Northwestern Mutual Roth IRA

[southflanole1]

Good afternoon. I having been reading the forum for a few months, but am a new member/poster. I previously (2011-2012) contributed to a ROTH IRA at Northwestern Mutual which is currently valued at approx. $10K. I maxed out my ROTH IRA with Vanguard in 2013, 2014 and for 2015. I decided I wanted to switch my Roth IRA at NM to Vanguard, and contacted Vanguard. They handled their end and NM hit me with a $450.00 cancellation fee stating "back loaded" funds. I simply had all my money in an S&P 500 fund at NM. Any suggestions? Anyone experience this? Thanks.

[Mel Lindauer]

Good afternoon. I having been reading the forum for a few months, but am a new member/poster. I previously (2011-2012) contributed to a ROTH IRA at Northwestern Mutual which is currently valued at approx. $10K. I maxed out my ROTH IRA with Vanguard in 2013, 2014 and for 2015. I decided I wanted to switch my Roth IRA at NM to Vanguard, and contacted Vanguard. They handled their end and NM hit me with a $450.00 cancellation fee stating "back loaded" funds. I simply had all my money in an S&P 500 fund at NM. Any suggestions? Anyone experience this? Thanks.

Yes, avoid Northwestern Mutual and go with Vanguard to start with. Too late for you, but your experience and my answer might help others.

[dhodson]

If you have other products with them then you might want to "thank them" and move those as well.

[dailybagel]

Could you post the ticker symbol and share class (if applicable) of the S&P fund you were invested in? That way, we can check if their cancellation fee is consistent with the fine print (which it presumably is).

[southflanole1]

Index 500 Stock (MSA) -B....... Any reason to just keep the plan, rather than converting it to Vanguard?

[dailybagel]

The Northwestern Mutual website suggests this product is offered within a Variable Annuity. Is that your situation?

If so, I would contact NM and ask them how for how long the termination fee will apply. For example, if the cancellation fee drops to $0 after 12 months, and your account is 11 months old, it would be worthwhile to wait, then transfer to Vanguard. I would draw the line at 6 months of waiting.

[southflanole1]

8 years unfortunately, I guess I should just take the hit.

[Mel Lindauer]

8 years unfortunately, I guess I should just take the hit.

Your break-even point will probably be relatively short since you'll be saving those high insurance company annuity costs using low-cost Vanguard funds.

[Dale_G]

Be sure to thank the insurance agent who got you into this.

And I am not trying to be a wise guy. You learned a very valuable lesson that will save you a lot of grief and money in the future. Many of us have made much bigger mistakes - and some still haven't learned. You are lucky that this was an early mistake and you caught on quickly.

Dale

[dailybagel]

Your break-even point will probably be relatively short since you'll be saving those high insurance company annuity costs using low-cost Vanguard funds.

I agree with Mel. If the annuity fees are 1.25% of your $10,000 assets, that is $125 per year in savings after switching to Vanguard. You will be moving from a high-cost investment product with limited flexibility to more flexible, low-fee investment. And you'll move to a firm that puts client interests first.

[Mel Lindauer]

Your break-even point will probably be relatively short since you'll be saving those high insurance company annuity costs using low-cost Vanguard funds.

I agree with Mel. If the annuity fees are 1.25% of your $10,000 assets, that is $125 per year in savings after switching to Vanguard. You will be moving from a high-cost investment product with limited flexibility to more flexible, low-fee investment. And you'll move to a firm that puts client interests first.

So true, dailybagel. And using 1.25% for an annuity expense ratio in your example is very generous, since many annuities have total costs of 2% and some even approach 3%.

[mickeyd]

hit me with a $450.00 cancellation fee stating "back loaded" funds. I simply had all my money in an S&P 500 fund at NM. Any suggestions?

Like many others here, this cost should probably just be chalked up to "cost of financial education". Your Boglehead education, OTOH will be free.

[BL]

Please let your agent and all your friends know how much you appreciate him and his company!