Multi Index Universal Life Insurance

[Maxburn]

First post here, please be gentle!

I have a financial adviser that I pay to handle my retirement financials and I think we have done some great things for my future but now I'm searching for more options to retire early.

She brought up a Riversource multi index universal life insurance package. In general the thing is too complex for me to comprehend but I'm researching it and finding a lot of negativity. I like some of the long term care benefits it has and of course the ability to use it as an additional vehicle for retirement. What are your thoughts?

I have around $200/mo that I feel I should be doing something with to further my early retirement. Ideas welcome!


My situation
-I'm single and 42, earning around 70k/y in a low cost of living area.
-Mortgage is being overpayed currently, roughly on track to pay it off by 63.
-I have a substantial IRA from previous employment 401k that is basically just sitting and growing, no contributions.
-I have a separate Roth IRA that I am contributing the maximum to.
-I have medium term savings investments that I am contributing to that is being managed and has a decent amount of funds in it to take care of projects like new roof for the house, new vehicle etc.
-I keep a good amount of money in checking to take care of unexpected things, I could live for six months off of checking if I had to.
-I have health, vision, dental etc through work.
-Disability insurances through multiple places adding up to something like 90% current income.
-I started a new 401k from my employer but for overhead reasons (small company) they decided they can't do that any more and are ending it. I was putting in 5%. This is the recent change that has me searching for new options.
-Before the 401k caved in I was on track to retire around 63 with over 80% income.

 

[REWahoo]

She brought up a Riversource multi index universal life insurance package. In general the thing is too complex for me to comprehend but I'm researching it and finding a lot of negativity. I like some of the long term care benefits it has and of course the ability to use it as an additional vehicle for retirement. What are your thoughts?

Your negativity is well-placed. Anything "too complex to comprehend" should be avoided.

 

[travelover]

You will probably find that your financial advisor has not been looking our for your best interests. Trying to sell you this dog is a good tip off. The good news is that you have plenty of easy options. Stick around.

 

[Maxburn]

Right, I agree. I'm looking for options though.

As I have moved and am dealing with this financial adviser long distance I might be better off finding a new financial adviser. How do I go about finding someone that I can trust?

 

[Walt34]

How do I go about finding someone that I can trust?

Look in the mirror. Read a few books, set up a "couch potato portfolio" with 3 - 5 index funds, and you're done.

 

[travelover]

Right, I agree. I'm looking for options though.

As I have moved and am dealing with this financial adviser long distance I might be better off finding a new financial adviser. How do I go about finding someone that I can trust?

Many, if not most of us just use low cost index funds from Vanguard and Fidelity. Vanguard will even assign you a financial advisor for 0.3%, though I don't think it is worthwhile on an ongoing basis. You can also find a fee only advisor that will help put you on autopilot and not sell you anything. The good news is that it is not hard and there are plenty of people that will help you here, or at the Bogleheads Forum.

 

[Travelwanted]

Right, I agree. I'm looking for options though.

As I have moved and am dealing with this financial adviser long distance I might be better off finding a new financial adviser. How do I go about finding someone that I can trust?

Simple...Vanguard.

 

[rodi]

Welcome Maxburn.

Your first post mentioned a few things that will probably trigger strong responses from the members here... 1) a financial advisor that would suggest this kind of "investment" and 2) a compex, expensive, fee-laden investment like the one proposed. Please take the responses as negative to the FA and the universal life policy, not as negative to you.

I agree completely with ReWahoo that any investment that is too complicated to understand is one to avoid. Especially when there are plenty of non-complex investments that perform well.

You're in a good position of being able to break from your FA because of the geographic change... Take that opportunity.

As Walt34 mentioned - you can do this yourself. Read "Millionaire Teacher", google "Couch Potato Portfolio" or "Lazy Portfolio"... You invest in a few index funds and rebalance once a year. Easy peasy. But if you want to use a service that does it for you (for a fee) Vanguard and Schwab both have low cost portfolio management. So does Betterment (robo-advising). You won't get a person to stroke your ego and hold your hand - but you'll get quality, low fee, low expense ratio investments.

 

[braumeister]

Earlier thread about this here.

Another opinion.

 

[nun]

You'll get the same advice from 99% of folks here.

Don't combine investing and insurance.

Ditch the FA (the indexed life insurance recommendation proves she is no good) and DIY with someone like Vanguard.
Insurance products do allow for taxed deferred growth (maybe that's the idea), but why commit yourself to such an expensive way to save when the 401k might start again. Keep the ROTH contributions going and whatever you'd have saved to the 401k use to pay down the mortgage or save to a regular investment account.

