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All Encompassing Investment and Financial Planning Thread for the Surly 99.5%


Dbeasy

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43 minutes ago, Trey3216 said:

I mentioned Life insurance as one of several options for non-market cash reserves and he didn't take kindly to it.  You pretty much hit my argument on the head, but to each their own.  

Just curious - what is a scenario where life insurance as an "investment" actually makes sense?  I had always heard pretty much a ripoff in all but very specific circumstances but never understood what those circumstances would be.

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2 minutes ago, Skipper said:

Just curious - what is a scenario where life insurance as an "investment" actually makes sense?  I had always heard pretty much a ripoff in all but very specific circumstances but never understood what those circumstances would be.

1) You'll always have it.  You could calculatingly spend your assets down because when you die, your family will replenish assets with LI cash.

2) It doesn't factor into assets for children applying to college on FAFSA.  

3) You can utilize the cash (via loan) to yourself at anytime with no application.  Pretty convenient during high interest rate environs.  You could take a car loan right now for 4.8-5% from yourself rather than 8+ from the bank right now.   (Had a business client loan his business $250k for equipment purchases from his life policy a few months back at 5%...bank wanted 9%...saved himself tens of thousands of dollars)

4) in the event you were to have some sort of life threatening chronic or terminal illness (cancer, dementia, etc) you can access the death benefit while you're still alive to pay for medical care rather than have to use assets

5) It can't be taken in a lawsuit.  OJ has a shit ton of money because much of his estate was in life insurance.  

...In reality, once you are retirement age it more or less becomes asset insurance.  You protect your assets, your nest egg, via the benefits of the policy.  The cash value of the policy is yours to use freely, when there's cash available.   

 

It's not for everyone, but it can BE A PIECE OF A WELL ROUNDED STRATEGY.  It is not the only strategy, nor is being completely dependant upon the market and hoping for permanently good health and timing your exit from the workforce just right.   

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I always thought the best time to have life insurance was when you were making all your money. After you have made the bulk of it,  you don't need it anymore. Life insurance in my eyes was always money for my family if I didn't have the time to provide it for them. Now it makes no sense for me to get it. Plus I've seen too many 48 hours mysteries to ever get more than a few 100k on a policy. 

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On 2/16/2024 at 7:42 AM, Neonmoon said:

True, the internet bubble hurt some people, like my dad. 

image.png.979480ff1825876c0f70ef136327f772.png

I can appreciate that someone (Gen Z, Millennial) today feels like they've missed out on a hot stock market over the last decade. I know because that is what I felt like from 95-99 when the worst year was +20%. I had some money in the stock market but my working career was still newish and I didn't have an opportunity to put much money into the market. 

In your younger days, it's just about getting money into the the market. The time to reap the rewards is later.

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2 hours ago, Trey3216 said:

I mentioned Life insurance as one of several options for non-market cash reserves and he didn't take kindly to it.  You pretty much hit my argument on the head, but to each their own.  

No, it wasn’t the life insurance. The issue is that you told a poster that 3 years of cash reserves is all you have to do to never run out of money, but you provided no other context.

You left that person believing that’s all there is to it. It is not all there is to it and you’ve never once admitted that you were misleading or incomplete in your advice.

And just when the question arises of whether you could be trusted, you promoted insurance, which more often than not is not a good choice for many people. 

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1 hour ago, Trey3216 said:

1) You'll always have it.  You could calculatingly spend your assets down because when you die, your family will replenish assets with LI cash.

2) It doesn't factor into assets for children applying to college on FAFSA.  

3) You can utilize the cash (via loan) to yourself at anytime with no application.  Pretty convenient during high interest rate environs.  You could take a car loan right now for 4.8-5% from yourself rather than 8+ from the bank right now.   (Had a business client loan his business $250k for equipment purchases from his life policy a few months back at 5%...bank wanted 9%...saved himself tens of thousands of dollars)

4) in the event you were to have some sort of life threatening chronic or terminal illness (cancer, dementia, etc) you can access the death benefit while you're still alive to pay for medical care rather than have to use assets

5) It can't be taken in a lawsuit.  OJ has a shit ton of money because much of his estate was in life insurance.  

...In reality, once you are retirement age it more or less becomes asset insurance.  You protect your assets, your nest egg, via the benefits of the policy.  The cash value of the policy is yours to use freely, when there's cash available.   

 

It's not for everyone, but it can BE A PIECE OF A WELL ROUNDED STRATEGY.  It is not the only strategy, nor is being completely dependant upon the market and hoping for permanently good health and timing your exit from the workforce just right.   

