There are billboards all over town advising you to visit ‘the safe money guy’. Invest your money into a ‘safe’ annuity and forget about the markets, volatility and risk for the rest of your life! It will cost you nothing and, at the same time, ‘guarantee’ you a 6% return on your principal each and every year. It can never go down and always goes up in value! This is, after all, your life’s savings so why risk it! Sign here please. So what’s the problem? Why not accept a guarantee of 6% and forget about your money? Why not buy your newborn a life insurance policy so he or she will have a head start on life and enjoy the principal rollup that the illustration clearly shows over the next 50 years of his or life? Why not let the government take care of your healthcare so you never have to worry about THAT expense again? And don’t forget to buy that whole life insurance policy for your family and mortgages as well as the future and use the hundreds of thousands of dollars as a pension for yourself in 30 years that the illustration shows you will build up? Why risk your future! You will also need, of course, auto insurance, homeowners insurance, a million or so in umbrella coverage, disability insurance, flood insurance, long term care, insurance to cover you before the insurance coverage begins to pay as well as riders for your jewelry and art work, your classic cars, pet insurance and coverage for your cell phones and any appliances you buy. Oh, and if you have any money left you better buy another policy that will leave some money for your spouse to compensate for all the expenses you paid on insurance during your lifetime so she has something to live on when you check out since you had to borrow from your whole life policy to live off of in retirement, that is if the company is still around and will pay the death benefit! You see, they have tried to avoid that eventuality over the years too.
Has anyone lived this dream during their lifetime? You bet they have. How do you think all those insurance companies have such large corporate offices and are able to pay such lucrative salaries and bonuses to their executives, not to mention the endless advertising featuring such cute characters as Snoopy? Who doesn’t love Snoopy!
Insurance is costly to own. The reason to own insurance is to manage debt your family could not pay in the event of death. Most of the products sold above and beyond basic coverage do not make a lot of sense for investors, although they are quite lucrative to the sales agent. The 6% guarantee many of the annuity products offer are subsidized by the 3% fee you pay each and every year for ten years or more while you wait to use your money, then the insurance company will guarantee you 1% the rest of your life as you wait for your check to come each month. The insurance company will not lose. The whole life insurance policy you buy will take you 15 to 20 years just to break even on the commission costs. How much more money could you accumulate for retirement if you eliminate the thousands of dollars paid on expenses in the policy? Government healthcare is a new nightmare we won’t fully understand until we find ourselves paying higher taxes to fund the system. Just think about Medicare and Medicaid and the financial positions those programs are in. Soon every dollar the government takes in will go to pay for the entitlement nation we are becoming. Do people really want an insurance nation? The current thinking, coming from theWashington, on 401(k) plans is that they need to turn them into immediate annuity plans, costs be damned, so that the workers will have money when they retire for a monthly check because they are not capable of saving and managing their accounts for themselves. Privatizing social security has been vilified as unworkable for the same reasons. People may think this is all a good idea because they are fearful due to the actions in the markets the past 10 years or so. It’s fashionable right now to sell fear, and it is an easy sell. And why have the markets displayed such volatility? Weren’t the financial regulations put in place the past couple of years supposed to put an end to investor fears? Wasn’t the goal to end ‘too big to fail’ in the banking system so there could not be another crisis? How is that working out for you? Interest rates are near zero and, last I checked, the banks are bigger than ever! Why has this happened? Follow the money to get to the answers of most anything in life.
So what’s next? Driverless cars are soon to be on the roads. This way the driver can text without worry and will not have to think about getting to their future destination.
I wonder if this new technology will drop insurance rates?!
By Joseph Harowski
Published October 25, 2012
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