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Message
re: Northwestern Mutual - Should I?
Posted on 8/21/14 at 4:04 pm to Maderan
Posted on 8/21/14 at 4:04 pm to Maderan
quote:
I think anyone would take a guaranteed 8% after fees and taxes for the next 30 years as a portion of their portfolio. If fact, most insurance companies and pension plans would invest heavily in this right now.
I agree. I've also seen old WL policies that have an IRR of around 8% for the prior 30 years or so. I'm not arguing that is the norm or anything, just that it has happened. If you have a properly structured policy with one of the best companies, it isn't the abortion that many claim it to be.
quote:
Isn't this basically fee refunds based on actual experience versus actuarial expected outcome?
Sort of. The expense ratio is just an expense ratio. You pay company X $1.00 of premium, how much do they take out to take care of expenses and what not. Obviously, if you have a policy with the company with the lowest expense ratio, then they have more money to invest/return to policyholders as a dividend.
Mortality isn't really a refund, seeing as actuaries don't really set it. It is based off of actual company experience. Actuaries just track the rates and set standards/benchmarks. The company that has the lowest number of claims to pay, has the lowest mortality, thus again, more money to invest/pay as dividends.
So, even if investment returns go down, the dividend rate could actually go up if the other two factors are favorable.
1
Posted on 8/21/14 at 4:19 pm to GoCrazyAuburn
Whole Life...
First off, there are maybe three companies out there that I would even briefly consider purchasing it from.
Once we get past that... you know the old saying, if you have 2 quarterbacks you have no quarterbacks? That's how I feel about WL. It tries to serve two masters - life insurance and investment return.
Unless you are very wealthy and need life insurance proeeds to pay an estate tax bill, most people by the time they approach say age 75 or so don't need life insurance any more (or they really only need enough for final expenses), and this is the age where term insurance pretty much is unavailable. Now, at that point, you could cash out the policy. But, considering the costs of the policy, you may well have had better investment results in a non-whole life investment.
First off, there are maybe three companies out there that I would even briefly consider purchasing it from.
Once we get past that... you know the old saying, if you have 2 quarterbacks you have no quarterbacks? That's how I feel about WL. It tries to serve two masters - life insurance and investment return.
Unless you are very wealthy and need life insurance proeeds to pay an estate tax bill, most people by the time they approach say age 75 or so don't need life insurance any more (or they really only need enough for final expenses), and this is the age where term insurance pretty much is unavailable. Now, at that point, you could cash out the policy. But, considering the costs of the policy, you may well have had better investment results in a non-whole life investment.
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