Buy Tem and Invest the Difference! Is this sound advice?

Many  readers listen or watch Suze Orman or Dave Ramsey in their  finance shows.  Don't  get me wrong.  I  like  them  both. However  there is one  area where they always  give  bad  advice!  That is  when  they  tell  clients  to only buy Term Insurance and  Invest  the  savings.   I  do  sell Term  insurance  but I generally use it as a supplement  to  a Cash Value Life Insurance policy that will always be there  when the client or their  family needs it.  There  are  several problems  with Dave and Suze's logic.
 First,
what  happens  if  you  need  to provide insurance  for  several years past the original term?  One of  several  things happens, your policy  expires with you  receiving  no benefit whatsoever, or if the policy permits you  to  keep paying, the premium jumps as much as 10-15 fold for  each additional year with an insurance need, or the policy  expires worthless and due to your then current age  and  health you  have become Medically Uninsurable.
 Second,
The problem  relates  to  the  actual  math involved. A recent  article in a professional  publication  demonstrated that the math often does not work out the way they suggest it should. I wont include  the  publication  here but  would gladly  share  the information and the  math with  readers individually. The  real  world  numbers indicate that especially in a low interest rate environment (does this sound at all like  like 2009- 2015) you are potentilly well ahead  by buying  a Cash value Life insurance product. The  author  illustrated  a Whole life  product  but there are some other products that can perform even better.
Third,
This problem  deals  with  the  rate of  return that they project  when they do  their projections. Both of them  talk about  making 7-8% per year on their portfolio.  How  many  readers can  honestly say that they  have  seen a 7-8% rate of return on their market risk assets in the  past 10 years?  Im willing  to  bet its no more thn one in a hundred who have  seen that ten year  return.  IF  you  have then  your 2003  $100,000  would now be worth  $216,000 in 2013.  This assums that  you  added no more money to the  account in that 10 yr period.  If  the average investor did not turn 100K into 216K  then the performance numbers quoted  by Dave and Suze  dont work out!!! You  can  make  that  in a good  year but they fail to  deal  with  the MASSIVE impact of the  down years.  Unfortunately real world investors  suffer in the down  years unless  they  are  using some SAFE MONEY assets in the financial plan.
Fourth,
Its very hard to beat the potential Tax advantages of a properly designed  and properly funded Cash Value  Life Insurance policy. Nothing Beats Tax Free Income!! 

I suggest that often a fiscally  smarter way to  go is  to  combine  several insurance products. At least  they  should consider  a Term  and a Cash Vale policy to minimize premium expense and maximize protection for  their premium dollars.  Of course everyones situation is different and  thats why they  should  consult  with  a licensed insurance professional  to help analyse their  specific needs.

What Happens to Bonds When Interest Rates Rise?

This  weekend an interesting  article appeard in the  Columbus Dispatch in the business  section. It was  titled "Bond-Lovers still buying despite risk, stock highs." In a recent month investors put $32 Billion into Bond  Mutual Funds.  This becomes a potential issue when interest rates are at all time record lows.  Do  you  think that interest rates one, three  or five years from now will be lower  or higher than  they  are  today?  Can they  get much lower?  Can they get much higher?  Is there  upside interest rate risk?  What happens to  existing values when  rates are rising?  Simple economics answers that question.   Existing prices fall when interest rate rise. The article  further states "With Bond prices rising and interest yields at historic lows the risk has picked up significantly"  The article is  worth  reading!

When customers wish to minimize their risks  Safe Money products might be a logical part of a financial portfolio.  Asset diversification is always very important.

Did you know that there are products that can guarantee lifetime income without any market risk?

I'm not telling anyone  to  buy  something or  to  sell  anything.  I'm just sharing  a nice article worth  reading.

OBAMA CARE The Afordable Care Act (ACA)

Not may people know that most of Obama Care enabling legislation didn't deal  with  health care at all. Most of the bill actually dealt  with new and onerous tax increases needed to fund  the bill. Did  you  know  that all  females  have maternity  coverage burried in the  cost of premiums. Thats  a mixed blessing of  course. If a woman is Sexually active, married and in child bearing age.  Its  not necessary to  add the cost of  the  premium for a woman  who isnt  sexually  active  or is beyond  child bearing age. However  courtesy of Obama  its in  there!
 Did  you  know  that  every  real estate  transaction  will  involve a better than 3%  federal  tax on a home sale. We are not  talking  about  a  tax on short or long  term  gains. We are  talking  about  a new massive  tax incurred  even if  you loose money on a home sale. There are dozens and dozens of  these new Taxes, Fines  and  Fees  hidden in the  1000 plus  pages of this legislation.
 That  just  doesn't  seem  right  to me.

What  do  you  think???

Would you be interested in 6.25% for 34 yrs?

