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Old 08-11-2010, 09:36 AM   #61
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Yes, I suppose technically you're supposed to be a Parent, Teacher or sometimes a Student but they didn't ask and I didn't tell. I suspect they appreciate the funds and the headcount and are not about to turn down the gift horse so no practical problem for us. For you either, I suspect.
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Old 08-11-2010, 09:41 AM   #62
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Very good point! Since they didn't ask and you don't have to tell I'll add that option to my list.
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Old 08-11-2010, 09:43 AM   #63
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Yes, I suppose technically you're supposed to be a Parent, Teacher or sometimes a Student but they didn't ask and I didn't tell. I suspect they appreciate the funds and the headcount and are not about to turn down the gift horse so no practical problem for us. For you either, I suspect.
Plus, if they want my school taxes, they'd better be ready to accept my input and participation if I want to provide it...
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Old 08-11-2010, 09:59 AM   #64
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Thanks Ron for the encouragement. Last year the fees were 'only' $1400. But as the account grows the fees will just keep getting bigger and bigger.

The money paid to Ameriprise so far is a sunk cost and I'm not going to fret about it. I am, however, setting a goal that by December 31, 2010 I will have a solid grasp of intelligent investing and will be ready to execute on our FIRE plan.

Lisa.... good to see that you recognize that the fees etc. are sunk costs... so all you should do now is see where the big cost are (looks to me like the VUL, which I do not know what it is...)... and get rid of them as quickly as you can with as little costs as you can... (taxes, transfer fees etc.)...

You might want to look to see how much gain you have in your various mutual funds if any.... if you do not have any gain... sell them, get a check and deposit it in Vanguard or Fidelity... if you just shrink your accounts but still have money left I do not think you are hit with a fee...

IOW, shrink it down over time... no fee... when it is time to close... you just close out what is left...
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Old 08-11-2010, 10:11 AM   #65
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We are in a negative position on virtually every Ameriprise fund. So taking the loss this year is something we're considering.

As for the VUL, there is a $5290 surrender charge. That fee goes down slightly each year for the next five years.

My thought right now is to just take the hit and move on, but I think it's because I am just so ANNOYED that I've let the wool be pulled so completely over my eyes....but as someone said a couple of days ago...it is simply the cost of tuition.
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Old 08-11-2010, 10:15 AM   #66
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As for the VUL, there is a $5290 surrender charge. That fee goes down slightly each year for the next five years.
And does that charge disappear after five years?

With a $40K cash value that's a current surrender charge of about 13%. Hate to say it but with a charge that high you're probably better off leaving the money there until it goes away (obviously, not adding any more). With a 13% surrender charge going away in five years, you'd have to outperform these funds by 2.6% a year on your existing balance to break even with the withdrawal.
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Old 08-11-2010, 10:18 AM   #67
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Very good point! Since they didn't ask and you don't have to tell I'll add that option to my list.
actually it may not be as shadowy as that......from wikipedia....
Groups going by the PTA acronym are part of the National Parent Teacher Association (National PTA), a non-profit fomerly based in Chicago (now in Alexandria, Virginia) that was founded on February 17, 1897, with membership open to anyone who believes in its mission and purposes

So.......it's probably a naming problem....should be PTFA or PTSFA.....
for Friends.
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Old 08-11-2010, 10:22 AM   #68
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DW had a roth with an FA. he would call about once a year and "move her into some better positions."

when we went to rollover the money to VG, i started looking at the funds she was in and got disgusted with all the back end loads of 3% or more. it's a hard pill to swallow, but get it over with.

except for the VUL, as z says, 13% is significant...
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Old 08-11-2010, 10:35 AM   #69
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Great analysis Ziggy. This is exactly why I've committed to not making any moves for at least 60 days. I need far more education to be able to make informed decisions.

To answer the surrender charge question:
Policy went into effect June 2006.

Years 1-5 5290
6 - 5290
7- 4232
8 - 3174
9 - 2116
10 - 1058 (end of year 10 is zero)

So it will be June 2017 before the fee is zero.

So having read the full disclosure, there is sufficient cash value to stop making the premium payments.
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Old 08-11-2010, 10:46 AM   #70
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So it will be June 2017 before the fee is zero.
You have almost seven years before it's zero. Amortized over that length of time, withdrawing now with a 13% hit would cost you about 1.9% a year. So then it's a matter of looking at the funds you're in now and seeing if you think you could do at least 1.9% better per year with the money elsewhere given better performance and/or lower fees.

And that assumes no ongoing "account maintenance fees" -- if any of those are in the picture, the amount of outperformance you need will be reduced accordingly.

Having said all that, if the math winds up making it a close call, I'd probably just eat whatever small difference there might be and make a clean break. But that's just me -- wash my hands of it, consider it a lesson learned and move on.
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Old 08-11-2010, 10:49 AM   #71
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My thoughts too...just be done with them. However, it's not that easy. We also have two REITs with them that mature in 2012 and 2013, so we're going to be with them for at least that long.
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Old 08-11-2010, 10:50 AM   #72
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BTW Ziggy, LOVE your dog! And all of dad's family is in the hill country, we absolutely love it there.
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Old 08-11-2010, 11:06 AM   #73
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Great analysis Ziggy. This is exactly why I've committed to not making any moves for at least 60 days. I need far more education to be able to make informed decisions.

