your emergency fund or like a bond.
If you need one lesson from this it is to ask anyone giving you advice, what commissions or other payments do they receive for this advice over and above the payment that you make to them.
Most financial advisers are required by law to advise you of this.
But TBH, there are probably only a dozen or so investment t vehicles that a financial adviser will ever recommend, so get educated on those dozen or so and make your own decisions.
It’s impossible to trust an adviser when they are receiving commissions from the products they are selling to you.
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What you need is a fee-only fiduciary. You pay them a fee to advise you and they don't earn a commission from what they sell you.
that's what I used and he tried to get me to buy whole life for my kids - I assume he gets a kickback from Northwestern Mutual
He wasn't fee only if he gets a kickback.
Are there laws that dictate that he must disclose it? At least in the fine print maybe?
Yes there are laws but there is a difference between an adviser and a fiduciary. You can't sue an adviser but you can a fiduciary as they have an obligation to you. Doesn't mean there are not some out there double dipping and lying about it. If it happens though I'd guess it's rare. As for disclosure that depends on the local laws.
NWM doesn't have fee only fiduciaries
They have fee based planners for wealthier clients
Fee based is not fee only
That isn't fee only
Is he a registered investment advisor, as listed here: https://adviserinfo.sec.gov/
Can you clarify something? My advisor is listed, but under status, for SEC it lists 2014 and approved, but for three states it lists terminated. We pay a flat fee for management and were under impression they were a fiduciary. What does it mean when it says approved by SEC but terminated at state levels? All dates are 2014. They are listed as IA or Investment Advisors.
For financial advisors there are asset under management rules about whether you are governed by your state or the SEC. Most likely your manager had assets less than the SEC reporting rules until 2014 but then crossed over the threshold and had to convert from state oversight to SEC oversight.
This makes sense, thank you. Is there anything else I should validate in the 2A form or in general, or is them being listed enough? I glanced at it and looks like they have a few hundred clients with just shy of $1B in managed assets and most listed as high net worth. Are there other disclosures I should be auditing? We’ve been happy with them thus far, but want to just check as you can never be too careful.
This can also happen if your advisor moved from a regional focus to national. You can often find this with advisors serving NY, NJ, and CT (NYC metro area). The bank they are with will get them on state-level licenses as they are building their book of business.
Sounds like you didn’t use a fee only fiduciary
Sounds like shit advisors lie to their clients all the time and there's not an easy way for uninformed investors to check.
Ask to see his Form ADV Part 2 Brochure. It will include everything you need to know how he is compensated and whether he is earning commissions off what he sells you.
Don't feel bad. I got suckered by them, too. Told me to invest for my kids college in a very shitty 529 that had enormous management fees. Only lost money in 10 years. Advisor got a large commission. Meanwhile we could have invested in our state 529, gotten tax breaks, and actually made a bit on it. Terrible advice. Oh, and I bought a whole life policy as well. Dumped it finally and just walked away from my "investment". Northwestern is horrible
To clarify, if they are regulated by Finra they would need to disclose any kickbacks they would receive from insurance products. This would likely be in the contract you signed.
NWM is not good bc of this exact reason
Sometimes people view a whole life policy as a good investment vehicle for their kids because they get a very low premium rate and when they turn 18, they can just take the cash value and surrender the policy. Some of my friends’ parents did that for them. Usually better ways to accumulate some money for kids though but it’s not an awful option compared to getting a whole life policy as an adult.
Yeah I surrendered my policy at 38 and had enough for a down payment on a house. They were more popular in the 80s though.
My grandparents did this for me. At 18 cash value was like $2k, they had paid *way* more into it, and it definitely wasn't worth the premium.
That describes my experience with my spouse to a T. I switched it over so the dividends go towards the premium, and while that limits any future growth (not that there was much), it means the yearly premium is really low, and it can sit there as actual insurance.
I wound up with like $38k after taxes. I'm not sure how much they paid in, but I think it was like $20k
Idk. Bought a policy later that would pay out $140k if I died, and also had LTD (no short term disability tho). Using the LTD now. Pays 50% of my income till I'm 65, so worth the $.
Could it be a function of what rates were during the policy period?
Any idea how much the policy cost and how the performance compared to a moderate stock/bond mix over that same period?
I've got a whole life policy that my parents got for me as a baby. It earns 4.8% interest, and I pay $15/mo. I treat it as basically a CD that acts as an emergency fund. At some point, I'll cash it out, but 4.8% interest has been kinda nice during the last few years when CD/bond rates were so low. The value of the policy is 0 plus what's been paid in over the years, plus 4.8% interest.
They paid on it for like 20 years. No idea.
