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Speaker 1: You know, generally speaking, no matter how much you're able

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to save, you will show up a retirement having earned

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your last dollar in the working world, hypothetically, and you

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will be terrified to spend your money because that's the

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last of the money you're going to earn. And I

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think that is creating an epidemic in our country where

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people are under enjoying their retirements, spending far less than

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they could because of all the possible what ifs that

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come along with retirement.

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Speaker 2: You are listening to Carrie Lutz's Financial Survival Network where

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you get valuable information you just can't find anywhere else

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to thrive in today's trying times. You need the Financial

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Survival Network now more than ever. Go to Financial Survivalnetwork

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dot com and get your free newsletter and gift. Financial

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Survival Network now more than ever.

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Speaker 3: And welcome.

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Speaker 4: You are listening to and watching the Financial Survival Network.

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I'm your host, Carrie Letz.

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Speaker 3: Will feel like me.

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Speaker 4: You're getting on in your years. You're thinking about retirement.

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Even if you're not going to retire soon, you should

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be thinking about retirement planning. We've got a real expert

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on with us now, Tom Wall. Tom actually coaches other

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people to help you.

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Speaker 3: Figure out how to retire.

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Speaker 4: You can find his book over at Permission to Spend

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dot com. Tom, it's great to have you on the show.

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So if there's one piece of advice then you give

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to somebody in their say, mid fifties, looking forward to

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the day that they one day might retire, what would

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that be?

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Speaker 1: My advice or my caution to you would be that

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you will be afraid to spend. You know, generally speaking,

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no matter how much you're able to save, you will

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show up at retirement having earned your last dollar in

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the working world, hypothetically, and you will be terrified to

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spend your money because that's the last of the money

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you're going to earn. And I think that is creating

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an epidemic in our country where people are under enjoying

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their retirements, spending far less than they could because of

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all the possible what ifs that come along with retirement,

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and you know, in terms of how long you're going

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to live, what kind of health shocks there may be,

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does World War three breakout in three years?

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Speaker 3: All the things that keep us up at night. Yeah, sure,

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And that's that's really the crux of my work.

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Speaker 4: So how do you get past that, how do you

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like give yourself permission to spend?

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Speaker 3: It's a good question.

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Speaker 1: So in the past, you know, and you think way

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back when people just worked at companies for thirty years

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and got their pension and the pension took care of them.

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That was what you did and someone else kind of

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handled it for you. So we now live in a

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world where the majority of folks don't have that arrangement anymore,

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and they need to take a pile of money and

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basically be their own pension fund manager, you know, manage

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that for the rest of their life. So there are

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you know, time tested one hundred and fifty two hundred

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year old strategies, you know, with life insurance and annuities

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and very unst products with names like that that actually

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their sole purpose is to help people do that, to

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transfer risk to major insurance companies so that they can

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spend and enjoy all that they've been able to accumulate

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rouring their lives.

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Speaker 3: Mm hmm.

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Speaker 4: So you think you still think insurance the time all

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tested product is the way to go here.

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Speaker 3: I think for a lot of folks it is.

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Speaker 1: You know, I want to look at my planning, you know,

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the reason I own permanent life insurance is you know,

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people talk about buy term and invest the difference right,

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So usually.

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Speaker 3: So relatively savvy folks will say, I'm just.

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Speaker 1: Going to own cheap term insurance while I'm in my

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working years and then I'm going to cumulate my millions

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in my investment accounts and then i won't need life

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insurance later on, which is true, you know to a

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large degree.

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Speaker 3: That's that should work that way.

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Speaker 1: But the problem is if you don't, if you don't

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continue to have, you know, a guaranteed legacy to the

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ones that you love, and you don't have a liquid

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source of capital outside of your investment portfolio, and you

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don't have something that guarantees an income stream for.

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Speaker 3: As long as you live.