To answer the surrender charge question:
Policy went into effect June 2006.

Years 1-5 5290
6 - 5290
7- 4232
8 - 3174
9 - 2116
10 - 1058 (end of year 10 is zero)

So it will be June 2017 before the fee is zero.

So having read the full disclosure, there is sufficient cash value to stop making the premium payments.
I would stop the premium payments, let the cash value pay them, wait until the end of the surrender, and then 1035 it to a low cost annuity.

One thing to find out: Sometimes a VUL will include a liquidity feature that allows you to remove a certain percentage of it before the surrender period ends. This is quite common with VAs. Look and see if there's a "penalty-free" amount of the cash value you can 1035 without a penalty. There might not be, but its worth a phone call or a little detective work.

I have YET to see a VUL that actually "works". The idea of "protecting your family while growing your coverage through equities" sounds good on paper, but not in reality...........
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Old 08-11-2010, 11:08 AM   #74
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When considering whether to keep the VUL or not, keep in mind that:

1) The mortality charges (what you pay for the death benefit) are usually much higher for VULs than they are for term life insurance policies.

2) Typically VULs charge you fees in the order of 1-2% of the cash value each year in addition to the expense ratio of the underlying funds.

So, if you pay $250 a month for the death benefit (and from what you said above, you may not really need it since you already have about $1M in life insurance coverage from your work and DH's work), then that's $3,000 a year you are pouring down the drain... Second, if you pay a 1.5% annual fee for the VUL, then that's another $600 a year you pay in fees in addition to the expense ratios for the underlying funds (which are themselves pretty high, I'm sure).

So you should weight all these costs with the surrender charges before making a decision.
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Old 08-11-2010, 11:14 AM   #75
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Drives me nuts when Amerprise reps sell insurance as a retirement funding mechanism..................
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Old 08-11-2010, 11:18 AM   #76
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Drives me nuts when Amerprise reps sell insurance as a retirement funding mechanism..................
That's how they sold it to us. We were maxing out our retirement accounts, and it was a way for us to save more retirement money in a tax-deferred account. Turns out, we never, ever made any money with the VULs to defer taxes on...

But the glossy brochure sure looked pretty!!!
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Old 08-11-2010, 11:21 AM   #77
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That's how they sold it to us. We were maxing out our retirement accounts, and it was a way for us to save more retirement money in a tax-deferred account. Turns out, we never, ever made any money with the VULs to defer taxes on...
And the thing is, from the standpoint of additional tax deferral *and* (in some states) asset protection, once you've maxed out all 401K and IRA options, the combination of term life insurance and a low-cost variable annuity (such as Vanguard's) is ***much*** better than any VUL product I've seen.
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Old 08-11-2010, 11:31 AM   #78
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And the thing is, from the standpoint of additional tax deferral *and* (in some states) asset protection, once you've maxed out all 401K and IRA options, the combination of term life insurance and a low-cost variable annuity (such as Vanguard's) is ***much*** better than any VUL product I've seen.
Actually, building up a non-qualified tax-efficient portfolio is the way I would proceed.

Ultra High Net Worth folks buy a lot of cash value insurance, but use it as an estate planning tool. Those folks are usually $20 million and above..........so they have estate planning issues in many cases. To apply that same mentality to folks under the estate tax limits is not being a fidcuciary...........
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Old 08-11-2010, 11:38 AM   #79
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Actually, building up a non-qualified tax-efficient portfolio is the way I would proceed.
I would agree in for most folks, but that's why I qualified it with the comment about asset protection (and it's relevant for folks already stuck in a VUL product). That's particularly true for high-worth individuals and folks in occupations likely to be sued. For example, here in Texas (also Florida and Oklahoma) there is a virtually unlimited protection from judgments and creditors in products like whole life, VULs and annuity products. Taxable brokerage accounts are vulnerable to being seized here, though.

If asset protection was a major concern to me, the VA might make some sense once other protected accounts like IRAs and 401Ks were maxed, but I don't think VUL *ever* does. Plus at least a low cost VA is a reasonable "escape hatch" for those already trapped in "VUL Hell" as Lisa is.

(Having said that, for estate planning under the estate tax exemption limits, there aren't many better deals than the step up in basis for appreciated stock that you get from stocks held for a long time in an ordinary taxable account.)
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 08-11-2010, 12:07 PM   #80
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I would agree in for most folks, but that's why I qualified it with the comment about asset protection (and it's relevant for folks already stuck in a VUL product). That's particularly true for high-worth individuals and folks in occupations likely to be sued. For example, here in Texas (also Florida and Oklahoma) there is a virtually unlimited protection from judgments and creditors in products like whole life, VULs and annuity products. Taxable brokerage accounts are vulnerable to being seized here, though.

If asset protection was a major concern to me, the VA might make some sense once other protected accounts like IRAs and 401Ks were maxed, but I don't think VUL *ever* does. Plus at least a low cost VA is a reasonable "escape hatch" for those already trapped in "VUL Hell" as Lisa is.

(Having said that, for estate planning under the estate tax exemption limits, there aren't many better deals than the step up in basis for appreciated stock that you get from stocks held for a long time in an ordinary taxable account.)
Folks in occupations likely to get sued should have proper E&O or malpractice insurance to cover them. Similarly, folks should have a minimum of $2 million in umbrella coverage as part of their financial house.............
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