Transcription
what product should I get? Should I get an IUL? Should I get whole life? One of the reasons why I like the IUL is because I can find a carrier that gives me a guaranteed 0% loan. Where whole life fits for me is the rock-solid guarantee you will get bond-like returns. I don't think whole life policies are designed to build money up and then take money out permanently. Why? Because there's typically a net cost to borrow. Okay, and if you don't pay that loan back, then there's a cost associated with those outstanding loans that can really take a toll as it compounds over time.
The three words I heard is, "If you believe this." Not where insurance fits in my opinion. Like, I don't want my insurance to be based on a belief. I want it to be based on the fact that it's going to be there no matter what. So with IUL specifically, the problem though is I'm here with two of the best minds as it relates to retirement planning, especially when you incorporate life insurance. We have Tom Wall, PhD in retirement income, bestselling author of "Permission to Spend," and he's going to be presenting around retirement using whole life insurance.
We also have David McKnight, the bestselling author of "The Power of Zero" and the many other books that he's written, and he's going to be presenting his philosophy around how he sees and helps people when it comes to retirement planning, especially how he uses the product index universal life. The hope is for us to be able to have a dialogue, for us to be able to challenge each other, discuss topics that we agree on and disagree on, but mainly hone in on whole life versus IUL. Both of you agree that life insurance is great, but you guys express that in a different way.
Tom, we're going to start with you. You have 5 to 10 minutes to present and lay the framework on how you view permanent life insurance, retirement, and your philosophy. Then we're going to give David the opportunity to do the same, and then we're going to open up a time where we can have dialogue and challenge each other. Hopefully, by the end of this conversation, people will have fewer questions, more clarity, and more conviction for what they do, who they represent, or what they're going to do with their retirement. Sounds good?
Well, thanks for the intro, Caleb, and thanks again for having me on and doing this. You know, I've been in the financial services space for 22 years, started right out of college, you know, basically selling life insurance before I became a full-fledged financial advisor and then spending time in various roles at major home offices in the industry.
Early in my career, I discovered that there's this problem in financial planning. I think we live very much by rules of thumb and accumulating to some certain dollar amount in the future, but people don't know how they're lacking advice. The epidemic that's going on in the retirement space right now is people are under enjoying their retirement because they're terrified to spend. They arrive with money in their retirement accounts as opposed to the traditional pensions of the past, and they now have to be an investment manager for the rest of their life, you know, making that last as long as they do.
People are afraid of living too long. They're afraid of what happens if World War III breaks out in five years. They're worried about major market crashes and hyperinflation and taxes, which David does such a good job talking about. All these things force them to live scared. You know, it's almost like not having health insurance or not having homeowners or car insurance. How differently do you drive or operate your house if anything catastrophic could completely wipe you out?
The book that I wrote, "Permission to Spend," is really a pretty high-level book on retirement planning in general, but it talks a lot about how there are strategies that you can use to shift the risk off of yourself and spread that risk through insurance companies across many individuals and give yourself permission to spend and enjoy that which you've taken an entire lifetime to accumulate. That's really been my mission. It's really a puzzle. It's been a fun puzzle to try to solve through all my education and all my years in the space.
How do we actually push consumption, you know, enjoyment of life to the early years of one's retirement versus just living scared and then giving yourself a pay raise at some advanced age when you might not even be alive? And even if you are, you're probably not as healthy as you once were. That's a great start when it comes to the whole life side because you even have a whole life mastermind. How do you talk about insurance and maybe a little bit in more depth as a bond alternative? And then why whole life? Why is that your lean as it relates to the solution in retirement?
Yeah, so I mean early on in my career, I was affiliated with one of the major mutual life insurance carriers, and they sell great products. They stood the test of time. These companies have been around since before Civil War times and have been delivering on paying dividends since then. But it was always in the back of my mind, am I just giving a sales pitch for a good product that you're probably not going to have to apologize for, or is this actually the best thing somebody can be doing with their money?
That's what led me to all my academics. I'm really not an academic. I just kept asking question after question, taking course after course, trying to figure out if this stuff actually made sense. Toward the end of it, when I wrapped up my PhD four or five years ago, my dissertation was actually in whole life as a fixed income alternative because I've seen so many advisers pitching it that way, and I wanted to study if that actually makes sense.
There are really two ways to look at life insurance. One is the accumulation benefit of it, the living values, which we talk a lot about, and then there's the death benefit piece. When it comes to the accumulation side, what I found was when you really understand the economics of participating dividend-paying whole life insurance contracts, why they're so attractive is the performance of those contracts is based on what the general investment account of those major life insurers are earning.
They're essentially passing through the cash flow of that portfolio to you as a participating policy owner. That's what the word participating means: you're participating in their profitability as a mutual, you know, almost owner of the company. What happens is because it's a life insurance contract with guarantees, you have cash values that are guaranteed to rise no matter what every single year and typically eventually equal your death benefit by age 100.
Then the only question is the rate at which the company enhances it. Assuming business models remain the same, you're essentially getting bond-like returns over time. That is, you know, the dividend crediting rate through the company or through the contract. They've indemnified you from all of the risk inherent in making those investments on your own, so it acts a lot like a better bond.
I actually think a lot of advisers almost lazily call whole life an asset class. It's like whole life as an asset class or something like that. It's not an asset class; it's a life insurance contract with an insurer, but the performance is backed by a portfolio of assets that perform predictably over time. Through risk pooling, it's just kind of a can't-lose situation. The only question is really how much do you win?
For retirees that are now holding a lot of assets that are going up and going down and don't have any guarantees, and there's a lot of uncertainty, that's really where my philosophy comes in. I know in my portfolio exactly at a minimum level what my kids are going to get. I know exactly or predictably what my rates of return are going to be, and that allows me to then take advantage of opportunities elsewhere, shoot for the stars, make investments, stay more fully invested closer to retirement and in retirement.
Whereas otherwise, I might be pulling off that risk and really not taking advantage of compound interest the way it can work. Yeah, there's a lot of life insurance people that are maybe anti-market or anti-traditional investments, and that's not you, Tom. I believe I don't want to put words in your mouth. Last question before we go over to David is, what is like an asset allocation that you would be leaning towards?
I know I just called life insurance an asset, which goes against what you said, but from a standpoint, is it like a 60/40? Does it depend? From a philosophy standpoint? Yeah, I know you wrote a whole book around this, but what are some of the things that you, some people in your community, or you yourself have helped people when it comes to deciding, like, "Yeah, that sounds good," but then how do I know how to maximize the whole life when it comes to my situation?
There's really no right answer for that. You know, asset allocation is essentially a game of how much risk are you willing to take. So whether it's 100% stocks or 60% stocks, the other 40% needs to go somewhere else. So I'm not one of those people that tries to time the market or say don't own bonds or don't own a certain thing. The way I like to think about it is, and this is really where whole life fits, and frankly, some people misunderstand this, is it's not whole life or investing.
