Is TIAA Really Different? Universal Life Ins

[frugalscholar]

This is my very first question, though I have been reading for quite some time. Thanks to all for good sense, financial and otherwise.

About 2/3 of my retirement stash is in TIAA. I was recently assigned a new "adviser." I mentioned that I had built up a large amount of cash (a mistake?) that was sitting in a high-yield savings acct. He immediately recommended Universal Life Insurance, which he said came with a 4.5% yield (less state tax). When I asked about commissions, he said "No commissions. We're TIAA. We're different."

He basically said it was a no-risk way to get higher interest than what is available elsewhere. I later read that Universal Life Insurance cannot be sold as an investment. But the adviser came pretty close. He said that most of his clients use it as a cash-generating vehicle.

Is this a Run, Don't Walk situation? I am 60 and my spouse is 62 if that makes any difference.

Thank you for any help.

 

[nun]

This is my very first question, though I have been reading for quite some time. Thanks to all for good sense, financial and otherwise.

About 2/3 of my retirement stash is in TIAA. I was recently assigned a new "adviser." I mentioned that I had built up a large amount of cash (a mistake?) that was sitting in a high-yield savings acct. He immediately recommended Universal Life Insurance, which he said came with a 4.5% yield (less state tax). When I asked about commissions, he said "No commissions. We're TIAA. We're different."

He basically said it was a no-risk way to get higher interest than what is available elsewhere. I later read that Universal Life Insurance cannot be sold as an investment. But the adviser came pretty close. He said that most of his clients use it as a cash-generating vehicle.

Is this a Run, Don't Walk situation? I am 60 and my spouse is 62 if that makes any difference.

Thank you for any help.

Do you need life insurance? It sounds fishy to me. TIAA is a good company, but I've always followed the practice of keeping insurance and investing separate.

 

[pb4uski]

If you need life insurance then perhaps it might be a play but not many 60-62 year olds need life insurance. You will get your 4.5% but that will be reduced by cost of insurance charges for life insurance that you don't need and might even be overpriced as a way of making up for them being able to offer such an attractive interest rate.

While I think TIAA is a fine company, I would be cautious. You could ask for an illustration and that would show how your 4.5% gets reduced by cost of insurance charges, and any expense charges or any admin fees.

 

[brewer12345]

TIAA rally is different, IMO, but if you do not need life insurance you should not put your cash in this.

 

[nun]

TIAA rally is different, IMO, but if you do not need life insurance you should not put your cash in this.

TIAA are a low cost insurer and I like their annuity products, but I agree that this sounds like the adviser might be trying to sell the wrong product.

 

[nash031]

TIAA are a low cost insurer and I like their annuity products, but I agree that this sounds like the adviser might be trying to sell the [-]wrong[/-] product that makes him the most scratch.

Fixed?

 

[frugalscholar]

Thanks everyone. The advisor gave me the creeps--as have the last 3 to whom I've been assigned, unfortunately. He insisted he would get no commission from the product, but it was nonetheless a pretty hard sell.

 

[nun]

Thanks everyone. The advisor gave me the creeps--as have the last 3 to whom I've been assigned, unfortunately. He insisted he would get no commission from the product, but it was nonetheless a pretty hard sell.

Does this advisor work for TIAA-CREF? I've never experienced a hard sell from TIAA.

 

[frugalscholar]

Yes he does. I had a wonderful advisor about 8 yrs ago, who steered us through the 2008 crash. Since then, our assets have risen and we are now assigned to a "wealth manager" (we don't have as much as that makes it sound--we are teachers in a poor state!). Those advisors have all pushed various products, including 1.5% advising services. I will never leave TIAA because of the TIAA Traditional, but we have some money in Vanguard also. I may try their advisors.

 

[nun]

Yes he does. I had a wonderful advisor about 8 yrs ago, who steered us through the 2008 crash. Since then, our assets have risen and we are now assigned to a "wealth manager" (we don't have as much as that makes it sound--we are teachers in a poor state!). Those advisors have all pushed various products, including 1.5% advising services. I will never leave TIAA because of the TIAA Traditional, but we have some money in Vanguard also. I may try their advisors.

You have advisors in this forum....what are your income/investment goals. A mixture of a TIAA-Traditional annuity and the variable annuity accounts is a nice way to fund retirement.

