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I Think We've Been Taken For A Ride By Axa

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Guest Sierra

Jim-

 

You are so right. When I was at AXA we used to sponsor the new hire orientation every year. We would pay for lunches and do drawings several times a day. It was a 2day event. All you had to do to enter the drawing was fill out an info card. once we got that card we would call and set up appointments and teach the new employees all about their benefits and they were happy because HR didn't have the resources to educate their new employees. I would guess that 50% of the new hires every year had an annuity 403b set up before their 1st day in the class room!! AXA was the largest provider in Denver Public Schools and all of Colorado but we weren't the only one sponsoring the new teacher orientation. AIG, VALIC, ING, MET LIFE... we were all begging to buy lunches and give away I Pods and gift cards to office depot. TIAA CREF was/is available in the district and in my 3+ years and meeting almost every teacher, janitor, admin person in the district I only met one person that had TIAA CREF. The sad thing was it took me 4 appointments but I was able to get her to roll the money into an AXA plan with me. Gosh I feel dirty even thinking about how many people I signed up in the AXA equivest 403b. We had a 12yr surrender charge on that thing!!!!!! I guess it still beats the other companies that had 5 years surrender charges that started over on every new deposit, so every pay period you got a brand new 5yr surrender charge!

 

time to go take a ######, i feel dirty.

 

To all the teachers that I put in expensive, long surrender period annuities I am sorry!!! I had to eat too.

 

All I can do now is try and educate everyone and encourage them to teach their co-workers. Every teacher on here should take the time and teach one coworker (teach the young teacher, they will listen) and spread the word

 

 

Thanks for proving the point that an employer offering no-load funds in addition to the loaded variety is hurting the employee bigtime while hiding behind the veil of impartiality. "Impartiality" is in reality giving the loads a decided advantage.

 

"Impartiality" means the EMPLOYER has done its due dilligence and decided to EXCLUDE loaded investments. This is how a fiduciary thinks and acts. CASE CLOSED!

 

Peace and hope,

Joel L. Frank

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Guest Sierra

 

Jim-

 

You are so right. When I was at AXA we used to sponsor the new hire orientation every year. We would pay for lunches and do drawings several times a day. It was a 2day event. All you had to do to enter the drawing was fill out an info card. once we got that card we would call and set up appointments and teach the new employees all about their benefits and they were happy because HR didn't have the resources to educate their new employees. I would guess that 50% of the new hires every year had an annuity 403b set up before their 1st day in the class room!! AXA was the largest provider in Denver Public Schools and all of Colorado but we weren't the only one sponsoring the new teacher orientation. AIG, VALIC, ING, MET LIFE... we were all begging to buy lunches and give away I Pods and gift cards to office depot. TIAA CREF was/is available in the district and in my 3+ years and meeting almost every teacher, janitor, admin person in the district I only met one person that had TIAA CREF. The sad thing was it took me 4 appointments but I was able to get her to roll the money into an AXA plan with me. Gosh I feel dirty even thinking about how many people I signed up in the AXA equivest 403b. We had a 12yr surrender charge on that thing!!!!!! I guess it still beats the other companies that had 5 years surrender charges that started over on every new deposit, so every pay period you got a brand new 5yr surrender charge!

 

time to go take a ######, i feel dirty.

 

To all the teachers that I put in expensive, long surrender period annuities I am sorry!!! I had to eat too.

 

All I can do now is try and educate everyone and encourage them to teach their co-workers. Every teacher on here should take the time and teach one coworker (teach the young teacher, they will listen) and spread the word

 

 

Thanks for proving the point that an employer offering no-load funds in addition to the loaded variety is hurting the employee bigtime while hiding behind the veil of impartiality. "Impartiality" is in reality giving the loads a decided advantage.

 

"Impartiality" means the EMPLOYER has done its due dilligence and decided to EXCLUDE loaded investments. This is how a fiduciary thinks and acts. CASE CLOSED!

 

Peace and hope,

Joel L. Frank

 

 

P.S. A fiduciary starts off being impartial as far as using a commissioned based vendor or a non-commissioned one or both. After completing its due dilligence the fiduciary makes a decision to exclude the commissioned based vendor. The fiduciary/employer has gone from being impartial to being partial. Why? Because commissioned based vendors provide NO VALUE-ADDED to the employee's investment account balance. The fiduciary/employer has become "partial".