That should never be the comparison. You should be diversified. You should own equities. You should own real estate. You should own your own business—all the things that have historically generated a lot of wealth. But to have permission to do that, you need to have something in your portfolio that is stable and predictable and accessible, or else you run the risk of financial calamity or major world events happening and all of that wealth going away.
So I think of it more in terms of, you know, if I think about a retirement distribution strategy, if I'm actually trying to spend down a bucket of assets and the markets generally speaking haven't lost value outside of the Great Depression for more than three years in a row, I'm going to want at least three or four years of income in an asset that can't go down in value.
So I think of it not so much as a percentage, but that percentage typically will work out to, you know, 15% to 20% of your assets in something that is unassailable by market events. That's what I work toward and would coach clients to work toward regardless of what else they have for their investments.
Tom, thank you, and I look forward to future discussion and dialogue. David, I'll hand it over to you. Tom went eight minutes with a little bit of help, so I'll hand it over to you, and we'll see. Please share your thoughts.
Sure. Really, I've built my worldview around the idea that I believe that tax rates in the near future are likely to be dramatically higher than they are today. I think that more and more experts are coming over into our camp. Tom, I think I've listened to you talk along those lines as well. Given the fiscal trajectory of our nation, given the $239 trillion of unfunded obligations, taxes have nowhere to go but up.
The lion's share of cumulative retirement savings across the country balances across the nation, $35 trillion or so, that are stuck in tax-deferred vehicles like 401(k)s and IRAs. I think that Americans have gone into a business partnership with the IRS, and every year the IRS gets to vote on what percentage of their profits that they get to keep. I think that's a dangerous partnership to be in.
You could have a million dollars in your IRA, but unless you can accurately predict what tax rates are going to be in the year you take that money out, you don't really know how much money you have. That can be pretty hard to plan for retirement when you don't know how much money you have.
So really, the general thrust of what I talk about is this idea of shielding your assets from the impact of higher taxes. I advocate for a balanced, comprehensive approach to tax-free retirement. There isn't any one solution that provides all the answers. I'm a real big fan of Roth IRAs. I love Roth IRAs. I love Roth 401(k)s. I love Roth conversions. I love being able to take money out of your IRA up to your standard deduction so that those distributions are also tax-free.
If you can keep your provisional income low enough, then your Social Security is tax-free as well. Then we talk about this idea of the life insurance retirement plan in my chapter five of my book, "The Power of Zero." I'm fairly agnostic as to what kind of cash value life insurance that is. I prefer index universal life. I don't think I'd be here having this conversation with you if I were the same brand as Tom here.
But I like IUL because I think I can do some specific things, can perform some specific applications that none of those other streams of income can do. In stark contrast to a lot of what you might see on TikTok or elsewhere, I don't think the IUL is an imperfect solution. It's not a silver bullet. It's not a panacea. It only works when utilized in concert with all those other streams of tax-free income.
In our group, we do workshops all across the country and universities. Folks that are 50 to 67 generally come into our classroom, and I'll tell you what the thing that is most weighing on their mind is long-term care. I would say 70% of our clients that end up using IUL are using it because they get a death benefit in advance of their death for the purpose of paying for long-term care.
People aren't opposed to having long-term care; they're just opposed to paying for it. If you can give them a solution where they're not paying for 30 years, dying peacefully in their sleep, never having used it, and then it goes to pay for someone else's long-term care, in this instance, if they do die peacefully in their sleep 30 years from now and never having needed long-term care, someone's still getting a death benefit—probably your kids or your grandkids.
So there isn't that sensation of having paid for something you hope you never have to use. That's probably about 70% of the applications. The other one is sort of a super Roth-type vehicle where instead of continuing to pound money into a taxable brokerage account, you know, where let's assume for a moment that you could net 6% in your IUL. I know there's lots of discussion as to whether you can do that or not; we can certainly talk about that.
Let's assume you get 6% net of fees over time. What would you have to get in your taxable brokerage account to be able to eclipse that? Well, if the higher your marginal tax rate is, the harder that is to eclipse. We're talking 9% and a half to 10% to be able to net 6% once you figure out the tax at your marginal rate.
So really, it becomes an alternative if you can get a 6% net rate of return without taking any more risk than what you're accustomed to taking in your savings account. That's a pretty safe and productive way to grow at least a portion of your assets. The third application that we really look at a lot, and I talk about this in my recent book, "The Guru Gap," is this whole idea of a volatility buffer.
I know that whole life has been used historically as a volatility buffer. I think it works really well in that situation. But this whole idea that if you can save three to five years' worth of living expenses in your cash value life insurance by day one of retirement, and then in the year following a down year in the market, you live out of that cash value, what that does is it gives your stock market portfolio a chance to recover before you take further distributions.
That act alone could increase your sustainable withdrawal rate on your stock portfolio to as high as 8% with a 95% confidence that your money will last through life expectancy. So again, sort of in summary, I like IUL, but I'm not in love with IUL. I think IUL serves a purpose. It's a tool that accomplishes a specific objective. It only really works when used in concert with all those other streams of tax-free income we talked about.
I think every stream of tax-free income I talked about does something unique that the other ones don't do. For example, Roth IRA gives you immediate liquidity; none of those other ones really do that. A Roth 401(k) gives you a match; none of those other ones really do that. A Roth conversion allows you to convert an unlimited amount of assets to tax-free; none of those others can really do that.
Taking money out of your IRA up to your standard deduction allows you to get a deduction on the front end, grow your money tax-deferred, and take your money out tax-free. That's the Holy Grail of financial planning. Finally, the IUL is almost an afterthought on all of this, but it allows most of our clients to get a death benefit in advance of their death for the purpose of paying for long-term care.
That's really, in a nutshell, my retirement planning worldview and how IUL fits into the discussion. David, I don't want to put words in your mouth, but if IUL over a long period of time can get a net 5% or 6%, and then you factor in taxes, the after-tax dollar equivalent, and then you factor in the value of a death benefit, and then you said if you factor in the value of long-term care, either if it's a legit rider or an accelerated benefit rider, now that's where you can potentially say this asset or this insurance contract is providing a 9% to 10% equivalent return to someone's portfolio. Am I putting words in your mouth, or am I articulating that summary?
No, let's—you're in a 37% tax bracket. What rate of return would you have to get in your taxable brokerage account in the stock market to be able to realize a net after-tax amount of, say, 6%? If you factor in the death benefit, then that makes the IUL part of it look even better. But really what I'm doing is I'm comparing the straight cash value to the balance in your stock market portfolio.
