Taking money out of any financial product, especially those with long-term goals like those offered by Northwestern Mutual, requires careful consideration. It's not just about getting the cash, but understanding the implications for your financial plan, potential taxes, and the future of your policy or investment.
Ready to explore your options and get your money? Let's dive in!
This comprehensive guide will walk you through the various ways to access funds from your Northwestern Mutual accounts, with a focus on life insurance policies and investment accounts, along with crucial details to help you make informed decisions.
How to Take Money Out of Northwestern Mutual: A Step-by-Step Guide
Northwestern Mutual offers a range of financial products, and the process for withdrawing money depends heavily on the type of account you have. We'll cover the most common ones: life insurance policies with cash value, investment accounts (brokerage, IRAs, 401(k)s), and annuities.
Step 1: Understand Your Northwestern Mutual Product and Its Features
Before you do anything, it's absolutely vital to know exactly what type of policy or account you have with Northwestern Mutual. Are you looking at a:
Whole Life Insurance Policy (or other cash value life insurance)? These policies accumulate a cash value over time that you can access.
Term Life Insurance Policy? Important Note: Term life insurance policies do not accumulate cash value, so you cannot "take money out" of them in the same way. Their primary purpose is to provide a death benefit for a specific period.
Investment Account (Brokerage, IRA, 401(k))? These accounts hold various investments like stocks, bonds, and mutual funds.
Annuity? Annuities are insurance contracts designed to provide a steady income stream, often in retirement.
Knowing your product will dictate your options, the associated costs, and potential tax implications. If you're unsure, the best first step is always to contact your Northwestern Mutual financial advisor or their customer service.
Step 2: Determine Your "Why" and "How Much"
Why do you need the money? This isn't just a philosophical question; it directly impacts the best method for withdrawal.
Are you facing an unexpected emergency (medical, home repair)?
Do you need funds for a planned expense (down payment, education)?
Are you looking to supplement retirement income?
Do you simply no longer need the policy or investment and want to cash out?
Also, consider how much money you need. A small, short-term need might be best addressed differently than a large, long-term withdrawal.
Step 3: Explore Your Options Based on Account Type
Now that you know your product and your need, let's look at the specific methods for accessing your funds.
Sub-heading: For Cash Value Life Insurance Policies
If you have a whole life or universal life policy with Northwestern Mutual, you have a few ways to access its cash value:
Policy Loan:
How it works: You borrow money against your policy's cash value. Your policy remains in force, and the loan is generally tax-free as long as the policy doesn't lapse. The cash value acts as collateral.
Pros: Quick access to cash, typically within a few days to two weeks. No credit check required. Flexible repayment schedule (though interest accrues). You can continue to earn interest on the outstanding loan amount if the cash value return exceeds the loan interest rate.
Cons: The loan reduces the death benefit until it's repaid. Interest accrues on the loan, and if unpaid, it can be added to the loan balance, potentially causing the policy to lapse if the loan balance equals the cash value. A lapsed policy with an outstanding loan can have negative tax consequences.
Process: Contact your Northwestern Mutual financial advisor or customer service. You'll likely need to fill out a specific policy loan request form.
Withdrawals (Partial Surrender):
How it works: You withdraw a portion of your policy's cash value directly. This reduces both the cash value and the death benefit.
Pros: You don't incur interest as you would with a loan.
Cons: Withdrawals are generally tax-free up to your "cost basis" (the amount you've paid in premiums). Any amount withdrawn above your basis will be subject to ordinary income tax. This permanently reduces your policy's death benefit. Northwestern Mutual may have minimum withdrawal amounts and limits on the number of withdrawals per year (e.g., a minimum of $250 and a maximum of four withdrawals per policy year for some products).
Process: Reach out to your advisor or customer service to initiate a withdrawal. You'll specify the amount and how you wish to receive the funds (e.g., wire, direct deposit).
Surrendering the Policy (Full Surrender):
How it works: You terminate your life insurance policy entirely and receive its cash surrender value.
Pros: You get a lump sum of cash and are no longer responsible for premium payments.
Cons: You lose your life insurance coverage, meaning your beneficiaries will receive nothing upon your death. You may be subject to surrender charges, especially in the early years of the policy (Northwestern Mutual may deduct these if you surrender within the first 15 policy years for some products). Any cash value received that exceeds your cost basis will be taxed as ordinary income.
Process: This is a significant decision. Always consult with your Northwestern Mutual financial advisor to understand the full implications before surrendering. You will need to complete a surrender form.
Selling the Policy (Life Settlement/Viatical Settlement):
How it works: This is generally an option for policyholders who are typically over 65 or have a serious illness. You sell your policy to a third-party company for a cash sum. The buyer then takes over premium payments and receives the death benefit when you pass away.