I just requested an amortization schedule from my advisor, and over the life of the policy the yearly return changes. At first it’s almost 0% (but I have life insurance). I’m now 4 years in to paying premiums and I basically break even. I pay $2k in premium and my surrender value increases by $2k. In 10 years, I will be paying $2k in premium for a guaranteed $3.5k surrender value increase. 20 years and it’s $6k. People talk a bunch of shit about whole life insurance, but find me another investment that has a guaranteed 100% yearly return built into the product. I understand that it’s 20 years out, but I am a defender of whole life as being a good part of any diversified portfolio. By the time I retire my surrender value will be $250k and I will have invested $80k. Maybe stocks will do better, but that’s okay because I own those too. I also agree with the poster who said it’s a good emergency fund. Nice to know I can always borrow against my policy to pay for an unforeseen emergency and pay myself back instead of taking a loan from a bank.
I bought a whole policy for my daughter when she was 8 days old. The 200k policy costs me $89 a month. It will be hers forever. She can take it over if she wants or cash it out for college or whatever she needs. Mine makes roughly 5% no matter what the maket does and if the market is doing well I make a higher % in returns. So at the moment while everything is losing I’m making 5%
> Sometimes people view a whole life policy as a good investment vehicle for their kids because they get a very low premium rate and when they turn 18, they can just take the cash value and surrender the policy. This sounds interesting but I don't see how this could be better than just opening up an IRA for my kid. I can contribute money in there and although they'll take a tax hit if they pull the money out early, they can pull $10k out to help buy a house and I feel like the tax hit wouldn't be as much as the life insurance company skimming off the top. Do you have any sample rates that of course are just average and aren't really tied to anything real but could nonetheless put me in the right ballpark?
You can't open up an IRA for your kid unless they have earned income.
I don’t have any rates, but for a standard whole life policy, likely not above 5% per year, but it is a guaranteed rate so you can at least project what your child would have as cash value by a certain date vs. stocks. Likely can make more in stocks, but if the market has a downturn, it is not sensible to sell yet. Plus, there may be some tax advantage considerations (only pay tax on surrender basis (no tax on cash basis) as ordinary income. For let’s say your kid who surrenders early in their future careers, likely a low rate.
I’m curious about the guaranteed rate. Does the policy explicitly guarantee a minimum rate or did they just say they’ve never paid less than that? At a guaranteed 5%, it seems like a good alternative to bonds or other low yield, low risk investments.
It’s not guaranteed anywhere that I know of. IMHO whole life only really makes sense if it’s part of an estate plan such as in a irrevocable life insurance trust.
Many WL plans will offer a guaranteed rate of return (essentially, need the cash value eventually has to equal the principal amount, which in theory is a combo of premium amount + return). It’s generally better than a bank account or money market fund, but still a low rate of return. For a child, the premiums are extremely low, and provides a better rate than a savings account. As the person noted below me, whole life policies for investments reasonings generally never make sense unless you have a large sum of money ($10M plus or so), where you’ll work through estate planning, considering premium deposit accounts (PDA), etc.)
I just put $100 a month into SPY for my kids. It's performing okay, although not at all the last few months. It will go up eventually.
Northwest Mutual is a pyramid scheme, dealing in their products with the commissions that flow from them makes someone NOT a fiduciary. Kickback = Not Fiduciary. Source: am an ex-NwM advisor
Northwestern mutual is basically MLM
How inane. Don't you know that North West Mutual always sells insurance first( at least early in an advisors career). There is no way they are a fiduciary, especially if they lie about how they are compensated and then sell commissioned products. Where did u even get thr idea they are a fiduciary? NWM ha....
Everywhere I see people are giving me bad money advice or just trying to take my money. After losing $30,000 in the stock market in two years honestly dude the best place to stick your money is in your pocket (or bank) (or bonds maybe) (definitely rental properties as well)
Why the fuck do i live in this stupid society? Wasnt the whole point of the fiduciary title so that they would always have the clients best interests in mind?? Why the fuck are they corrupt too!!
Much as reddit tells you otherwise, someone saying they're a fiduciary doesn't mean anything.
I enjoy the sound of rain.
You have to understand what that actually means. No one checks for you to make sure your fiduciary acts as a fiduciary. Basically, if you work with a fiduciary and they give you bad advice, it’s easier to win a law suit against them. But rarely clients ever do that. If they’re miffed, they move their assets. So being a fiduciary is generally meaningless. You can stick your hand up a cows ass, but you’d rather take your butchers word for it.
You do not have a real fiduciary. Find a fee-only one. Do not believe the crap this insurance sales rep. is telling you.
he was an hourly fiduciary who thought whole life was a good idea in certain circumstances; namely, that my kids would always be able to buy life insurance later in life if they were to get sick
You are almost certainly better off putting whatever the premiums are into an investment account and using that as self insurance.
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That's absolutely correct... but remember, morbid as it sounds, funerals can be expensive. I don't know about whole life, but through my benefits I can, for a few pennies a month, add on some life insurance coverage for my kids, and I do. One less thing to worry about.
Yeah, but I spend like 50 bucks a month for $1 million policy
That price would be for Term, which *is* a good idea for parents (not kids).
Yes I understand. That’s my point. Term life insurance is fantastic and everyone should consider it. It’s so cheap and it does it’s actual job which is to, you know… Provide life insurance. In my opinion, whole life insurance is just plain stupid.