 

Now, the case is closed!

 

Peace and Hope,

Joel

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Hello,

I am a new poster on this forum; I have discovered this place by doing some research about pros/cons of different types of life insurances. I will shamefully admit that I have little knowledge about managing finances and investing (go easy on me). I always trusted that the "advisors" will offer good advise. Even though my wife has no interest in getting educated, I want to correct the error of my ways. I have located a few sources reading this forum for the past few hours.

 

Heres' how the story goes: My wife (43 yo) is a teacher in NY state (Long Island) and contributes to 403(b). When she got a better paying job in the current school district, she was approached by an AXA advisor and told her that he manages 403(b) for a lot of teachers in the school district and advised her to go with AXA. He came over our house and by the time he left, I had purchased a $100,000 flexible premium variable life insurance and my wife had a $300,000 flexible premium universal life insurance.

Just to show how dumb we are, this is the first time that we opened our policy benefits booklets to see what the charges are for managing the policies.

 

Wife:

Annual premium - $2,640

Deductions from premium payments - 4% of total premiums paid up to $15,510, and 2% of premiums in excess of this amount.

Admin charges - will never be more than $10/month

 

Surrender charge (if she were to dump it now) - $5,553

Net Cash Surrender Value - $5,460 (means we'd be left with nothing)

 

Mine:

Annual premium - $630 quarterly

Premium charge - deduct an amount no to exceed 6% from each premium payment. They reserve the right to increase this %-age.

Admin charges - 9 cents for each $1,000 of initial base policy plus an amount not to exceed $10 monthly (total about $20/month)

M&E risk charge - deduct a monthly amount not to exceed 0.06666% - calculated as a %-age of the amount of the policy account.

 

Surrender charges (if I were to dump it now) - $1,834

 

There's more... at the time we met, I had to roll over my 401k (from the previous job) and he offered to roll it into AXA rollover IRA. I planned on closing it and rolling it over into my current employer's 401k (which AXA salesman advised against). Here's what it looks like now:

 

http://i73.p######obucket.com/albums/i232/...RolloverIRA.jpg

 

Hmmm, for some reason the word p-h-o-t-obucket is being flagged in the URL.

 

 

A couple of weeks ago, the adviser came over to discuss my wife's pension. After she retires, the maximum benefit (100% of her pension) provides the largest monthly payments to her for life, but provides no payment to a beneficiary (me) if she kicks the bucket before I do. There are options where she takes less that the max and I get a percentage of her pension for life. The link below explains it in more detail:

http://www.nystrs.org/main/library/max_option.html

 

Since I am 3 years older than my wife with higher cholesterol level, chances are that I will leave this world before her. Nevertheless, AXA guy advised my wife to take the max pension payout, lower her 403(b) contributions, and use the amount (which 403(b) was lowered by) to buy another life insurance from AXA. His logic was that 403(b) is funded by pretax dollars now but will be taxed once you tap into it. If my wife buys life insurance with taxed dollars now, with 10% average annual growth in life insurance investments will give us a lot of cash. He recommended that I do the same with my new employer's 401(k). My wife was about to go along with the plan but all kinds of bells and whistles went off in my head - why would we want to have another life insurance each as an investment tool at the expense of our 401k and 403b. I called the AXA salesman and started asking a lot questions. As of right now, he is coming over next week to answer my questions.

 

I would like to sever our relationship and close all the accounts. I realize that we will be losing a lot of money by paying the surrender charges. But I feel that in the long run, we will be better off with term life insurance until the mortgage is payed off and kids are out of college. Please offer this "uneducated" guy and his wife some advise. Thank you for reading my sob story.

 

 

Jarhead,

 

I actually have some of these policies in my retirement portfolio. I actually have them through AXA. Now, without seeing the policies and original illustrations, I can not say wether or not your polisies were set up in a favorable manner. I will go over a few scenarios I see:

 

First: Close all the accounts, pay all the surrender penalties, move on. Not a great Idea. I think this idea is where you are letting your bull headed-ness, being a marine, get in the way. You and your wife are getting closer to retirement.You are going to need all the money you can get. Taking huge penalties isn't a great idea.

 

Second: Invite the AXA guy over and MAKE him explain everything to you. Make sure you know those products as well as he does. Ask him why he advised you to put your money in those vehichles. Maybe invite a friend who might be more financially saavy over to help.