Pros: You may receive more cash than the policy's surrender value, especially if you have a significant health condition.
Cons: You lose control of the policy and your beneficiaries receive no death benefit. This is a complex transaction involving third-party companies, and you'll likely pay fees and taxes on the settlement. Strict qualifications apply.
Process: This is not handled directly by Northwestern Mutual but by specialized life settlement companies. Seek independent legal and financial advice before pursuing this option.
Sub-heading: For Investment Accounts (Brokerage, IRA, 401(k))
Accessing funds from investment accounts depends on whether they are taxable (brokerage) or tax-advantaged (IRA, 401(k)).
Brokerage Accounts:
How it works: You can sell investments held in your brokerage account and withdraw the proceeds.
Pros: Highly flexible access to your funds. No age restrictions or penalties for withdrawal.
Cons: You will owe capital gains taxes on any profits from selling investments.
Process: You can typically initiate trades and withdrawals through your Northwestern Mutual online account or by contacting your financial advisor.
Individual Retirement Accounts (IRAs - Traditional or Roth) & 401(k)s:
How it works: These are retirement savings vehicles with tax advantages, but also restrictions on withdrawals.
Pros: Tax-deferred growth in Traditional IRAs/401(k)s, and tax-free withdrawals in retirement from Roth IRAs/401(k)s (if conditions met).
Cons: Withdrawals before age 59½ typically incur a 10% early withdrawal penalty, in addition to being subject to ordinary income tax (for Traditional accounts). There are exceptions (e.g., hardship withdrawals, Rule of 55 for 401(k)s if you leave your employer at age 55 or later). You also have Required Minimum Distributions (RMDs) once you reach a certain age (currently 73), meaning you must start taking money out.
Process: Contact your Northwestern Mutual advisor. They will guide you through the necessary forms and explain the tax implications based on your age and account type. For 401(k)s, your employer's plan administrator may also be involved.
401(k) Loan:
How it works: Some 401(k) plans allow you to borrow against your vested account balance. You repay the loan with interest, usually within five years.
Pros: Generally tax-free and penalty-free if repaid on time. Interest paid goes back to your own account.
Cons: Reduces your retirement savings in the short term, as the money is no longer invested and growing. If you leave your job, the loan may need to be repaid quickly. Failure to repay can result in taxes and penalties.
Process: Check with your employer's 401(k) plan administrator or your Northwestern Mutual advisor about the availability and terms of 401(k) loans.
Sub-heading: For Annuities
Annuities are complex, and withdrawal options depend on whether you are in the accumulation phase or the payout (annuitization) phase.
Withdrawals from an Accumulation Annuity:
How it works: If your annuity is still in the accumulation phase (where your money is growing), you can typically make partial withdrawals.
Pros: Access to funds before annuitization.
Cons: Withdrawals before age 59½ may incur a 10% IRS early withdrawal penalty, in addition to ordinary income tax on any gains. Many annuities also have surrender charges for withdrawals made within the first few years (typically 5-10 years). "Gain-out-first" taxation applies, meaning earnings are taxed first.
Process: Contact your Northwestern Mutual advisor. They will explain the specific surrender charge schedule and tax implications for your annuity contract.
Annuitization (Turning into Income Stream):
How it works: You convert your annuity's accumulated value into a series of regular income payments, either for a set period or for life.
Pros: Provides a guaranteed income stream, which can be valuable in retirement planning.
Cons: Once annuitized, you generally cannot access the lump sum again. If you choose a "single life" option, payments stop upon your death, potentially leaving nothing for beneficiaries.
Process: Your advisor will help you understand the various annuitization options (e.g., single life, joint life, period certain) and their implications.
Full Surrender of an Accumulation Annuity:
How it works: You cash out the entire value of your annuity before payments begin.
Pros: You get a lump sum.
Cons: Subject to potential surrender charges and full taxation on any gains, plus the 10% early withdrawal penalty if under 59½. You lose the guaranteed income potential of the annuity.
Process: Consult with your Northwestern Mutual advisor to understand the full financial impact.
Step 4: Contact Northwestern Mutual or Your Financial Advisor
Once you have a clear idea of your situation and preferred method, the next step is to reach out to Northwestern Mutual.
Your Northwestern Mutual Financial Advisor: This is often the best first point of contact. Your advisor has in-depth knowledge of your specific policies and investments and can provide personalized guidance, explain the pros and cons of each option for your situation, and help you complete the necessary paperwork.
Northwestern Mutual Customer Service: If you don't have an assigned advisor or can't reach them, you can contact Northwestern Mutual's general customer service line.
For general questions: (866) 950-4644 (Mon–Fri, 7am – 6pm CT).