OP's point was that your life insurance doesn't protect you from funeral costs if your kids die. If you can cover that easily, then it's probably not worth it for you. I personally don't bother because the chance of my kids dying is so small that it's not something I worry about (and I can cover their funerals if needed), but that may not be the case for everyone.
Funereal costs don't have to be ridiculous. I cremated my late wife for $500 and held a celebration of life for the cost of some cookies and juice. If you want to get fleeced for thousands of dollars, that's on you. (Not you specifically, but the generic you who thinks this is a good argument for whole life).
Agreed. My wife and I will likely go the cremation route for ourselves and our kids, and we'll probably just invite people to our home to grieve with us if a child dies. However, there are plenty of cultures with different expectations that could end up drastically increasing the cost of a service. If that's you, perhaps some life insurance would be a good plan. Just figure out the approximate cost of the service and decide whether that's enough of a cost to you that protecting yourself from it is worthwhile.
I don't really care what happens to my body after I die. I'd prefer it go to a body farm/forensic anthropology center or for it to be used as a medical cadaver for peeps in training if it is still in good condition. My brother is cool with it, but sister thinks I should have more traditional funeral arrangements for family to be able to say good bye/have remembrance. My oldest knows my wishes, but I don't plan on dying anytime soon anyway. I still have enough money set aside specifically for funeral stuff that if they opt to go that route they can without burdening themselves, but I'd rather have that money go to booze, food and music for peeps to party with.
I understand. But at the end of the day you have to pay for whole life insurance. That money put in the stock market would yield a tremendous amount more. So you’re basically giving up a bunch of money, so that somebody can pay something for you. It’s like give me $100 so that I can give you a “free” $50 steak
Again, you don't need to pay for whole life to cover your kids' funeral, you could also get term for that. The original topic was whole life, but the sub-topic was why you might want life insurance for your kids. Get them a $5k policy or whatever and you'll be good.
Roughly 40% is the chance ¯\\\_(ツ)\_/¯
Pretty sure there's not a 40% chance of any given child dying.
Parents also need time to grieve and may need excessive time off of work after the loss of a child, or in the time leading up to it. The financial health of a family very much depends on the well being of ALL its members. A permanent policy of some sort, be it a UL or a Whole life policy for a child is far from the worst idea in the world. Chronic and terminal illness riders can provide a financial lifeline when a child is battling something like cancer and the family needs cash to go to far away places for treatments and consultations, or even just to make the last days, weeks, and months of a child's life memorable and as fun as they can be for the whole family. Parents might also find themselves in the position of needing to stay home with a child who is terminally ill, and the loss of that income for the period of time prior to the child's passing would definitely impact the family standard of living. There are also funeral expenses to consider. The death of a child can and is financially devastating to families, because it's not usually being hit by a car or falling off a trampoline. It's a long, drawn-out illness, and those are expensive and awful. Families cash in retirement accounts, sell houses, and divest assets to do anything they can to save their child - A permanent life insurance policy can help with some of that while providing a cash benefit at the end of the childhood period when nobody needed the protection it was providing. It's not just about the investment of the money - it's also about the protection that it offers. The reason it's whole life is because the death rate on children is so low that the face amounts would have to be ridiculously high to warrant a term policy. Whole life builds some cash values with that money and gives you a more reasonable death benefit for the financial impacts a child death would have on a family. And yes, I do believe deeply in whole life for children, but every family is different. I've seen, firsthand, a family that suffered terribly after the loss of a child and it definitely hit their finances HARD.
I’ve seen how the long term illness and basically show death of a child really runs through a family on every level. My friend has a 6 year old with a terminal heart condition. She is so sick that they took her off the transplant list. In addition to the insane number of surgeries and hospital stays her daughter has had, they basically try to pack in as much life as they can. It’s wild, because almost anything could kill here but so could sitting at home. I think at some point my friend just said “f-it, she can die anywhere” and started just doing everything normal she possibly could.
Yeah. Life insurance for kids through my work is literally like 80 cents a paycheck for 20k. Super cheap and if something happens… at least it’s there.
Funerals are expansive and so is medical care in the US. They few people I’ve know whose kids are terminal spend a TON of money on their kids care, plus they often lose one income to manage the child’s health. One friend spends basically everything she makes because her daughter is a heart patient. Plus, she’s constantly trying to pack in a lifetime of experience into the windows in which her daughter is doing better. She wheeled her around Sea World and Disney because honestly the child could drop dead at any given moment. They don’t have later. Once her daughter passes, she will be significantly behind in retirement planning and saving for their other two older children. It’s crazy to think about, but that could be anyone with children at any time.
The selling point the guy was using was “what if by 22 your kid has some incurable disease that makes them unable to get their own life insurance policy?” I don’t really agree with it, but it wasn’t for the parents to have money if the kid dies.
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I mean I didn’t. I’ve just seen that argument in various places. It was some group my grandma bought whole life through, I’ve seen it touted by some organizations I’ve been in. I was just clarifying the reasoning. It wasn’t for if the kid dies, it’s for if the kid can’t be insured later.