 

Third: Ask someone who has similar products in their portfolio why they chose them. I use them for 2 reasons. Everyone needs life insurance and the ability to pull money out tax free later in life. The variable life insurance isn't as good on accumulation as a no load mutual fund is, but it is way better on the distribution side ... if it is set up right.

 

As far as the pension thing ... I know some people who it is great for ... Other ... Not so great. I will NOT make broad statements and say that the pension idea is a bad one for you or a good one for you with out knowing your situation. That is the problem. Many people hear something and start acting like it is the only way to go. In the end, every situaion is different.

 

Good Luck. I hope I was of some help.

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Guest Sierra

 

Hello,

I am a new poster on this forum; I have discovered this place by doing some research about pros/cons of different types of life insurances. I will shamefully admit that I have little knowledge about managing finances and investing (go easy on me). I always trusted that the "advisors" will offer good advise. Even though my wife has no interest in getting educated, I want to correct the error of my ways. I have located a few sources reading this forum for the past few hours.

 

Heres' how the story goes: My wife (43 yo) is a teacher in NY state (Long Island) and contributes to 403(b). When she got a better paying job in the current school district, she was approached by an AXA advisor and told her that he manages 403(b) for a lot of teachers in the school district and advised her to go with AXA. He came over our house and by the time he left, I had purchased a $100,000 flexible premium variable life insurance and my wife had a $300,000 flexible premium universal life insurance.

Just to show how dumb we are, this is the first time that we opened our policy benefits booklets to see what the charges are for managing the policies.

 

Wife:

Annual premium - $2,640

Deductions from premium payments - 4% of total premiums paid up to $15,510, and 2% of premiums in excess of this amount.

Admin charges - will never be more than $10/month

 

Surrender charge (if she were to dump it now) - $5,553

Net Cash Surrender Value - $5,460 (means we'd be left with nothing)

 

Mine:

Annual premium - $630 quarterly

Premium charge - deduct an amount no to exceed 6% from each premium payment. They reserve the right to increase this %-age.

Admin charges - 9 cents for each $1,000 of initial base policy plus an amount not to exceed $10 monthly (total about $20/month)

M&E risk charge - deduct a monthly amount not to exceed 0.06666% - calculated as a %-age of the amount of the policy account.

 

Surrender charges (if I were to dump it now) - $1,834

 

There's more... at the time we met, I had to roll over my 401k (from the previous job) and he offered to roll it into AXA rollover IRA. I planned on closing it and rolling it over into my current employer's 401k (which AXA salesman advised against). Here's what it looks like now:

 

http://i73.p######obucket.com/albums/i232/...RolloverIRA.jpg

 

Hmmm, for some reason the word p-h-o-t-obucket is being flagged in the URL.

 

 

A couple of weeks ago, the adviser came over to discuss my wife's pension. After she retires, the maximum benefit (100% of her pension) provides the largest monthly payments to her for life, but provides no payment to a beneficiary (me) if she kicks the bucket before I do. There are options where she takes less that the max and I get a percentage of her pension for life. The link below explains it in more detail:

http://www.nystrs.org/main/library/max_option.html

 

Since I am 3 years older than my wife with higher cholesterol level, chances are that I will leave this world before her. Nevertheless, AXA guy advised my wife to take the max pension payout, lower her 403(b) contributions, and use the amount (which 403(b) was lowered by) to buy another life insurance from AXA. His logic was that 403(b) is funded by pretax dollars now but will be taxed once you tap into it. If my wife buys life insurance with taxed dollars now, with 10% average annual growth in life insurance investments will give us a lot of cash. He recommended that I do the same with my new employer's 401(k). My wife was about to go along with the plan but all kinds of bells and whistles went off in my head - why would we want to have another life insurance each as an investment tool at the expense of our 401k and 403b. I called the AXA salesman and started asking a lot questions. As of right now, he is coming over next week to answer my questions.

 

I would like to sever our relationship and close all the accounts. I realize that we will be losing a lot of money by paying the surrender charges. But I feel that in the long run, we will be better off with term life insurance until the mortgage is payed off and kids are out of college. Please offer this "uneducated" guy and his wife some advise. Thank you for reading my sob story.

