For the first time in over a decade, we're all getting reacquainted with the adverse consequences of interest rate risk. To better explain to you what that actually means, we went on a Google search for a simple definition. But in doing so, found one from the FDIC, and in light of the recent turmoil in the banking industry, it seems to be the most appropriate one to share. So here it is straight from the FDIC website: Interest rate risk is the exposure of a bank’s current or future earnings and capital to adverse changes in market rates. This risk is a normal part of banking and can be an impo ..read more

Despite the strengths of whole life guaranteed cash value, many people attack the guaranteed ledger of a whole life insurance illustration because they believe they can do better.  Do better is a highly subjective and relative notion, but one major argument notes that with whole life insurance, you are guaranteed to lose money if you buy it. Seems like a reasonable claim.  The ledger reflects a cash value less than your premiums in the first few years--a guaranteed negative return.  If you look at a whole life policy illustration (that we provide to our clients and potentia ..read more

We have discussed indexed universal life insurance (IUL) at great length in previous podcast episodes, but we know the big question remains: does it work? So, to further investigate that question, we decided to update a bit of an experiment we ran about ten years ago. We will use a hypothetical IUL contract (a real contract from which we have borrowed heavily, but we won't name names) with a minimum interest rate of 0% per year and a maximum of 10%.  We're viewing this from two different approaches, one will be a model based on Monte Carlo methods, and the second will be a historical anal ..read more

While most financial advice is heavily focused on maximizing return while minimizing fees (and this perhaps is one of the reasons so many people fail long-term in their financial plan), today we're going to introduce a concept that is by no means new but one of those golden little nuggets that could dramatically change the way you look at financial matters through the lens of your personal self-worth. Since you'll never have control over the rate of return, it makes little sense to spend significant amounts of time worrying about it. Consider an alternative that puts you in total control of yo ..read more

We've spent a lot of time trying to locate the source that validates this assumption (8% average return on investments). And back in 2018, we recorded an upside reporting our findings. At the time, we couldn't find evidence supporting 8% as a reasonable return assumption. But we decided it's been nearly five years since that original study, so we need to revisit it.  How did the extreme market increase over the last five years change things, or did it? Listen to the full episode to find out what we discovered.  ___________________________________ If you'd like to look at planning for ..read more

After spending a considerable effort attempting to corroborate an 8% compound annual growth rate for stock market investments, we’re about to unveil the latest and greatest research on achieving such returns - five years in the making. But this attempt at updating our data set with recent performance yielded something remarkable – prompting us to dedicate an entire episode exploring it further. What was the discovery...? It seems almost unbelievable, but a staggering 20-year compound annual growth rate of just 2.76% is something we've seen in the rolling 12-month returns data! That's huge – wh ..read more

Annuities have experienced a cold dark winter over the last decade or so. It's not to say that annuities stopped existing and that the benefits they offered fell short. The product serves a vital role in providing guaranteed income in multiple combinations. However, the prolonged period of depressingly low-interest rates that we had from the financial crisis until the earlier part of 2022 saw the popularity of annuities fall. Again, they always fulfilled their promises as an income-focused product, but there was no real immediate gratification to them. Now things have shifted, and they've done ..read more

For years, we've all been taught that bonds are the "safety" valve to the otherwise stock-heavy allocation of our retirement/investment portfolios. And for years, we've argued that this was largely unproven as all of us have been living through extraordinary times where bond ETFs and mutual funds haven't faced the pressure of rising interest rates.  But the tables have turned over the last year to 18 months. Interest rate policy has shifted, and bond funds (ETFs and mutual funds) are reaping the sour harvest. The notions about bonds being more stable and safe are not holding.  In thi ..read more

When looking at life insurance illustrations or the actual policy documents, you'll see some version of "Please seek the advice of your tax professional..." in numerous places. But why? Is it really necessary for you to go over every possible financial decision or potential purchase of a potential product with a tax professional? Well, that's up to you, but in our experience, that would be pretty costly and unrealistic. Not that seeking professional tax advice is a bad idea. Still, in many cases, insurance companies add these disclosures or warnings as a CYA tool because they can't possibly kn ..read more

Oftentimes people will ask us how whole life insurance compares to buying passive stock market index funds or ETFs. It's a fair question and one that we've answered privately and publicly in the past. But we'd like to propose an alternative. Rather than a straight head-to-head comparison (which should always favor a higher return for stocks over time), perhaps there's a better way to view whole life insurance and where it fits into your financial or retirement planning strategy. Why not look at using whole life as an alternative to bonds? It produces more cash overall in the portfolio balance ..read more