Whole life insurance as an investment vehicle
The one stands out and given by multiple of professional or so-called professional is to buy a "Whole Life Insurance" as an investment vehicle plus life insurance coverage vs. a "Term Life Insurance" policy.
Just do some calculations of the future value (Excel formula FV) in 20 years of the estimated monthly premium cost for a $1 million Whole Life Insurance vs. a 20 year Term Life Insurance (for the rate of return, you may assume 8%, in some estimates the long term retun of the stock market if you invest that money in Index Mutual Funds.) – you'll be SHOCKED!
Related Horror Stories
The Financial Planner Who Missed the Tax Benefits of Donating Appreciated Stock
A financial services guy told a lunch group that it made no difference whether people donated appreciated stock directly to a charity or sold it and donated the proceeds to charity. He claimed that, either way, “you still got the charitable deduction. ”While this is true, he completely ignored the capital gains tax that would be triggered when the person (rather than the charity) sold the appreciated stock. He could not comprehend that a direct donation of the appreciated stock to charity could save the donor from having to pay tax on that capital gain.
He was totally obsessed with the relatively minor charitable deduction on their tax return. I thought this was horrible advice and a disservice to anyone who followed his financial advice.
How My Financial Advisor Profited More Than I Did
No horror story, they just made more money out of me than I made out of them, so in a way they taught me a useful lesson. This was back in the 90s, when we were all simpler folk.
Dodging Disaster: The Terrible Mortgage Advice That Almost Led Me Into the 2008 Crash
Some idiot financial advisor came to my workplace circa 2006 advising everyone to take zero-downpayment, interest-only mortgages, which were widely available at the time and were what fueled the housing bubble.
Then use the proceeds to buy life insurance as an investment.
I recall asking him, what happens when the interest-only period expires and you're required to start paying principal? "Oh, don't worry, you can always refinance into another interest-only loan. "Obviously I did not follow his advice, and we all know how the real estate market ended up after the 2008 crash. (I ended up buying my house in 2012.)
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