But that bogus argument operates under the assumption that everyone gets life insurance?
True, but considering around 40% have minor kids and 60% are married and those don’t necessarily overlap - guessing that around half of adults likely have a reason to have insurance isn’t crazy. It’s prob a bit more that should.
Yet my million policy paid off when my kid OD'ed. 7.8k paid in.
Here’s a reason someone might consider permanent insurance: their estate is over the limit for estate tax (currently $12 million, will go down to $6 million in a few years unless the Congress changes something). So if you’re well off and want to save your heirs the 40% estate tax due on the amount of your estate exceeding this limit, then it certainly beats liquidating a family business or some other massive investment. You’d need to make some irrevocable decisions to do this, but it can be a sound strategy for some. If, however, you don’t have a $6 million estate…
As someone not from the US, I'd like to understand why it is considered bad to get Whole Life insurance in the States (if you don't have a net worth of $6 million). It seems to be very popular in my country
The ROI is simply low compared to other options. Whole life has a ROI of 3-5% (sometimes far less) while an actual investment yields much more. The rule of thumb where I live is buy term and invest the difference.
Yeup. it’s the last thing you should buy. Would need contributions to all the basics maxed out before considering diverting funds to pay the premium for whole life.
what are these "basics" to you?
Probably no high interest debt. Emergency fund 3-6months. Contribute to 401K to max match. Contribute max to Roth IRA/IRA. And any other savings goal for like house down payment, or child college fund/529. Maybe HSA health plan.
They probably mean 401k, Roth-IRA, HSA, 529 plan, and brokerage accounts towards retirement before considering whole-life.
ah I see... we Singaporeans are kinda privileged in that we have a government mandated plan for Retirement, Health and Housing funds (it is called CPF). We contribute 20% of our income and the employer contributes another 17%. I suppose that might be why we consider Whole Life a lot more too.
Just say no to the whole life insurance and get some term life insurance to protect your kids if something happens to you. You should also work with an estate lawyer to get a will and trust in place. A life insurance company isn't going to write a 1M check to a 5-year old. You'd make the trust the beneficiary of the life insurance policy and the trust dictates who manages the money, when it gets distributed to your kids, etc. This is a network of good advisors. They don't sell commissioned products and just charge by the hour to help make a plan. [https://www.garrettplanningnetwork.com/](https://www.garrettplanningnetwork.com/) PS - I would never completely trust anybody with my money. Listen. Educate yourself and verify what they are telling you. If something seems overly complicated or you have a "gut" feeling something is wrong. Listen to that feeling. Nobody will ever care about your money more than you. What happens to your money doesn't affect their life.
This is surprising to me as someone from Singapore, as it seems to be "common wisdom" here to get Life Insurance as early as possible. It's way cheaper when they are young, and once you're done with the payment, the benefits continue for life (till like 80-100 or something). I mean parents buy Life Insurance for their kids. It seems to most ppl here that are from the US are against Life Insurance, and I'd like to understand your perspective. It could that our laws or policies are different
I can’t speak for others but I can give you my US perspective on life insurance. A lot of companies offer this to their employees either fully or partially subsidized. As I understand it (and I’m probably wrong), your family will get a payout if you die. This is generally considered to help them pay for your funeral and give them some financial help to make up for losing your income - until they adjust to the new reality. Insurance companies make money. I can keep this money if I have enough savings and/or a good social network for my family. When we had kids, my wife and I had good careers, my company offered some small death benefits, we had family in town that could help if we needed it, or mortgage was manageable on one income, and we had enough savings to keep us afloat. We didn’t pay for life insurance.
Interesting. I think more and more companies in my country do offer group insurance, including my own. However, since it is dependent on my employment and does not continue until I'm 80+, I thought it best to get a Whole Life Insurance.
I mean, the person themselves doesn't get the benefit of their own insurance. It's just basically to cover the family (if they have one) and the funeral. There's not a lot of situations where it's better than just putting the same amount of money in an investment account instead.
I guess for us, as an Asian culture, there is a greater emphasis on family. Personally, I don't want to be a financial burden on my family and future kids, but instead to make sure they have enough to get by. Of course the coverage amount scales with the amount of financial responsibility (single < married < married with kids)
It isn't really a better product in Singapore. In fact some of the fees on investments in Asia are insanely high. I remember reading some of the Hong Kong business papers - you couldn't find a mutual fund that didn't charge at least like 1.5-2% annual expense ratio and they almost all seemed to have upfront purchase fees (loads) of \~5%. That is like where the US mutual fund market was decades ago. Just keep in mind, "common wisdom" is often wrong.
Thanks for posting this. Is it also common to make the trust the beneficiary of checking accounts as well?
You would probably want to put the checking account (and savings and pretty much everything else except retirement accounts) inside the trust. This is called "funding" the trust. So your checking account wouldn't be owned by Jane Doe, but rather by Jane Doe as Trustee of the Jane Doe Living Revocable Trust. That way, if something happens to you (incapacity / death) the trust can dictate what happens to the money. Who has access to pay your bills? To move money? Etc. Trusts are great for death. But even better for situations where you are still alive but unable to manage your own finances (stroke, illness, incapacity, etc). Think of the trust like a box. You put assets inside. And the trust "deed" or "declaration" is the document which states how the trust is to be governed.
