Monday, May 25, 2015

The Last Chance Millionaire by Douglas R. Andrew

 Andrew starts with a good discussion of the basics, such as compound interest vs. simple interest, and the different types of tax-advantaged retirement accounts most Americans use, as well as knocking down a few myths about Social Security. If you need the primer, this is some good foundational material. 

He dropped hints along the way which led me to believe that he's going to propose something similar to the universal/whole life insurance policy-based juggling act proposed in Dan Thompson's book which I reviewed back in 2010.

One serious issue I have with some of his basic information is that its underlying assumptions about returns are flawed. Dave Ramsey does the same thing, telling his viewers that it's possible to earn a steady 12% return in the right mutual funds year to year. That's simply not true, I'm afraid. Thompson talks about making huge equity gains in the real estate market, which you can tap into by refinancing your home and using the money to invest (something I heard about years ago, called the Smith Maneuver), but this book was published in 2007 - just before the big real estate bubble burst. If your investment time horizon is long enough, returns in the stock and real estate markets are positive - over the LONG haul. Timing those markets can be a real, pardon the phrase - bear.

Reading on through. my surmises turn out to be correct. Andrew recommends purchasing a "properly structured investment grade life insurance policy", and basically funding the policy to the maximum allowed by tax law, in order to get a guaranteed tax-free return on your retirement funds. If it meets federal guidelines for insurance policies, then you can withdraw the proceeds tax-free up to the point where you've withdrawn the equivalent of your "basis", I believe, after which you can take out loans against the principal and, in theory, still pass on the full face value of the policy to your heirs when you pass on.

Though it goes against the whole "buy term and invest the difference" motto I've used for several deccades now in my own investing, I thought it might be worth taking a peek...until I discovered that the whole book is simply a referral to his own firm, and that the only other firms he recommends must be affiliated with him and "properly trained" to set up these types of contracts. In fact, you can't even get a list of the names of these firms without going through his agents, it appears.

Just another well-disguised sales pitch, sold as a book.

Ah well.

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