Have your policy or account number handy.
Step 5: Complete Necessary Paperwork and Understand Tax Implications
Northwestern Mutual will provide you with the required forms for your specific withdrawal type. These often include:
Withdrawal Request Forms
Loan Application Forms
Surrender Request Forms
Carefully read all documentation. Pay close attention to:
Fees and Charges: Are there surrender charges, administrative fees, or loan interest rates?
Tax Implications: This is crucial. Understand how the withdrawal will affect your taxable income. Northwestern Mutual is required to report distributions to the IRS (e.g., via Form 1099-R).
For cash value life insurance: Loans are generally tax-free. Withdrawals are tax-free up to your basis, then taxable. Full surrenders are taxable on gains. Modified Endowment Contracts (MECs) have "gain-out-first" taxation, and loans/withdrawals may be taxable and subject to penalty.
For retirement accounts: Early withdrawals are typically subject to ordinary income tax and a 10% penalty.
For annuities: Withdrawals are generally taxed gain-out-first and may be subject to a 10% penalty if taken before age 59½.
Impact on Future Benefits: How will this withdrawal affect your death benefit, future cash value growth, or retirement income stream?
Don't hesitate to ask your Northwestern Mutual advisor for clarification on any point. Consider consulting with a tax advisor if you have complex financial circumstances.
Step 6: Receive Your Funds
Once all paperwork is submitted and approved, Northwestern Mutual will process your request. Funds can typically be received via:
Direct Deposit (ACH): Funds are transferred directly to your linked bank account. This is usually the quickest and most convenient method.
Wire Transfer: For larger sums, a wire transfer might be an option, often with a fee.
Check: A physical check can be mailed to you.
The timeframe for receiving funds can vary, but generally, expect a few business days to a couple of weeks, depending on the method and type of withdrawal.
Frequently Asked Questions (FAQs) - How to Take Money Out of Northwestern Mutual
Here are 10 related FAQ questions with quick answers to help you navigate taking money out of your Northwestern Mutual accounts:
How to take a loan from my Northwestern Mutual life insurance policy?
Quick Answer: Contact your Northwestern Mutual financial advisor or customer service to request a policy loan application. The loan amount will be based on your policy's cash value, and while flexible to repay, interest will accrue.
How to withdraw cash from a Northwestern Mutual investment account?
Quick Answer: For brokerage accounts, you can sell investments and initiate a withdrawal online or through your advisor. For IRAs/401(k)s, contact your advisor to discuss withdrawal options, understanding potential taxes and penalties if you're under 59½.
How to surrender a Northwestern Mutual life insurance policy?
Quick Answer: Speak with your Northwestern Mutual financial advisor to understand the surrender value and tax implications. You'll then complete a surrender form to terminate the policy and receive the cash value, minus any surrender charges.
How to get money from my Northwestern Mutual 401(k) before retirement?
Quick Answer: Generally, early withdrawals before age 59½ incur a 10% penalty and income tax. Check if your plan allows for loans or hardship withdrawals, or if you qualify for the "Rule of 55" if you leave your employer. Always consult your advisor.
How to access the cash value in my Northwestern Mutual whole life policy?
Quick Answer: You can access it through a policy loan (borrowing against it) or by making a partial withdrawal (reducing the death benefit). Both have different tax implications, so discuss with your advisor.
How to avoid taxes when taking money out of Northwestern Mutual?
Quick Answer: Policy loans from life insurance are generally tax-free. For other accounts, it's difficult to completely avoid taxes, but you can minimize them by withdrawing from Roth accounts in retirement, or waiting until age 59½ for Traditional retirement accounts. Consult a tax professional.
How to find my Northwestern Mutual policy or account number for a withdrawal?
Quick Answer: Your policy or account number should be on your policy documents, statements, or accessible through your online Northwestern Mutual account. If you can't find it, contact Northwestern Mutual customer service.
How to calculate the surrender value of my Northwestern Mutual policy?
Quick Answer: The surrender value is typically your policy's cash value minus any outstanding loans and surrender charges. Your Northwestern Mutual financial advisor can provide you with the exact current surrender value.
How to take a hardship withdrawal from my Northwestern Mutual account?
Quick Answer: Hardship withdrawals are generally available for 401(k)s and IRAs under specific IRS guidelines (e.g., medical expenses, preventing foreclosure). Contact your Northwestern Mutual advisor to see if you qualify and for the necessary forms.
How to transfer money from my Northwestern Mutual account to my bank?
Quick Answer: Once a withdrawal is processed, you can typically choose to have the funds sent via direct deposit (ACH) to your linked bank account or by wire transfer. Confirm your bank details with Northwestern Mutual during the withdrawal process.