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Speaker 1: You know, you're always going to be investing and managing

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your money based on probabilities and those employees you know,

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may not be accurate, and they're based on what the

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last one hundred years gave us in terms of returns

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and volatility. But there's absolutely no reason that the next

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hundred years needs to look the same. So that's where

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where it fits is guarantees and predictability, not necessarily performance.

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It's just it's just a matter of putting in that

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predictability into the plan, right, So.

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Speaker 4: So maybe it's not your whole retirement, but it's kind

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of no pun intended uh an insurance policy if you will.

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Speaker 1: Yeah, you know, I think there's there's there's some bad

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actors in the business that have given, you know, some

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of these strategies of bad names. And I say bad actors,

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I think most advisors are trying to do the best

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thing for their clients. So it's not always unsc unscrupulous individuals.

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Sometimes it's just uneducated folks. So I think there are

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people in our in our space who will tell clients

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just put all your money here, it's all guaranteed it's

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going to go up like it's a triple A rated company,

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and that's that's that's not a good idea either, you

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know it putting all your eggs in one basket and

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regardless of safe, that less it is.

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Speaker 3: So yeah, absolutely not. It's it's a balance of the two.

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So what kind of insurance companies you look at.

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Speaker 4: You're looking at mutual life insurance companies.

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Speaker 3: Yeah, my preference is the big old mutuals.

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Speaker 1: So you know, it's just some names that people might

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recognize is like Northwestern Mutual, New York Life Mass Mutual,

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you know, guarding those kind of companies. You know, they

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all date back to the eighteen hundreds, you know, and

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they've they've been paying dividends reliably to their to their

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policy owners since that time. And I think the big

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the big reason that I say that is because they're

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mutually owned, so you know, they are not necessarily owned

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by their policy owners. But I'm ready for the better

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policy owners. You know, the stock the stock companies that

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you can trade in the open market.

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Speaker 3: They are serving two masters.

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Speaker 1: They are trying to provide value for their policy owners,

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but also you know, pay quarterly dividends to their investors.

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Speaker 3: So it becomes hard.

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Speaker 1: To sit on the same side of the table as

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your clients and deliver value over long periods of time

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when you're at the same time trying to extract value

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for others who are not part of that contractual arrangement.

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So that's that's big reason and why I personally think

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that the big mutuls are the place to go. That's

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really what you want to build in your portfolio.

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Speaker 4: Okay, so you know what about commissions that you pay

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for life insurance? I mean that comes out of your return,

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right it does.

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Speaker 1: So this is another knock against you know, insurance based

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products is typically their commission based product, So there's an

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upfront commission that comes out. It's not it's not something

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that directly is paid by the client, but it comes

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in the form of you know, the early the early

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years in these contracts tend to have lower values because

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of that. That said, you know, if you work with

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an investment manager who's managing a portfolio of investments for you,

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there's fees and charges on that as well, much lower,

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but on an ongoing basis, and based on the calculations

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I've done, that'll actually cost you more over the course

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of your life in terms of fees and expenses than

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a typical insurance contract that's well designed.

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Speaker 3: So I think that's overplayed.

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Speaker 1: I think that's there's a there's a space that tries

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to paint the industry as a bunch of salespeople that

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are trying to to pull one over on you. But

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all financial products that you acquire, no matter how you

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acquire it, have a fee structure that you're paying and

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I don't I don't think that's necessarily at odds with

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with the client success story.

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Speaker 4: Yeah, there's no free lunch. It's here right, exactly right.

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But there's fees and then there's fees. How do you

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judge you whether you're paying a fair fee or not.

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Speaker 1: Well, again, that's where it comes down to mutuality. So

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these companies are operating for the benefit of their policy owners.

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So you know, there's when these these companies will put

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products in place that are guaranteed. They'll guarantee a death benefit,

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they'll guarantee cash values, they'll guarantee that premiums can never

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change on the annuity side, which guarantees an income stream.

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They'll guarantee payouts for as long as you live. And

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typically they do as they control the expenses through the dividend.

