Speaker 1: You know, generally speaking, no matter how much you're able
to save, you will show up a retirement having earned
your last dollar in the working world, hypothetically, and you
will be terrified to spend your money because that's the
last of the money you're going to earn. And I
think that is creating an epidemic in our country where
people are under enjoying their retirements, spending far less than
they could because of all the possible what ifs that
come along with retirement.
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Speaker 3: And welcome.
Speaker 4: You are listening to and watching the Financial Survival Network.
I'm your host, Carrie Letz.
Speaker 3: Will feel like me.
Speaker 4: You're getting on in your years. You're thinking about retirement.
Even if you're not going to retire soon, you should
be thinking about retirement planning. We've got a real expert
on with us now, Tom Wall. Tom actually coaches other
people to help you.
Speaker 3: Figure out how to retire.
Speaker 4: You can find his book over at Permission to Spend
dot com. Tom, it's great to have you on the show.
So if there's one piece of advice then you give
to somebody in their say, mid fifties, looking forward to
the day that they one day might retire, what would
that be?
Speaker 1: My advice or my caution to you would be that
you will be afraid to spend. You know, generally speaking,
no matter how much you're able to save, you will
show up at retirement having earned your last dollar in
the working world, hypothetically, and you will be terrified to
spend your money because that's the last of the money
you're going to earn. And I think that is creating
an epidemic in our country where people are under enjoying
their retirements, spending far less than they could because of
all the possible what ifs that come along with retirement,
and you know, in terms of how long you're going
to live, what kind of health shocks there may be,
does World War three breakout in three years?
Speaker 3: All the things that keep us up at night. Yeah, sure,
And that's that's really the crux of my work.
Speaker 4: So how do you get past that, how do you
like give yourself permission to spend?
Speaker 3: It's a good question.
Speaker 1: So in the past, you know, and you think way
back when people just worked at companies for thirty years
and got their pension and the pension took care of them.
That was what you did and someone else kind of
handled it for you. So we now live in a
world where the majority of folks don't have that arrangement anymore,
and they need to take a pile of money and
basically be their own pension fund manager, you know, manage
that for the rest of their life. So there are
you know, time tested one hundred and fifty two hundred
year old strategies, you know, with life insurance and annuities
and very unst products with names like that that actually
their sole purpose is to help people do that, to
transfer risk to major insurance companies so that they can
spend and enjoy all that they've been able to accumulate
rouring their lives.
Speaker 3: Mm hmm.
Speaker 4: So you think you still think insurance the time all
tested product is the way to go here.
Speaker 3: I think for a lot of folks it is.
Speaker 1: You know, I want to look at my planning, you know,
the reason I own permanent life insurance is you know,
people talk about buy term and invest the difference right,
So usually.
Speaker 3: So relatively savvy folks will say, I'm just.
Speaker 1: Going to own cheap term insurance while I'm in my
working years and then I'm going to cumulate my millions
in my investment accounts and then i won't need life
insurance later on, which is true, you know to a
large degree.
Speaker 3: That's that should work that way.
Speaker 1: But the problem is if you don't, if you don't
continue to have, you know, a guaranteed legacy to the
ones that you love, and you don't have a liquid
source of capital outside of your investment portfolio, and you
don't have something that guarantees an income stream for.
Speaker 3: As long as you live.
Speaker 1: You know, you're always going to be investing and managing
your money based on probabilities and those employees you know,
may not be accurate, and they're based on what the
last one hundred years gave us in terms of returns
and volatility. But there's absolutely no reason that the next
hundred years needs to look the same. So that's where
where it fits is guarantees and predictability, not necessarily performance.
It's just it's just a matter of putting in that
predictability into the plan, right, So.
Speaker 4: So maybe it's not your whole retirement, but it's kind
of no pun intended uh an insurance policy if you will.
Speaker 1: Yeah, you know, I think there's there's there's some bad
actors in the business that have given, you know, some
of these strategies of bad names. And I say bad actors,
I think most advisors are trying to do the best
thing for their clients. So it's not always unsc unscrupulous individuals.
Sometimes it's just uneducated folks. So I think there are
people in our in our space who will tell clients
just put all your money here, it's all guaranteed it's
going to go up like it's a triple A rated company,
and that's that's that's not a good idea either, you
know it putting all your eggs in one basket and
regardless of safe, that less it is.
Speaker 3: So yeah, absolutely not. It's it's a balance of the two.
So what kind of insurance companies you look at.
Speaker 4: You're looking at mutual life insurance companies.
Speaker 3: Yeah, my preference is the big old mutuals.
Speaker 1: So you know, it's just some names that people might
recognize is like Northwestern Mutual, New York Life Mass Mutual,
you know, guarding those kind of companies. You know, they
all date back to the eighteen hundreds, you know, and
they've they've been paying dividends reliably to their to their
policy owners since that time. And I think the big
the big reason that I say that is because they're
mutually owned, so you know, they are not necessarily owned
by their policy owners. But I'm ready for the better
policy owners. You know, the stock the stock companies that
you can trade in the open market.