It's a tool - nothing more nothing less.  When used properly in the right situation to solve the proper problem, it is highly effective and has enormous benefits.  When used in the wrong application, it's akin to trying to cut down a tree with a screwdriver.

Investing in hedge funds and fine art is ridiculous for a 20-something with a 5-figure income and 4 kids, but that doesn't mean those don't have a place for someone else.

The stigma associated with cash value life insurance is associated with certain salespeople and how/where they sell it, but that doesn't mean its a bad product.

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1 hour ago, Skipper said:

Just curious - what is a scenario where life insurance as an "investment" actually makes sense?  I had always heard pretty much a ripoff in all but very specific circumstances but never understood what those circumstances would be.

For me personally - with no dog in the fight.....I firmly believe in the power of properly funded permanent insurance when the need is there.  But, I would never call it an investment and don't consider it as such.  It also has no benefit and may even be detrimental to most. 

It's a funding vehicle for certain situations and a flexible asset I can use to my advantage - but again...it isn't an investment for me and in my mind.

I'm a business owner and have seen how it works, how it works for me and what it did for my predecessors over my 35 year tenure and the company's 80 year life.  It's a fantastic tool for me to use in planning and funding certain obligations....both professionally and personally.  It is also a horrible tool for one of my shop guys to buy when he's barely able to even fund his 401(k) to grab my matching dollars.

I control an ESOP, and I must plan for buying out certain employees at their death or in retirement - whichever comes first.  I fund that obligation with permanent life insurance.  If they retire prior to them dying, I use the cash in the policy (that protected me from the liability of them dying early) to pay them off via a loan and I have negligible cost to access those funds.  When they die, I recoup all of my premiums, their buyout, and then some.  All the while I was protected from an unfunded obligation in their early years for pennies on the dollar.  My working capital was protected.

I have a close friend with a handicapped daughter.  He peels off a fraction of his estate annually and funds a permanent policy that will take care of her at his death, without disinheriting her siblings.  He spends 1-2 percent of his estate anually on those premiums.  His estate and the other children will get that spend back at his death (with a multiplier) and his disabled daughter will have perpetual care.

It's an asset class and not an investment in my mind.

Two things can be true at the same time.  

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17 hours ago, Dbeasy said:

No, it wasn’t the life insurance. The issue is that you told a poster that 3 years of cash reserves is all you have to do to never run out of money, but you provided no other context.

You left that person believing that’s all there is to it. It is not all there is to it and you’ve never once admitted that you were misleading or incomplete in your advice.

And just when the question arises of whether you could be trusted, you promoted insurance, which more often than not is not a good choice for many people. 

I apologize, truly, for the missing context.   Wasn't trying to mislead anyone.  Sorry I didn't clearly define the guardrails.  The vast majority of my business is in portfolio management, life insurance is a tool that CAN be integrated into a full strategy for SOME people.  It is not for everyone, correct.  Which is why I listed it as 1 of several mechanisms.  Nowhere was I saying that was the best or only way to go.  Anyway, cheers.  I'm not on here having a meeting with anyone, which is a completely different thing than merely offering some concepts that have shown to work for a lot of people in my book of business.  Have a good day.  

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As somone who has been in the business for well over 30 years. I've seen everything and more than 99% of people in the business. There is some good info on here and some not so good.

I'll just say. There is a a reason insurance is sold on commission

Edited by midtown
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  • 1 month later...

talk to me about ditching long held single stocks that have grown to a state where they are intolerably risky

i mean really this is probably not a stock question as much as a psychology thing about attachment and loss aversion, but I dunno. I invested a fairly smallish amount in a single company early in my career and... reviewing my portfolio again the other day made me realize how much it has grown and how it represents wayyy too much of my overall wealth for a single stock. but i don't really want to sell it because that's my boy, we've been through so much.

any of y'all been burned? this doesn't feel like a stonks question since i've held it for 16 years

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2 hours ago, Celery Man said:

any of y'all been burned? this doesn't feel like a stonks question since i've held it for 16 years

Often, it's not so much the risk of being completely burned as it is the opportunity cost of better market returns with diversification.

A family member is a good case study I try and always remember.

She held T as her sole equity position prior to the break-up and then held the collective basket of entities for +50 years until her death - hanging on to that step-up in basis for dear life.

Had the taxes been paid at any point and the balance simply invested in the S&P 500, the value would have been 10x at her death.

