How to reduce these expenses

[DHK]

Tell you what. Insurance companies should appoint fiduciaries who actively manage this product and make sure it performs as illustrated if the premiums are paid. Most agents make that sale and disappear.

An obviously very common problem - on that we both can agree. Good agents should be considering making their recommendations as though they will be with that client for 10-20+ years AND review their total financial situation to maximize the use of that policy in the client's life. That's my standard, but not necessarily the standard for the insurance side of the industry.

 

[mespinosa]

Hmmm... haven't viewed my PDF file yet. Of course, if you're on your phone, you won't see it (and it would be very difficult to read/dicipher on a small screen anyway).

If the Index does not return 6.5% or if you don't put more premiums at that point or if the insurance company reduces the cap rate or increases expenses THEN everything comes cascading down in the next few years. How is that not gambling?

In the 401k, if the market crashes, you still own the shares of stock of the S&P Index. Their value maybe down but the "units" are still very much yours and you can do covered calls to generate monthly income. Here, you are locked in, can't get out and slowly bleed to lapse.
The only way you can stop the bleeding is to drop the DB and make it a MEC. The very tax free distributions and the guaranteed DB that were touted before, that you were counting on will be forced out of you at the ripe old age.

 

[DHK]

In the 401k, if the market crashes, you still own the shares of stock of the S&P Index. Their value maybe down but the "units" are still very much yours and you can do covered calls to generate monthly income.

That works out fine when you're in the accumulation stage, but not in the distribution / retirement income stage. Reverse dollar cost averaging and sequence of returns risk is an uncontrollable factor in retirement income planning.

 

[mespinosa]

That works out fine when you're in the accumulation stage, but not in the distribution / retirement income stage. Reverse dollar cost averaging and sequence of returns risk is an uncontrollable factor in retirement income planning.

Think of those "units" as your rental properties that you can rent. You dont care about the value of your rental property, do you? The only thing that matters is you can collect some rent.

There are many money managers that manage these kind of portfolios for grandma's 200k portfolio

 

[DHK]

And per Morningstar (link above)... you still have a 10% failure rate with a 60/40 portfolio withdrawing only 2.8% per year.

 

[mespinosa]

And per Morningstar (link above)... you still have a 10% failure rate with a 60/40 portfolio withdrawing only 2.8% per year.

I am not talking about withdrawing the principle, only the covered call proceeds.

Look, the point is, rightly structured does not save grandma from stressing out at 80 about her money. If you tout an alternative to stock market, then I am sorry, it's not an alternative. It's far worse where you can lose everything. It's like futures trading, for god's sake!

And all those features you mention are useful only for wealthy people and NOT for middle class people.

 

[DHK]

LOL - I thought we were talking about middle America... where such strategies generally aren't suitable.

However, covered calls do not produce results each year. They can expire worthless. Therefore, "Ma and Joe Lunchbucket" will still need that income to meet their expenses. Depending on their investment portfolio, they will then be withdrawing principle. Hence, the failure rate in retirement income planning.

 

[mespinosa]

LOL - I thought we were talking about middle America... where such strategies generally aren't suitable.

However, covered calls do not produce results each year. They can expire worthless. Therefore, "Ma and Joe Lunchbucket" will still need that income to meet their expenses. Depending on their investment portfolio, they will then be withdrawing principle. Hence, the failure rate in retirement income planning.

And you say Equity Indexed Universal Life is the answer to that?

I understand you are fighting for your livelihood and you see me as someone attacking it. It's not upto me to protect the middle class but I have raised some good, valid points here and they can be useful for middle class people contemplating buying these IULs. With that said, the chapter of IULs is closed for me. It's better to lose little money now than a lot latter.

 

[DHK]

LOL - and you think I see you as a threat to my livelihood? lol. You're in PA and I'm in CA. And after 3 weeks, you think you know what I know about financial planning?

I've been in this business 15 years and I am more analytical than most. I know how to treat MY clients. And you think that, after 3 weeks of looking at your (probably improper) illustration that you can lecture on my profession - or at least on me PERSONALLY??

You are funny.

Misrepresentation and ignorance: A dangerous blend for ethics | ThinkAdvisor

 

[DHK]

And you say Equity Indexed Universal Life is the answer to that?

I say avoiding investment risks that one cannot afford to take is my answer to that. Having 100% of your money available after a market correction (not subject to market risk) is better than 50%. That's how you beat inflation and rising costs of insurance - have more money.