Dave Ramsey on Life Insurance: Buy Term vs Cash Value (response video)

[2mconsolidated]

I dare ANY term insurance zealot to beat (or even remotely compare) to my results over the last ten years. Using properly front loaded whole life + PUAs... it would require a mutual portfolio to CONSISTENTLY and GUARANTEED produce 11.5% annually just to match my results... and.... THAT doesn't even consider my FREE $2.0 million dollar death benefit which will care for my wife after I depart.

Not to mention...EVERY $ I put into this method, I can actually USE (or pull out) whenever I want.

[drkpaladin777]

A person making 40k and saving 5800 a year will be doing so (hopefully) tax free through a 401k or IRA. This completely changes the math coupled with Monthly savings earning interest as opposed to Yearly savings, plus the assumption here is that a person stops saving for retirement at the same time that they stop paying for their initial term life insurance. Yes, a person who starts saving for retirement at 40, stops at 52, and keeps working until 65 be in trouble by age 77(No more characters)

[vicclement]

Wow. For some dyed in the wool, buy term and invest the difference zealots, you might have just as well posted: κατάλληλα δομημένο μέγιστη χρηματοδότηση because it seems that they just can't get their heads around what you're saying. The curious should paste that in at google translate ;)

[missedfortune]

@vicclement Well said. In greek no less! :)

[potts80]

You still cant justify a middle class family to pay for a $400k 20 year level term policy @ $220/yr and $18.33 a month vs a IUL policy with a $588k death benefeit @ $6k/yr and $500 a month. Which one do you think middle class families can afford? Invest the difference can be added to a work 401k plan adding 15% which is deducted before tax. This is more affordable to most families vs what you guys are pushing. Can you at least admit that? Also which vehicle pays most commision to agents?

[potts80]

In defense of Dave Ramsey. First is advice is for mostly middle class families. Middle class families have to have common sense vehicles to help adequatly protect their families. Your illustratuion has a lot of trickery to it. So you're selling that a $400k 20yr term policy @ $220 a year and $18.33 a month vs your UVL whole life policy $588k @ $6,000 @ annualy @ $500 a month is a good deal for a middle class person? Why didnt you guys break that down in your Illustartion?

[missedfortune]

@potts80, A lot of trickery? Please show with specific times in the video where we use ANY trickery. Your one argument isn't making any sense to me. At 2:18 we very clearly outline ALL the numbers (using Dave's guidelines of 15% of income), and account for every dollar being spent. The end result is that the buy term and invest the difference strategy falls far short of ours (which is an IUL, not what you incorrectly called a UVL Whole Life Policy).

[freedmfiter]

DiceHunt believes that if an Insurance Agent is paid a commission for his time, effort and expertise that he is a crook out to "rob the blind". That characterization demonstrates ignorance, malice and is simply unfair. So, DiceHunt is anyone who is compensated for their services a crook? How do you get paid? I'll bet someone has to sell something to generate your paycheck, probably gets a commission too. As for your slam on CV insurance, I challenge you to suggest something better...

[missedfortune]

@ayervp1 Regarding borrowing/accessing cash value via ZERO cost loans, that is the correct terminology to use according to the IRS guidelines in section 7702 of the code. You're saying we're being dishonest because we're using the accurate terminology? Also, what's your point? When you access money via zero cost loans, it's the same net effect as withdrawing your money, except that it's tax-free. You dispute this? From your post it sounds as though you truly don't understand this concept...

[missedfortune]

@ayervp1 Yes the loan is taken from the death benefit with zero wash interest, all death benefits shown in this video were net death benefits. But there is always an additional death benefit left behind on TOP of your existing cash value. How much do you leave behind if your money is in a bank or in mutual funds? Nothing more like the life insurance. Regarding borrowing...

[DiceHunt]

It seems that you ACCIDENTALLY FAILED to mention that on Universal Life, UL, you can 'skip' a pmt, and your CV will pay it for you..eventually eroding your "savings."

You also ABSOLUTELY failed to tell that the "interest" in the UV policy is 1) a selling key, 2) NOT GUARANTEED, BUT PROJECTED!

It's so EASY to see that YOU are an insurance SALESMAN who is out to sell CV insurance in order to "rob people bllind" and make a nice FAT commission for YOU and to hell with them!