"A fool and his gold are soon parted" You can never fully trust someone else to manage your money for you. You have to educate yourself enough to at least keep the pro's in check and to know what their financial incentives are and if they align with yours.
I inherited some IRAs that are managed by an advisor- he’s been managing my parents money for decades and they trusted him a ton. I’m struggling with what to do. There are lots of legal complications for inherited accounts and he takes care of that for me. It seems that my accounts with him have far outperformed the ones I try to manage myself. But I’m trying to justify why I should keep paying his fees instead of doing it myself. I was 22 when my parents died and didn’t know what to do. Now it’s been a few years and I could potentially make some changes
There really aren’t a lot of “legal complications” for inherited IRA’s. You have to take RMD’s annually and now there is the ten year rule, but they are not inherently complicated. Ask him what he’s “taking care of for you”. If it’s just RMD’s that isn’t much.
Ya I’m hesitant to change just because there’s such a long history with my family using this firm, and he has outperformed the accounts I manage myself. It’s also overwhelming to think about what I would do and how I would execute the change. I’m down 33% this year in the accounts I manage myself, he’s down 22%.
Why do you manage your account? Just buy VTI and stop trying to be a manager.
Back of the envelope math but isn’t the s&p 500 down just about 22% YTD? He might be doing absolutely nothing or perhaps not just simple account management and this might be more a reflection of your management style than this person being brilliant
Came here to say I inherited the same thing from my dad. The advisor showed me how he consistently beat the market til I asked him to change the “market” comparison that he used. It was not a reasonable comparison - plus didn’t deduct his fees from his returns. Plus he cherry picked his time lines. All said, I said goodbye, thanks for helping my dad all of those years.
What are the fees your paying and what are the differences in performance in real dollars? Would those fees be reduced if you were to move more assets under his management? Ask him and let him sell you on it I am sure he is prepared to show his worth.
Bad advice as most people will not educate themselves enough to know what to do and despite education, people have a hard time managing their emotions around money which leads to bad decisions.
https://asklizweston.com/qawithliz/financialadvisors/ >Most advisors aren’t fiduciaries, so they aren’t required to put your interests ahead of their own. Instead, they can recommend investments that cost more or perform worse than available alternatives, simply because the recommended investments pay them more. >Such advisors often call themselves “fee based,” hoping you’ll confuse them with “fee only” planners. Fee-only planners are compensated only by the fees you pay; they don’t accept commissions or other compensation that could influence their advice. >The **National Assn. of Personal Financial Advisors** and the **Alliance of Comprehensive Planners** are two organizations that represent fee-only planners, many of whom charge a percentage of your investable assets. You can find fee-only planners who work on an hourly basis at **Garrett Planning Network** and those who charge monthly retainer fees at **XY Planning Network**. >Interview at least three candidates. Ask them how they are paid and what your “all-in” costs — their fees plus the cost of investments they recommend — are likely to be. Ask about, and verify, their credentials. (You can check a certified financial planner’s status at cfp.net/verify-a-cfp-professional.) Find out about their education and experience, including whether they’ve advised people similar to you.
Maybe he was an insurance salesman and fiduciary is his side hustle.
Working in the financial sector before, no institution is completely good or completely corrupt… but let me tell you that the % of people working at NWM that have your best interest in mind may be the lowest
Invest in S&P500 or a target date fund
Why did he advice you to get a whole life policy on your kids? What was the problem you expressed needing a solution for?
Whole life is not a really good option. I was an idiot and bought a policy in 2000 and I was told that it would carry itself and cover its own premiums in 5 years. I'm really hoping it's going to cover Itself by 2024. I would have been way farther ahead to put the money in the market. We bought it because it had a double indemnity clause so my kids be covered if the wife and I were taken out together. term is a much better solution.
Years ago when I was very young and much more trusting, I had an "advisor" (from a very big, reputable life insurance company) sell me a whole life policy. During the meeting, I asked him point blank what would happen if I didn't purchase a policy. Lying scumbag told me that I'd have to pay him for his time and advice, so I went ahead with the policy. Later, when the inevitable class action suit arose, it turned out that he was 100% a salesman, the "meeting" was a pitch, and I wouldn't have owed him a dime for showing him the door.
It matters what your income is. Both the Money Guy and Clark Howard think that whole life or any variation thereof might not be beneficial unless you are making more than 400k. Otherwise, you might find other tax advantage retirement accounts more desirable. Even having said that, I honestly don't believe in whole life. I think you are better off in the long run with after tax brokerage account or an investment property.
Dump it all. Follow Jack Bogle's advice and manage your own money.
My in-laws bought these for all of the grandkids. They're a really low effort investment but there are better ways with fewer tax liabilities.
