Hypothetical from the Hampton Inn is curious about whether he should keep his 30 year term life insurance policy or let it lapse with 12 years left on the policy.
Ramon asks us about the details behind infinite banking.
Anonymous Emily is wondering which financial products would work best to cover care and expenses as she ages.
Max is thinking through real estate and stock market returns as they relate to future population trends.
Do you have a question on business, money, trade-offs, financial independence strategies, travel, or investing? Leave it here and we’ll answer them in a future episode.
Hypothetical from the Hampton Inn asks (at 1:48 minutes): Eighteen years ago, I purchased a 30 year, $1M term life insurance policy for $100 per month. The monthly payment is locked in for the next 12 years and I’m in pretty good health.
Once I have a net worth of $1M, should I let the policy lapse and invest that $100 per month or should I keep the policy until the 30 years is reached, no matter what my net worth is?
Ramon asks (at 13:00 minutes): Can you talk about infinite banking? Apparently, this is when an individual takes out a whole life insurance policy and then takes out a loan against that policy to fund their lifestyle, thereby becoming their own banker and eliminating the need to get money from a bank. Is that all that there is to it or is there more to the story?
Anonymous Emily asks (at 23:23 minutes): I’m 42 years old. I have no plans to marry or have kids, and financial security is a huge priority. I must put systems in place that’ll provide the kind of security that others might get from having a spouse or kids, especially as older age approaches.
It seems like an annuity would guarantee that basic expenses are covered in retirement, even if the stock market goes down. Long-term care insurance would cover nursing care or in home care, especially since I won’t have family around to share that burden. Umbrella insurance would help in protecting my savings.
I estimate I’ll be able to retire around age 65 with approximately $2M in investments. My annual spending is low and shouldn’t exceed $50,000 in retirement, considering inflation and healthcare. Social security should conservatively take care of $15,000 of my annual expenses. I’d want the annuity to cover roughly $20,000 of essential expenses.
I’m not sure when to purchase these different financial products: I think I should get umbrella insurance within the next year, especially with my savings and retirement balances growing, and I’d wait to buy the long-term care insurance and the annuity until I’m in my 50’s. I’d like to wait at least a few years because I’m really focused on paying off student loan debt and reaching a coast FIRE level. I think I can do that in the next five years.
After that, I can contribute to my retirement accounts, but not as much. Also, without the student loan I’ll have more money in my budget.
I’d like to hear your thoughts on a timeline, if these financial products are worth it to someone in my situation, and if you have any other suggestions on how a single person could build a successful retirement plan.
Max asks (at 53:59 minutes): My partner and I are comfortable in our early thirties, have fulfilling jobs, are hoping to buy our first home soon and are about to welcome our first child. As I think about investing in the market and in real estate, I’ve read about the forthcoming population deceleration.
I’ve heard about South Korea closing schools and colleges because they don’t have enough young people who need them and about Germany razing homes to create parks, for similar reasons. A NY times article from earlier this year also talks about this trend.
When we talk about historical stock market and real estate returns, it’s in the context of the US population growing from 76 million in 1900 to 282 million people in 2000, or nearly quadrupling. By comparison, from the 2000 population of 282 million people to an estimated 500 million people in 2100, the population doesn’t even double over the same time span. This, coupled with the fact that the population pyramid is going to skew towards retirees, has me worried that historical data won’t hold for the remainder of the century, and we might be heading into uncharted waters.
For me, the math adds up to a lower demand, generating lower returns for real estate over the next eighty years and a shifting of the balance with retirees drawing from their retirement accounts and fewer young people adding to them, resulting in lower investment returns.
It would be beneficial to hear how the both of you think about these issues.
Thanks to our sponsors!
In minutes you can work out how much life insurance coverage you need and compare personalized quotes to find your best price. Go to policygenius.com for free quotes and comparisons across more than 30 insurers. It only takes a few minutes to get started, and Policygenius never sells your information to other companies.
Rothy’s shoes are stylish, sustainable, and comfortable for everyday wear, anywhere. They come in numerous styles, their lineup is updated often, and their flats, shoes, and bags are made from recycled plastic water bottles! Go to rothys.com/paula and get $20 off your first purchase of $100.
Most of us find ourselves in situations where we need to wear dress pants, whether it be for work, a conference, or a meeting. If only you could wear comfortable pants to everything, right? Well…now you can! Betabrand offers dress pant yoga pants, and they’re as awesome as they sound. Check out betabrand.com/paula and get 30% off your order.
Want to reduce your cell phone bill? Mint Mobile plans comes with unlimited nationwide talk and text. You don’t have to pay for unlimited data you’ll never use – Mint Mobile offers 3GB, 8GB, or 12GB of 4G LTE data each month. To get your new wireless plan for just 15 bucks a month, and get the plan shipped to your door for FREE, go to mintmobile.com/paula.
Gusto makes payroll, benefits, and HR easy for modern small businesses. In fact, 72% of customers spend less than 5 minutes to run payroll! If you sign up at gusto.com/paula, you’ll receive 3 months free once you run your first payroll.