It’s Time To Think Outside The Box – Part 1

As an alternative to the stock markets, we suggest a specific type and structuring of Whole Life insurance.  Now, before you close down on that title, “life insurance”, please allow us to explain:

“Cash value life insurance” has been used to accumulate savings for retirement, college funding, and other needs, for well over 100 years.  Prior to the 1970’s, it was quite common for people to own these life policies. It was the late 1970’s when money started following and aggressively rolling into the stock market with “Buy Term & Invest the Difference”.

The 20 year period of 1980 – 2000 (“The Roaring Twenty”) was a time of great wealth expansion in the equity markets, with previously unequaled growth rates.  The cumulative rate of return (CROR) was just under 14%!  During that period it became conventional wisdom to invest in the market for retirement and for funding other financial needs.

You may remember the “Tech Bubble” collapse in 2000-2001, and the “Real Estate Bubble” collapse in 2007-2009.  The markets have been quite volatile since that 2000 collapse, yet many people believe (or hope) that the stock markets are as robust and upwardly-directed as they were before 2000.  The reality is that since 2000, the Standard & Poor’s index (S&P) has had a cumulative rate of return (CROR) of close to 3.25%, hardly robust in comparison to what many imagine.  Almost fifteen years of markets that fail to impress overall.  Yes, we’ve had a good last few years, but in a recovery from low levels.

During the period 1980 – 2000, “infrastructure” grew throughout society. Corporations, retail, housing, and almost everything else became bigger as the stock markets expanded, and wealth was created. That infrastructure is now a partial source of the market volatility as society tries to regain a solid footing. Empty storefronts and vacant homes are displays of some dislocations as that footing is sought. It looks like the volatility and societal adjustments will continue for some time.

There were a number of unique factors that contributed to The Roaring Twenty.  We had Baby Boomers, tax code restructuring (1981-1982), desktop computerization, a change in perception of “below investment-grade risk” (Michael Milken at Drexel Lambert), the introduction of 401(k)’s, and more. One might suggest that The Roaring Twenty will not return in any close form without a similar confluence of factors, which looks unlikely.

Volatility may be an exciting part of the investment experience, but that is the last thing you’ll want in retirement, as you withdraw cash from your account to pay bills.

Whole Life Insurance of a specific structure is utilized and provides a range of exceptional benefits.   Our next message will further explore the topic.

About L N Himel

Site creator and author has well over 30 years experience in the world of Finance at both the institutional and personal levels. As is often true, his successes, but also the pain of the author's mistakes, have resulted in insights that you, the reader, might find helpful in your efforts to avoid pitfalls and poor results. Associated with Himel Financial Services, at http://www.himelfinancial.com/#intro
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