re: Northwestern Mutual - Should I?

I wish it was that easy sometimes .

If you're retired and living off the income your IRA is providing you, then you think SPY is a good investment? Probably not. Not to mention in today's market with low interest rates and the future of the bond market as those interest rates begin to rise. That retired individual with the bulk of their retirement in BND is not going to know what went wrong.

You tip a server 15-20% just to deliver your food, Why not pay a professional 1-2% for the peace of mind of handling your life savings?

You do realize there is more to permanent insurance than just UL's, right?

Not getting into the whole debate, but it seems all anyone ever talks about on here are UL's.

Well that's awfully rude.


And how would you rate your post on the ignorant scale?

Exactly what "insurance" are you getting from the life annuity? A guaranteed minimum payout if you knock off tomorrow?

Sounds like he has a relationship with American Funds that may provide extra incentive to sell them. If I'm going to pay a front-end sales load, I better be getting a fund that vast outperforms a market index fund, plus, I better be super confident in that fund to hold for the long term.

For most funds, that just doesn't happen, which is why I never invest in mutual fund shares that require a front-end charge.

Did he not even sell you life insurance?

The average investor has pulled less than 5% off the S&P 500 over the past decade. IUL's have averaged 8% in the same index over the same time period.

In summary, don't speak in absolutes about things you don't know.

ETA: Permanent life insurance, when funded adequately, is a worthy addition to most portfolios. It's not just for the mega-wealthy.

When Social Security starts means testing, it will be awfully nice to have some of that retirement income spilling in from non-reportable sources.

quote:

---

I used to work in the insurance industry and I know first-hand that it's all, ALL, about making money for the company. Trust me.

---

I trust you.

Can you please share more of your wisdom? Could you tell me if any other company tries to earn a profit in the future so I know what else to avoid?

Thanks

It's cuz you're here buddy

Pretty similar to most of these threads when they come up. Always good for a good chuckle.

not sure if you're serious or trolling me, but I'll bite anyway

I don't claim to be an oracle,or know better than others, but my comments are:

quote:

---

I'd like your opinion/advice then. Last year, a friend introduced me to his friend at NWM. I opened an IRA and a life annuity. The LA seemed like a decent idea since I get insurance (just got married last year same time) and a guaranteed return of 5% (NWM has averaged closer to 8% over last 30 years).

---

There is no such thing as a 'guaranteed return'. Annuities are terrible investments for the vast majority of people who have them. They are too complicated for most investors to understand and therefore should not be purchased.

quote:

---

The IRA is a no brainer and I'm mad I didn't do it a couple years earlier since I have now been an independent contractor for 3 years. Problem is, he told me how great American Funds is and then I get my first statement and see a 5.78% load. That and the annual fees and I am still a little over $140 in the red on that account (about 10 months old now).

---

American Funds is a decent firm with decent returns, BUT only 25% of money managers beat their index over time, and this is always changing. As far as the fee, you were simply ripped off and I would NEVER trust another word from the guy. As I noted in a previous post, a 1% difference in net returns over 30 years on 100k is 250!! A simple market ETF like SPY is the best thing that the vast majority of people can do. If you can spend 20+ hours a week watching stocks and researching funds, you can look at that, but the VAST majority of investors have zero business buying individual stocks.

quote:

---

My last company, Starwood, I was an employee and did a 401k and boy I wish I could pour money into that account. It has grown every year but one and since it's through ING, they offer free advice which I follow every quarter and it works nicely.

---

dump max into 401k in a market ETF, never company stock, unless thats the only option, then only do so if you get a very substantial match.

quote:

---

I own a decent amount of Apple (first bought in 08).

---

we discussed in another thread. That has turned out well for both of us, but as I noted earlier, individual stocks have tremendous risk and no place in most investors portfolios. In addition to macro risks (economic, political, etc), you have to assess the industry for the company, their technological competence, legal environment, distribution network, marketing abilities,etc, as well as the same for key competitors. This is FAR beyond the ability of most people.

quote:

---

At the same time I went with NWM, I decided to do some Fidelity MF's on my own to see how I do against the "professionals". One of them, I'm up only 3% this year, but the other one over 20%.