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The dividend payout, so you know, to the extent that

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the insurance company is profitable. In generating profits, they really

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can only do two things. So they can make they

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can make strategic investments to make their general investment account

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perform better or and or they can give that back

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to the policy owners in the form of a participating dividend.

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You know, they these policy owners essentially you know, own

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the company indirectly. So when there's profitability, it comes back

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to you. So again, these these contracts tend to have,

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you know, high, high guaranteed cost structures. But because they're

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sitting on the same side of the table as you,

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they're operating for the benefit of the policy owner. It

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all comes back. It all comes back in the form

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of a non guaranteed dividend. When I say non guaranteed,

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it's not like the market where it goes up and

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down and can be taken away from you. You know,

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it's really just the rate at which they enhance those guarantees.

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So it's it's hard, I would say that's that's probably

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the hardest part about these participating whole life contracts is

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there they have an opaque fee structure. You can't actually

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see exactly where every dollar is going. Uh, they just

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kind of give you. They just give you the performance

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and you have to interpolate, you know, what performance you're

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not getting, you.

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Speaker 3: Know, to kind of come up with with what those

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fees are.

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Speaker 1: But like I said, over over a long time horizon,

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it's typically less than be paying inside of an investment account.

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Speaker 4: So in today's modern world, you got cryptos, you got

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a lot of competing investments here, Uh, is the amount

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going into these uh insurance contracts. Is it still increasing

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where these companies at now.

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Speaker 1: Yeah, it's always increasing, you know, as as the consumer

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base grows and the population grows. I think where it's

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going toward is you know, there's there's a few different

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markets in this space. There's a there's a market known

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inside the industry as like the infinite banking crowd, and

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these are people that are using the unbelievable tax advantages

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that life insurance has and they're they're overfunding these policies

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and using it as a separate, you know, investment if

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you will.

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Speaker 3: There it's it's not an investment, it's an insurance contract.

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Speaker 1: But they're they're funding these vehicles to the point where

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they look like you know, alternative to savings and bonds

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and some of that stuff. And then there's the other

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side of the spectrum, which frankly I think I live

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closer to, which is really death benefit focused.

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Speaker 3: You know.

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Speaker 1: For me, you know, I've got two boys that I love,

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and you know, my future spouse in retirement, like these

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people are, I'm going to be obligated at the very

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least to provide my spouse with something when I die.

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I make sure that there's there's money left over for her.

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But also I want to leave a legacy to my children,

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so a permanent death benefit guarantees that delivery of future money.

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I know that that legacy is covered, so that when

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I get to retirement, I can take my investments and

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annuitize them or aggressively spend them down. And if I

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do that over twenty or thirty years and there's not

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a whole lot left, I've got that backstop and I've

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got those guarantees in place. So it's less about you know,

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fighting over rates of return and you know what, I

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think this aviation of this asset classes, and more about

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I know that those things are covered, so I can

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then go with the rest of my money shoot for

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the stars and buy crypto and invest invest in businesses

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and real estate and all the things that have historically

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generated big wealth. But if that's all, I think that

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the takeaways, if that's where all of your money is

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in these risky asset classes, and then you know, a

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year or two after you retire, some you know, geopolitical

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calamity happens in the much it goes down sixty percent,

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Like that's just untutable.

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Speaker 4: I just remember in economics class, the professor quoted somebody saying,

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you know, in the long run, we're all dead.

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Speaker 3: So hopefully the long run.

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Speaker 4: So when you're looking for the company you want, I mean,

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these companies have been around for like one hundred and

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fifty plus years, a lot of them, haven't they Yeah.

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Speaker 3: I mean the majority of the majority of the big ones.

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They predate.

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Speaker 1: They predate any company you can think of in the

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financial space. You know, the mutual fundedn't even wasn't even

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invented until early nineteen hundreds. So yeah, they are time tested.

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If if anything, if there's a knock against them is

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that they're boring. They're boring, they're predictable. They're going to

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be here in one hundred years because of the way

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they invest and manage things. And that's that's where they live.