As a single 42 year old you don't need life insurance and if you worry about long term care then buy a long term care policy or defer SS.

edit:
I see Riversource is affiliated with Ameriprise....so another reason to run away.

 

[Big_Hitter]

if you are single why do you need LI?

 

[nun]

if you are single why do you need LI?

It could be for the tax deferred gains because of not having access to a 401k, still that's a poor reason given the expense and contract required.

 

[Maxburn]

It could be for the tax deferred gains because of not having access to a 401k, still that's a poor reason given the expense and contract required.

This plus there is a cheap rider for long term care if/when I am unable to live on my own. My grandmother is in a home and running out of money, I don't want that to happen to me.

 

[Maxburn]

Earlier thread about this here.

Another opinion.

Thank you! Already found those via google, that's how I got here out of the blue, good reads.

 

[Maxburn]

Welcome Maxburn.

Your first post mentioned a few things that will probably trigger strong responses from the members here... 1) a financial advisor that would suggest this kind of "investment" and 2) a compex, expensive, fee-laden investment like the one proposed. Please take the responses as negative to the FA and the universal life policy, not as negative to you.

I agree completely with ReWahoo that any investment that is too complicated to understand is one to avoid. Especially when there are plenty of non-complex investments that perform well.

You're in a good position of being able to break from your FA because of the geographic change... Take that opportunity.

As Walt34 mentioned - you can do this yourself. Read "Millionaire Teacher", google "Couch Potato Portfolio" or "Lazy Portfolio"... You invest in a few index funds and rebalance once a year. Easy peasy. But if you want to use a service that does it for you (for a fee) Vanguard and Schwab both have low cost portfolio management. So does Betterment (robo-advising). You won't get a person to stroke your ego and hold your hand - but you'll get quality, low fee, low expense ratio investments.

Thank you. She started me out pretty well I thought and I'm the one asking for other solutions to enhance retirement. Still I would like to work with someone local to look my entire situation over, including reviewing tax impacts, on a little more personal level and I'm not adverse to paying for it. I will look those articles up and take some time.

You'll get the same advice from 99% of folks here.

Don't combine investing and insurance.

Ditch the FA (the indexed life insurance recommendation proves she is no good) and DIY with someone like Vanguard.
Insurance products do allow for taxed deferred growth (maybe that's the idea), but why commit yourself to such an expensive way to save when the 401k might start again. Keep the ROTH contributions going and whatever you'd have saved to the 401k use to pay down the mortgage or save to a regular investment account.

As a single 42 year old you don't need life insurance and if you worry about long term care then buy a long term care policy or defer SS.

edit:
I see Riversource is affiliated with Ameriprise....so another reason to run away.

The 401k is guaranteed to not start again at the company I am with now. I'm happy here for a variety of other reasons though so I don't see this changing soon. Good call on the mortgage though, that's easy enough. And you all have something against Ameriprise here too?

 

[travelover]

..........And you all have something against Ameriprise here too?

Oh, yea. Use the Google search function to search the site for Ameriprise.

 

[nun]

The 401k is guaranteed to not start again at the company I am with now. I'm happy here for a variety of other reasons though so I don't see this changing soon. Good call on the mortgage though, that's easy enough. And you all have something against Ameriprise here too?

Yes, Ameriprise have a bad reputation here because of a number of court cases and the fees they charge.

I would not lock yourself into any whole life or universal life type of product even if you don't have access to a 401k. The tax deferred gains are outweighed by the expense and the contract. If you are worried about long term care then buy long term insurance.

This board will be almost unanimously against the indexed life insurance product you are considering because keeping fees to a minimum and control over funds take priority.

 

[Maxburn]

Oh, yea. Use the Google search function to search the site for Ameriprise.

Yes, doing that and seeing all the comments. Thing is I thought she had excellent advice up to now in identifying gaps in insurance and making sure the whole package fit with the goals I specified, making sure there is a plan. I can see where my asking what else I can do lead to the MIULI. When I first went to her I was just shoving money in an ING savings account and forgetting it so I don't look back on my time there as bad. Saving the money has never been my problem, figuring out how to maximize it has.

I'm pretty good on forums and reading though, guess I'll be spending time here.

 

[travelover]

I'd add that there is nothing wrong with investing for retirement in an after tax account, especially after you have maxxed out your Roth. You can invest in a tax managed fund if you don't want it to throw off earnings, or even invest in a non-dividend paying stock like Berkshire. At this point I wish more of my stash was after tax as I'll be paying 25% taxes on it as I pull it out.

