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from Joe H Friday, September 05, 2003 - 13:08 (Agree/Disagree?) Hey davinci, can you elaborate on this "Tax-free life insurance policy"? It sounds a little too good to be true. (reply to this comment)

From Persephone Thursday, September 18, 2003, 13:58 (Agree/Disagree?) Joe H, since ThinkingDavinci has not answered your question, I will go ahead and offer some information. I haven’t done a lot of study on insurance though, so you’ll want to double-check everything that follows. As far as life insurance goes, there are about as many variations as dogs have fleas, but I believe that what TD is referring to in his post is either whole life insurance or single premium life insurance. Whole life insurance is a life insurance that you pay premiums into and if you live out the policy, you get your cash value back. If you die, your cash goes to the insurance company and they pay the value of the policy to your beneficiaries. For example, you take out a 100,000-dollar policy that is for 20 years, and during those 20 years you’ve paid in $35,500 to the policy. If you live longer than the policy, you get your 35,500 back. If you die, your beneficiaries get 100,000 and the insurance company keeps the 35,500. Whole life insurance is often promoted by insurance agents saying that you’ll be earning interest on your deposits, that you can borrow against your cash value or that your insurance policy is a tax shelter. As far as earning interest on the deposits go, this of course varies from company to company but the rate of return in miniscule compared to other investments. When you borrow against your cash value the interest on the borrowed amount (I believe) goes to the insurance company and not towards your cash value. If you die before the loan is paid off, the amount going to your beneficiaries is reduced by the amount still owed. If you borrow $20,000 from your cash value and your policy is for $100,000 & you die still owing $15,000, your beneficiary receives only $85,000. Insurance people also say that you can borrow against your cash value tax-free. That’s brilliant because no loans are taxable. And while it’s true that there is no income tax on the policy if it is paid out at your death, the amount does go through the estate tax processes (until the estate tax is eliminated). As far as I am aware, insurance companies are in business because they are able to make more money than they pay out, and whole life insurance is one of their biggest gimmicks because the amount you have to pay vs. what you’d pay with, say, term insurance is so astronomical, and the terms of investment so minor compared to what you could get elsewhere, that generally you’d be better off separating your life insurance from investing all together. Single premium life insurance, is, pretty much the same thing as whole life insurance with the exception that it is sold mainly as a tax shelter and not really as insurance. You pay a lump sum into the policy, say, 50,000. Supposedly then, you accumulate earnings on this money over the years and you are also able to borrow off of it tax-free. These types of life insurance policies usually have heavy commissions, fees, surrender charges (what you pay to get out of it if you change your mind) etc. The single biggest selling point for single premium life insurance is that you can borrow the money tax-free. But the fact is, you can borrow money from anywhere tax-free and as far as tax shelters go, there are other places to put your money allowing it to grow tax sheltered with much better returns as long as you leave the money alone (can’t borrow from it). This information is not being put forward to say that TD made a poor choice. Obviously, he is well versed in what is best for him and acted accordingly. I am simply providing this information in answer to your question, and obviously, it is what you will not hear from the insurance sales person. When making tax-based decisions, it’s also helpful to remember that the US tax system is a graduated system – that is, if you move up from one income tax bracket to the next, that unlike some countries, it doesn’t mean that now your entire income is taxed at the higher rate. For example, your first $10,000 is taxed at, say, 10% your next amount at 15% whatever is above that at 20% and so forth, etc. (reply to this comment)

From Persephone Thursday, September 18, 2003, 18:27 (Agree/Disagree?) I also forgot to include that so far as tax-based decisions go in the United States, it is not your total income that you are paying taxes on, it is your total adjusted gross income, minus deductions and credits -- which can mean paying taxes on as little as 5 or 10% of your actual earned income if you plan your tax strategy properly. (Horray for financial planners!)(reply to this comment)

From Joe H Thursday, September 18, 2003, 14:16 (Agree/Disagree?) Wow, you combine my three favorite things: women, intelligence, and money! Let's hook up!(reply to this comment)

from Joe H Friday, August 08, 2003 - 03:51 (Agree/Disagree?) How affordable is it? Do they charge on a sliding scale based on your net worth? Because in that case they would have to pay me to come in. (reply to this comment)