[missedfortune]

@DiceHunt - It sounds as though you didn't even watch the video. Please refer to 8:48 where we STOP funding both plans and watch what happens. Remember, we are maximum funding these policies, they are not funded the way you're probably thinking of, and in this video we're showing ALL costs of the policy, and we're going easy on the costs of the mutual funds. Yes, projected using historical averages, and we say that clearly at 5:33! The mutual funds are projected as well, what is your point?

[missedfortune]

@DiceHunt -Also, there ARE guarantees, if you understood how indexed ULs work you would know this. The floors are 100% guaranteed. What are the guarantees of mutual funds? How come you're not attacking the mutual funds that lost 40-50% in one year? Mutual funds are BARELY back to break even from where they were10 years ago, while our strategies have nearly DOUBLED their money in that time, even when factoring costs. Again, what is your response to this?

[GlennBeckBookList]

@DiceHunt apparently you failed to notice the company logo at the beginning and end of the video or that they mention the company they work for of course they are an insurance "SALESMAN"....

Of course the interest rate (I assume that is what you meant) is not guaranteed and is projected, but so are Dave Ramsey's 12% returns that he talks about. The difference is that Dave does not offer a safe investment like CV Insurance because these have guarantees!!!! In IRA's and 401k's you can lose MONEY!

[lsmisscute]

@DiceHunt It's pretty clear you're a blind Dave Ramsey fan, so I'll help you. While they're not guaranteed, neither is your Ramsey "Good" Mutual Fund. They are projected, but so is your 8.5% taxable. While I think the guys in the video are still missing the point of permanent insurance, you haven't added anything, so you rely on the insults you learned from Dave's radio show.... Either contribute some intellectual argument or you'll continually get owned. Sorry.

[lsmisscute]

By the way, if you wanted to be a salesmen, Cash Value insurance is probably the worst thing you'd want to sell because all of the stigma with it. If it was truly an awful product, why do banks buy this by the truckload? Read the book Pirates of Manhattan. Banks consider it their Tier-1 (their best) asset. Every year bank-owned life insurance goes on sale 1/1, it's fully accounted for by 1/2. Yes, companies do sell out of bank-owned insurance for sale... Sorry, just the facts.

[TrevorKEdwards]

@DiceHunt You are ignorant, but I don't care it's your loss! Look at what it does, not what it is!!

[vicclement]

@DiceHunt - in 2012, companies will have to disclose the hidden fees in their retirement plans. The public is about to find out how much they're actually paying in fat commissions and other charges on their mutual funds including the commissions that they pay when they "rebalance" their plan...robbing the blind is about to come to an end because the light is about to be shined on all the fees behind retirement plans funded with mutual funds.

[ayervp1]

Money inside a life insurance money can be 'accessed' tax-free... I love the choice of words on that one! The money is 'accessed' via a 'policy loan' which needs to be paid back at a rate of 6-8%... very misleading!! Of course they won't tax you on money that you are borrowing... and why would I want to borrow my own money?

[missedfortune]

@ayervp1 Absolutely incorrect. The loans are charged an amount and that same amount is credited back to the individual's funds, it's called a zero-cost loan feature. There are no payments due, no due dates, and no restrictions on how much or little you borrow or why. If you look at our youtube channel, there are videos explaining this very concept.

[ayervp1]

@missedfortune I will watch your video, but I've analyzed many of these types of policies and what is in the contract is what is in the contract. Their is no due date, because if the person dies, they will deduct the loan amount from the death benefit. I'm glad you mentioned the word 'borrow' though in your response instead of saying 'access'. The fact that you mentioned borrowing the money pretty much proves my point that the statement of 'tax free' is really misleading if anything.

[GlennBeckBookList]

@ayervp1 I want to "borrow" my own money because I don't have to pay taxes on the money I "borrow" (I love the choice of words on that one!). Not misleading at all, unless you do things after a 12:01 video. MOST people would rather LEARN all of the "in's" and "out's" of what "accessed" means. AND that is what these guys do...TEACH, so stop being so nit picky and learn it for yourself so that you don't look ignorant, especially when you make statements about "rates or 6-8%"

[MadDogAM]

Another huge problem with making the assumption of consistent returns is that it NEVER happens in real life. If you had $100K and had 10% ROI in year one and -10% ROI in year two, your average annual return would be 0% but you would have less than you started with... $100K*1.1=$110K year one, $110K *0.9=$99K. So although you average 0% the losing years have a much larger affect on your returns than the winning years. It doesn't matter in what order they occur. Try it yourself!

