Here's something we should address right off the bat that I think a lot of people in the BOY et. al. crowd tend to forget to mention: YOU CAN SPEND YOUR MONEY! So, if today I'm serving you dinner in the form of financial security, we're going to start first with dessert. And if it weren't for copyright law (and a little bit of laziness), I might think about stealing a picture off the internet of a young child with ice cream all over his/her face. But I'll just let you envision that instead.
Have you ever had an investment account that you thought about tapping for an emergency situation only to hear your “adviser” lecture ad nauseum about how terrible an idea touching your money was? That's money for later, and if you take it out now you'll lose out on all the money it could have earned you if you left it there (say nothing about possible taxes or the potential that you'll want your money right after the stock market just finished up it's all too frequent latest nose dive).
What if instead of having to hear about how disastrous taking your money out for a good time is, we could talk about how perfectly ok it was to touch and spend (gasp) your money. Yes, it makes sense to touch it only when necessary (in other words, we're not really condoning that mid-life crisis sports car…but if you must…) but doesn't the notion of knowing that you can use your money and not commit financial suicide in doing so have a certain relaxing notion to it? A notion that perhaps makes you feel less like a criminal (or at least immature and an ill established adult) because you need a new car and you'd rather not pay Wells Fargo or Ford Motor Credit 4-8% extra to drive it?
Or perhaps it's just a vacation or home remodel you've been wanting to do for a long time. Most of the “advisers” I've met would damn near pop an aneurysm if you told them you needed to take a withdrawal from your IRA to pay the bill. Maybe some of this ties into the fact that if you spend your money that's less in AUM for them (nobody likes a pay cut). But if you're banking with a dividend paying life insurance policy, what's the harm? The obvious is you won't have access to loan the money out for something else until you pay it back and…well…there's that whole you have to pay it back part. Gee whiz you mean a system that motivates me to be responsible all the while continuing to pay me money on my money despite the fact that I took it out for an evening on the town for good times (hypothetically speaking that is)?*Quick Note: the intention of this post is to discuss the notion of using Cash Surrender Value on a life policy for life event purchases while still in the working and accumulating stage of your life. We're not really focused on taking retirement distributions here, which is why we are saying you have to pay it back. There is definitely a different time and a different purpose for taking the money that would put you in a situation where you had no intention on paying the money back. That is completely doable, it just has nothing to do with the main focus of this post.*
So here it is folks, something you won't find the guys at Acme Investment Partners telling you anytime soon (unless they decide to use their insurance license for something more than selling you junk variable annuities): you can spend your money. It won't ruin you financially and it'll actually be a better financial decision than getting a loan or draining any other savings or investment vehicle you have. Here's the other cool thing, your insurance agent could care less because he or she isn't worried about how much cash is in the account. He or she isn't paid a dime on any of that. Well, not unless he or she sold you Variable Universal Life Insurance at which point in time it might be time for a sobering and somewhat uncomfortable face-to-face sit down.