It is very confusing and that’s one of the reasons I recommend a fee only insurance adviser to evaluate different policy terms when you don’t understand something. Let me first say that term is best when the need to provide for heirs is the main concern. Because of the fees and costs of insurance, people should contribute the maximum to a 401k or IRA before considering it. Life insurance should only be an option if the money won’t be needed until the surrender period expires and all other deferred options have been exhausted. Even still, there may be better options for the money. It is really a decision that should be made in terms of estate planning, financial planning, and tax planning with the help of your attorney, financial planner, and tax expert.
Life insurance as a wealth building vehicle should be done with conservative investments for the cash value. To me, that means tracking some kind of equity index and a guaranteed minimum return. The death benefit should be the minimum to maintain the tax deferred benefits of the policy, keeping in mind the purpose is to build cash value for retirement income and not to provide a death benefit for heirs. Finding such a product will be a challenge and finding a good agent will be even harder. Too many chase the commission.
What made these products attractive to me was the tax free withdrawals and the statutory protections against creditors. There are very few products that have tax free growth and tax free withdrawals with virtual immunity to creditor attack. I learned about it from other investors (vs. an agent) and then did the research to see if it makes sense for me. It did, but that doesn’t make it right for anyone else. Even if it is right for someone, it shouldn’t be done unless that person can understand it and is comfortable.
I’ll answer whatever you questions you have to the best of my ability. Just remember I am an investor building wealth, not an insurance agent versed in all aspects of the industry. I limit my knowledge and research to the areas that concern me. If it doesn’t apply to me, I skip it. I found this book to be a good primer to explain some concepts: The Home Equity Management Handbook by Roccy DeFrancessco.
Just a few thoughts on traditional investments vs. an R.E. portfolio for retirement…
shaun stated that a portfolio of rental properties might be a way to go “Assuming You Don’t Mind Being Landlord”
This is the operative statement due to the fact that managing anywhere from 10 to 50 units (numbers stated in previous posts) is not most people’s idea of retirement.
This plan involves large amounts of the two P’s…People and Paper. You will be preparing and executing leases, getting and renewing rental permits, saving receipts and records for properties to be used at tax time, etc. etc…
Interviewing countless prospective tenants, negotiating terms, moving people in and out, collecting and returninig security, moderating tenant conflicts and compaints, etc. etc…
The two P’s can be a high stress, low exercise scenario without careful planning, streamlining, and proper property selection (I advise doing at least some of you own maintenace work for exercise and fresh air).
I suggest that one maintain a smaller portfolio and renovate and rehab on the side for added income. Especially if you view real estate as an avenue to express your inner architect, interior designer, landscaper etraordinaire, etc…
It keeps your hand in the game, taxes and challenges your mind and skills, gives you plenty to talk about at family gatherings and parties. This will keep you young and vibrant to live longer (more exercise too…LOL) Cuts down on the two P’s
Why retire when your present set of tires have plenty of mileage left on them?
Are any of your properties paid off, Mike? What are your thoughts on leverage with a quantity of properties with notes versus having a smaller number of properties paid off and generating more cash flow due to no mortgage?
I looked up the infinite banking concept you mentioned. From the little I have seen, I don’t like it all. It reminds me of the missed fortune and money merge account seminars.
BLL,
Thank you for the honest opinion and comparison to money merge as well…It is often confusing to me why people pay huge sums of money for seminars such as money merge…I’ve read that the cost runs around $8,000 for a seminar…Also I’m sure many do not know the seminar business is a cashcow when you can get the sheep to pay up and attend…A fool and his money are soon parted
For the time being I’m going to stay with my real estate…It seems suitable for me…
This is the operative statement due to the fact that managing anywhere from 10 to 50 units (numbers stated in previous posts) is not most people's idea of retirement.
It is my idea of retirement (or should I say semi-retirement). I typically work 12-16 hours per week and enjoy getting out of the house and doing something productive. My idea of retirement isn’t sitting on my rear and watching soap operas. A 3-4 day weekend every week is about all the retirement I can stand (and I am very active snowboarding, scuba diving, riding my motorcycle and my bicycle, camping, etc).
Are tenants a pain in the butt? YES, YES, YES! However, those tenants are what allows me to live the lifestyle I want!
Are any of your properties paid off, Mike? What are your thoughts on leverage with a quantity of properties with notes versus having a smaller number of properties paid off and generating more cash flow due to no mortgage?
Right now, I only have two properties paid off. I am absolutely in favor of having fa smaller number of paid-off rentals as opposed to a larger number of properties with mortgages. However, this is usually not an option when you’re first starting out, if you want to live off the income from the properties.