 

 

Jarhead,

 

I actually have some of these policies in my retirement portfolio. I actually have them through AXA. Now, without seeing the policies and original illustrations, I can not say wether or not your polisies were set up in a favorable manner. I will go over a few scenarios I see:

 

First: Close all the accounts, pay all the surrender penalties, move on. Not a great Idea. I think this idea is where you are letting your bull headed-ness, being a marine, get in the way. You and your wife are getting closer to retirement.You are going to need all the money you can get. Taking huge penalties isn't a great idea.

 

Second: Invite the AXA guy over and MAKE him explain everything to you. Make sure you know those products as well as he does. Ask him why he advised you to put your money in those vehichles. Maybe invite a friend who might be more financially saavy over to help.

 

Third: Ask someone who has similar products in their portfolio why they chose them. I use them for 2 reasons. Everyone needs life insurance and the ability to pull money out tax free later in life. The variable life insurance isn't as good on accumulation as a no load mutual fund is, but it is way better on the distribution side ... if it is set up right.

 

As far as the pension thing ... I know some people who it is great for ... Other ... Not so great. I will NOT make broad statements and say that the pension idea is a bad one for you or a good one for you with out knowing your situation. That is the problem. Many people hear something and start acting like it is the only way to go. In the end, every situaion is different.

 

Good Luck. I hope I was of some help.

 

 

Guru:

 

Now your telling us that these commissioned products are only sold to those that can actually benefit from them. Common Sense tells us that you could not fill up your gas tank if you limited your prey to such people.

 

Joel L. Frank

 

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First: Close all the accounts, pay all the surrender penalties, move on. Not a great Idea. I think this idea is where you are letting your bull headed-ness, being a marine, get in the way. You and your wife are getting closer to retirement.You are going to need all the money you can get. Taking huge penalties isn't a great idea.

I was just blowing off steam when I said that. I have made an appointment to see a fee-only CFP to go over everything and set up a plan. And that's a Marine with a capital "M" ;-)

 

Second: Invite the AXA guy over and MAKE him explain everything to you.

He invited himself over when I started asking questions about the policies. He was concentrating only on positives and and brushed all the negatives under the rug. When I questioned him why all the fees were not disclosed before we signed on the dotted line, he said that he did... Liar!

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He invited himself over when I started asking questions about the policies. He was concentrating only on positives and and brushed all the negatives under the rug. When I questioned him why all the fees were not disclosed before we signed on the dotted line, he said that he did... Liar!

And salesmen like this are the guys who are supposed to "increase participation rates" for teachers contributing to 403b plans.

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Hello,

I am a new poster on this forum; I have discovered this place by doing some research about pros/cons of different types of life insurances. I will shamefully admit that I have little knowledge about managing finances and investing (go easy on me). I always trusted that the "advisors" will offer good advise. Even though my wife has no interest in getting educated, I want to correct the error of my ways. I have located a few sources reading this forum for the past few hours.

 

Heres' how the story goes: My wife (43 yo) is a teacher in NY state (Long Island) and contributes to 403(b). When she got a better paying job in the current school district, she was approached by an AXA advisor and told her that he manages 403(b) for a lot of teachers in the school district and advised her to go with AXA. He came over our house and by the time he left, I had purchased a $100,000 flexible premium variable life insurance and my wife had a $300,000 flexible premium universal life insurance.

Just to show how dumb we are, this is the first time that we opened our policy benefits booklets to see what the charges are for managing the policies.

 

Wife:

Annual premium - $2,640

Deductions from premium payments - 4% of total premiums paid up to $15,510, and 2% of premiums in excess of this amount.

Admin charges - will never be more than $10/month

 

Surrender charge (if she were to dump it now) - $5,553

Net Cash Surrender Value - $5,460 (means we'd be left with nothing)

 

Mine:

Annual premium - $630 quarterly

Premium charge - deduct an amount no to exceed 6% from each premium payment. They reserve the right to increase this %-age.

Admin charges - 9 cents for each $1,000 of initial base policy plus an amount not to exceed $10 monthly (total about $20/month)

M&E risk charge - deduct a monthly amount not to exceed 0.06666% - calculated as a %-age of the amount of the policy account.

 

Surrender charges (if I were to dump it now) - $1,834

 

There's more... at the time we met, I had to roll over my 401k (from the previous job) and he offered to roll it into AXA rollover IRA. I planned on closing it and rolling it over into my current employer's 401k (which AXA salesman advised against). Here's what it looks like now:

 

http://i73.p######obucket.com/albums/i232/...RolloverIRA.jpg

 

Hmmm, for some reason the word p-h-o-t-obucket is being flagged in the URL.