 

[travelover]

Yes, doing that and seeing all the comments. Thing is I thought she had excellent advice up to now in identifying gaps in insurance and making sure the whole package fit with the goals I specified, making sure there is a plan. I can see where my asking what else I can do lead to the MIULI. When I first went to her I was just shoving money in an ING savings account and forgetting it so I don't look back on my time there as bad. Saving the money has never been my problem, figuring out how to maximize it has.

I'm pretty good on forums and reading though, guess I'll be spending time here.

It is important to understand exactly what you are paying to be with an advisor. Not only is there the wrap fee that they charge you on the value of the whole portfolio, but they can also profit from steering you into funds with high fees. These fees can really add up, especially as they compound over time. A safe withdrawal rate when retired is around 4%. If you are paying someone 1% or more, they are eating up 1/4 of your retirement income.

 

[6miths]

Permanent life insurance is a loser unless you die in the first few years of the policy or you are the one selling it. If you were counting on dying in the first few years of the policy then you still would have been better to go with term life insurance as you would have been able to buy 10 times as much for the same cost. If you have 20k a month in excess then it might be worth considering for a portion of it. For $200 a month, not to be disrespectful but I'm surprised your FA is even interested unless it is to get you on the hook for when you do have more. These policies usually get surrendered at a loss or turn into good money after bad propositions. Run away!

 

[nun]

Yes, doing that and seeing all the comments. Thing is I thought she had excellent advice up to now in identifying gaps in insurance and making sure the whole package fit with the goals I specified, making sure there is a plan. I can see where my asking what else I can do lead to the MIULI. When I first went to her I was just shoving money in an ING savings account and forgetting it so I don't look back on my time there as bad. Saving the money has never been my problem, figuring out how to maximize it has.

I'm pretty good on forums and reading though, guess I'll be spending time here.

What insurance did gaps do you have?.....you are single with no kids so you don't need any life insurance, just car, health and home and maybe long term care if that worries you.

How has your FA organized your finances, what are the investments, what are the expenses and what does the FA charge? You might go over to http://www.bogleheads.org and ask for an analysis of your arrangements. They have a standard format and lots of people willing to give advice......just like here....or maybe we just like the [-]sound of our own voices[/-] look of our own typing

 

[Maxburn]

What insurance did gaps do you have?.....you are single with no kids so you don't need any life insurance, just car, health and home and maybe long term care if that worries you.

How has your FA organized your finances, what are the investments, what are the expenses and what does the FA charge? You might go over to http://www.bogleheads.org and ask for an analysis of your arrangements. They have a standard format and lots of people willing to give advice......just like here....or maybe we just like the [-]sound of our own voices[/-] look of our own typing

Basically disability. I have it through work but I didn't check out the coverages and how it worked. Overall if I would be in trouble if I had a problem and had to rely on it, so I got some additional coverage (again riversource) to bring my disability income up to something approaching my current salary.

Right then, I think I'll have to take a more hands on approach here and the answer is no to the MIULI.

 

[brewer12345]

Maxburn, I would dump your advisor. If you really feel a need for some outside help, find a fee-only planner who charges by the hour or some other way that is not related to a percentage of your assets. Use them sparingly because the heavy lifting is done. Just keep aggressively saving and investing and you will do fine.


Since you do not have access to a 401k I would continue maxing out the Roth IRA. After that, I would take your excess savings and dump it into a tax efficient fund. Vanguard tax managed balanced fund is an example of an extremely low fee, low tax fund that can serve as a one-and-only fund for a taxable portfolio if you want to keep it simple. Details here: https://personal.vanguard.com/us/funds/snapshot?FundId=0103&FundIntExt=INT

 

[exnavynuke]

Basically disability. I have it through work but I didn't check out the coverages and how it worked. Overall if I would be in trouble if I had a problem and had to rely on it, so I got some additional coverage (again riversource) to bring my disability income up to something approaching my current salary.

Right then, I think I'll have to take a more hands on approach here and the answer is no to the MIULI.

FYI - My company's LTD/STD policies offered are paid in full by employees, which means that all payments made under them are 100% tax free to the beneficiary. So, when collecting disability in that situation, it may only be 60% of your gross pay, but it's 60% of your gross pay and no taxes are taken out of it. No SS, no medicare, no state, no federal. (if the employer pays for it, then the tax situation changes)

For me, that 60% after tax would actually replace 82% of my gross income minus just taxes. If I wasn't working because of a disability, I also wouldn't be contributing to my 401k or HSA (since I would have no income to put into it), so that 60% replacement actually would result in more take home pay than I get when going to work currently.

Even if it didn't though, my budget doesn't utilize 82% of my gross income for necessities, and I expect you would find a similar thing is true for you. Just food for thought on that extra disability insurance.