Speaker 3: They are serving two masters.
Speaker 1: They are trying to provide value for their policy owners,
but also you know, pay quarterly dividends to their investors.
Speaker 3: So it becomes hard.
Speaker 1: To sit on the same side of the table as
your clients and deliver value over long periods of time
when you're at the same time trying to extract value
for others who are not part of that contractual arrangement.
So that's that's big reason and why I personally think
that the big mutuls are the place to go. That's
really what you want to build in your portfolio.
Speaker 4: Okay, so you know what about commissions that you pay
for life insurance? I mean that comes out of your return,
right it does.
Speaker 1: So this is another knock against you know, insurance based
products is typically their commission based product, So there's an
upfront commission that comes out. It's not it's not something
that directly is paid by the client, but it comes
in the form of you know, the early the early
years in these contracts tend to have lower values because
of that. That said, you know, if you work with
an investment manager who's managing a portfolio of investments for you,
there's fees and charges on that as well, much lower,
but on an ongoing basis, and based on the calculations
I've done, that'll actually cost you more over the course
of your life in terms of fees and expenses than
a typical insurance contract that's well designed.
Speaker 3: So I think that's overplayed.
Speaker 1: I think that's there's a there's a space that tries
to paint the industry as a bunch of salespeople that
are trying to to pull one over on you. But
all financial products that you acquire, no matter how you
acquire it, have a fee structure that you're paying and
I don't I don't think that's necessarily at odds with
with the client success story.
Speaker 4: Yeah, there's no free lunch. It's here right, exactly right.
But there's fees and then there's fees. How do you
judge you whether you're paying a fair fee or not.
Speaker 1: Well, again, that's where it comes down to mutuality. So
these companies are operating for the benefit of their policy owners.
So you know, there's when these these companies will put
products in place that are guaranteed. They'll guarantee a death benefit,
they'll guarantee cash values, they'll guarantee that premiums can never
change on the annuity side, which guarantees an income stream.
They'll guarantee payouts for as long as you live. And
typically they do as they control the expenses through the dividend.
The dividend payout, so you know, to the extent that
the insurance company is profitable. In generating profits, they really
can only do two things. So they can make they
can make strategic investments to make their general investment account
perform better or and or they can give that back
to the policy owners in the form of a participating dividend.
You know, they these policy owners essentially you know, own
the company indirectly. So when there's profitability, it comes back
to you. So again, these these contracts tend to have,
you know, high, high guaranteed cost structures. But because they're
sitting on the same side of the table as you,
they're operating for the benefit of the policy owner. It
all comes back. It all comes back in the form
of a non guaranteed dividend. When I say non guaranteed,
it's not like the market where it goes up and
down and can be taken away from you. You know,
it's really just the rate at which they enhance those guarantees.
So it's it's hard, I would say that's that's probably
the hardest part about these participating whole life contracts is
there they have an opaque fee structure. You can't actually
see exactly where every dollar is going. Uh, they just
kind of give you. They just give you the performance
and you have to interpolate, you know, what performance you're
not getting, you.
Speaker 3: Know, to kind of come up with with what those
fees are.
Speaker 1: But like I said, over over a long time horizon,
it's typically less than be paying inside of an investment account.
Speaker 4: So in today's modern world, you got cryptos, you got
a lot of competing investments here, Uh, is the amount
going into these uh insurance contracts. Is it still increasing
where these companies at now.
Speaker 1: Yeah, it's always increasing, you know, as as the consumer
base grows and the population grows. I think where it's
going toward is you know, there's there's a few different
markets in this space. There's a there's a market known
inside the industry as like the infinite banking crowd, and
these are people that are using the unbelievable tax advantages
that life insurance has and they're they're overfunding these policies
and using it as a separate, you know, investment if
you will.
Speaker 3: There it's it's not an investment, it's an insurance contract.
Speaker 1: But they're they're funding these vehicles to the point where
they look like you know, alternative to savings and bonds
and some of that stuff. And then there's the other
side of the spectrum, which frankly I think I live
closer to, which is really death benefit focused.
Speaker 3: You know.
Speaker 1: For me, you know, I've got two boys that I love,
and you know, my future spouse in retirement, like these
people are, I'm going to be obligated at the very
least to provide my spouse with something when I die.
I make sure that there's there's money left over for her.
But also I want to leave a legacy to my children,
so a permanent death benefit guarantees that delivery of future money.