 

 

A couple of weeks ago, the adviser came over to discuss my wife's pension. After she retires, the maximum benefit (100% of her pension) provides the largest monthly payments to her for life, but provides no payment to a beneficiary (me) if she kicks the bucket before I do. There are options where she takes less that the max and I get a percentage of her pension for life. The link below explains it in more detail:

http://www.nystrs.org/main/library/max_option.html

 

Since I am 3 years older than my wife with higher cholesterol level, chances are that I will leave this world before her. Nevertheless, AXA guy advised my wife to take the max pension payout, lower her 403(b) contributions, and use the amount (which 403(b) was lowered by) to buy another life insurance from AXA. His logic was that 403(b) is funded by pretax dollars now but will be taxed once you tap into it. If my wife buys life insurance with taxed dollars now, with 10% average annual growth in life insurance investments will give us a lot of cash. He recommended that I do the same with my new employer's 401(k). My wife was about to go along with the plan but all kinds of bells and whistles went off in my head - why would we want to have another life insurance each as an investment tool at the expense of our 401k and 403b. I called the AXA salesman and started asking a lot questions. As of right now, he is coming over next week to answer my questions.

 

I would like to sever our relationship and close all the accounts. I realize that we will be losing a lot of money by paying the surrender charges. But I feel that in the long run, we will be better off with term life insurance until the mortgage is payed off and kids are out of college. Please offer this "uneducated" guy and his wife some advise. Thank you for reading my sob story.

 

Jarhead,

 

I actually have some of these policies in my retirement portfolio. I actually have them through AXA. Now, without seeing the policies and original illustrations, I can not say wether or not your polisies were set up in a favorable manner. I will go over a few scenarios I see:

 

First: Close all the accounts, pay all the surrender penalties, move on. Not a great Idea. I think this idea is where you are letting your bull headed-ness, being a marine, get in the way. You and your wife are getting closer to retirement.You are going to need all the money you can get. Taking huge penalties isn't a great idea.

 

Second: Invite the AXA guy over and MAKE him explain everything to you. Make sure you know those products as well as he does. Ask him why he advised you to put your money in those vehichles. Maybe invite a friend who might be more financially saavy over to help.

 

Third: Ask someone who has similar products in their portfolio why they chose them. I use them for 2 reasons. Everyone needs life insurance and the ability to pull money out tax free later in life. The variable life insurance isn't as good on accumulation as a no load mutual fund is, but it is way better on the distribution side ... if it is set up right.

 

As far as the pension thing ... I know some people who it is great for ... Other ... Not so great. I will NOT make broad statements and say that the pension idea is a bad one for you or a good one for you with out knowing your situation. That is the problem. Many people hear something and start acting like it is the only way to go. In the end, every situaion is different.

 

Good Luck. I hope I was of some help.

 

Guru:

 

Now your telling us that these commissioned products are only sold to those that can actually benefit from them. Common Sense tells us that you could not fill up your gas tank if you limited your prey to such people.

 

Joel L. Frank

 

 

Joel,

 

what I am telling you is that these products can be set up to benefit the sales person or the client. Unfortunately, people with all the major insurance companies think it is ok to do what is right for them and not the client. It is dispicable. But, the bottom line is that you can't say that all of these products are bad for everyone. Thats the bottom line. You will never talk me out of funding my policies. EVER.

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First: Close all the accounts, pay all the surrender penalties, move on. Not a great Idea. I think this idea is where you are letting your bull headed-ness, being a marine, get in the way. You and your wife are getting closer to retirement.You are going to need all the money you can get. Taking huge penalties isn't a great idea.

I was just blowing off steam when I said that. I have made an appointment to see a fee-only CFP to go over everything and set up a plan. And that's a Marine with a capital "M" ;-)

Second: Invite the AXA guy over and MAKE him explain everything to you.

He invited himself over when I started asking questions about the policies. He was concentrating only on positives and and brushed all the negatives under the rug. When I questioned him why all the fees were not disclosed before we signed on the dotted line, he said that he did... Liar!

 

Sorry about missing you capital "M" .. I know a few Marines and should have checked my spelling. I had a feeling you were blowing off steam ... But I wanted to make sure.