If you don't believe you can get 6%, you only believe you can get 5%, then that changes the numbers just a little bit. But again, you're not taking any more risk than what you're accustomed to taking in a savings account versus stock market risk. So I think that it could be an interesting solution if that's what you're looking to do.
One of the things that I see, part of Tom's story is he kind of went down the asking a lot of questions, never necessarily wanted to be an academic but kind of got there, and then that's where it was like the epiphany for life insurance came in for you. I see it as more of a—you're obsessed around the tax side and like, "Hey, taxes." Your book is really clear. We talk about diversification asset-wise, but there's not a ton of people talking about tax diversification when it comes to the silent partner that we're in called the U.S. government.
So it almost sounds like, "Hey, you're like product; I don't care." What I do care and where I am biased to is I want my money not deferred for some known date at some known time at an unknown threshold, whoever knows who's in president. Is that—did I articulate that well? And then the second thing is, when it comes to asset allocation, not that I'm holding you to any of this, but do the people that work with you or that you speak to tend to put more than 20% of their assets? Because there's only so much you can do in a Roth and other things.
Is it one of those things where it's like instead of me putting it into a brokerage account or deferring, I end up maybe putting a little bit more than 20% into a life insurance policy? Again, I just want to get kind of a basis on how you use life insurance and how you think about that when it comes to retirement planning.
Yeah, so as far as your initial question goes, look, there are all these nooks and these tax-free nooks and crannies in the IRS tax code, and I'm just looking to take advantage of every one of them, right? They all, like I said, do something a little bit different, and I think that a balanced, comprehensive approach to tax-free retirement capitalizes on all of those nooks and crannies.
That's really what we're trying to do at the end of the day. It's a very non-life insurance-centric approach to tax-free retirement. Like I said, the life insurance is almost an afterthought, and it accomplishes an objective that none of those other things can do.
You know, we got to the point where people—there are some companies that will underwrite IUL for morbidity and not for mortality, at least the chronic illness rider. So they'll get rated preferred or preferred plus, and they come back and they'll say, "Hey, approved preferred or preferred plus, but you did not qualify for the chronic illness rider," and they'll not accept the policy. That's how badly they want it for the purposes of paying for long-term care.
They just—this idea of use it or lose it just gives them heartburn. Nobody wants to pay for something they hope they never have to use. This whole idea that if you do die peacefully in your sleep 30 years from now, never having needed long-term care, then at least someone's still getting a death benefit—your kids or your grandkids.
Although I've noticed that people don't like to give money to their kids, but if you say grandkids, then they're all over that. You're going to have to remember the second—remind me of the second part of your question, Caleb.
It just comes down to the asset allocation between life insurance versus other things. I think Tom, again, I'll let you respond to this after, but you said something about 20%, maybe 30%, but you're not a fan of putting a ton of money into life insurance. Whereas I assume David, you're more comfortable being like, "Yeah, after you maximize those other tax-free areas, life insurance, when set up and used properly, is maybe a better alternative than other places."
Again, I don't want to put words in your mouth. I'm just trying to get an idea, and then what we'll do is we'll kind of have a dialogue back and forth on some of the things that we agree and maybe some of the things that we have differences in.
I'm very much in agreement with the Ernst & Young study that recently came out. I mean, they're advocating for 30% of your retirement savings going towards cash value life insurance. So if that's—I mean, admittedly, we don't have a ton of clients or prospects who are in that younger generation, but if you were in that younger generation, you know, whether it's whole life or IUL, that's the number that I would recommend.
As far as our typical client who's over age 50, really we're backing into it. We're saying, "Okay, what amount of money, when fully funded into an IUL, produces a death benefit for Mr. and Mrs. Jones where they have between $400,000 and $500,000 of death benefit each fully funded?" So, I mean, that could be 5% of their overall net worth; it could be 20%; it could be 30%.
But we're talking, you know, for Mr. and Mrs. Jones, we're talking $35,000 per year, maybe over seven or eight years, something like that. That could be a higher percentage for some people but a much lower percentage for others depending on what their liquid net worth is. So that's really how we back into it. It's generally for the long-term care, but we have that cash value that we're accumulating along the way that can do some really interesting things.
Like, you wouldn't—knowing what you know about insurance, you wouldn't say, "Yeah, someone should have 80% of their retirement assets in different types of life insurance policies and use that as cash flow." Even if it can be set up as tax-free cash flow, that would make me super uneasy.
Okay, hey, maybe we'll do a part two and get some of my other buddies on here that are like, would promote that, and that would be an interesting dialogue. But stay tuned for maybe part two on that.
All right, so what I want to do is, Tom, is there any questions or thoughts or feedback that you have for David and what he shared? And then, David, the same for you. I don't want to touch on the I and whole life quite yet, but anything other than the whole life IUL product conversation, is there anything, Tom, that came up when David talked that you're like, "Hey, I have a question about that," or comment, or like, "I really agree or love how you articulated that?"
No, I wholeheartedly agree. You know, the IRS recognizes that the deal on these life insurance contracts is so good for people that are healthy enough to get into it that they put limitations on it, you know, called the MEC test or the seven-pay premium. They actually say there's only so much we'll allow you to put in.
David highlighted that's the issue. Sometimes we meet people a little bit later in the process, in their 60s and 70s, when it's not too late by any means; it's just a little more of a difficult process to get into it. So, you know, I say that message widely: if you're young enough—and by young enough, I mean pre-retirement—to get into these vehicles, you can do a lot of that work.
But I will address, you know, to your question you already asked me once. I'll kind of reiterate on that. You mentioned, is there an ideal allocation or a maximum allocation for me? No investment manager that's prudent in the world would tell you to concentrate all of your assets into one stock. You know, put all your money in Apple and hope. Like, we all saw it happen with Enron and companies that go out of business.
So I think the same thing applies for a life insurance contract issued by one company. I wouldn't want 80% of my net worth in one contract from one company. I'm going to want to spread that out. So even if you are in the camp of, "Yes, let's dump all my money into insurance," there's probably a diversification discussion to be had there too.
David, is there any other questions or dialogue, if we're not touching the I and whole life quite yet, that you would have for Tom? Also, just like this is the first time that you guys, I believe, are meeting. This is also—I want you to know that we're having this in real time, but in conferences or when people meet, like, people have discussions all the time.
That's one of the things I'm hoping to do a better job this year on my channel is to have authentic conversations and to open up what I've experienced for the last years because I've been in the green rooms and gone to conferences, and you guys both have events that you put on. Highly recommend them. But this is some of the benefit that you get, maybe not even listening to on stage, but like having dialogue.
So any comments or questions or points that you want to make, David? Yeah, I mean, I think initially I would say that one of the reasons I agreed to do this is because I've seen Tom on YouTube, and he's very respectful. I think he approaches this whole subject in a very even-keeled way. He's not heavy-handed, and he just approaches the whole discussion in a very respectful way.