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That's essentially the space I think people get. People get

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it a little bit twisted when they try to compare

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these contracts to other investment classes and say that I

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can do better elsewhere, And the answer is, over long

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periods of time, on average, you should. The point is

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to have it in place when when the market doesn't

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go up and you're in a period of time when

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you can't just go earn more money in your job

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or your business to make up for that.

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Speaker 3: Yeah.

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Speaker 4: Interesting, And you know, this kind of formula works all

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over the world, Asia, Europe. You know, started in England,

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in the UK in the seventeen hundreds in these coffee

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shops and here it is now even in the digital world.

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It's still the same basic contract. Yeah, a lot of

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things have changed, but the contract, it's all about a

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contract between you and a company, right, That's where it

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all starts.

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Speaker 1: Yeah, and that's an important distinction. It's not some people

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will call this stuff, you know, an asset class. It's

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not an asset class. It is a life insurance contract.

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But what I what a lot of my research and

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study has been done is we're basically how I got

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here was I've been on stages for twenty years in

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front of advisors, you know, talking about whole life insurance

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and does this make sense? And basically the question in

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my mind was always is this just a good a

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good product that's probably going to serve you well that

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you don't have to apologize for, you know, twenty years

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down the road, or is this actually actually the best

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thing someone could be doing with their money, and what

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I what I found in my in my studies historically

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was these contracts tend to give you bond like returns

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over time because they're backed by portfolio of long term

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corporate bonds and mortgage lee among all the stuff that

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these general investment accounts of these major mutuals invest in,

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so that that flows through the contract to you. But

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because there's a contract between you and that portfolio, there's

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guarantees in place that your cash values must go up

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in value every year. The only question is how fast

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you've got complete access to them along the way, and

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that's that contractual nature.

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Speaker 3: Is actually the positive.

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Speaker 1: Of this is that there's there's an insurance company indemnifying

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you from all of the risks inherent in building a

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portfolio of your own, and you get better risk adjusted

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returns as a result. You know, you get basically bond

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like returns, but none of the risk and volatility. And

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that's what the smartest minds of all street are trying

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to figure out. They're not necessarily looking for the best

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absolute returns, They're looking for the best returns relative to

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the risk and downside we're taking on.

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Speaker 4: Everybody wants the risk free return, but you know treasuries,

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and there's obviously risks in bonds as well. You're not

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worrying about the equitable or you know mass mutuals bond

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portfolio when you sign the contract, that's their.

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Speaker 3: Problem, right, exactly right?

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Speaker 4: Yeah, So all right, hey, Tom, just tell us again

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how we connect with you, how we find you on

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the internet.

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Speaker 1: Yeah, I do a lot of I actually publish a

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lot on LinkedIn, so you know LinkedIn and Tom Wall,

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I'm easy to find there. Permission to spend dot com

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is where my book is, so for if there's advisors listening,

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they can actually use that book as a tool with

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clients to help have the conversation. But individuals will get

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a lot of it too. It's available on Amazon and

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all formats. And you know, I'm just here to serve

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individuals and try to tell the story in an objective

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academic way, which a lot of the industry frankly isn't

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doing well.

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Speaker 4: We appreciate your candidness and your depth of knowledge is

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quite obvious. And if you have any questions or comments

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for Tom myself, shoot me an email kl at Carrie

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LUTs dot com.

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Speaker 3: The link to tom site get the book is in the.

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Speaker 4: Show notes to this interview on Financial Survival Network dot com.

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Speaker 3: While you're there, we.

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Speaker 4: Just ask that you please sign up free free newsletter.

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Like over sixty five thousand other FSN community members, have

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a lot of useful info there.

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Speaker 3: Tom, thanks for coming on. We'll talk to you again soon.

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Thanks for having me, I appreciate it.

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Speaker 2: Thanks for listening to Carrie Let's Financial Survival Network your

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solution to today's trying times. For the latest, go to

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Financial Survivalnetwork dot com. Financial Survival Network now more than ever,