What to do with Northwestern Mutual AC & WL policies

[Loulou]

Hello – I have 3 Northwestern Mutual policies varying in age from 19-23 years, and I would greatly appreciate advice about what to do with them. I no longer need the death benefits for my adult children and do not want to pay premiums anymore. NWM advised an annuity, loan, or decrease in death benefits to pay off all policies. Please let me know if you recommend any of these options or others.

Net Death Benefit: $382,718.00
Annualized Premium: $4,206.72
Last Annual Dividend: $3,456.19
Net Accumulated Value: $139,205.35
Loans: $0.00 (Loan Interest Rate: 8.00% until 1/21, then 5.5%)

29 - Adjustable CompLife / Waiver Premium Benefit
Net Death Benefit: $100,000.00 Decrease: $60,285.00 to eliminate premium
Net Accumulated Value: $30,379.70
Past Year's Accumulated Value Increase: $2,215.82
2020 Dividend: $967.52
Less Cost Basis: $22,993.95
Taxable Gain if Surrendered: $7,385.75
Cash Available for Loan: $29,260.08
Annual Premium: $1,082.36

92 - Adjustable CompLife
Net Death Benefit: $130,826.00 Decrease: $88,751.00 to eliminate premium
Net Accumulated Value: $42,843.62
Past Year's Accumulated Value Increase: $3,499.20
2019 Dividend: $1,139.18
Less Cost Basis: $33,640.40
Taxable Gain if Surrendered: $9,203.22
Cash Available for Loan: $41,803.42
Annual Premium: $1,790.00

68 - Whole Life / Waiver Premium Benefit
Net Death Benefit: $151,892.00 Decrease: $129,347.00 to eliminate premium
Net Accumulated Value: $63,089.18
Past Year's Accumulated Value Increase: $3,702.80
2019 Dividend: $1,349.49
Less Cost Basis: $31,767.93
Taxable Gain if Surrendered: $31,321.25
Cash Available for Loan: $60,547.80
Annual Premium: $1,157.00

 

[Newby]

Hello – I have 3 Northwestern Mutual policies varying in age from 19-23 years, and I would greatly appreciate advice about what to do with them. I no longer need the death benefits for my adult children and do not want to pay premiums anymore. NWM advised an annuity, loan, or decrease in death benefits to pay off all policies. Please let me know if you recommend any of these options or others.

Net Death Benefit: $382,718.00
Annualized Premium: $4,206.72
Last Annual Dividend: $3,456.19
Net Accumulated Value: $139,205.35
Loans: $0.00 (Loan Interest Rate: 8.00% until 1/21, then 5.5%)

29 - Adjustable CompLife / Waiver Premium Benefit
Net Death Benefit: $100,000.00 Decrease: $60,285.00 to eliminate premium
Net Accumulated Value: $30,379.70
Past Year's Accumulated Value Increase: $2,215.82
2020 Dividend: $967.52
Less Cost Basis: $22,993.95
Taxable Gain if Surrendered: $7,385.75
Cash Available for Loan: $29,260.08
Annual Premium: $1,082.36

92 - Adjustable CompLife
Net Death Benefit: $130,826.00 Decrease: $88,751.00 to eliminate premium
Net Accumulated Value: $42,843.62
Past Year's Accumulated Value Increase: $3,499.20
2019 Dividend: $1,139.18
Less Cost Basis: $33,640.40
Taxable Gain if Surrendered: $9,203.22
Cash Available for Loan: $41,803.42
Annual Premium: $1,790.00

68 - Whole Life / Waiver Premium Benefit
Net Death Benefit: $151,892.00 Decrease: $129,347.00 to eliminate premium
Net Accumulated Value: $63,089.18
Past Year's Accumulated Value Increase: $3,702.80
2019 Dividend: $1,349.49
Less Cost Basis: $31,767.93
Taxable Gain if Surrendered: $31,321.25
Cash Available for Loan: $60,547.80
Annual Premium: $1,157.00

When you say reduced face to eliminate the premium are you certain that it's a Reduced Paid Up Policy at that point? Or is the agent saying it's reduced enough to have the dividend cover the premium? If the 2nd one that is never guaranteed and you want to watch it every year to pay any shortfall.

