Molar MechanicParticipantStatus: Dentist, Small Business OwnerPosts: 287Joined: 10/29/2017
No, I don’t have a policy, and I’m not about to get one. I am having a ‘friendly’ discussion on another, less financially focused forum with a whole life salesman/financial advisor.
This was posted in response. I was set to blow it off till I saw Wade Pfau’s name attached. I think he is generally well regarded, and his word wall seems to point to some advantage to the whole life policy. I didn’t read it all, but skimming it the only real rebuttal I could find was that he seemed to hamstring the results of the no annuity/whole life proposal by adding investment fees. What am I missing?February 7, 2019 at 4:42 pm MST #189073The White Coat InvestorKeymasterStatus: PhysicianPosts: 3954Joined: 05/13/2011
Not surprised to see insurance agents using that article to sell more whole life. I predicted that when I saw the original article which was widely panned for issues like the one you identified.
I have completed a new whitepaper for OneAmerica, “Optimizing Retirement Income by Combining Actuarial Science and Investments,” which looks at how life insurance fits into the picture with investments and income annuities for a retirement income plan. Because this research is sponsored by an insurance company, I take special care in the whitepaper to explain my methods and assumptions as clearly as possible, so that readers can potentially challenge my conclusions. I say this because the conventional wisdom has become to “buy term life insurance and invest the difference,” and my findings do not support this.
Basically, he was paid by an insurance company to write a pro-whole life insurance paper. That’s issue # 1. Major coup for OneAmerica that they can use for years. I’m curious what it cost them.
My main criticism is all the benefits he attributes to whole life insurance are more efficiently achieved by using a SPIA. If you want an insurance product to allow you to spend a higher percentage of your nest egg safely, use a SPIA not whole life.
Notice there is no scenario where the investor buys term, invests the difference, then converts that nest egg to a SPIA when he retires.
Another criticism is he uses a 3.5% withdrawal rate. That’s very conservative considering a 4% withdrawal rate on average leaves the retiree at death with 2.7X what he retired with. Many can safely use a 4.5%, 5%, or even higher withdrawal rate.
Sure, if you never spend any of that nest egg, you can make something look better a lot easier.
Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011ZaphodParticipantStatus: Physician, Small Business OwnerPosts: 5227Joined: 01/12/2016
Saddened he did that and felt that caveat explaining basically how he chose parameters to get the results the bosses wanted did anything other than sully his reputation. If you’re going to sell out, go big.ENT DocParticipantStatus: PhysicianPosts: 2510Joined: 01/14/2017
Seems like this sort of thing could have easily been studied without the payment from an insurance company. Pretty bad look.Molar MechanicParticipantStatus: Dentist, Small Business OwnerPosts: 287Joined: 10/29/2017
I’ve tried to mostly out grow the internet pissing match, but sometimes I can’t stand to see these guys peddling their BS and I do try to rebut a little. I think I’m mostly pissing in the wind, but at least there is a competing viewpoint for forum spectators to investigate.February 7, 2019 at 7:56 pm MST #189130