 

About the rep you used ... If he didn't disclose it you ... Then he is a bad guy ... Stopp using him. I think working with a different CFP is a good idea.

 

Good Luck in the future.

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About the rep you used ... If he didn't disclose it you ... Then he is a bad guy ... Stopp using him. I think working with a different CFP is a good idea.

 

Good Luck in the future.

Alternatively, educate yourself (as you seem to be doing) and make your own decisions. You, and only you, have your best interests at heart.

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Alternatively, educate yourself (as you seem to be doing) and make your own decisions. You, and only you, have your best interests at heart.

apteacher,

I have just finished reading "Teach and Retire Rich" and have a couple other investment books on the way from Amazon. I have also spoken to two other teachers (married to each other) from my wive's school distrcit and started spreading the word about AXA.

 

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Guest Skeptical

Alternatively, educate yourself (as you seem to be doing) and make your own decisions. You, and only you, have your best interests at heart.

apteacher,

I have just finished reading "Teach and Retire Rich" and have a couple other investment books on the way from Amazon. I have also spoken to two other teachers (married to each other) from my wive's school distrcit and started spreading the word about AXA.

 

Jarhead,

 

I've followed this thread for a while and I have a few comments. Regarding surrender charges/ periods: This mechanism is designed to keep participants locked into their contracts in order to maximize the revenue that can be produced by the product. Make no mistake; you will either pay TODAY through a surrender (or more likely) LATER through asset based fees levied on higher account values. YOU SPENT THAT MONEY THE MOMENT THE CONTRACT WAS FUNDED. The only method of avoiding the cost is at the DEATH of the annuitant (which helps only the beneficiary).

 

Prove this to yourself: Calculate the dramatically lower expenses in a low cost provider (say Vanguard) as a ratio of the surrender charges. I bet the break even is well BEFORE the surrender period expires. FYI: This would NOT apply to permanent life insurance.

 

Financial Planners (CFP or not): Avoid anyone that charges an asset based fee. Stick with fee-only (no insurance agents) that work hourly. The work you need is probably basic insurance calculations and an asset allocation for your investment portfolio.

 

Best of luck and remember this: There is very little honor among the sharks that pretend to be "Advisors".

 

Cheers,

 

Jim

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Guest Sierra

Hello,

I am a new poster on this forum; I have discovered this place by doing some research about pros/cons of different types of life insurances. I will shamefully admit that I have little knowledge about managing finances and investing (go easy on me). I always trusted that the "advisors" will offer good advise. Even though my wife has no interest in getting educated, I want to correct the error of my ways. I have located a few sources reading this forum for the past few hours.

 

Heres' how the story goes: My wife (43 yo) is a teacher in NY state (Long Island) and contributes to 403(b). When she got a better paying job in the current school district, she was approached by an AXA advisor and told her that he manages 403(b) for a lot of teachers in the school district and advised her to go with AXA. He came over our house and by the time he left, I had purchased a $100,000 flexible premium variable life insurance and my wife had a $300,000 flexible premium universal life insurance.

Just to show how dumb we are, this is the first time that we opened our policy benefits booklets to see what the charges are for managing the policies.

 

Wife:

Annual premium - $2,640

Deductions from premium payments - 4% of total premiums paid up to $15,510, and 2% of premiums in excess of this amount.

Admin charges - will never be more than $10/month

 

Surrender charge (if she were to dump it now) - $5,553

Net Cash Surrender Value - $5,460 (means we'd be left with nothing)

 

Mine:

Annual premium - $630 quarterly

Premium charge - deduct an amount no to exceed 6% from each premium payment. They reserve the right to increase this %-age.

Admin charges - 9 cents for each $1,000 of initial base policy plus an amount not to exceed $10 monthly (total about $20/month)

M&E risk charge - deduct a monthly amount not to exceed 0.06666% - calculated as a %-age of the amount of the policy account.

 

Surrender charges (if I were to dump it now) - $1,834

 

There's more... at the time we met, I had to roll over my 401k (from the previous job) and he offered to roll it into AXA rollover IRA. I planned on closing it and rolling it over into my current employer's 401k (which AXA salesman advised against). Here's what it looks like now:

 

http://i73.p######obucket.com/albums/i232/...RolloverIRA.jpg

 

Hmmm, for some reason the word p-h-o-t-obucket is being flagged in the URL.