 

[ERhoosier]

Looks like current yield on TIAA's Variable Universal Life Insurance (as of Mar 31st) is 4.25%. But that's on the cash value of the policy. Typically in Universal Life plans, your initial premiums buy life insurance plus some cash value.

https://www.tiaa-cref.org/public/pr...ed/apply/policies/intelligent_life_rp_ol.html

https://www.tiaa-cref.org/public/pdf/performance/ivul_performance.pdf

And some info on Variable Universal Life Insurance in general. IRS says you must buy a certain amount of life insurance for a given size premium payment. IOW you cannot allocate all your 'insurance premium" payment to your VUL plan investment accounts.
https://en.wikipedia.org/wiki/Variable_universal_life_insurance

 

[frugalscholar]

Thanks to all once more. I have lots of other questions and am amazed by the generosity of people on this forum.

The comments of ERhoosier suggest to me that I should stay far, far away from the product--as I don't really understand it. My general rule in life is that if people are trying to sell you something, it's usually for their benefit (that's depressing, no?).

Anyway, thanks again to all and I will be asking my next question--about Roth403bs--shortly.

 

[pb4uski]

If it is like most universal life products, understanding it is pretty easy. It is basically similar to a savings account combined with a term life insurance policy. Your premiums add to the account, interest adds to the account and there are deductions for insurance premiums, expenses and administration fees.

If it is a variable universal life product then it is a bit more complicated but in essence a mutual fund account combined with a term life insurance policy.

For both types, cost of insurance increase as you get older.

 

[Chuckanut]

Those advisors have all pushed various products, including 1.5% advising services. I will never leave TIAA because of the TIAA Traditional, but we have some money in Vanguard also. I may try their advisors.

The fact that you feel like you are being pushed into something or otherwise manipulated into making a certain decision is a huge warning sign. Trust your instincts.

The comments of ERhoosier suggest to me that I should stay far, far away from the product--as I don't really understand it.

One test is to get a copy of the annuity/insurance/whatever agreement - the entire contract - and see if you can read and understand it. If it's 30 pages of stuff you can't keep track of, then how do you know what you are [-]investing in[/-] putting your money into?

 

[ERD50]

A little side-track, but I couldn't help myself:

.. My general rule in life is that if people are trying to sell you something, it's usually for their benefit (that's depressing, no?).
...

NO! (IMHO ).

It's what makes the world go around. It is invigorating and exciting, not 'depressing'! In general, we work to develop a skill (manual or mental ability) so we can 'sell it'. Getting paid for our skill or the product we produce is a great motivator. The open market places a value (or not) on these products/skills accordingly.

Some people will misrepresent those products/skills, or try to convince others they need them, whether they really do or not. It's our responsibility to understand that, and apply the 'buyer beware' approach.

But what kind of world would we live in if there was no personal benefit to the work we do? I think that would be a depressing world.

Carry on.

-ERD50

 

[FinanceDude]

TIAA-Cref is a good company. However, they are an insurance company first and foremost. The fact he is pushing it so hard means he gets a bonus or something to sell it. Life insurance, no matter what kind, is NOT an investment, NOT a savings account, Not "the bond portion of your asset allocation", etc. It IS life insurance. Anyone who states otherwise is a liar.........

 

[pb4uski]

I guess that I am a liar then because I consider my 36 year old whole life policy that increased in value by 4.65% last year (IRR considering beginning and ending CSV and premiums paid) and has an IRR of 5.07% over the 36 years I have owned it (ending CSV in relation to premiums paid) as being part of my fixed income allocation. I have pretty much ignored the life insurance aspects once my net worth grew to the point that I no longer needed life insurance. From that point on, whether I keep it or not is based solely on its investment characteristics.

Not that I recommend whole life to people but I think your post is to broad brush.

 

[ERhoosier]

I guess that I am a liar then because I consider my 36 year old whole life policy that increased in value by 4.65% last year (IRR considering beginning and ending CSV and premiums paid) and has an IRR of 5.07% over the 36 years I have owned it (ending CSV in relation to premiums paid) as being part of my fixed income allocation. I have pretty much ignored the life insurance aspects once my net worth grew to the point that I no longer needed life insurance. From that point on, whether I keep it or not is based solely on its investment characteristics.

Not that I recommend whole life to people but I think your post is to broad brush.

I'm also holding on to an old whole life policy for same reason. Investment decisions must be made from situation today going forward. Can't turn back the clock

FWIW- I took FinanceDude's post to be in ref to OP buying a NEW policy purely as an investment. Didn't think he was talking about situations like ours.

 

[pb4uski]

I don't doubt that may be the case, but the post wasn't specific enough to tell.