Would you  be interested in turning $383,000 into a guarantee income stream for 34 year and paying a total of $1,607,000. The transaction is only available to one client. when its sold its  gone. There are other similar deals available with diferent amounts, diferent payment schedules, various durations and different  nominal interest rates. Smaller deals are also available.  The payment streams are guaranteed by Billion dollar  Insurance Companies that are highly rated and very well known.  This particular opportunity is issued by an A rated American insurance company.

Whats  the  catch?
You  must qualify to purchase the  deal.
You must have adequate liquidity to afford the transaction.
You get a schedule of monthly income checks thats is modest for the  first 14 years then increases every year until the maturity in 2047
You  cant change the monthly payment amounts. The  payment schedule is available for  review
You must have a very long term focus.

Im guessing the ideal client would be a professional with  high net worth possibly a lawyer, doctor or business owner.  Possibly utilizing IRA,  SIMPLE, SEP or 401K assets. Imagine a $1.2 M  plus gain in a ROTH!  It could be a younger sucessful individual or an older client looking to  fund a Mult-generational Family or charitable trust!

What are  your  thoughts on  this  type of very long term transaction and  rate of  return??

Public comments can  be made here or 
serious inquiries would be best handled by email or phone

How much money can you spend in your retirement

Most Professional Financial Advisors use a Rule of Thumb called  "The 4% Rule". Rules help clients understand what they  should or should not do. This rule states that if you  want a high probability that your  retirement assets will last as long as you live you should  remove or spend no more than 4% of your assets per year.  This rule applies  to self managed money accounts and  does not apply to Defined Benefits assets.  Recently we have lived through 5 or more years with Low interest rate earnings, High market volatility and we are actually living longer than ever in history. A number of  economists and planners have asked and studied this question. "Does the 4% Rule still apply in todays world?" What a great question! Many financial Advisors now believe that it no longer provides adequate protect of your income for life. They believe that you should limit withdrawals to only 3 % or so if you  want your self managed assets to last for your lifetime.

A recent study that appeared in the Journal of Financial  Planning  has found that up to 18% of people utilizing the 4% Rule will in fact run out of money before they die. That is a terrifying study result! That means that many people will have  to work long and or spend less in their retirement years.

What should a retired boomer, retiree or pre-retiree do.  They can  decide to  work longer and spend less. Those are a couple of good steps. Clearly they should also convert at least some portion of their assets into a Lifetime guaranteed income stream. These products  are only available  from Licensed Life insurance agents with the products  and knowledge needed to meet  these needs.  This is what I have  focused my business on for  over 8 years. Some of  these products can Guarantee a withdrawal rate for  life of 5% or more for your  entire lifetime.  Now compare that to  the 4% Rule or maybe 3-3.5% withdrawal rate with self managed assets.  These products can guarantee you an income 25-66% more than you  can  get from any self managed assets with the same Asset value. Thes products do this with Zero Market Risk. They delivered during 2008-2009 and they  can do the same thing during the next  recession whenever the out of control goverment excess spending creates the next Recession. These products have a role to play in almost everyones retirement strategy.

PBS Television Ed Slott 2013 Retirement Rescue Show

Sat  March 2 2013, and Sat march 9th WOSU PBS television station in Ohio is broadcasting a great  financial show.  Unlike Suze Orman and  Dave Ramsey who have no professional training in Finance or Taxation or Retirement Planning. Ed Slott is a professional Certified Public Accountant (CPA) and a retirement expert. His Special is  running on Public Television which does not accept commercial advertising. He  does not sell  Financial products, Stocks, Bonds or Mutual Funds, Insurance or Annuity products. Because the show  airs on Public TV there are no advertisers like TD Ameritrade or other Securities Brokerage firms  as show sponsors, or advertisers and potential content influencers.  Just look at the  advertisers or show sponsors for the  Suze Ormon or Dave Ramsey shows.

Don't get me wrong, I like Suze  and  Dave. They do give a lot of good advice.  However I know that some of their messages are biased, probably unintentionally,  by their  Lack of Accounting, Financial Training or their commercial sponsorship relationships. They believe that the only life insurance anyone ever needs is  term life insurance. They are flat out wrong! Although some clients may never need any other form of insurance many clients need a combination of both and some clients may be better  served by purchasing a cash value product

Ed Slott  has no comericial sponsorship bias and  does not sell  Securities, Bonds, Mutual Funds, Insurance or Annuities. Ed recognizes and speaks favorably about the unique advantages found only  with Fixed Annuity products and Universal Life Insurance. He Loves Tax Free retirement  strategies.  He says "Move your money from Forever Taxed to accounts that are  Never Taxed." ROTH IRA's are one way to  accomplish this goal. 401 K Plan rollovers are a useful tool where you can pay some tax now to avoid much higher taxes later.

I  agree  with  his  strategies  and  can  help implement them for clients looking  to protect some or even most of  their assets  from taxation now and into  the  future. Another quote I loved  was " The only thing better than guaranteed income for life is guaranteed Tax Free income for life." Contact me if you  want help with the strategies needed to accomplish either or both of these strategies.