 

 

A couple of weeks ago, the adviser came over to discuss my wife's pension. After she retires, the maximum benefit (100% of her pension) provides the largest monthly payments to her for life, but provides no payment to a beneficiary (me) if she kicks the bucket before I do. There are options where she takes less that the max and I get a percentage of her pension for life. The link below explains it in more detail:

http://www.nystrs.org/main/library/max_option.html

 

Since I am 3 years older than my wife with higher cholesterol level, chances are that I will leave this world before her. Nevertheless, AXA guy advised my wife to take the max pension payout, lower her 403(b) contributions, and use the amount (which 403(b) was lowered by) to buy another life insurance from AXA. His logic was that 403(b) is funded by pretax dollars now but will be taxed once you tap into it. If my wife buys life insurance with taxed dollars now, with 10% average annual growth in life insurance investments will give us a lot of cash. He recommended that I do the same with my new employer's 401(k). My wife was about to go along with the plan but all kinds of bells and whistles went off in my head - why would we want to have another life insurance each as an investment tool at the expense of our 401k and 403b. I called the AXA salesman and started asking a lot questions. As of right now, he is coming over next week to answer my questions.

 

I would like to sever our relationship and close all the accounts. I realize that we will be losing a lot of money by paying the surrender charges. But I feel that in the long run, we will be better off with term life insurance until the mortgage is payed off and kids are out of college. Please offer this "uneducated" guy and his wife some advise. Thank you for reading my sob story.

 

Jarhead,

 

I actually have some of these policies in my retirement portfolio. I actually have them through AXA. Now, without seeing the policies and original illustrations, I can not say wether or not your polisies were set up in a favorable manner. I will go over a few scenarios I see:

 

First: Close all the accounts, pay all the surrender penalties, move on. Not a great Idea. I think this idea is where you are letting your bull headed-ness, being a marine, get in the way. You and your wife are getting closer to retirement.You are going to need all the money you can get. Taking huge penalties isn't a great idea.

 

Second: Invite the AXA guy over and MAKE him explain everything to you. Make sure you know those products as well as he does. Ask him why he advised you to put your money in those vehichles. Maybe invite a friend who might be more financially saavy over to help.

 

Third: Ask someone who has similar products in their portfolio why they chose them. I use them for 2 reasons. Everyone needs life insurance and the ability to pull money out tax free later in life. The variable life insurance isn't as good on accumulation as a no load mutual fund is, but it is way better on the distribution side ... if it is set up right.

 

As far as the pension thing ... I know some people who it is great for ... Other ... Not so great. I will NOT make broad statements and say that the pension idea is a bad one for you or a good one for you with out knowing your situation. That is the problem. Many people hear something and start acting like it is the only way to go. In the end, every situaion is different.

 

Good Luck. I hope I was of some help.

 

Guru:

 

Now your telling us that these commissioned products are only sold to those that can actually benefit from them. Common Sense tells us that you could not fill up your gas tank if you limited your prey to such people.

 

Joel L. Frank

 

 

Joel,

 

what I am telling you is that these products can be set up to benefit the sales person or the client. Unfortunately, people with all the major insurance companies think it is ok to do what is right for them and not the client. It is dispicable. But, the bottom line is that you can't say that all of these products are bad for everyone. Thats the bottom line. You will never talk me out of funding my policies. EVER.

 

TO Guru,

 

How old are you? Why did you not buy Term life for protection and fund your tax free withdrawals during retirement with a Roth IRA or with a Roth 401(k), if you belong to a 401(k) Plan? Did you pay a commission to acquire your AXA universal life policies?

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Calculate the dramatically lower expenses in a low cost provider (say Vanguard) as a ratio of the surrender charges. I bet the break even is well BEFORE the surrender period expires.

Jim,

If I read you correctly, you're saying I'd be better off paying the surrender charges now and by investing in low expense ratio fees in no-load funds, we'll break way before we retire?

 

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Calculate the dramatically lower expenses in a low cost provider (say Vanguard) as a ratio of the surrender charges. I bet the break even is well BEFORE the surrender period expires.

Jim,

If I read you correctly, you're saying I'd be better off paying the surrender charges now and by investing in low expense ratio fees in no-load funds, we'll break way before we retire?