[missedfortune]

@MadDogAM, exactly and well said. If we lose 33% we must then have a 50% gain to compensate for that loss! Or, a 50% gain in one year can be wiped out by a 33% loss the next.

[devolutionification]

Great! The lie of buy term and invest the difference is that the investing the difference part is always going to work. When it dosen't work for a full decade we need to have a reality check. The objective is not to "get back to where we were." Its not loose and compound from the downs of the market. Being back to where I am a decade ago is not an accomplishment. I've heard Dave say on many ocassions we can get 9% or higher in our mutual funds over time. Reality check! Didn't work for me!

[missedfortune]

@devolutionification Most of the time I've heard him saying 12%! :O

[kkail6359]

I can't recreate the hypothetical cash value of the mutual funds in the 20th year using your assumptions of 8.5% return less 15% taxes paid. You are showing $222,200 of net cash value of the "invest the difference bucket". Are you investing the money at the beginning or end of the year or monthly? Are you netting taxes annually or at the end? Are you carrying Lost opporutnity on the taxes paid along with that? Please provide your methods of obtaining that number.

[missedfortune]

@kkail6359 Are you factoring in costs? The national average for a management fee is 1.49%, we reduced our example down to 1%. We also used a sales/load fee of 3%, the typical range is from 2.5%-5%+. There are of course many other expenses we could include but we kept things conservative (we used ALL costs for the insurance, however). All calculations are annual. This should help you get closer.

[kkail6359]

@missedfortune - OK your example just said 8.5% - so I assumed net of all costs... I appreciate the clarification and I know that will bring the numbers closer to what you illustrated. Thank you.

[missedfortune]

@kkail6359 Yes, 8.5% gross for both sides (which is the 30yr historical for the Insurance), minus costs and taxes. Thanks!

[zylamediagroup]

@kkail6359

wrong... mutual funds will always until the world ends ... be taxed... because its regulated as investment ... and its not life insurance... Life insurance is not an investment but has investment advantages because its tied to the S&P 500.... you get all the gains no losses... just except the fact that there is something out there you don't know about ...

[millionairebythirty]

@missedfortune There are some good places you can go to read about all of the costs that are associated to mutual funds. Just google "typical costs/fees on Mutual funds" The SEC lists them on their site and their are several articles that will list the ranges for all of these possible fees.

People never tend to really look at all of the costs of these accounts let alone the taxes on top of the costs! Most professionals just quote gross interest without costs being taken into consideration.

[missedfortune]

@millionairebythirty Great resources. Right from the SEC. Thank you!

[kkail6359]

I can't recreate the hypothetical cash value of the mutual funds in the 20th year using your assumptions of 8.5% return less 15% taxes paid. You are showing $222,200 of net cash value of the "invest the difference bucket". Are you investing the money at the beginning or end of the year or monthly? Are you netting taxes annually or at the end? Are you carrying Lost opporutnity on the taxes paid along with that? Please provide your methods of obtaining that number. I've run it several ways

[GlennBeckBookList]

So I can't joke about you being 40 and living in your parents basement (how would I know?) but feel it is ok to call missedfortune SLEAZY? Got it! At least you have made everyone aware of your level of education. Funny that you are an engineer because more engineers do Missed Fortune than any other career...

[mar27171]

@GlennBeckBookList Wrong, miseading, and inaccurate AGAIN. Did I call missedfortune SLEAZY, no? I'm saying selling tactics that are based on preying on fears are SLEAZY. I think most everyone would agree with that. Saying I was living in my parents basement was totally off base, and if an attempt at humor, a poor one.

[missedfortune]

@mar27171 You have said that Missed Fortune is using scare tactics and that using scare tactics/fear is "sleazy", how is this not saying that Missed Fortune is Sleazy? Again, you're dancing around my question so let me ask it a different way: What is the possibility that tax rates will go down in the future?

