Indexing In Monte Carlo

Indexing In Monte Carlo

Now that we know the basics of indexing, we can dive into a much more interesting topic: Does it work?  We're going to use a hypothetical contract (it's actually a real contract from which I have borrowed heavily, but we won't name names) where there is a minimum interest rate of 2% per year and a maximum of 12%.  I'm going to attack this from two different approaches, one will be a model based on Monte Carlo methods, and the second will be a historical analysis of 140 years of annual growth in the S&P 500 index.

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The Indexed Approach

The Indexed Approach

For several decades insurance companies have been using an approach to determining credited interest rate that is known as indexing.  It's a practice that has had it's detractors (yours truly for a little while) and has been a method that has been used for good an evil by well educated and unscrupulous agents respectively.  Today we're going to dive into what it is, what it's not, and ask if it works (i.e. is it worth your time).

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Wealth Building Opportunity

Wealth Building Opportunity

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) I'm going to take time today 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.

Because SOPA and PIPA went down a ball of flames I'll post the following picture to illustrate what today's post will be all about.  Not, of course, before acknowledging that it's not my original work and noting that you can purchase it directly from despair.com (I haven't started selling ad space; I'm not getting paid for this, FYI)

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How Policy Blending Works and Why You Want to Know about It

How Policy Blending Works and Why You Want to Know about It

People know that I'm generally a pretty big fan of policy blending.  It's essentially a process of combining term insurance with a whole life policy to increase the MEC limit on a whole life contract so that more paid-up additions can flow into the policy.  This means more of your outlay goes towards PUA's which means the policy has a higher cash value from the start.  This is the design feature that really separates whole life used primarily for death benefit from whole life used for cash accumulation purposes.  It requires a little deeper understanding of what's going on, and so isn't always a first choice method among newer or less skilled agents (and there's a big difference between an agent who has been in the business for 10 years and an agent who has had 10 first years in the business).

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Single Premium Whole Life Insurance, a Really Safe Place to Store Cash

Single Premium Whole Life Insurance, a Really Safe Place to Store Cash

I'm not going to commit personal finance heresy when I say that as we get older safety of principal becomes way more important than rate of return (personally I believe it's a lot more important even for the younger crowd than a lot of people would have you believe, but that's a fight for another day), today instead I want to talk about Single Premium Whole Life.  Also, as people get older and tend to realize they aren't immortal, life insurance suddenly becomes a lot more coveted.  If you want to set me off on a several hour long discussion about putting things in order before it's too late, ask me about the number of people in the 60+ crowd I've talked to who stress over whether or not they can afford that 20 year term premium and if they think they'll be dead in the next 20 years so they can “make good on the policy” (copious amount of forehead slaps understood).

Enter Single Premium Whole Life Insurance… 

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Looking for some Good Ideas for your Emergency Fund? Part 3 Reasons 6, 7, and 8

Looking for some Good Ideas for your Emergency Fund

Here we are, the conclusive post to the Emergency Fund trilogy (sounds special).  Again, if you'd like a refresher on all 8 reasons from the original post they are:

  1. Increased rate of return
  2. Tax deferral
  3. Potentially tax free withdrawal
  4. Death benefit
  5. Private and non-probate asset
  6. Fewer fees (in most cases)
  7. Recaptured opportunity
  8. Systematic savings

    Keep ReadingLooking for some Good Ideas for your Emergency Fund? Part 3 Reasons 6, 7, and 8

Looking for some Good Ideas for your Emergency Fund: Part 2 Reasons 1-5

Part 2 Reasons 1-5

So last time we dove into general design, and this time around we'll be addressing why this is such a great idea.  I left off the last post with 8 reasons for using cash value life insurance as a spot to store emergency fund cash.  If you forgot here they are:

  1. Increased rate of return
  2. Tax deferral
  3. Potentially tax free withdrawal
  4. Death benefit
  5. Private and non-probate asset
  6. Fewer fees (in most cases)
  7.  Recaptured opportunity
  8. Systematic savings

Keep ReadingLooking for some Good Ideas for your Emergency Fund: Part 2 Reasons 1-5

Looking for some Good Ideas for your Emergency Fund? Part 1: Cash Value Life Insurance?

Cash Value Life Insurance as an Asset Class

In the spirit of the Holiday Season, which just wound down for the most part (hurray I can drive by major commercial locations again!), I figured I'd make today's piece a sort of “holiday gift ideas with cash value life insurance that kick ass” type post.  For years I've been advocating what I'm about to roll out here, and I've got clients who have accomplished some seriously nice cash positions that are crushing what others are traditionally taught to do with their emergency fund money on a rate of return playing field.

Keep ReadingLooking for some Good Ideas for your Emergency Fund? Part 1: Cash Value Life Insurance?

An Oldie, but Goodie

An Oldie, but Goodie

I remember quite vividly the first time I saw this video.  I was still a career agent with one of the big 4 Mutuals and we had a special meeting conducted by the Director of Individual Life Sales.  He came from the Home Office to give us a presentation on the topic of life insurance as an asset class and brought with him this video recorded a few months prior on CNBC.

httpv://www.youtube.com/watch?v=1sskwUTj4z8

Keep ReadingAn Oldie, but Goodie