But unless you have a great need for the cash I would do just what he is advising. Keep reduced amounts in force and get rid of the premium. Unless you really have ZERO interest in leaving any money to anyone.

 

[Loulou]

Newby - Thank you very much for your prompt and helpful response!

 

[Lloyds of Lubbock]

Reducing the face to eliminate premium is not a terrible idea, if you stress the policy at a lower div rate.
You could always go rpu at a later date.
If one of these clients became uninsurable, having a policy you can pay into may be very beneficial.
Just another viewpoint

 

[Loulou]

Hello Lloyds of Lubbock – Thank you for responding! I am not sure what you mean by “if you stress the policy at a lower dividend rate.” Are you referring to the option of offsetting payment of premiums with my dividends? I realize that decreasing death benefit for RPU policies is irreversible, so appreciate a chance to review all options before choosing that one.

 

[PA Bill]

Hello Lloyds of Lubbock – Thank you for responding! I am not sure what you mean by “if you stress the policy at a lower dividend rate.” Are you referring to the option of offsetting payment of premiums with my dividends? I realize that decreasing death benefit for RPU policies is irreversible, so appreciate a chance to review all options before choosing that one.

An old whole life policy from a company like that is a very valuable asset. Handle with care!

 

[Lloyds of Lubbock]

You can run the illustration at a lower dividend rate, than the is currently crediting.
So if you reduce the face amount, you can reduce the crediting rate to see if premiums come back.
On some of these it looks as if the dividend is closer or greater than the premium, some of these reductions seem a bit drastic to eliminate premiums.
Also check underwriting classes, if they reduce their face below a certain point can they maintain the uw status.
For example if NML offered best class for policies over a 100k in face, if you reduce below that, will you maintain the best class?
A lot to consider...Good Luck!

 

[PA Bill]

You can run the illustration at a lower dividend rate, than the is currently crediting.
So if you reduce the face amount, you can reduce the crediting rate to see if premiums come back.
On some of these it looks as if the dividend is closer or greater than the premium, some of these reductions seem a bit drastic to eliminate premiums.
Also check underwriting classes, if they reduce their face below a certain point can they maintain the uw status.
For example if NML offered best class for policies over a 100k in face, if you reduce below that, will you maintain the best class?
A lot to consider...Good Luck!

Absolutely, there are gentler ways to turn off the premium without destroying the policy. Of course NML trains their agents to advise this. It gets them off the hook for the big payout!

 

[DHK]

@Loulou -

You have some great assets you've build up within these life insurance policies. The tax benefits of these policies are only going to become more and more valuable the more our government prints money to "stimulate" our economy.

My thoughts: I'd look at doing a "reduced paid up" option on all policies to eliminate any further premiums.

Then, I'd look into leveraging those policies to benefit YOU and enhance your retirement.

This is a book often recommended to agents and consumers alike. Let me summarize this for you: your policies can be worth 3-4x their value as a source of retirement cash flow if that equivalent value was in a 401(k) plan. You'd want to work with an agent on these ideas, but don't surrender your policies. They have exceptional advantages.

Amazon product ASIN B0842YHBT6

 

[Allen Trent]

'd look at doing a "reduced paid up" option on all policies to eliminate any further premiums.

while I like the reduced paid up idea, it has some downsides. When you go reduced paid up, it takes all cash values & makes it paid up. the problem with that is that it takes the liquid Paid Up additions cash value & makes them illiquid by putting all values into the base policy & reduced paid up. this means the only future access is by loan only. not terrible, but it is usually my 2nd or 3rd choice.