[mar27171]

@missedfortune Again, you are NOT reading. I answered the first time and I'll have to REPEAT myself. NOONE knows what taxes will be in the future. I dont know, YOU dont know. NOOONE does. If you have to scare someone into saying that taxes will rise just to make your plan that you are selling look attractive, that is pretty weak and misleading. Never mentioned MISSED FORTUNE. I said ANYONE making claims like this are using scare tactics.

[missedfortune]

@mar27171 No, I read you perfectly, what I'm asking is what you THINK tax rates will do. Of course no one can predict the future and predict what taxes WILL do, and we've NEVER claimed to know that, only what we THINK will happen. So the question remains, what do you think will happen with future taxes based on your assessment of the economy, deficit spending, your political philosophies, etc... ?

[mar27171]

@missedfortune I have NO idea. No CLUE. Just like I dont know if the dollar will be higher or lower against in the euro in 30 years or what the price of oil will be in 30 years. NO CLUE! But I do know I wont make a financial plan that is contingent on guesses. Do you finally UNDERSTAND??

[GlennBeckBookList]

@mar27171 Did you read that article I posted?

[mar27171]

@GlennBeckBookList Yes. Thank you. Here's a quote from it "While it's difficult, if not impossible, to predict how lawmakers will handle future tax rates,...." Thanks for re-iterating my point.

[mar27171]

@GlennBeckBookList Also, this article REINFORCES what I tried to tell you over and over. That your retirement income is LESS than your earning income. Also the whole idea on this article is that the author is SPECULATING that taxes will increase in the SHORT term, within the next 5-10 years. Again, NO ONE in their right mind knows where tax rates will be in 30 years.

[missedfortune]

@mar27171 So are you also saying you will never react with your 401k or other investment strategies, if the economy is tanking you wouldn't change anything? Or if you felt real estate was going to shoot up you wouldn't consider buying if real estate was your interest? Foresight on what future events might be makes no difference to you and your financial decisions?

[mar27171]

@missedfortune I react if I can see something coming. Experts can only foresee a few years in advance and make educated guesses. But 30 years down the line? Thats IMPOSSIBLE. Where will OIL prices be, the value of the dollar, the unemployment rate, be THIRTY years from now? NOONE knows, so why in the world would I base my retirement planning on what taxes will be THIRTY years from now?

[GlennBeckBookList]

@mar27171 so you ARE saying that tax rates won't change....

[GlennBeckBookList]

@mar27171 "Higher Tax Rates Loom for 401(k) Savers"

finance.yahoo.com/focus-retire­ment/article/112433/higher-tax­-rates-loom-for-401k-savers?mo­d=fidelity-managingwealth&cat=­fidelity_2010_managing_wealth

[zylamediagroup]

@mar27171

you just don't get it ... its unlearning process to relearn something different that goes against ... everything

i didn't believe it either but my uncle is retiring TAX free... its amazing but you just have let go of the conventional thinking

[mar27171]

One more IMPORTANT question. What happens if in your example the person after 5 yrs (for whatever reason) wants to get out after 3 years. A lot of salesman are targeting working, but in debt, undisciplined families. Lets say they get their act together for 3 years, but then fall off the wagon and stop making the payments (very possible). How much is left in each plan? I would say the mutual fund would have about 110% of contributions and IUL plan would have 15%. But the salesman got PAID!!

[GlennBeckBookList]

@mar27171 Nice assumptions but wrong! I have one of these and I fell of the wagon and then got back on two years later and everything was fine. People lose more money in an Mutual Fund or 401k in one down turn in the market (AND THE MONEY MANAGER STILL GETS PAID) then I lost with two years of not putting anything into my policy. Even though you have a hardship it doesn't mean you have to stop! You have 11 years to put money in!!

[mar27171]

@GlennBeckBookList Nice answer, but WRONG. My statement was if you STOPPED making payments after 3 years altogether. Not if you fall off the wagon temporarily and start back up again. Please answer the question. Thats is why the sales guys make killing off of this. The customer is FORCED to stay in this plan. If they bail after 3 years salesman wins, insurance company wins, and family loses. Salesman need to be upfront about this very important point.

[missedfortune]

@mar27171 Once again you are incorrect. We've structured many MANY policies that give FULL surrender value of funds even after 3 years, even after 1 day!! There's no cookie-cutter plan for everyone so it all depends on what matters to you and what your values are and what kind of flexibility we're trying to accomplish. I would agree with your statement to the extent that many agents don't structure these policies correctly, but many do and they knock the socks off of other alternatives.

