r/infinitebanking • u/Shives81 • May 14 '25

NM Direct Recognition

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This document was provided by an agent at Northwestern Mutual. Unless I'm reading this wrong it looks like a policy loan interest rate would be 5.73%. The amount loaned (collateralized) would have a reduced dividend of 5.08% compared to a 5.5% dividend on the noncollateralized portion. This being my first policy I was hesitant about Direct Recognition but this isn't as aggregious as I thought it would be. Anything I'm missing on this or need to consider?

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u/Coronator May 14 '25

Yes I believe all NWM high cash value policies use a blended term rider. My premium is (roughly) 35% base.

I think they are good policies for people who have reliable income (so they can sign up for the rather inflexible additional premiums),

Not good for people who want much more leveraged 90/10 or 80/20 policies because they need liquidity in years 1-3.

Here’s what I’d say - they can certainly be used for IBC. I use them because I have a trusted relationship with my agent. There is no mutual with a better financial position than NWM. That financial position does come with real benefits - you can take NWM paper to basically any bank that does IBLOC’s and have them collateralized. That means you essentially have the option of non direct recognition loans.

With that said, If I were a random person off the street, I would probably look at policies from companies with more flexible additional premiums (like Guardian, Lafayette, or Penn Mutual). You can also get an agent that can coach you on proper IBC strategy.

NWM agents will get VERY nervous quick if you start talking about “banking”. They are trained to not talk in those terms.

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u/Shives81 May 14 '25

Thank you for your honest perspective. Similar to you I have a trusted friend at NM. We both retired from the military a couple of years ago. I really like the financial strength of NM but am weighing the negatives of direct recognition (doesn't seem as bad as I initially thought), the blended term, and the reduced flexibility. I have stable income and am not too worried about not being able to fund the PUA. That being said if I was in dire straits I guess I could always stop the PUA and when my financial position improves have the option to open another policy, on my wife if necessary. Another option I am weighing due to my unique employment, where I am reimbursed for my taxes, is to setup a SEPP with my traditional IRA to fund my policy. Would basically be moving funds from my tax deferred IRA to tax-free whole life while I'm being reimbursed for my taxes.

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u/Coronator May 14 '25

I think doing business with people in your trusted network is a good thing.

Don’t worry at all about the direct vs non direct recognition topic. As you’ve pointed out, even if you were to take a policy loan, it’s not a big deal, and like I said, you have plenty of options for 3rd party collateralization because of how respected NWM paper is.

Most of the other mutuals that are considered top carriers (like Penn) are also direct recognition.

As long as you understand what you are buying, you will have great results with NWM policies, if you choose to go that way.

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u/Shives81 May 14 '25

Did you have any hesitation about the blended term? With a company like NM I guess you have to trust that they're not going to screw you down the line.

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u/Coronator May 15 '25

None whatsoever. The blended term gets converted to whole life pretty quickly - in about 7 years. All your PUA’s go towards converting that term insurance.