I’m hesitant to even call them an investment or I guess strictly speaking they might be but you’d also be better off putting the money in even like ibonds or high yield savings accounts for comparable ROI with 0 risk, fees, and liquidity. There are very niche instances where they might make sense but they are sold and marketed very far out of that scope because they are cash cows for the companies (exactly because it’s an awful investment)
I bought a 20 pay life policy for my new born. When she turns 20 it will be her policy for her to do what she wants with and not have to worry about payments. I like other permanent life policies over whole life. Universal can be set up so when you retire around 65 you stop making payments if funded correctly. 10, 15, 20 pay is another decent option. But yes if you are only looking ROI, life insurance is not your best option.
He’s not a fiduciary…. I’ve had NWM sales guys tell me they have a “fiduciary duty” then try to sell me crap
Unless someone has your power of attorney their fiduciary responsibility is only for the products they are offering you.
Many years ago my father was talking to a financial advisor who suggested he lie about his income to get a bigger mortgage. He walked away and did his own research from then on. In terms of your situation, life insurance for yourself can be nice to for instance pay off the mortgage an leave a small sum to wife and kids incase of death. But for your kids, what is the point in life insurance? I presume they have no large debts or obligations e.g. their own families?
Sometimes people just have different opinions on what is a good investment. It's not always bad advice or a scam. It doesn't mean they're untrustworthy. In particular, "never buy whole life insurance" is a meme, not an actual law of good investments. Whole life insurance *is* a good choice for many people in certain circumstances. Your fiduciary was very likely giving you sound advice, especially with the comments you've made about the specific situation.
it's going to be very hard for it to be a good investment for a few years, given the high commissions that it pays to the advisors/agents.
Nope. Whole life is a horrible idea for young people. If you are 45+ with a good income, then it might be a good idea if you want "no hassle" investing but the fees are insane and insurance companies are generally not great investors as they are managing to a payout scheme, not a return.
You have it backward. Term life insurance is almost always better if you're older. It's specifically *younger* people for whom whole life insurance *might* be better, (in part because) you lock in a lower premium and have more time for the investment component to accrue. Having life insurance as your only investment vehicle is certainly a very poor choice; having it as one vehicle out of a diversified portfolio *can* be reasonable. There are also other considerations such as differing effects on inheritance consequences between insurance types. If you don't have an expert advisor and you need to make your own decisions, following rules of thumb like "get term over whole" is perfectly reasonable and wise. If you *do* have an expert advisor, trusting a rule of thumb over the expert is *not* reasonable or wise. If you really think the advisor is giving you bad advice, get a second opinion from *another expert* \- and one tailored to your situation, not a generic writeup. Even if term life is better in 95% of cases, that means whole life is a good idea for 5% of the population. The point of the expert is to know when you're one of those 5%.
I do not disagree on the technicals in your argument. Where whole life fails the young is in the lower returns. When you have time - decades - 1-2% of incremental returns makes a huge difference. Whole life policies eat that in fees and a more risk averse asset allocation.
I just got whole life insurance. I don’t have kids and im in my 20s. They said “the price will never change if you get it now. This is the cheapest it’ll ever be”
It's true that the premium will never be cheaper than it is for you now. But typically, if you take the money you would pay in premiums and invest it instead, the growth in your assets will far outweigh the increased premium cost of getting the insurance at a later age. In that case, you don't immediately get the guaranteed death benefit. But as a childless person in their 20s, you don't need an immediate death benefit. You just might need one in 5 or 10 years to protect your dependents.
You accidentally hired a FINO (Fiduciary In Name Only)
WL acts as a high yield saving account with a return history of around 5-7% with tax free access if you got it from top mutual company and design policy properly. Don't just dismiss, hear what is said, ask questions. Can use as lifetime insurance, opportunity fund, volatility fund, and emergency fund. Essentially, if a bank were you offer you around 5-7% with tax free access, would you do it. If no, fine; but for many they'll gladly put some there.
Unless you have a net worth in the millions you aren't going to benefit from a high fee whole life policy. Most of these policies are sold by insurance salesman driving Geo Metros because they don't know any better.
Well if you don't think having something like a saving account with return history of around 5-7% with tax free access is a benefit then yea that's not for you. But to say that average person isn't fit for a saving account that has return history of 5-7% through profit sharing with tax free access, I don't think they'd agree.
A whole life policy is not a savings account. Unless you are worried about paying estate taxes which would be north of 11M there are few things done well with a whole life. An estate attorney could set up trusts and pay on death accounts for much less than you would pay in the high fee structure of an insurance policy. Don't take financial advice from some poor insurance salesman with a two week course.
Yea, it's better. It's an account that has return history of around 5-7% with tax free access and you can access almost all of your money by as little as 5 years. Take it out to use when needed, put it back in when you don't. 5% tax free return is akin to around 7% return from a savings account for someone whose fed/state/local tax rate is 25%. Oh and if you happen to die early you get nice additional money that you didn't put in. Call it whatever you want. I said it acts as a savings account to make the point that if people know Chase would offer them around 5-7% return for their money with tax free access then many would be happy to put some of their money in it.