[missedfortune]

@mar27171 The bottom line is this - There's nothing terrible about typical retirement plans. But here are the facts - with 401ks you're limited on contributions, distributions (can't touch money til age 59.5), funds and investment choices, and you're at the mercy of wherever taxes go to down the road, even if it's up to 50-60% with the way this country is heading. With Max-funded life insurance, we offer guarantees, indexing, tax-free growth and access, usually around 7-8% NET after costs.

[mar27171]

@missedfortune The bottom line is if you have to resort into SCARING people that taxes are going to 50-60% to make your plan advantageous, then your strategy is very WEAK. And if you can only offer a piddly 7-8% on GOOD years, ummmm no thank you. 401k is at the mercy of the market? Well 2 years after the crash, the market is back to where it's at. Market ALWAYS come back, you know that. Scare tactics about market crashing is yet another sign of your weak argument.

[missedfortune]

@mar27171 Those are CBO estimates, not scare tactics. Try 15% in good years, and a floor of 0% in bad years making for an AVERAGE of about 7% the last 10 years, one of the worst BAD periods in history. While the market was trying to get back to break even from where it's been 10 years ago, our clients have doubled their money. Once again, you are completely wrong.

[mar27171]

@missedfortune Nice how you pick and choose your data. Compare returns for the last 2 years. S&P is over 50%. What is ILU? I can almost guarantee that if you look at almost ANY 25 year span, the LIU plans cannot compete with the market (S&P). When you try to tell people that the market is gonna crash and never come back, yes those are SCARE tactics.

[missedfortune]

@mar27171 You are wrong, attend one of our webinars found in the details section to find out why...

[GlennBeckBookList]

@mar27171 let me help you out with this just google "Tax Day 2011: Deficit Spending Hides Future Tax Hikes" and look at the charts provided by the Heritage Foundation and tell me what you see there that says taxes won't go up? Also if you would actually look at the S&P 500 you will see that is DROPS every few years! Did you know that if you lose 50% of your $ you now have to earn 100% back on that money to break even? I know you don't know that but now you do!!!

[mar27171]

@GlennBeckBookList Sure and in the 1950's nuclear war was inevitable. You have NO idea what tax rates will be 30 years from now. No one does. Uncontrary to you guys, I do understand MATH. And yes if you lose 50%, you need to gain 100%. But guess what, 2 years after the BIG crash, thats just what we the market did. Made it up!

[mar27171]

@mar27171 It's pointless to try and have an unbiased discussion with someone who's livelihood is dependent on selling LIUs. I think you have spent enough time convincing your clients that these products are so advantageous in every single way that you probably actually now believe what you're saying. I'm sure you're a very rich man, not from being in one of these products, but from selling them to hard working families.

[missedfortune]

@mar27171 Nearly everything you've assumed about IULs has been wrong and incorrect, but you've still yet to admit you are wrong and instead keep "bashing" away about crooked agents, etc. Stop gulping down what Dave Ramsey and Suze Orman teach, do some research, ask questions before just condemning a strategy and think for yourself.

[mar27171]

@missedfortune I've done research and have proved (as you agree) that the seed vs. harvest that many LIU sellers try to pitch is TOTALLY false. You know that. You only try to justify it by saying taxes will go up to WHOPPING 50%.

[missedfortune]

@mar27171 So you are stating with 100% certainty that taxes will NOT go up? Please answer this question. And what is TOTALLY false? That if taxes go up IULs will not have advantages because they are tax-free on the back end? Also you're completely ignoring the other factors, such as the guarantees, higher death benefit, etc. You may think it's no big deal to lose 50% in one year in the market, but I can tell you about numerous of our clients who would disagree...

[GlennBeckBookList]

@mar27171 OK I'm curious now what do you sell???

[mar27171]

@missedfortune I am independent. I just don't buy your MISLEADING statements. Lets recap what you said: Seed vs. harvest WRONG, taxes going to 50% (scare tactics), cash value is still high after 3 years (no answer just a reply that you have a PLAN), retirement salary = current salary (WRONG, with no more kids or house payment). And yet somehow you've proved me WRONG in every item. Thats about as fuzzy as your MATH.

