This morning a man woke up and realized that he had changed. It was just yesterday that he was 28, single with a few thousand dollars in the bank and a nice car. Debt free, he lived with his parents and seemed to have the world in the palm of his hands.
This morning he found out that he was 53 years old, married with 2 daughters in their 20s. One had two years of college left, the other had moved home with her son, who was now 2 years old. His mother-in-law had moved away, bringing 4 generations under one roof.
You love your life and realize it’s time to start rethinking your financial plan again. When her daughters were little, she bought a lot of temporary insurance. In fact, she was carrying a term of $1 million dollars. She never bought whole life insurance because she knew that she would put the difference in the stock market or some other investment that would be better than a whole life insurance policy.
As you review the old plan, you realize that you never ruled out the difference between term insurance and whole life insurance premiums. What he saved did not earn the interest he expected. There are many reasons for this… stock market crash, interest rates were low at banks, business was a bit slow too.
This is what frustrated the man. He knew that he could earn about 6% interest on his money if he had purchased a whole life insurance policy long ago. He also knew that if he bought a whole life policy from the right insurance company, it would have been possible to pay whole life insurance premiums for 10 to 15 years; stop (at least 10 years ago); and then let the cash dividends pay the premiums for the rest of his life.
Goal nooooooooo. He sold life insurance for a living. He understood financing. I could certainly buy the term and invest the difference if anyone could!
Now, I’m going to be completely honest with you. At that point in my life, term insurance was all I could afford. If I could have afforded my whole life, I would have bought it. Like most people in our country, I have never been a good saver.
Now, here I am, at a point in my life where I was hoping to start slowing things down, but it doesn’t seem to be in God’s plan. If his plan is for my family and I to continue to have good health and not a lot of money, I’ll take it. After all, my family would have been in trouble if I had died last night because the million dollar policy no longer exists.
Now, it’s time to start a new plan. You may be wondering, “Will you buy forward this time or a lifetime?”
In fact, I will buy both.
The fact has always been and always will be “the only good life insurance policy is the one in force at the time of your death.” However, the first rule of thumb when buying life insurance is to address the need first. In other words, if the family needs $1 million at the time of someone’s death, $1 million of insurance must be purchased. If all you can afford is the term, so be it. The person must buy on time.
If one can afford $1 million in a lifetime and doesn’t save well, they should buy a lifetime. However, in my situation, I need to buy a few of each. I need $1 million again, today; and I need to force myself to save money. Since I can’t afford all the whole life insurance at my age, I’ll be smarter this time and bundle it up.
The bottom line is that “only 5% of people in this country can live off their savings.” This was true 30 years ago and is still the same today.