That's the type of dialogue that I'm looking to engender with other experts in the industry. The other—I do have a question, and this is more of a curiosity. Everything that you said with regard to the permission to spend theme sounds almost word for word what might come out of my mouth. But instead of using whole life, I would use a guaranteed lifetime income annuity.
So figure out what your income shortfall is in retirement and then bridge the gap with a guaranteed lifetime income annuity. Help me understand in what situation you might use the whole life. So guaranteed lifetime income gives me a permission to spend because I've got 100% of my lifestyle expenses covered, right?
So I can have the luxury of watching the stock market ebb and flow. If the market goes down, I don't have to dig into it because I've got my lifestyle expenses covered. Once it recovers, I can start spending again. So I understand how guaranteed lifetime income annuity can help give you a permission slip to spend, right?
To really take a lot more risk in the stock market, help me understand how a whole life policy would function in that regard. I'm asking from a position of sincere curiosity because I'm just not familiar.
No, I love what you said. So I am a huge SPIA or lifetime income annuity fan. I think, you know, there's this phrase with the academics they call the annuity puzzle. The annuity puzzle is basically them scratching their head, not understanding why most Americans aren't just annuitizing their assets, you know, trading their volatile bucket of money in for a guaranteed paycheck because the deal is so good and on average should work out so well for so many people.
It comes down to two things: once you trade in your bucket of money, you lose liquidity, and the other one is you also lose a legacy. You know, if you win a lottery today and you know that you're going to get paid, but it's 10 years from now, how differently do you spend and enjoy your life for the next 10 years?
So if I know that there is a guaranteed sum of money being paid at some future date and there are guaranteed cash values that will be there at some future date, that drastically changes my attitude towards spending early on in retirement versus not having that as part of the plan.
So you can hear me saying guaranteed, guaranteed over and over again. I think that's—in our world of just this perma-bull market that we're living through, I think that people forget about the value of that and the value of that safety inside of a portfolio. That's philosophically where I come from.
You guys are trying to tell me that you're not putting all your clients' money into Trump meme coins, kind of deal. David, I want to hear from you how you use annuities from a standpoint of—because I believe you're a fan as well. You had Tom Hegna write one of the forwards of your book. How do you incorporate annuities into your retirement philosophy?
Really, the things that Tom talked about as being sort of the reasons why Americans aren't fully embracing SPIAs and DIAs and things like that is I think you're totally spot on. It's the liquidity issue. You're handing a chunk of your retirement savings over to an insurance company in exchange for a stream of income that's guaranteed to last as long as you do. That sounds great in principle, but people just have consternation when they think about losing liquidity on a huge portion of their net worth.
That sort of talks them out of ever entering into the transaction. The whole idea that if you enter into a SPIA and then you step off a curve and get hit by a Mack truck two years into the proposition, all that money goes to pay for the income of everybody else in the risk pool.
To me, in my mind, the specific product that helps to assuage those concerns is a fixed index annuity. The reason it does so is because yes, it has liquidity—10% is a smorgasbord of liquidity. Why? Because, you know, in a world where they're saying never take more than 4% of your savings per year because of the 4% rule, hey, I mean, you have up to 10%.
So there's plenty of liquidity there. And then if you die, whatever your money has grown to, minus whatever distributions you took along the way, that's what goes to your heirs. I think that the annuity industry is always evolving, and they're coming out with new products that help assuage the concerns that people have with sort of the more traditional approaches.
So fixed index annuities are how I approach it. I prefer fixed index annuities that have what I call in my book tax-free income for life. I call it a piecemeal internal Roth conversion feature. What that does is it allows you to convert your annuity to a Roth IRA in an amount of your choosing over a timeframe that your financial plan calls for.
Once all the money is moved into the Roth IRA, then you can elect that guaranteed lifetime stream of income. You're getting a tax-free stream of income that shields you from the impact of tax rate risk down the road that also shields you from longevity risk all at the same time. That's how I would position the annuity. That's the strategy I lay out in "Tax-Free Income for Life."
I'm not saying that there are other kinds of annuities that are bad or there's not a place for them, but that's traditionally how we recommend it in the sort of the Power Zero worldview. Tom, any comment on that?
No, I wholeheartedly agree. You know, there's two phases of an annuity: there's the accumulation phase and the distribution phase. But I think just going back to what we said, what stops people from turning on the income, from actually taking income, is that perceived loss of liquidity. But there are so many ways to build around that and give people that access. It doesn't need to be a barrier.
Incredible. Okay, now we're going to go to the place or the time that everyone's waiting for, getting their popcorn out. It really comes down to you guys are very aligned when it comes to your worldview of like even life insurance, taxes, how to approach the retirement space. Someone says, "I'm sold! I 100% agree with what you guys are saying."
Because you guys have said that multiple times, but what product should I get? Should I get an IUL? Should I get whole life? This is where there's been a lot of conversations around because you go onto some channels, and it's like all whole life. You go onto other channels, and it's all IUL. Then you have very few people that are maybe in the middle that's like talking about here's the pros and cons to these and this is where you would want.
The purpose of this video is to have someone that can maybe represent both sides in a very respectful way and help people maybe ask a question that they never asked or help them maybe lean towards one product or the other. I don't know who wants to go first on this, but that would be a big win for me if we can at least address this.
Because I think, again, you're—we're agreeing across the board, but Tom, you don't want to put words in your mouth, but you're almost all whole life, and you run a mastermind called Whole Life Mastermind. David, you've sold both, but you're—I've only sold one whole life. Fair?
Okay, so you're—it's fair to put you in the category of almost all IUL, and you speak publicly in your book about IUL. With that, I don't know how we want to go about this, but anyone want to take maybe a first stab at why you guys are agree on almost everything but maybe don't agree when it comes to the actual whole life versus IUL product and how we facilitate that into—
I can take a stab at this.
Hey guys, I just want to interrupt this incredible conversation real quick to tell you about something very, very exciting. We are having our fourth annual Whole Life Insurance Summit in June in Nashville, Tennessee. It's going to be the biggest venue yet. We're going to have the best speakers yet. We're going to have the most amount of people in the room, and I want you to come.
You might be an adviser; you might be an insurance agent; you might be a financial professional. You need to be here. There are going to be incredible people, but we're also opening it up for the people that are not insurance agents, not financial professionals, people that are watching this show, are interested in whole life insurance, are interested in different financial strategies, and would benefit from meeting people, hearing different strategies, and being in a room of people that are thinking differently when it comes to their money.
So if you are interested or want to be at this event, make sure to check out the link below, be theif summit.com. We cannot wait to see you, and there's more details on that page. Back to the conversation.