[missedfortune]

@mar27171 How is tax-free on the harvest wrong if taxes go up? Are you saying they absolutely won't? Yes, we write policies all the time that give you 100% of what you put in at any time if you want to cancel the plan. Most plans provide more than 90% liquidity at any given time. What happens if you want to cash out your 401k plan after 3 years? YOU CAN'T, not only is there a 10% penalty but most plans with current employer don't even ALLOW you to touch one dime of it.

[mar27171]

@missedfortune I have NO idea where taxes will go 30 years from now. No one does. If you try and sell someone that you do know, you are full of ____. Its just a sell that is based on preying on fears, which is incredibly weak and SLEAZY.

[mar27171]

One more math ERROR. From Age 52 to age 65, how does IUL outgain mutual fund by so much? At age 52 they are essentially the same (222k vs. 232k). They are both SUPPOSEDLY earning the same 8.5%. There are no contributions from age 52 to 65, and no taxes should have been applied yet. Whats going on here???

[GlennBeckBookList]

@mar27171 where was the first math error? I think it was clarified where your math error was...

[mar27171]

@GlennBeckBookList No math error on my part. I'm no tax accountant nor was I familiar with how the mutual funds were taxed. I am very familiar with the taxes on 401k's and IRA's and you should try to do a tax comparison there. That is where the seed vs. harvest argument is. Its an absolute horrid argument with no mathematical basis whatsoever to say that IUL's (seed) offer huge tax advantages over 401k's (seed).

[missedfortune]

@mar27171 Yes, we can and will do a comparison vs 401ks/IRAs on here, we've done them many times in our other presentations. One question though, what have 401ks/IRAs done the past 10 years? IULs have done about 7%, in one of the worst 10 year histories since the great depression! And don't forget about fuzzy math, a 401k that loses 33% must now have a 50% gain to make up the loss!!!!

[GlennBeckBookList]

@mar27171 So if you didn't know that is this is how Mutual Funds work then what else do you not know? Open your mind a little bit and learn then make the wisest decision for you. Nothing is worse then someone ignorantly defending a subject they don't understand BUT I do appreciate you standing up and at least taking a stand!!!

[GlennBeckBookList]

@mar27171 EXACTLY this is the point, TAX-FREE Accumulation vs TAXABLE Growth is different!

[zylamediagroup]

@GlennBeckBookList

the money paid into the Indexed UL is already taxed by the government because you where taxed when you paid by your employer...

they can only tax again the death benefit is paid to the estate and not the beneficiary

[missedfortune]

@mar27171 Where was the first math error? You're being proven incorrect on all your points and instead of having a discussion with give and take you try to move on to some other insubstantial point you don't understand as a "gotcha" tactic. The reason the IUL performs so much better is because it's not taxed each year and as it's taken for income. That's EXACTLY what this video is showing, the difference between taxed with volatility vs tax-free with guarantees.

[mar27171]

@missedfortune Where have I been proving wrong? The only thing was a misunderstanding on my part in that I thought you were comparing mutual funds vs. 401k. No math errors on my part when comparing to a 401k. Have NOT been moving on to OTHER points, been trying to answer each question. You should compare vs. 401k. Reason being why one earth would anyone use a mutual fund in stead of a 401k/IRA if they dont get better returns and have huge tax disadvantages.

[GlennBeckBookList]

@mar27171 The problem here is that this is a RESPONSE video so it is responding to a video by Dave Ramsey who uses two different products in his description so these guys had to pick one direction and go with it and if you follow Dave Ramsey at all you know what a huge proponent he is to Growth Stock Mutual Funds so I would imagine this is why they went with Mutual Funds...

[mar27171]

Two HUGE problems with these guy's math.

They dont account for the fact that in IUL plan you are paying taxes on that 6k each year. How in the world can you NOT take that into account. In the traditional plan that money is TAX deferred. So, you can take those TAX savings and add to the savings contribution.

After year 20, why is the retire plan getting one lump tax? Did it get cashed out? No it did not, it gets taxed as it is taken out each year. At A LOWER RATE!

FUZZY MATH!

[missedfortune]

This comparison is not to 401ks but to regular growth stock mutual funds. Dave references both but we had to choose a direction. However, we've done many comparisons to IRAs/401ks in the past and we'll gladly get a comparison and post a link here.