 

 

Jar,

 

Let me separate my comments into two distinct posts to avoid confusion:

 

The annuity: Based on the graphic you provided, you would incur a surrender charge of $4195 if you cancelled the contract and rolled it to a no-load fund such as VG. So that's about a 6% hit (which is likely what your agent received in commissions). It would take you about 3 years to break even by paying 2% less in overall asset based costs. (We don't know the details of your contract but the hidden costs might be 4-5%). So if your surrender period expires in a year, maybe wait. But I'll bet you have more than three years to go. So my point is simple. The agent was already paid. You can let the insurance company collect the up front commissions made to the agent one of two ways. Through a surrender charge today or excess expenses for the duration of the surrender period window. YOU SPENT THAT MONEY THE MOMENT YOU PAID THE PREMIUMS.

 

Another view:It's like the annuities with a 5% BONUS. You put in $50,000 and they add $2500 for a total of $52,500. Looks pretty. But then the agent gets a $3000 commission so the insurance company actually has $47,000 in cash on hand. What's your surrender value for the first year?? Well, about $47,000. The statement looks nice and says CONTRACT VALUE $52,500 (Surrender Value $47,000). hmmm? What?

 

What if the bonus was FIFTY PERCENT (50%). You pay $50,000 and they BONUS you $25,000. Still paying the agent $3000 to sell it to you, so cash on hand is still $47,000, there fore the surrender value is about $47,000. Remember the CONTRACT VALUE of $75,000 is an illusion just like the example above!! You have to hold the contract for years (decades in the second example) in order for the insurance company to make enough through asset based charges to recover their marketing costs.

 

Hope that makes sense.

 

Cheers,

 

Jim

 

p.s. I'll address the UL insurance in a later post.

 

 

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Guest Skeptical

Jar:

 

The Life Insurance:

 

This one is more complicated and a topic you should study. A very easy to follow resource is "The New Life Insurance Investment Advisor" by Ben Baldwin available through the usual places.

 

I noticed that you purchased the life policies before any discussion of the pension payout your spouse would be eligible to receive. So I'll assume that they were to be used to provide cash in the event of a premature death. They were likely SOLD with the additional idea of taking tax free withdrawals during retirement. So with those assumptions in place please understand that I'm not giving you specific advice, just some food for thought.

 

You could likely obtain a 30 year level term contract in NY for about $100 a quarter that would pay the same $100,000 death benefit. The balance of the savings could be directed into a Roth for (potential) tax free withdrawals. So in your case the savings of $2000 a year or more goes to a Roth. LEVEL term means that if the annual premium in year one is say $500, then the premium in year 30 is $500. It's level.

 

For your spouse a 30 year level term contract in NY ($300,000 DB) would also run about $500 a year, for a savings of $2000 or more. That puts both contracts in force (as long as you pay the premiums) well into a normal retirement scenario of age 65-70. You can run instant quotes at lifeinsure.com anonymously, WITHOUT an agent contacting you.

 

The surrender charge versus the cash value? The principle is the same as the annuity. AXA paid a commission to the agent for selling those contracts. That money is gone. They must recover that up front payment through ongoing policy expenses or if you cancel too early, a surrender charge.

 

On a personal note: My wife, who passed from cancer at age 42, was uninsurable beyond her group coverage due to Rheumatoid Arthritis. But a long term (30 year) level term contract would have been very helpful financially. Most (many) of these term contracts have a conversion rider that allows you to switch to a Universal Life contract during the term (say 30 years) WITHOUT any further medical underwriting. I would not buy a term contract without this feature, because you never know about future health issues.

 

Recap:

 

For a pure death benefit consider the 30 year term. You save a combined $4000 (+/-) a year in premiums which you could use to fund Roth(s) (assuming you are eligible). This is a serious financial decision that you should weigh carefully. There would be no harm in taking the next year to learn more about this issue before making any changes.

 

Finally:

 

There is an insurance concept (often called Pension Max or Pension Flex) where spouse A takes the full pension payment (with no benefit to spouse B at death). The risk of an "early" death is mitigated through the purchase of life contract. The death benefit would provide enough capital to continue the same monthly "pension" for spouse B. The idea is that the cost of the life contract is less than the difference between the full and reduced spousal benefit. In THEORY it makes sense. But when you run the actual numbers it's much more difficult to produce a meaningful improvement. Anyone with a pension, who works with an insurance agent, will likely be pitched this scenario. Listen with both ears and with healthy skepticism when you do.

 

Best regards,

 

Jim

 

 

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