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Participating Permanent Life Insurance

2,235 Views | 12 Replies | Last: 5 yr ago by Baby Billy
CSPAggie05
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I was talking to a financial adviser and he recommended getting a Participating Permanent Life Insurance policy through Northwestern Mutual. I'm already maxing out a Roth for my wife and I and putting enough into 401k to get full company match.

He was talking about using the PPLI as a sort of emergency fund for retirement. He mentioned keeping most of the other retirement vehicles in the market to maximize returns and use the PPLI funds when/if the market turns for a year or two during retirement.

Would like to get others opinions if this is something I should look into. Of course he mentioned that Northwestern Mutual has the highest/most consistent contributions of any participating policies.
Stive
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https://texags.com/forums/57/topics/3018547/1#discussion

Go to page 2 and 3 of that thread. Most of it is about kid's policies but it derailed into some permanent discussions.



Oh....and get your popcorn ready. Permanent insurance discussions are the bat signals for some of this board's most hardcore opinions.
CSPAggie05
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Below is a quote from the thread you sent me to and is exactly what he adviser was pushing. Using this as a proxy for bonds while keeping most assets in the market. Pretty much ignore bonds all together. Trying to get feedback on others that are doing this.

"He's already maxing 401k and contributing to a taxable account. We're increasing his equity exposure and using WL as a proxy for the bonds over time. The return won't be what his 401k is but it also won't drop when his 401k drops...he can let the market recover and live off the cash in this. Same lifestyle but less risk."
nactownag
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Deleted comment. Immature answer.
Stive
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While there is a TON of other info that should be gathered or known by people on this before that recommendation can be bashed or supported, one difference between your original post and the quote you made after reading that other thread I linked is that the guy in the other thread was already maxing his 401K (not just getting the match). You're not doing that it seems (you said you're getting the match and that's it). That would be red flag #1 (and I'm someone that doesn't mind recommending permanent life insurance where it fits).


This thread will end up getting slogged down with all sorts of stuff, so here's an option on allowing the guy to earn the business with math or shoot himself in the foot with math: have him run a plan that shows you using the permanent life insurance he's suggesting versus an option of just continuing to do what you're doing. Scrutinize the heck out of it....ask tons of questions....check his assumptions on rate of returns, etc. If the math works out, go for it. If it doesn't or you think he's not comparing the alternatives fairly, then don't. (disclaimer, if you're using it for accumulation purposes it typically should be after you max the 401k)


CSPAggie05
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Thanks for the quick reply. This is the type of stress test I'm looking for to see what others would recommend. His recommendation was to put enough in 401k to get match, then max the 2 Roth IRA, then the insurance.

My initial thought that that's a long time to tie up money before you get the return. Seems more reasonable to use that money as general investment and then move to a safer alternative closer to retirement. I'm 35 so planning for retirement disbursements is what the discussion was about.
Stive
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nactownag said:

Deleted comment. Immature answer.

Thought that seemed a bit hardcore for you but I was going to roll with it.
cheeky
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Talk to NWM agent and you're going to be pushed for PPLI. Life insurance is their business. Putting themselves out there as financial advisors is dubious. Ask him what his commissions will be over the life of the policy. It's huge and no amount of slight of hand of their clever presentations will overcome that reality. Level term with an annuity is a better insurance solution in my experience. Family protection while you need it and more of your dollars going into tax-deferred accumulation in a low load vehicle rather than the agent's pocket.

Permanent life has a place, but too often they are sold as retirement accounts without explaining the adverse consequences should the policy lapse before death with outstanding policy loans. Think about what that means. Good luck with your decision.
aggiebrad94
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Unless you have a cash flow issue, I would go back to max out the 401(k) after the Roth IRAs. THEN, you can look at life insurance.
Wrighty
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I would be very cautious about buying a product, based on the advice of someone who gets a large commission from you buying said product.
investorAg83
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Wrighty said:

I would be very cautious about buying a product, based on the advice of someone who gets a large commission from you buying said product.


You've made your opinion known. Im curious if you even know how it works much less how the compensation of it works?
Wrighty
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I don't know is the OP's adviser is paid. Wouldn't the ideal situation be that the OP has an adviser that is unbiased who can recommend if this insurance is needed or not (Like a flat fee adviser)? And if this "flat fee adviser" recommends the insurance as a good path, then the next step of specific insurance options are looked at?

It seems like having an adviser who is rewarded differently based on the different products chosen could potentially incentivize the adviser to recommend unnecessary products and that it muddies the water?
Stive
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Not a bad concept. Except now the insurance just cost you more to get. You may feel better about it, but you paid extra for it.

If you're good with that....so be it.
Baby Billy
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aggiebrad94 said:

Unless you have a cash flow issue, I would go back to max out the 401(k) after the Roth IRAs.then max out your HSA, then fund a variable annuity THEN, you can look at life insurance.


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