- Joined
- Feb 19, 2009
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I have a variable universal life insurance policy. Many of you will have used Larson Financial, and this was a product that they pushed. I think signing up for this product was a little like signing the consent form for surgery. I thought I had an understanding of it, but really didn't. Could I go back in time I likely wouldn't repeat the deal, but continuing with this product won't turn out too poorly. I am youngish, a high earner, will likely have a high income in retirement, am an excellent saver, max out my 401(k) and roth IRA, have a well stocked emergency fund, fund my child's 529, live a modest lifestyle, have a long term horizon, hope to have a large estate for my heirs, and would rather pay a private company commissions than the government more taxes. (I already pay the fair shares of many taxpayers. I began making an attending level salary after the current administration raised taxes and phased out nearly all of the deductions previously available.)
My advisor did let me know that I wouldn't break even for 8-10 years. But when I read the quarterly statements I was surprised all over again, so I called him up and had him walk me through it once again. The first year had the highest fees. The next 9 years had smaller fees. Years 11-20 have very small fees. After 20 years of payments the cash value would have built up enough that I would no longer have to pay any premiums, yet it will continue to accumulate. While my financial advisor received a commission for the product, he did not get to bill me any account under management fee for this money, which would have been much more lucrative long term.
My VUL is through John Hancock.
More recently I have begun managing my own investments and shed the complicated asset allocation recipe of his company by switching to a 3 fund version, with Total US 40%, Total Foreign stocks 40%, and US Bond 20%. I have my reasons for being so aggressive. Within the VUL I have a nice S&P 500 index fund 0.25 ER (in lieu of total US which had a much higher expense raio). A total foreign stock market fund with 0.36 ER. And finally a total US bond fund with a 0.25 ER. This raises my average ER to only 0.17 when accounting for my 401(k) and roth IRA.
The part of the VUL that gives me the most angst is long term nature of this relationship. In order for this to not have been a waste of money I need to remain a high earner for 18 more years.
The most comforting part is also the long term nature of this relationship. I have a vehicle for transferring wealth to my heirs without concern for taxes (just fees and commissions).
My advisor did let me know that I wouldn't break even for 8-10 years. But when I read the quarterly statements I was surprised all over again, so I called him up and had him walk me through it once again. The first year had the highest fees. The next 9 years had smaller fees. Years 11-20 have very small fees. After 20 years of payments the cash value would have built up enough that I would no longer have to pay any premiums, yet it will continue to accumulate. While my financial advisor received a commission for the product, he did not get to bill me any account under management fee for this money, which would have been much more lucrative long term.
My VUL is through John Hancock.
More recently I have begun managing my own investments and shed the complicated asset allocation recipe of his company by switching to a 3 fund version, with Total US 40%, Total Foreign stocks 40%, and US Bond 20%. I have my reasons for being so aggressive. Within the VUL I have a nice S&P 500 index fund 0.25 ER (in lieu of total US which had a much higher expense raio). A total foreign stock market fund with 0.36 ER. And finally a total US bond fund with a 0.25 ER. This raises my average ER to only 0.17 when accounting for my 401(k) and roth IRA.
The part of the VUL that gives me the most angst is long term nature of this relationship. In order for this to not have been a waste of money I need to remain a high earner for 18 more years.
The most comforting part is also the long term nature of this relationship. I have a vehicle for transferring wealth to my heirs without concern for taxes (just fees and commissions).