You know, I think that whole life can accomplish a lot of the same things that I'm hoping to accomplish with IUL. After all, you know, the Ernst & Young study, the product that Ernst & Young used, if you look at the Ernst & Young study, it literally says right there in the footnote, whole life was used as a volatility buffer-type strategy.
In the down years, they borrowed from the whole life, and then when the stock market came back up, then they paid that loan back. What I'm doing is I'm looking at the IUL slightly to the right of whole life on the risk continuum. I think that you only do IUL if you think that that risk premium can get you a slightly higher rate of return over time.
This is where I think that that slightly higher rate of return could be useful if the goal is to accumulate three to five years' worth of living expenses in your cash value of your IUL by day one of retirement. Let's face it, that's your deadline. You've got to have it all there by day one of retirement because you never know if the first year of your retirement is going to be down or what have you.
So the question is, whatever money that could have otherwise been directed to the stock market is going into my cash value life insurance. The goal is to get three to five years' worth of living expenses in that cash value life insurance. Which one will enable me to do it less expensively?
Now remember, I'm recognizing that IUL has risks, but I think that in exchange for those risks, I am getting, like I said, that slightly higher rate of return. So if the goal is three to five years' worth of living expenses and I put that money into an IUL policy versus a whole life policy, the bet that I'm making is that it will take less money to accumulate the three to five years' worth of living expenses, which means that I'm not having to take as much money out of my stock market portfolio or redirect as much money to my IUL away from my stock market portfolio along the way.
Because if I have to put more money into these insurance contracts, the greater the opportunity cost I'm going to have to experience along the way. So those are the two considerations that I work through. I'm getting a slightly higher rate of return; therefore, I have to put less money into the contract to accumulate the requisite amount I need by day one of retirement.
The second consideration that I would put forth is that I don't believe whole life policies—and Tom, you're the PhD on this, so feel free to put me in my place—I don't think life policies are designed to build money up and then take money out permanently. Why? Because there's typically a net cost to borrow.
If you don't pay that loan back, then there's a cost associated with those outstanding loans that can really take a toll as it compounds over time. One of the reasons why I like the IUL is because I can find a carrier that gives me a guaranteed 0% loan.
So when it comes time to take that loan out of the IUL to pay for my living expenses in retirement, I don't necessarily have to pay it back. If I had to pay it back, how would I pay it back? I would pay it back with money that was otherwise in my stock portfolio earning, whatever you want to say, 8%, 9%, 10%, 12%, or your Dave Ramsey.
If I have to pay that loan back, I'm taking money that could have otherwise accumulated in my stock market and pay that loan back. There will be an opportunity cost associated with paying that loan back. That money is no longer growing in my stock market portfolio because I had to pay my loan back.
Those are the two considerations that I work through.
Tom, I'm sure you've thought this through, and I have a very good answer for it, but those are the two considerations. I'm getting a slightly higher rate of return; therefore, I have to put less money into the contract to accumulate the requisite amount I need by day one of retirement.
Because I can take that tax-free, cost-free loan out, and I don't have any net interest that I'm paying, I'm not constrained to pay that back with money that could otherwise be growing in the stock market. The net effect of all of those is to build my wealth higher over time.
Yeah, and if you believe that you can continue to get a reasonable rate of return in the stock market.
Yeah, and I will just say those two things are a big deal, though. It's really one addresses the accumulation and the other addresses a more efficient distribution, essentially.
And would you say those two are the main? Everything else that whole life also checks the box—the permanent death benefit, the long-term care-esque return, like all those things are relevant because it's an insurance contract. But the reason you like IUL are potentially a more efficient accumulation and a more efficient distribution?
Yeah, people come to me and say, "Dave, the guy that wrote the forward for your book, The Guru Gap, Wade Pfau, prefers whole life." I say, "Great! Whole life could totally work in this situation." I'm just saying that if the goal is to build three to five years' worth of living expenses, it's going to take more money to pull that off.
Money is not going to grow quite as quickly if you believe that the IUL, given that risk premium, is going to push you further ahead. If you look at the Ernst & Young study, the Ernst & Young study says that the loans were paid back, and they're paid back out of the stock market portfolio.
So those are my considerations, and I'm not in any way demonizing the whole life approach because, for crying out loud, Ernst & Young, that's the product that they use. So you can't really vilify it.
Tom, what I would love for you to do is, on the whole life side, what are the reasons? Then if you could address what David talked about, and then David will have an ability to address your reasons, if that makes sense.
Yeah, there was a lot there. I'm not sure I remember everything that was said, but I'll do my best. The main two is accumulation on the front end. Well, I'll let you talk about the reasons first, and then I can rehash the two reasons why David prefers IUL over whole life.
Yeah, there's a lot to it. The three words I heard is, "If you believe this." Not where insurance fits for my opinion. Like, I don't want my insurance to be based on a belief. I want it to be based on the fact that it's going to be there no matter what.
So when I look at insurance as part of the portfolio, yes, it's got all the tax advantages. I mean, I use it heavily for my own accumulations, so I'm not disagreeing with that at all. But at the end of the day, that death benefit needs to be there.
Having that guarantee in place is important. My fear of universal life in general as a category is, you know, back to the '80s, you know, you saw universal life contracts failing because they were illustrated at 12% and got less as interest rates went down.
Then they were illustrated at 12% and then they got less because of a market crash. That's just one thing that can hurt a UL contract. The other one is funding. Does the client actually put the money in as planned? Assuming they have it and they have a good advisor, that will happen as well.
The third one is the carrier can change the rules. Typically speaking in the industry, the carriers have not gone back and charged clients more money for the internal charges. That's not a good business practice. As soon as that gets on the front page of the Wall Street Journal, guess what happens to your new sales?
That's not a good thing for the industry. It's not a scare tactic I think agents will say, but it's not really based in reality. But with IUL specifically, you know, when they're illustrated, they're based on floors and caps, usually a floor of 0% returns is assumed. They'll usually guarantee a 0% floor and then they'll illustrate based on a cap, you know, which is the maximum you can get in a year.
So if the market does 30% and your cap is 10, you only get 10. The idea is that over time, you'll be somewhere in between that zero and 10, probably 6% to 8%, or whatever the historical data has shown. The problem, though, is if you get that bad period of time, you know, and you get that—you get that two zeros in a row, or like 2000 to 2002, you get three of them in a row, and you were illustrated to get a compounding 6% or 8%.
You know, you're supposed to be at a compounded total of 20-something percent after those three years. You got zero. Now you're mathematically capped and can't catch up. So that's what I'm thinking of when I'm thinking about a retirement strategy that can't fail.
