Whole life insurance before...your 401k?
Not advice that I was given, but I've worked with plenty of clients who were told by someone else to buy whole life insurance BEFORE investing into IRA or 401(k)...young, no kids, no spouse...just bad financial advisors looking for commissions.
Related Horror Stories
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!
Mortgage financial advisors pushing risky loans
In the fall of the year 2005 and when the real estate market was going crazy and all kinds of real estate investors were giving speeches and masquerading as advisors, I attended a local seminar about real estate investing.
I already had my rural land property/investment business model developed and most of my current advisors in place. A mortgage broker was speaking about loans for real estate.
These so called mortgage financial advisors were recommending people take interest only loans to fund their real estate purchases because the rates were low and it cash flows easily. There are many problems with this dumb advice.
Here are some:
- Debt at some point has to be paid back. Anybody who has done any investing and used debt with real estate, stocks, or a business knows this. Delaying indefinitely paying off a debt is foolish.
- Even if an interest only loan for any type of investment cash flows today, it might not tomorrow, next month, or next year. The investment might quit paying. For example:
- The tenant lost his/her job. The property flip did not work as the foundation crack was not discovered during the euphoria when the property was bought. Funds (from more debt) were needed to fix the crack when an engineer who looked at the property to buy it discovered it.
Whole life insurance before...your 401k?
Not advice that I was given, but I've worked with plenty of clients who were told by someone else to buy whole life insurance BEFORE investing into IRA or 401(k)...young, no kids, no spouse...just bad financial advisors looking for commissions.
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