[mar27171]

Okay, so unlike the 401K, the growth stock mutual fond yearly contributions are POST-tax? We are then getting taxed AGAIN at the end? Whats going on here?

[GlennBeckBookList]

@mar27171 That is how Mutual funds are taxed!!! Taxed as earned, I can find the tax code on that if you would like?



[mar27171]

@GlennBeckBookList So the gains of Mutual funds are taxed EACH year? Well, then comparing a 401k to a stock mutual fund that has post-tax contributions and the earnings get taxed EACH year is a silly comparison. For such a tax situation who in their right mind would use a mutual fund as a retirement planning vehicle? Try comparing the IUL vs. a 401K or traditional IRA, which are true retirement plans. Then you will see there are NO tax advantages that the IUL offer.

[missedfortune]

@mar27171, This is correct if taxes stay the same. What is your opinion, are you positive they will stay the same or go down? If they go up doesn't a tax free strategy on the back end make sense? Also, if you are successful saving for retirement, like we all are hoping to be, doesn't that mean we'll be in a higher bracket in the end? Also, remember we're not just comparing tax strategies but also volatility vs the guarantees with indexing, as well as the life insurance death benefit.

[mar27171]

@missedfortune No, no, we'll not be at a higher tax bracket in the end. We should be at a LOWER tax bracket, since we'll be withdrawing less money when we are old and retired then we will when we're currently working, paying mortgage, supporting family, etc. If I'm making 150k/yr, lets say I will be taxed at 20%, and I really could use the tax break NOW. But when i retire and withdrawing only 80k/yr my tax rate should be 15%. Speculatin where taxes are 30 yrs from now is just SPECULATION.

[GlennBeckBookList]

@mar27171 Yes, yes you will be in a higher tax bracket!!! Once you are retired you no long have little deductions running around the house, typically your home is paid for and you are not contribution to a 401k PRE-TAXED! So you have lost all three deductions, if you need $100k in income you must pull out $150,000 to pay taxes and net $100k. (using easy numbers here so let's not get side tracked)

[mar27171]

@GlennBeckBookList Those 3 deductions wont equal the difference in my retirement income. Lets say my current income is 160k. My retirement income should be 80k. WIth those deductions you describe gets me down to 120k. In retirment I could EASILY live off 80k (no kids, house payment, etc). STANDARD deductions get me to 70k. Tax rate for 70k is smaller than 120k. According to YOU, If I pull out 150k at retirment I will pay 33% tax rate? Cmon man. No need to exaggerate.

[missedfortune]

@mar27171 Wow, so you're PLANNING on making half of what you're earning now?? Jeez, you're really scraping to come up with a bad scenario that doesn't make any sense... In MOST cases people are planning and NEED the same amount of NET income in retirement (gross income minus deductions), and are thus planning for such. If that's the case (and it mostly is), you are FLAT WRONG (again). Someone PLANNING on living on half of what they are currently earning is a ridiculous example...

[mar27171]

@missedfortune No its a realistic scenario. I make 160k/yr. At retirement lets take away 401k contribution(15k), house payments (15k), Kids (20k), Kids College Fund (5k), slower life style (20k). If you need me to add these up for you I can, as math does not seem to be your strong point. Come on as a financial planner you know that you wont need as big a salary during retirement as you need now. Finance 101.

[missedfortune]

@mar27171 - If you're no longer making contributions to 401ks you're losing those deductions (ie, income goes UP), if you no longer have a mortgage you're losing those deductions (ie, income goes UP), if you no longer have kids as dependents you're losing those deductions (ie, income goes UP). You have this totally backwards. Sure you can tell me that you'll only pull out 80k to keep taxes low (have fun with that), but you'll STILL have no more deductions and taxes will be higher on that 80k!

[GlennBeckBookList]

@mar27171 well you may not need as much money as it would seem at age 40 you are still living in your parents basement blogging all day long but most people when they retire want to travel, see grand kids, spoil grand kids, work on hobbies etc, no just sit home and eat oatmeal until they die...but hey if that sound fun to you enjoy retirement, never mind inflation (which we are in a high inflationary period now so your oatmeal just got more expensive than yesterday).