I don't want to be in a scenario where there is, you know, a Great Recession or a Great Depression, and then my policy underperformed, and because of the rules in the contract, I can't catch up unless we have this outstanding bull market, you know, which we've only seen a few times in history.
So it's, again, it's more philosophical than math. It's not predicting which one's going to do better; it's just if I'm buying it for insurance, if I'm buying it for guarantees and safety, I want that guarantee and safety. That's really where a lot of the leaning comes from from the distribution standpoint.
Historically, insurance companies are largely investing in long-term corporate bonds to back up these whole life portfolios. When you look at dividend interest rates, and actually I was just in a seminar two days ago, they were talking about this, and I have some data of my own where if you look at dividend interest rates over the last hundred years and compare it to the Moody's season corporate bond average, which is a published index that a lot of the whole life carriers will base their adjustable loan rates on, it's like a single-digit basis point, like one hundredth of a percent difference over a hundred-year period of time.
There are markets where if interest rates move up quickly, that can work against you on loan rates. Frankly, for the last four decades, it's worked in your favor, which probably won't happen again for at least the next little while going forward, where you've actually been paying less loan interest than the crediting rate on whole life.
So over long periods of time, they kind of rise and fall together, but because it's the predictable nature of whole life, you can see it coming. It doesn't happen over time. Unless I misunderstand, you know, in those guaranteed 0% IULs where it's effectively a wash loan, where they're going to credit your contract the same rate that you're paying in loan interest, you're still paying ongoing mortality charges and expenses inside the contract.
So in a negative scenario, my understanding is that could actually work against you and be a little bit cannibalistic over time. Like income forever is a hard thing to create in those IULs on a guaranteed basis or understanding that that could happen and it chips away at your death benefit.
So I'm not sure if I addressed all of those questions, but I think the other one that I wrote down was the accumulation that you can get money—if you can put less money into an IUL to get the same result of that three to five years of assets. But again, that's based on an assumption. That's based on a belief that, you know, that the indexes will provide better for you than you would get in whole life.
Because on the back end, you know, both insurance companies, IUL and whole life, they have the same team of actuaries, underwriters, legal team, marketing departments, commissions. They all have the same costs, and they all kind of show up the same way over long periods of time, even though it might look different on an illustration.
But I have found that you can pretty much just as effectively get the money into a whole life with similar dollars. Just to summarize, David, I want to hear your response. If you're talking about life insurance as a backstop, not even a foundation, but as a backstop, you don't love the idea of messing it.
Like, you would rather have it maybe be a will perform smaller and have a guarantee versus a belief around that it could perform better, but it also could perform worse. You also said, Tom, that like it could be a scare tactic, but there is a world where if a company was just not managed well at all, that they could just totally hike up charges.
That's what everyone says, like they have the ability to do, but in history, I don't think anyone's ever done that. I appreciate you acknowledging that. What you also said when it comes to distribution is no, you don't have the wash loan, but the internal rate of return of the policy versus the loan rate is pretty close.
Then, yeah, the difference is, you know, also factoring in the cost of insurance. Then you ask David, in the wash loan component, are you still—is there still a cost of insurance component to that?
Is there anything else, Tom, that you wanted to say in addition to addressing David's thoughts around like why even more so like why whole life? Or is it really just like the guarantee? It goes back to the classic, like guarantees if that matters to you.
It matters. Is there anything else you want to say before I hand it over back to David?
Yeah, well, that was the epiphany. That was the epiphany all at the end of all my research and studies and historical data and, again, kind of digging into the details. There's—and you didn't say these words, but I almost heard it as you were talking—is the word guarantee.
We're almost wired to believe, "Oh, if it's safe and guaranteed, therefore my returns will be more muted." What I'm telling you is that there's really two big things you get out of a life insurance contract. There's a better tax wrapper, okay? And all permanent life insurance has the exact same tax wrapper.
Then there is the risk component. So risk and taxes, those are two of the big variables when you construct an investment portfolio. So if you can get similar returns but none of the risk, that's a better risk-adjusted return. They call it the Sharpe ratio on Wall Street is how, you know, for whatever our return was, how volatile was that asset?
So with life insurance over a long period of time, whole life insurance, you know, a dip—and this is—I'm being very careful here—big mutual dividend-paying participating whole life insurance. It's not some of these other small carrier guaranteed, you know, basically final expense policies. I'm talking about, you know, certain kinds you will and have and you should, unless their business model changes, get bond-like returns, but none of the volatility.
They have indemnified you that away. In fact, they haven't guaranteed you zero; they've guaranteed a positive growth on that cash value over time. So just—I mean, this is such a complex topic, but if you are going to have a mix of stocks and bonds, replace a piece of that bond component, that safe component, or however you define that with whole life cash value, and you will have a more efficient piece of that portion of the portfolio.
That's what I'm saying. So it's not versus equities. It's not—there should be no opportunity cost. There should be no taking away from your upside exposure to equities because we're taking away from the piece of every prudent portfolio, which should be some cash, bonds, and things like that that are traditionally more predictable.
As long as that mentality is what people are looking at, replacing that piece of the portfolio versus taking from equities or taking from other opportunity, that is just a completely different nature. Then I think that's where it's a win, and that's where it makes sense.
David, what are your thoughts?
Yeah, I mean, I think we're coming from two just different worldviews. I think I heard you say on a video once, Tom, that the reason you believe the way that you do is because you were weaned in a whole life company, in a whole life environment where you were really inculcated with this idea that you have to protect—you know, you have to build a foundation of protection. That's sort of what you do right out of the chute.
You've got to build a foundation of protection. That doesn't ever really enter into the picture for me. To me, I've got very stated objectives. The stated objective is you build up net worth as effectively as you can. You save as well as you can over time. You invest mostly in stocks during your accumulation period.
I do think there would be opportunity cost if you started early off in life with whole life, and you're incorporating that bond-like alternative into the mix too early on in life. I do think there would be an erosion in your net worth over time because you're taking money that could have otherwise harnessed the power of the stock market, and you're putting it very early on into a bond-like return.
So I think that's a consideration. But really, at the end of the day, I am not using the IUL as a way to protect my assets. It just doesn't even enter into the picture. I'm looking at it as a tool that's slightly to the right of whole life on the risk continuum.
When I say I believe you can—if you believe you can get—I'm being slightly differential here because we're both nice people and we're having a nice conversation. But I'm basing that on the idea that over the last 20 years, an IUL through a good carrier has gotten those types of rates of return.
I've talked to actuaries who have done Monte Carlo scenarios on these things using caps of about 10% over time, and they say that 99.5% of the time, these policies stay in force when funded properly, right? When maximum funded and executed in the way they were intended to be executed.
Okay, so is there risk associated with down returns? Certainly. But you're getting something in exchange for that risk. You're getting a slightly higher rate of return, and I think that history bears that out. Over the last 20 years, we've had high interest rates, we've had low interest rates, we've had surging interest rates.