She let a fear of taking gains and paying taxes dictate the investment decision instead of being just one facet of the decision.

Would I invest X% of my assets in this today is the question everyone wakes up to, whether they realize it or not.

If I wouldn't buy it today, why do I still own it is an interesting question to ask about any portfolio holding.

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thinking of buying some raw land, funded in part by a 50k loan from my 401k.  never done it before, seems too good to be true.  the cost of the loan appears to be about $135 in fees.  i pay back the loan plus 10% interest to my 401k.  i of course just end up with that interest myself back in my 401k.  right now 401ks are super high and i'd guess a bit of slowdown, so its a good time to take money out of one anyway.  am i looking at this wrong?

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Posted (edited)
21 hours ago, BehoId, The Underminer! said:

thinking of buying some raw land, funded in part by a 50k loan from my 401k.  never done it before, seems too good to be true.  the cost of the loan appears to be about $135 in fees.  i pay back the loan plus 10% interest to my 401k.  i of course just end up with that interest myself back in my 401k.  right now 401ks are super high and i'd guess a bit of slowdown, so its a good time to take money out of one anyway.  am i looking at this wrong?

Where do you want to buy raw land? And for any purpose, or just to have land?

Edited by SydneyCarton
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On 4/10/2024 at 12:16 PM, BehoId, The Underminer! said:

thinking of buying some raw land, funded in part by a 50k loan from my 401k.  never done it before, seems too good to be true.  the cost of the loan appears to be about $135 in fees.  i pay back the loan plus 10% interest to my 401k.  i of course just end up with that interest myself back in my 401k.  right now 401ks are super high and i'd guess a bit of slowdown, so its a good time to take money out of one anyway.  am i looking at this wrong?

If you leave your job or get fired it must be paid back immediately or is considered a withdrawal with penalties and taxes, that is one downside. 

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Posted (edited)

Question:

My parents, both 75, are looking for a financial advisor in Houston. They spoke with someone referred to them and were given a fee structure but have nothing to compare it to. They are not big time (firmly middle class) and are afraid the FA might be too “big” for them. 
 

Can anyone give me a ball park of what the fees would look like?

 

*Understand more info may be needed 

Edited by ChickenSandwich
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35 minutes ago, ChickenSandwich said:

Question:

My parents, both 75, are looking for a financial advisor in Houston. They spoke with someone referred to them and were given a fee structure but have nothing to compare it to. They are not big time (firmly middle class) and are afraid the FA might be too “big” for them. 
 

Can anyone give me a ball park of what the fees would look like?

 

*Understand more info may be needed 

1% of assets under management (AUM) is frequently quoted as a standard fee. There are different opinions out there about this fee structure, and people feel strongly about their opinions.

Some people opt for what is effectively an advisor flat fee, or $/hr advised. Then you or your parents may have to perform the actual transactions with the brokerage account.

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18 hours ago, Nice Guy Eddie said:

1% of assets under management (AUM) is frequently quoted as a standard fee. There are different opinions out there about this fee structure, and people feel strongly about their opinions.

Some people opt for what is effectively an advisor flat fee, or $/hr advised. Then you or your parents may have to perform the actual transactions with the brokerage account.

That's somewhat standard.  However, most advisors will have a graduated fee schedule (automated) where it's 1% for the first X #of $$'s and then scaled down to where the comprehensive fee is somewhere in the .4-.6% as you get over $1mm in assets.  Others also break it down further to where if it's a fully Fixed Income portfolio, the flat AUM fee starts at a lower fee schedule as well.    

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21 minutes ago, Trey3216 said:

That's somewhat standard.  However, most advisors will have a graduated fee schedule (automated) where it's 1% for the first X #of $$'s and then scaled down to where the comprehensive fee is somewhere in the .4-.6% as you get over $1mm in assets.  Others also break it down further to where if it's a fully Fixed Income portfolio, the flat AUM fee starts at a lower fee schedule as well.    

Is the percentage commission charged for the income they produce each year or simply the size of the account regardless?

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2 minutes ago, ChickenSandwich said:

Is the percentage commission charged for the income they produce each year or simply the size of the account regardless?

An AUM fee is based on assets.  It's an annual fee.  Commissions aren't charged in a fee based platform.   Any changes made are made to help the client either avoid more losses or to grab better gains.  Whereas commissions based advisors are making changes that while they may help the client, the advisor is also receiving a commission on both the sale of the old asset and the purchase of the new one.  

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