“A good person leaves an inheritance to their children’s children, but a worthless person’s wealth is stored up for the righteous.” This verse from Proverbs 13:22 is a reminder for us to take into serious consideration what kind of legacy we are creating, not only for ourselves, but for our children and grandchildren as well.
Furthermore, we are cautioned, “If anyone does not provide for his own, especially his own household, he has denied the faith and is worse than an infidel.”
These are some severe words. Yet, it is surprising how many are complacent about leaving a legacy for their children, let alone their grandchildren. Perhaps part of the reason for this complacency is,
With so few children living with both their parents, the relationship between parents and their progeny has become disturbingly distant. This is no excuse for NOT doing the right thing, but it is a meaningful statistic which enlightens us about why so many are not actively pursuing such a legacy.
These prophetic words, written nearly 2000 years ago by Paul, as he sat in prison for proclaiming the truth no less, is exactly what is occurring today. Paul’s warning, to all who will listen, is, “Keep your head about you. Do what is necessary to discharge your duties.” In other words, “Don’t get greedy. Greed leads to haste, and haste invites deception.” Instead of being greedy, perform your due diligence because diligence produces knowledge and knowledge can be utilized to achieve the happiness, prosperity and well-being you need to survive this life while also creating a legacy for your children and children’s children.
Unfortunately, there are those who unrelentingly go about looking for those whom they can deceive. Inevitably, they attract those who desire to get rich. In fact, those who want to get rich seem to allure such schemers much as flies are lured to rubbish and refuse. The reason is, those who are bent on getting rich hear exactly what they want to hear from such schemers, instead of what they need to hear.
Indexed Universal Life (IUL) products, according to the Center for Economic Justice, “… are complex products sold with false promises and deceptive marketing.” Yet, the growth in sales of these IUL products had swelled to more than $3 billion by the end of 2019. In fact, according to LIMRA, a financial research company, more than 20% of all new life insurance premiums written in 2019 were IUL.
Here is the way IUL functions. Options are bought or sold in an underlying index. Options can increase or collapse very abruptly and precipitously. When an option is “exercised” in the money the payoff can be significant. But when an option expires “out of the money” the entire money invested in that option is lost. Even though an insurance company might place floors and caps on this volatility in an IUL contract, IUL still remains much more risky to own than traditional whole life insurance.
Fascinatingly, Birney Birnbaum, director of the Center for Economic Justice, warns consumers to stay away from IUL policies because insurance companies and the agents who sell these products have no obligation to work in the consumer’s best interest. Even the American Council of Life Insurers, which represents 280 life insurance companies, admits “IUL is not for everyone.”
Unlike IUL policies, traditional whole life insurance policies come with specific values backed-up by the insurance company’s contractual guarantees. Insurance companies who sell whole life insurance invest primarily in corporate bonds and government-backed mortgages which provide small but very reliable annual returns. Thus, whole life insurance delivers safe and guaranteed returns, allowing the policyholder to build a legacy which is certain.
Besides this, an insurance company which allows policyholder participation also pays dividends to policyholders when the life insurance company generates profits which exceed mortality and operational expenses. This is similar to dividends paid in dividend paying stock companies.
There are only 15 stock held companies who have paid dividends annually for the past 100 years or more. And some of these are threatening NOT to pay dividends this year,
There are at least 26 mutually held life insurance companies who have a stellar track record of paying dividends annually to their policyholders over 100 years and running.
Unfortunately, not all mutual life insurance companies offer the paid-up additional insurance rider, which is the rider responsible for building cash values of a whole life policy quickly. This makes choosing the company who issues a participating whole life insurance policy very critical, as it will determine how much a policyholder will be able to benefit from owning a policy and how much they will be able to leave their beneficiaries.
But NOT becoming greedy is imperative. Other riders can be added to a participating whole life policy which initially increase early cash values but drag down efficient cash value later in the policy. This drag also adds unnecessary cost to premium without creating any long-term advantages to the legacy.
Therefore, discovering the reasons why certain riders are essential, while others are NOT, is imperative. Call our office to learn more about why policy design, the issuing insurance company, and the policy riders are fundamental to understand so you can keep more of your capital at work for you. Building a legacy doesn’t have to be hard, it can be fun, profitable, and enjoyable. In fact, building a legacy will produce the happiness, prosperity and well-being everybody is searching for but so few ever discover.
Dr. Tomas P. McFie
Most Americans depend on Social Security for retirement income. Even when people think they’re saving money, taxes, fees, investment losses and market volatility take most of their money away. Tom McFie is the founder of Life Benefits which helps people keep more of the money they make, so they can have financial peace of mind. His latest book, How to Build Sustainable Wealth, can be purchased here.