My mom always told me I liked to do things the hard way and by now I understand she was right! I could be selling mutual funds to folks and call it financial planning but nooooo, I need to be a little different and really help people get their retirement on the right track. But that means dealing with a lot of roadblocks both psychological and other.
Most people are happy to just go along with what everyone else is doing and hope it all works out well. So they let Wall Street and the government plan their retirement. How do you think that will work for them? Haven’t we seen exactly who Wall Street cares about? And the government, however well-meaning, would be the last folks I let plan my retirement.
We all think that we are great “thinkers,” so we discount the effect of propaganda on our psyche. Take a look at what almost every financial planner suggests. 401K/IRA/403B with mutual funds inside them. Maybe, do some fancy diversification buying bond funds along with equity funds. Whoopee!
How many out there are suggesting Real Estate? Ever wonder why? Too risky they say. Be careful they say.
Here is another brilliant bit of advice. Buy term insurance and invest the rest [in mutual funds no doubt]. But what they don’t say is that the average term life insurance policy lapses after year 2! So if you buy level premium 20 year term you have overpaid for those first years you own it and most people let it lapse well before it can become useful or even fairly priced. Term insurance is a cash cow for insurance companies, which is why so many relatively new insurance companies get into that business. The funny thing is that most of the financial planning industry came from accounting backgrounds if they have any formal training at all.
Yet, they advise the least tax efficient devices as possible.
For a moment, let go of all you have heard about life insurance. Now, think about this; historically EIULs have gotten an internal rate of return better than mutual funds. You can get $$$ out of a life insurance policy without having to pay taxes. You leverage your dollars in the first 15 years [or so] when most of the fees and expenses are being charged by having the life insurance component. If you die without finishing your financial plan the life insurance can complete your plan! And you will always have some amount of $$ going to your heirs no matter how long you live.
Does this sound like you are taking a huge risk? Does it sound like a worst idea than what most financial planners are suggesting? Does it sound like it might be a good fit for folks who also invest in real estate?
BawldGuy and I think it is a good fit. Around 1997 I stopped believing what financial planners were telling me. Since then my investment portfolio has thrived. Isn’t it time you do the same? Even though EIULs will never win a popularity contest?
Related posts:
- Using An EIUL As a Savings Vehicle – Generate Tax Free Income
- Real Estate & Financial Planning: Best of Both Worlds-Part 2
- Real Estate & Financial Planning: Best of Both Worlds
- Inflation and EIULs – Purposeful Planning In Action
- Purposeful Planning For Real Estate Investors Must Be Flexible ‘Cuz Life Happens
About David Shafer
I’ve read your blogs and I an so happy to learn more about EIULs and Self Directed 401Ks for my company.
I am sick of fnancial advisors and if I continue with them, I am sure t be on Medicaid at retirement. I also have great employees who are a bit ignorant to financial matters; however, it is my duty (I feel) to look after my sheep and ensure they have a great 401K plan. I also would like to use MY retirement money to purchase real estate.
I am interested in more information on how to setup a self directed 401K plan for my company.
I would like to max out my contributions annually as well. Is there a self directed 401K plan with the Roth component?
Thank you for your blog!
Joy
Hey Joy — The guy with whom you wanna talk, is John Park — for setting up self-directed plans. That’s his specialty. Here’s his website’s url — http://www.pgiselfdirected.com/ — his phone number is top right on the home page.
For info on EIUL’s you’ll wanna speak with David Shafer.
If you need help with the acquisition of real estate using your self-directed retirement plan, gimme a call, I probably know a guy who can help ya.
David, you wrote something that caught my attention: “Historically, EIULs have a better IRR than mutual funds”. I have suspected that is the case, but don’t KNOW. What are the actual numbers? I’ve seen the Dalbar report on mutual funds. Are there similar historical performance data on EIULs? I can’t get a handle on how well such polices actually performed over say 10-15-20 years. I realize they haven’t been around too long but, couldn’t the crediting formulas be retroactively applied to the index used, even beyond the intro of the first EIUL? (to see how they might have fared under various combinations of participation rates, caps and floor). Promising as they seem, I am amazed at how little verifiable information is available about EIUL performance. Even by agents that sell them can’t answer basic questions about them, starting with past performance of carriers. The fact that they can change caps (sometimes even participation rates), fees and cost of insurance annually concerns me. Thanks.