So I think we've seen all sorts of different types of environments, and I think that an IUL through a good carrier that has integrity when it comes to cap rates has performed in the way it was intended to perform, which is to say a point to point to a half higher than what you could have otherwise gotten had you put that money into whole life.
I think that given the choice between having a guaranteed 0% loan and a loan provision where it could fluctuate based on whatever interest rates happen to be or whatever the portfolio rate happens to be, where you could be paying 2% or 3% net percentage, if you look at the charts that show the net toll that that takes on your cash value, because remember that interest has to be accounted for somehow.
You either have to pay it back, and how are you going to pay it back? Out of your stock market portfolio? You can use paid-up additions or what have you to pay it back. I'm not using the right jargon here, I know, but the point is there's no free lunch. That interest has to be paid somehow.
Given a scenario where I can choose between having a scenario where the interest rate could have been low over time and having a guaranteed 0% interest rate that's guaranteed in the contract, I would take the guaranteed 0% every single time.
So in summary, again, I'm looking at something where I think based on historical rates of return that I can get one to one, one and a half percent higher. To get that guaranteed 0% loan, so that I'm not required to pay that money back out of my stock market portfolio down the road, I think your dogs are agreeing with you, David.
What I just wanted to double-click on one thing you said: you don't use life insurance as like an asset. I don't want to put words in your mouth. You asset protection or maybe like you maybe don't necessarily buy into like the backstop conversation. I want you said something like that because I think that was the epiphany for me around like why you believe this.
But then I can also understand if someone did see it as like a backstop that was like a big part of their thesis where they would say, "Yeah, I would rather have the guarantees because it's that important."
To say, "Hey, I would be willing to take less upside potential over time but to have that quote-unquote peace of mind." I know that there will be other people in time you can mention that. I know the goal is the reason why people do IUL is for that upside potential and maybe more efficient distribution.
But I know that there's people that just say, "Well, over a long period of time, that's going to be the exact opposite." I don't know if we even need to get into that now, but I think it would be—it would no one would do IUL if there wasn't that—you wouldn't take less guarantees and then get less.
Like, you wouldn't take less guarantees for a smaller outcome in growth-wise and a smaller outcome in distribution. I think that's a pretty fair statement. If we live in a market that wants to stay competitive, the IUL carriers have to try to give some type of reason why you would maybe part ways with more guarantees for that upside.
Let me just real quick, and Tom, you can weigh in on this. You know, I've done comparisons where you take an IUL, you maximum fund it, and you just put the money in the fixed account, and then you run that out and compare it against a whole life policy where you're maximum funding it.
Then you take loans out of both policies out the back end. So you're not even messing around with the index caps. You're not messing around with the fact that you could get two or three down years in a row. You're just going with the fixed account.
I know fixed accounts, you don't get the same thing every year, but you know it's based on interest rates. Interest rates affect whole life policies like they affect IUL as well. But because of that 0% loan, that IUL policy is going to distribute money more efficiently over time than the whole life policy is because you have to reckon for that net cost of borrowing that exists.
That's a reality that you have to confront in the whole life policy. If you're just looking at pure building money up, even if you forget the index part of it, just go to the fixed account. You say, "I don't want to mess with the index. There's too much risk associated with that. I'm just going to put money into the fixed account and do that each and every year."
Couple that with a guaranteed 0% loan that I can distribute down the road, I think that's a pretty efficient way to go. It's not going to build the money quite as quickly, I don't believe, but I think that when given the choice of that approach versus the whole life approach, I think I'd still take the IUL.
There's really two ends of the spectrum when it comes to life insurance and retirement. One is the backstop approach, as I've discussed before. The other one is the funded up to the MEC threshold. Just you as efficiently as possible get cash in there for the purpose of taking it out.
I would love to look at the illustrations and actually see that comparison. There are so many different options out there, and they're all—there are all nuances to every carrier out there, so I can't say I can comment about the entire industry.
But broad strokes, you know, once if you do illustrate it that way where you're just going to spend all the money down, it's essentially giving a nod to the fact that you no longer want life insurance. You no longer have people in your life that you care about leaving money to, or you no longer care about long-term care benefits, which eventually evaporate if you do take systematic distributions out of a life insurance policy long-term.
So my book, you know, "Permission to Spend," it's really meant as life insurance for life insurance's purpose. And here's why you want a permanent death benefit: because of the death benefit and the long-term care component. And by the way, the cash value is incidental, and it doesn't actually cost you anything over time if you're going to be owning bonds over a long period of time too.
It's just a matter of strategically getting your assets into it effectively so that you can start to earn those bond-like returns. So, you know, fighting over loan spreads, I can't do that effectively. It's based on many assumptions.
I don't think that's true. I'd have to look at the illustrations. There's been a lot of scenarios and a lot of environments where whole life insurance has done far better than a wash loan, depending on the carrier that you purchased and the loan provisions of that carrier. Again, they're all so different.
But again, it's really just what are you using it for? If you're using it as basically a tax dodge, as a way to have an unlimited Roth-like vehicle where you can put money in and have some relative safety around it in a whole life or an IUL structure, then that completely ignores the conversation of making sure that those benefits are there to be payable 30 to 50 years down the road.
So we may be saying two different things, actually, is my philosophy.
Yeah, I finish your thought. I'm sorry. I have a follow-up question for you.
Yeah, I mean, my philosophy of whole life in retirement is to be that volatility buffer. It's to be that piece that you use a little bit, but not spend down. So maximum 90% loans that you just let sit there forever isn't even really part of the conversation I typically have.
In fact, in all my years in the business, having talked to every gray-haired person I could find, I still have yet to find one person that has a client who has ever done it that way in real life. In fact, they'll all tell you that it's typically yanking 50 grand out to take the grandkids on vacation or do some big thing or fix the house or make some other investment.
Actually, I hear I've heard a lot of stories from 2022 where people took cash values to then go make investments and catch the wave on the upside.
Yeah, a lot of gray hair in the industry to talk to.
So that's—and real quick, Tom, to be clear, I don't recommend that either. I get very uneasy with these illustrations where you build money up and then take money out for 35 years. That's why the really the two applications that I really advocate for are just the long-term care where you're not really taking any money out at all or the volatility buffer-type approach where you're taking out three to five years.
Chances are, and that concept really only works in the first 10 years of retirement, so there's a pretty good chance you may only take out two years, right? Because you're only taking out in the year following a down year in the market. So it could be two to three years. If you have five years saved, you could pay the money back, but you're not constrained to because you don't have those compounding loan interest.
So I agree with you there, Tom, that this whole idea that you would build money up and then take money out, like these illustrations are showing year over year over a year, and it's accounting for a 6% linear rate of return or 7% linear rate of return, it's just not realistic.