---

I would guess you got lucky on one and not on the other, no different than throwing darts. Better of in the long term in SPY or similar

quote:

---

What would you say or do with my situation? I feel like I'm being railroaded a bit with NWM and basically I have to at least keep going with the annuity since I will lose money if I stop before about 8 years (all the fees up front in the first couple years). That's fine, I don't feel like that one is total garbage, but I do feel like I was sold. I just wanted to do something as I had too much cash sitting in the bank.

---

I can't reply specifically, but there's a 90% chance you go screwed on that deal. I would sell out now and dollar cost average the money into a broad market ETF. Yes, you lose now, but you also lose opportunity cost by not being in a better investment during the time you wait for it to vest. Again, the specifics of your situation require you have a CPA or other numbers person look at it before making a decision.

quote:

---

I have a good amount of cash in my bank accounts and think it is wasting away.

---

slowly put it in an ETF if you don't need it for MINIMUM 5 years, 10 is preferable. You could easily lose 30-50% of it in a year if things go south again.

quote:

---

Not happy with the IRA so much. The guy from NWM and I had our semi-annual phone call and he was pumping that fund while I told him I wasn't exactly stoked about it still being negative. He said "that's your long money, don't worry about it".

---

if your broker sold you a fund that cost 6%, you can't trust a word he says about anything

Insurance agents have no business advising on investments. They don't know what they're talking about, they are only given info from their employer on investments which generate large commission, they have to spend more time selling than researching, and they are not accountable in any way for errors. You're much better off using a discount broker like Fidelity and their customer service department. They won't throw you into expensive load funds, but may try to put you into their mutual funds, which you should avoid for the reason above, but the certainly won't ever suggest you buy a fund that hits you for 6% right off the bat.

Whole life, universal life, annuities, and other BS instruments are nothing more than smoke screens to hide excessive fees and commissions. Its a shell game that most people can't figure out. The products are sold exploiting individuals fear of the unknown and love for their family.

Virtually every unbiased investment study supports everything I've said above. Yes, there are exceptional situation in which hybrid insurance products are of value to a very select group of investors, but the exception does not make the rule. Buy term and save 10% of your annual earnings, invest in SPY, don't sell anything until you retire, and you will be ahead of 99% of the people out there.

All that being said, I do invest in individual stocks and mutual funds, but I do this virtually full time. I research funds performance of long term, how they performed in bull and bear markets, how long current managers have been in place, how their portfolio has changed over time, what individual stocks they own, what their fees are, what their turnover is etc. I invest in individual stocks with even more research. Not many people have for this and should just buy the market.

Also, the numbers the insurance company give you on market returns vs their returns over time are HIGHLY suspect. There are many ways to massage these numbers, and remember, these are the same guys that charged you 6% fee on a fund that sells at ZERO fee to everyone else.

All this being said, I don't think insurance guys do all of this with malice. I think they are selling these products based on information they have, all from their employer or the funds themselves, and really think they are helping their clients...but they are mistaken.

summary: sell everything you have, save 10% of your annual income, put it in SPY and by term life if you need it...you'll retire a multi-millionaire

but then again...I could be completely wrong about everything

cheers!

ETA; I just started researching how many individual investors, hedge funds, and mutual funds beat the market over time. The numbers are worse than I noted above. I had said 25% of managers beat the market, but many studies say it's actually 1% and that when individual investors and hedge funds are included, that drops to .6%. I'm not sure what the correct number is, but KNOW that the odds are you will be much better off in a broad index rather than any managed investment. I'm apparently a genius as I've made 9.1% over the last 10 years (24% vs 17% over last 5 years) and the s&p has returned 8% according to Fidelity. The problem of course is that the market is always changing and the philosophy I used over the last 10 years may or may not work in the next 10.