[mar27171]

@GlennBeckBookList If you can't live a good life on 80k, with no kids, no house payment, no 401k savings, no daycare, you need help. Accusing me of living in my parents basement. You know you've lost your argument when you have to result to personal insults that are baseless. I'm a married engineer, and father of 2 young kids. I am no means a financial expert, but I do know math, which you sir seem you could use a lesson on.

[missedfortune]

@mar27171 What's going on here? Many individuals use stocks and mutual funds, or growth stock mutual funds for their retirement, and this is how they ARE treated!

[missedfortune]

There is no difference between a tax break on the seed vs a tax break on the harvest - if ALL other things are equal. The problem is - their not: For one, taxes WILL be going up. Max-funded life insurance offers indexing and market protection which qualified plans cannot offer. There are also no strings attached (like qualifieds plans have), and a much higher death benefit, especially in years 20+ after the term policy runs out.

[mar27171]

seed vs. harvest? You said that we were comparing mutual funds vs. IUL. Both tax on the seed right? So which is it?

[missedfortune]

@mar27171 You asked why we weren't comparing tax savings on the front end, and I explained that we're not comparing to qualified plans like IRAs/401ks (we can, that's a another illustration and video). So yes, both plans in this comparison show after tax dollars going into a plan.

[missedfortune]

Not sure what you mean on the lump tax comment, can you clarify?

[mar27171]

@missedfortune By lump tax, refer to age 52 line. You give a NET value of 222,200 after taxes. What taxes? You are not getting taxed yet, it's only AFTER you start WITHDRAWING.

[missedfortune]

@mar27171 As is stated in the video, we're showing AFTER TAX VALUES to make it simple, and not we're not taxing the "buy term" plan at a higher rate, we're using a simple (and very low might I add) 15% tax, again, as was clearly stated and shown in the video.

[ninoandtammy]

The only stocks I hold tend to have very high dividend yields...8%- 10% and I hold them forever. I do believe in life insurance, and have a nice term life policy for my wife and four children. It's my peace of mind policy...not my capital appreciation policy.

[ermacg97]

Index funds are a better option for most passive investors.

[ermacg97]

You are right that stocks are volatile, but cost dollar averaging in a Vanguard Index over a 25 - 35 year period will most likely serve you very well. Look at their annual expenses: .09% for VTI. That's a beautiful thing, especially in a ROTH IRA. Stocks and mutual funds are largely a suckers game. Like John Bogel says, "Don't try to find the needle...buy the haystack!"

[fubecara]

@ermacg97 "Most Likely"

[ermacg97]

No, you don't lose half of your money if you don't sell your position. The paper (market value) of stocks change daily. My focus is on earnings growth and dividend yields. If they are good, the stock's market appraisal will soon catch up in the long run. Just like rental properties. If you are getting solid, consistent rents for 20 years it doesn't matter how much your property is valued on paper.

[fubecara]

@ermacg97 True on the property...

[ninoandtammy]

The problem with your reasoning is clear, and I'm not sure how you over looked this. Perhaps it was purposeful and you sell this product so you have an incentive not to disclose al, the necessary info. The info I'm referring to is of course a ROTH IRA. Please re run this scenario with a ROTH that grows tax free year after year. Also, try running this scenario with a low cost Vanguard index fund, VTI, with ultra low expenses in a ROTH vehicle. Fair to say the Vanguard Index Roth Ira will win.

[missedfortune]

This is a video response to Dave Ramsey's "Buy Term" video where he specifically cites "growth stock mutual funds" and says nothing about ROTHs. However, it's true that ROTHS and MFTA Life contracts do have similar tax advantages. But beyond this, do ROTHs offer any kind of guarantees for your principal or interest rate? No. Does the ROTH strategy offer any death benefit beyond the 20 year mark? No. Can the ROTH strategy lose half it's money in a single year (ie, 2008)? YES.

[fubecara]

@ninoandtammy yeah I think you missed the point, probably because you didn't watch and listen. This a comparison to Dave Ramsey's mantra of "Buy Term and Invest the Difference."

True Roth's are a step in the right direction they are still subject to loss in the market. Just think if you were to lose 50% in the market you would not have to earn 100% on what is left in your Roth just to get to break even point. Also, Roth still have lots of GOVERNMENT restrictions. ROTH'S NEED TIME TO REBUILD LOSS