So I feel more comfortable using it in these sort of constrained settings where you've got a very specific goal, a very specific objective, and it's more of a controlled setting.
I think just—I want to point out that both of you agree around not leveraging life insurance systematically in retirement. And while I do, I also agree with both of you, Tom. Like, most people I talk to is like, "Yeah, the illustration shows that," but you don't necessarily do that.
It's not like an annuity where life insurance is built that way. I do feel like in my time of learning, I feel like that's been a little misleading sometimes because that's usually a big pitch on both sides, like a supplemental tax-free income.
Again, I said so many things that are not compliant, just to be clear. I'm just saying what has been said. I just want to point out, it seems like you guys very much appreciate the life insurance benefits.
And Tom, you're more of like a backstop guarantee. You'll pay a premium for that. And David, you're like, "Well, if I could pay less to get the same check, the same box, and have the difference to invest, I will by default have more."
It sounds similar to the concept of a little bit of buy term and invest the difference when you think about it that way. But being like, "Okay, if I can spend less and get the same outcome over here, I have a greater return over here."
But you guys both agree that life insurance in general is not that thing that you want to put all your money in. It would be interesting if I could find somebody who would be willing to stand by and say, "All your money should be in insurance," and that could be a whole different conversation.
Because that is like—I just want to point out, we're all in the life insurance camp, but there's different parts of the camp. Even though we're talking about IUL and whole life, you guys are both maybe unpopular even in your own camp right now by saying what you said in this conversation.
I just want to point that out because I think we've all heard some wild things. Yeah, I'll stop talking. At the end of the day, we both dislike Dave Ramsey, and I think that's what's important, you know, when you really get down to the bottom.
Don't rope me into this! Look, I mean, Caleb, at the end of the day, like you said the word insurance. I have no problem if a client wants to have 80% of their portfolio in cash value life insurance. God bless them! But there's more to the conversation than just a policy. It's diversification.
So if I'm going to have 80% of my assets in life insurance, I'm going to want to own eight different carriers. I'm going to want some of it to be VUL so I have exposure to the upside when the market grows by 40%. I'm going to want some of it in whole life so it's guaranteed and getting bond-like returns over time with guarantees in place.
So hypothetically, if you were that person who believed you could put all your money into life insurance because it's this tax panacea, you still need to diversify. You know, you don't want all your money with one company where some future CEO decides they don't want to support this product anymore. They don't want to honor the caps. You would diversify, right?
So I think that I think it's more about diversification than the asset itself that you're putting the money into too, at least from my perspective.
I think that that's a personal decision of what percentage of your net worth should be there. At the end of the day, Tom, as we lay in the plane, is there any final thoughts or questions or anything else that you would want to ask David or just comment on?
I mean, I'm familiar with your work. I respect the heck out of it. I think more Americans need to be educated about these strategies and understand, you know, the good that you can do with these strategies. I think a lot of people shy away from working with advisers because they're afraid of being sold something that's no good.
So to have positive voices out there doing it, I mean, I'm thrilled to be on here with you. I love the work that you've done, and if there's any debate today, you know, it's really philosophical. For me, I want guarantees in place because those guarantees allow me to continue to invest money into my business, my multiple real estate holdings, my have more equities closer to and right after retirement—all the things that have historically generated the most wealth.
Because if all I have is volatile assets and all hell breaks loose right before my goal, the whole plan fails. So that's philosophically where I come from.
Where I come from, but I, you know, I think done right, I can work. I just, for me, I challenge the fact that over time, it's going to do better than whole life, based on the way the crediting strategies are priced at the insurance company level.
David, we'll give you the final word here.
Yeah, I think the big epiphany I had throughout the course of this conversation is where Tom finds that sort of backstop or safety net, as it were, in whole life. To me, that's where I see the guaranteed lifetime income fitting into my retirement worldview.
You're using that as a rock-solid guarantee that no matter what happens in the stock market, no matter what happens on the geopolitical scale, no matter what happens, you know, who's elected president, right? You're going to be able to meet your living expenses no matter what.
And that is what gives you the permission slip to take more risk in the stock market and sort of ride the vicissitudes of the market over time. I'm a big believer that if you want to increase the likelihood that your money is going to last as long as you do, you have to take more risk in retirement.
I mean, Dave Ramsey, the one thing he says is don't put your money in bonds in retirement. That would work great if you actually had a backstop like a whole life policy or a guaranteed lifetime income annuity, both of which he demonizes and vilifies and rejects out of hand.
And so I think that these tools allow you to do some really interesting things. They give you some permission slips to do some interesting things. I love having this dialogue, Tom, because I reject the notion that it's, you know, it's binary, it's either/or.
I think Tom has brought some really good points to bear in tonight's discussion. I love the idea of using whole life as a bond alternative. As Tom Hegna says, reach into your portfolio, remove the bonds, replace them with cash value life insurance.
You'll increase your return, lower your risk, lower the standard deviation of your entire portfolio, and experience a better outcome over time. That's a true principle.
And so I really am in favor of these types of discussions where it's not, you know, whole life is exalted and I is demonized. I think there's space for both of us in this market, and we're just using these tools for different ultimate objectives.
I appreciate having this dialogue.
Well, I appreciate you both for taking a risk in walking into a virtual room like this. I have the utmost respect for you both and just want to continue to support the work that you guys are doing.
I will link your books, and if there's anything else that you want me to have below, there will be a section for you, for you, David, for you, Tom.
My hope is that this is one of many conversations that we can be a part of for the future. And again, sincerely, thank you guys for the work that you're doing, making this industry and our profession more relevant and shedding light on this.
And again, I would love to hear you in the comments. What are some of the things, if we had a part two, or what other conversations or what questions? You can comment on how terrible of a moderator I was. You talk too much, Caleb. I'll take it all.
I want to hear from you, and I just want to thank you, the listener, because quite frankly, if we didn't have a channel that people watched, both David or Tom would not come on.
So thank you for the people that subscribe, comment, and help share this message, because ultimately we have conversations like this because of you.
David, Tom, thank you, and have a great rest of your day.
Hey, it's Caleb Williams here. I'm just interrupting this video quickly to invite you to check out our Anet Vault. You may have been there; we've actually revamped it.
If you are somebody that wants to learn more about, is life insurance the right fit for me? Does this Anet make sense? Like, does this actually help me be more efficient?
We've put together a 10-minute documentary-style video, and I think it does a really, really good job giving the history, why the Anet asset, different setups and designs that we use.
And then we have an Anet asset vault that gives case studies, calculators, handbooks, and so much more. We are here to serve you, whether it's a conversation, whether it's education, or the video.
So make sure to go check out Anetasset.com to learn more.