Short, medium and long term advice needed

[bosco]

My wife and I just started seeing a financial planner. She's getting ready to come back with an assessment of our spending, insurance, and savings with recommendations.

Red flags have popped up in my head because she gave us "variable life" information (through an affiliate of her company) to review as a long-term investment option (plus we do need some more life-insurance).

I guess I'm looking for advice from seasoned investors on investing for short (<12 months), medium (12-60 months), and long (>60 months) investments. We're maxing out our 401k's, IRA's, and stashing money in a 529 for our daughter.

My risk tolerance is proportional to the time range.

Based on my own personal research it looks like CD ladders would be good for short term. Maybe index funds for medium and long range. This last statment comes from reading the following link:

http://www.efmoody.com/insurance/variableversusfunds.html

I came across this web site as I was doing research on variable life.

Anyhow any help or web links would be greatly appreciated.

 

[selkirk]

Bosco will not give advice on insurance, own some term insurance, got a good deal on it, not sure which is best, DTB would know more.

as for investing short term CDs/cash would be a good idea for under one year, especially anything you need in the short term 1-2 years.

like index funds, good place to start and build up a portfolio, there are some mutual funds that outperform indexes over the short and long term, could list you some cdn. mutual fund companies, however do not own any in the US. with some research and time you can find some also, like funds with low mer, performance. you should also look into how the managers invest and if you are comfrotable with those investments.

you can start to invest in stocks later when you do your research. good luck

thanks
selkirk

 

[DOGS THAT BARK]

Bosco
Will say this and remember it is only my opinion and many,especially in my field will argue but to me insurance is NOT an investment regardless of how you package it.
Been doing this for bout quarter of a century and have seen them all.My opinion is life insurance is a great tool to cover risk or future obligations for pennys on the dollar but have not seen the 1st one yet that I would qualify as investment.
I keep my own insurance and investments seperate. I go the term route as Kirk but at some point in time,depending on future of estate tax laws, may buy permanant if needed but will buy product at lowest premium available and if it had )"0"cash value on the day of my death,it would be perfect--if you know what I mean.
Variable life can be good or bad for person buying but is "always" good for agent
I'll let Kirk take you down the investment road. He's taught me most of what I know but not all of what he knows, yet

 

[Doughboy]

Both My wife and me have Variable Universal Life (VUL) policies. I like them for the following reasons. Term for me I use as a gap for mnow, but I want some level of permanent insurance, and whole life is too expensive. To me, combining the buy term and invest the difference ideology into one policy loosely being the VUL, is not a bad option. My concern is that by only having say 30 year term, and if I become disabled and unable to work, or become uninsurable for some reason, I like that the VUL is there for me for permanent insurance. I think they are great in conjunction with a term policy.

I also think you can use it as an investment and should if you "need" additional insurance that comes along with it. I like it because you can pull most of the cash out at any time tax-free. It makes a good cash value should you not want to use somethinfg you might be penalized on such as a 401k, or Roth IRA, or Annuity. Also, if you make too much money(over $150k per year), you can use it when you only have a couple of tax-deferred strategies. I also think if it makes financial sense to possibly use it as a early retirement vehicle when you overfund the policy.

I think yyou have to weigh all of the benefits and cons, as with any other purchase. And in regards to the DTB saying the agent makes a lot of commission on the policy, that is true, but they don't make as much money as they would on a whole life policy. This is not a knock on DTB , because he is a stand up guy, but I have heard insurance saleman who can't or don't sell VUL's, knock them because they don't have a series 6 or 7, and can't sell the policy, or their companies don't offer them.

I also disagree with the investment options point, because you can buy index funds inside many VUL's, or build a portfolio of funds, just like a 401k. The fees inside a VUL might be a little high, but you can look at it as if you are paying for the ability to save money tax-free.

And Bosco, if you are meeting with American Express Financial Advisors, run towards the door. If you want me to get into some of the problems I had with them, let me know.

All lof my 2 cents though.

 

[DOGS THAT BARK]

Doughboy You have some valid points but just a few clarifications.
In buying term you can convert it to permanant with no proof of insurabilty if sold correctly.
--and as I said Variable Life objection is my opinion only. I got series 6 years ago for my own education purposes only with no intent to sell products. I let license go after selling no products. The reason was personal in that I do not and never did feel qualified to give others investment advice.I would lose more sleep if I lost someone elses money than if I lost my own.
Something that turned me off was when they 1st came out I had associate gung ho on them and rolled a lot of his business to them. When the crash came on black monday many of these people (most older who had purchased for Estate Planning purposes got some very unpleasant surprises. I noted back then that I never wanted to put any of my people in that situation.
So again,it is just my opinion and that does not make it correct for everyone--be being quite conservative by nature I chose the road with less intangibles and most quarantees--quite boring,yes--but I sleep better at night---and in your defense, in booming years there would be MANY folks look at returns of variables and say "sheez why didn't you let me in on this"--- so its a 2 way street. It all comes down to each persons risk tolerance--and I have had several that insisted on variable and in those situations I have referred them to others that are comfortable in that area.
Also most of my clients are older and in the conservative mode at their stage in life--for younger generation I could see Variable contracts be much more appealing.

 

[Doughboy]

DTB,

Like I said, I was not wanting you to take it as an attack on you. I think every one of your points made above is absolutely correct.

I have heard of the many policies that blew up and died when people were crushed in the market, and even people that created variable life policies based on rates of 10 -15% back when rates were so high. Especially if they get off to a bad start in the market, and you have to pour money in to keep the policy funded in the future.

In regards to the term, you are right about the conversion, I forgot about mentioning that.

Again, I certainly respect your opinion, especially when it comes to insurance. I just wanted to give my 2 cents, which is probably worth exactly 2 cents most of the time.

 

[bosco]

Thanks guys!!!

Sorry it to me so long to respond, been on the road.

Sellkirk-
Thanks. The reason I threw index funds out is because of the comments in the link I posted. The writers assessment is that they make more sense than variable life because if you pick the ones with very low expenses and very low turnover, they are almost tax deferred....the carrot that the VUL proponents dangle. Also, I am completely comfortable with mutual funds. I still don't seem to have the knack for stock picking!

DTB-
Based on the link I pasted in the original post, the writer and you see eye to eye. The more research I do, the more I'm agreeing. Thanks. I'd like to understand how a bear market affects VULs or at least if one has a negative rate of return for a few years. The scenarios that the agents give you don't really address that.

Doughboy-
Based on the link I pasted, it sounds like VULs are not the best investment option after you include expenses and its my understanding any withdrawal is taxed as ordinary income. It's a tax-defffered arrangement. In addition, if you die, you heirs get slammed with more taxes than if they were just inheriting a mutual fund. By the way, my wife and I are not eligible for Roths. We're maxing out the 401k. Also, its my understanding that Whole life has lower premiums than VUL becuase you do not get to choose your investments in the Whole life. I may be off on this last one. I haven't done detailed research yet.

I'd be interested to hear your experiences with AE advisors. You can post them here or e-mail me at tekboy@excite.com. If you e-mail me reference madjacks in the subject line so I don't think its junk mail.

Thanks again!

 

[bosco]

just bumping this back up top to see if you guys have any more thoughts on my previous post....

thanks!

 

[Doughboy]

Bosco,

E-mail me at shill12@austin.rr.com if you have any questions.