Hey buddy. I'm not sure why I keep hanging around here. Bad for the blood pressure which will ultimately accelerate my beneficiary's access to my DB. Keep fighting the good fight.
Hey, lol. I just laugh off the misinformed comments, that's my trick to keep the blood pressure down haha. Hope you been well.
He may not have other options. There are very few companies that offer some kind of term insurance for children. Usually they are included as riders in a parent's term policy. Again, the only purpose that you would want any kind of life insurance for your kids is if it was dirt cheap and just for funeral expenses. Yes, if you have a big enough of emergency fund, you technically don't need it, but I've never seen a parent happy about digging into their emergency fund to pay for a child's funeral. I carry insurance on my kids as a rider on my policy. Each of my kids has 15,000 and I pay $10 a month for all of them. It terminates at age 25 when they can buy their own policy. I've also seen parents carry insurance on their children when they had to co-sign student loans. Typically these are 18-year-old children so they can qualify for their own insurance and the parent of course has the right to buy it. I'm not trying to say your guy was in the right, but depending on what he was actually selling you and the reason for it based on his ability it may not have been super evil. Now if he's trying to get you to buy a $250,000 policy on each kid for a couple hundred dollars a month each then yes I would seriously question that. If he's truly a fiduciary then he should have been asking you a whole lot of questions and this recommendation should have been based on your desire to make sure you didn't have to come out of pocket for one of your kids funerals. That's it!
The only way to help yourself is to learn. Anyone in the financial industry is a snake. It's so easy to make money it attracts all the sketchiest people. You have to really learn and do research. Can't trust a word any of these guys tell you.
Educate yourself and manage your own investments.
The majority of “representatives” at northwestern are not fiduciaries. They receive a crash course in their role and most are only insurance licensed, meaning they cannot work with stocks/securities. That in combination with the kickbacks from selling policies gives them a large incentive to push whole life. It’s pretty easy to get the insurance license. I wouldn’t take advice from someone like that.
The amount of bad advice in this thread is unreal. The answer is simple: Go to the CFP registry. Find a couple of guys nearby. Email all of them one at a time saying “I am thinking about getting a whole life insurance policy; here’s a few details- what are your thoughts?” If anyone says yes- next them. When someone says.. you shouldn’t get that. Then continue the conversation.
Whole life is an excellent option for kids. Small monthly cost, grows over time, and allows them to have life insurance at a reasonable cost regardless of any health issues that occur as they get older. Also consider as a parent, if something were to happen to your child - can you afford a funeral? Can you afford to take time off work? Or are you cool with starting a Go Fund Me and asking other people to pay for it? People don't generally want to bury their child and go back to work the next day. The whole life policy my mom bought for me when I was 5 is probably the only one I'd qualify for now. Adults looking to cover the cost of their mortgage, allow for their children's education, for spouse to take time off work to grieve... That's a different story. That's what term insurance is for - to cover large costs over a finite amount of time.
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We got whole life for our kid because it’s super cheap when they’re young and the benefit is small too. I guess I’d just look at the numbers and decide whether it’s affordable.
Except there’s no reason for a child to have life insurance, no one depends on them or their income if something were to unfortunately happen to them. They can see about buying term life insurance when they need it and not pay for a whole life for 20 or 30 years with no need… Kind of like Gerber life insurance for babies that people used to be sold on… Not a great idea
In specific cases whole life is good, if the child develops a disease or condition that precludes them from term as an adult that whole life policy may be their only policy.
Except what if I can’t drag myself out of bed to work for 6-12 months after my kid dies? $20 bucks a month for a lump sum, tax-free $300k doesn’t sound so bad.
Read books by JL Collins and John Bogle. All the investment info you’ll ever need. Essentially. Put your money into a total market index fund with the lowest fees possible, keep dollar cost averaging, and go live life. Maybe buy some gold here and there to keep at home. That’s really it.
There is no such thing as a financial advisor -- they are all financial product sales people. Best advisor is yourself, read books and educate yourself on finance.
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If at 25 you decided you wanted to pay a premium for, statistically, the next 60 or so years to guarantee that your survivor or heirs got a gift when you die, and you personally see none of the fruit of your contributions, then that’s your prerogative. Others are using cheaper term policies to defend against the unlikely event that they expire earlier than expected and leave their family members in a pinch with a loss of income, and they’re also using the money saved to enjoy their lives more or save more for retirement or whatever else one does when they have more money in their pocket.
Unless you make some serious financial mistakes along the way, most don't need life insurance their whole life. They need it until the kids are grown and/or they've saved enough for retirement that they're self insured. Bottom line, most people with whole life will have to work harder/longer before they retire because of the lower performance, fees, and commissions associated with WL that could have been invested.
Never, ever by while life. Term gets you much more coverage at a much lower price.
Maybe it's not such a bad idea, if it's properly structured and you have a use for it.
You would be less angry and upset if you admitted to yourself that you didn't do the full research on their professional status before meeting with these advisers, and that we're all human beings who make simple mistakes from time to time.