I know that that legacy is covered, so that when
I get to retirement, I can take my investments and
annuitize them or aggressively spend them down. And if I
do that over twenty or thirty years and there's not
a whole lot left, I've got that backstop and I've
got those guarantees in place. So it's less about you know,
fighting over rates of return and you know what, I
think this aviation of this asset classes, and more about
I know that those things are covered, so I can
then go with the rest of my money shoot for
the stars and buy crypto and invest invest in businesses
and real estate and all the things that have historically
generated big wealth. But if that's all, I think that
the takeaways, if that's where all of your money is
in these risky asset classes, and then you know, a
year or two after you retire, some you know, geopolitical
calamity happens in the much it goes down sixty percent,
Like that's just untutable.
Speaker 4: I just remember in economics class, the professor quoted somebody saying,
you know, in the long run, we're all dead.
Speaker 3: So hopefully the long run.
Speaker 4: So when you're looking for the company you want, I mean,
these companies have been around for like one hundred and
fifty plus years, a lot of them, haven't they Yeah.
Speaker 3: I mean the majority of the majority of the big ones.
They predate.
Speaker 1: They predate any company you can think of in the
financial space. You know, the mutual fundedn't even wasn't even
invented until early nineteen hundreds. So yeah, they are time tested.
If if anything, if there's a knock against them is
that they're boring. They're boring, they're predictable. They're going to
be here in one hundred years because of the way
they invest and manage things. And that's that's where they live.
That's essentially the space I think people get. People get
it a little bit twisted when they try to compare
these contracts to other investment classes and say that I
can do better elsewhere, And the answer is, over long
periods of time, on average, you should. The point is
to have it in place when when the market doesn't
go up and you're in a period of time when
you can't just go earn more money in your job
or your business to make up for that.
Speaker 3: Yeah.
Speaker 4: Interesting, And you know, this kind of formula works all
over the world, Asia, Europe. You know, started in England,
in the UK in the seventeen hundreds in these coffee
shops and here it is now even in the digital world.
It's still the same basic contract. Yeah, a lot of
things have changed, but the contract, it's all about a
contract between you and a company, right, That's where it
all starts.
Speaker 1: Yeah, and that's an important distinction. It's not some people
will call this stuff, you know, an asset class. It's
not an asset class. It is a life insurance contract.
But what I what a lot of my research and
study has been done is we're basically how I got
here was I've been on stages for twenty years in
front of advisors, you know, talking about whole life insurance
and does this make sense? And basically the question in
my mind was always is this just a good a
good product that's probably going to serve you well that
you don't have to apologize for, you know, twenty years
down the road, or is this actually actually the best
thing someone could be doing with their money, and what
I what I found in my in my studies historically
was these contracts tend to give you bond like returns
over time because they're backed by portfolio of long term
corporate bonds and mortgage lee among all the stuff that
these general investment accounts of these major mutuals invest in,
so that that flows through the contract to you. But
because there's a contract between you and that portfolio, there's
guarantees in place that your cash values must go up
in value every year. The only question is how fast
you've got complete access to them along the way, and
that's that contractual nature.
Speaker 3: Is actually the positive.
Speaker 1: Of this is that there's there's an insurance company indemnifying
you from all of the risks inherent in building a
portfolio of your own, and you get better risk adjusted
returns as a result. You know, you get basically bond
like returns, but none of the risk and volatility. And
that's what the smartest minds of all street are trying
to figure out. They're not necessarily looking for the best
absolute returns, They're looking for the best returns relative to
the risk and downside we're taking on.
Speaker 4: Everybody wants the risk free return, but you know treasuries,
and there's obviously risks in bonds as well. You're not
worrying about the equitable or you know mass mutuals bond
portfolio when you sign the contract, that's their.
Speaker 3: Problem, right, exactly right?
Speaker 4: Yeah, So all right, hey, Tom, just tell us again
how we connect with you, how we find you on
the internet.
Speaker 1: Yeah, I do a lot of I actually publish a
lot on LinkedIn, so you know LinkedIn and Tom Wall,
I'm easy to find there. Permission to spend dot com
is where my book is, so for if there's advisors listening,
they can actually use that book as a tool with
clients to help have the conversation. But individuals will get
a lot of it too. It's available on Amazon and
all formats. And you know, I'm just here to serve
individuals and try to tell the story in an objective
academic way, which a lot of the industry frankly isn't
doing well.
Speaker 4: We appreciate your candidness and your depth of knowledge is
quite obvious. And if you have any questions or comments
for Tom myself, shoot me an email kl at Carrie
LUTs dot com.
Speaker 3: The link to tom site get the book is in the.
Speaker 4: Show notes to this interview on Financial Survival Network dot com.
Speaker 3: While you're there, we.
Speaker 4: Just ask that you please sign up free free newsletter.
Like over sixty five thousand other FSN community members, have
a lot of useful info there.
Speaker 3: Tom, thanks for coming on. We'll talk to you again soon.
Thanks for having me, I appreciate it.
Speaker 2: Thanks for listening to Carrie Let's Financial Survival Network your
solution to today's trying times. For the latest, go to
Financial Survivalnetwork dot com. Financial Survival Network now more than ever,