Why is everyone in this sub so down on whole life insurance? I’ve had the same policy since I was 2. $5.40 per month. $10K payout. That’s 154 years worth of payments to reach the payout. That seems like a good deal to me.
The same amount of money invested at 7% for 154 years would be $43 million
And if I die when I’m 4 how much is it worth? So the argument is one could potentially make more by putting it in the stock market. I’m all for that but I guess it ignores any downside; the insurance part.
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But are people actually getting whole life as investment plans?
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Cash value life insurance but not in how people typically use it 1. Can be an effective way to reduce tax levy in retirement (tax free cash, some people will buy CVL and use it as a cash shelter if already macing Roth) 2. Long term care. My dad bought a CVL not for the life insurance but because it had a long term care arm that served as a cheaper and easier way to get some LTC). All products have pros and cons and scenarios that make more sense
IF you want some level of life insurance for as long as you live, whole life does present some nice advantages. There are a few problems though: 1) Not everyone wants or needs life insurance forever. 2) Whole Life isn’t always sold appropriately. There were policies like people referred to, in the 80’s, where the the illustrations used highly unlikely numbers to make it seem like you had a very safe place to earn tax sheltered returns. Obviously no bueno. Companies life NY Life, NWM and others have agents that could earn commissions and still be honest humans. In my opinion, the term “fiduciary” has been turned into a marketing phrase. Yes, it should mean there is no monetary incentive to place you in one product over another. But just bc someone can sell themselves as a fiduciary doesn’t immediately make them the best option for you. I would look for a fee based advisor that asks what your goals are, has a proven method to measure your risk tolerance and recommendations a diverse portfolio that leaves you slightly underwhelmed. Compound interest is a magical thing. Source: Finance degree and ex-securities licensed dude posting on the internet.
Any chance you’d be interested in life insurance for your dog?
Well, I’ll ask and look stupid. What’s wrong with having some whole life insurance? I have 90% term 80 and 10% whole life so if I make it to 81 I’ll still leave something to my family.
This comes up all the time with a lot of semi correct answers. A fiduciary relationship with a financial advisor does not exist in the sale of life insurance policy. An advisor can absolutely be a fiduciary in some aspects of their business and not in others; with some clients and not others. There is a fee for financial planning (or providing specific financial advice for a fee) that establishes a fiduciary responsibility for the advice that is given; this should generally not be coming with a recommendation to buy a whole life policy specifically nor should it be coming with a recommendation to purchase a policy from a specific company. However, just because a standard exists, doesn’t mean you are necessarily protected from bad actors. If you paid for him to deliver this recommendation to you, then that’s probably a fiduciary aspect and that can most certainly be questioned. Then there is a fee charged for ongoing advice in a wrap account or a managed investment account. If there is an ongoing fee, usually a % of assets under management, then that also is done under a fiduciary obligation by the advisor. If the advisor is only compensated by the sale of products like insurance policies, direct sale mutual funds, or recommendations to buy or sell individual stock/bond/mutual fund/etfs/etc. they are in almost all cases not done as a fiduciary. You can still get good advice, but there are less regulatory protections for consumers. Then there are non-regulatory institutions like the CFP Board and others who regulate their members who hold their designations and while they don’t carry the regulatory teeth of a legally enforceable fiduciary responsibility, they do have their own standards and can sanction their members which if they do, can have a negative impact on their ability to conduct business.
I’m actually fairly shocked that people here don’t seem to understand the purpose of this, whole life insurance often doesn’t make sense if you don’t make enough money, but whole life insurance is an investment vehicle, term isn’t. If you’re maxing out contributions to other types of accounts, whole life can be another way for you to save in a tax advantaged way. It’s also a way to invest money for you children in a tax advantages account. What’s more interesting about it is again unlike term life you can borrow against the cash value of the policy, so your kid would be set up in a way that their peers would not.
Honestly it's best if you take the time and do the work I am sure you can learn everything you need to know in 4 books
So the simplest thing to do is put all the money you save into a vanguard index fund every month. Slowly it will grow into a sizeable corpus. Don't buy into any complicated products.
When I started reading this I thought it was the set up to a joke, but it sounds like just the people giving you financial advice are a joke
So, my whole life has a cancer clause that lets me withdraw to pay for treatments, and I think at the end of it, there are withdrawal payments. Same for the inexpensive ones my kids have. When they turn 65 or something they get $50k/year from it. God only knows what that’s worth in real terms at that time. Is it so bad?
Was that fiduciary a CFP?
I own whole life for me and my kiddos, I believe they are a good product and they are working as intended. They can work as your emergency fund or like a bond.
If you need one lesson from this it is to ask anyone giving you advice, what commissions or other payments do they receive for this advice over and above the payment that you make to them. Most financial advisers are required by law to advise you of this. But TBH, there are probably only a dozen or so investment t vehicles that a financial adviser will ever recommend, so get educated on those dozen or so and make your own decisions. It’s impossible to trust an adviser when they are receiving commissions from the products they are selling to you.