From ThinkingDavinci Saturday, August 09, 2003, 21:20 (Agree/Disagree?) They have student prices, & flat fees as well, that start around $300 for some advisers. The best way to go is with no load, or no fee financial planning. This means they actually take their profit from your profit, so it's all worked in. Say your entire portfolio gains 8% a year. Well, you get 7%, they get 1. The strength of the plan is in the fact that some really rich people have hundreds of millions invested, so they're paying a sizeable 1%, & your $250 investment is coasting along with theirs! ou're obviously not the one paying the electric bill for your adviser, but the hope is that as your situation changes you'll eventually add to it, maybe they'll do your taxes for $200, then an estate plan for $500, introduce some friends, start a business & have them do your corporate taxes & invest your employee's 401 K with them, etc. Just like you go to them for planning they have their own plans too. They know very well that salaries tend to go up, & of course your little investment will grow up too. (reply to this comment)

from porceleindoll Friday, August 08, 2003 - 01:50 (Agree/Disagree?) Good advice! Thanks! You said you are into real estate, is that actual property or REIT stocks? (reply to this comment)

From ThinkingDavinci Saturday, August 09, 2003, 21:12 (Agree/Disagree?) I'm actually a real estate agent, so in my work I can learn about builders' financials, as well as become very familiar with their products, sales structure, future plans, etc. That makes it easy to pick good real estate stocks. A REIT, or Real Estate Investment Trust, is a group of a minimum of 100 people who put their money together to invest in real estate. Many unions own REITS, they mostly own apartment communities & hire fee management companies to handle all the daily stuff, like rent collection, maintenance, etc. Because so many people are buying houses these days the apartment rental biz is not very good. In an apartment building nearly 85 % occupancy is needed to pay for salaries, utilities, mortgage, insurance, etc. so the last 15% is your profit. If an apartment is 85% full, they're not doing well. Most REITS these days are doing what's called "Flipping", buying run down buildings & fully remodeling & painting them so they look nice again, appraise at a higher value, then they raise rents & sell them at a higher evaluation based on the fact they just spruced the old witches up. So the money isn't coming from the rentals at all, & the vacancy is explained to the new buyers as people who couldn't afford the new rents moving out, so that higher payers will be here any minute. That's the biz!(reply to this comment)

From wondering Sunday, August 10, 2003, 13:08 (Agree/Disagree?) Isn't having knowledge of a particular company's workings (such as future plans, aquired contracts, etc) and then investing in stock using that knowledge considered insider trading? (reply to this comment)

From ThinkingDavinci Sunday, August 10, 2003, 22:49 (Agree/Disagree?) No, dahling, it's called RESEARCH>>>>(reply to this comment)

From wondering Sunday, August 10, 2003, 23:09 (Agree/Disagree?) I'm a male & prefered not to be called "dahling" by other males. The reason I asked this question is because a friend of mine told me about one of his buddies that used to fly helicopters for oil workers and at one point, supposedly, this guy heard about a new oil find from some of the guys he was flying back and forth to the rig. This pilot went and bought stock in the company that found the oil before the information was made public and he got busted for insider trading.(reply to this comment)

From ThinkingDavinci Monday, August 11, 2003, 02:39 (Agree/Disagree?) Sorry, Dude. I don't know about the helicopter pilot, but it's actually greatly encouraged by corporations & companies for their employees to buy as much of their stock as possible. It's very different for executives that might know for example if they're ready to declare bankruptcy, so they sell all their stock, but it's very hard to catch. You can go to Morningstar.com & actually look at Insider activity to see what top executives are doing with their stock. On AOL if you look up a stock with the "Stock Quotes" feature under Services & then selrct "profile" you can see a very detailed picture of what their board members are doing. However, buying or selling based on your knowledge of a stock or an industry is basically good sense. Insider trading really applies to the company officers & their close family & friends. (reply to this comment)

from Persephone Thursday, August 07, 2003 - 21:42 (Agree/Disagree?) Excellent advice! A tack-on to this would also be to note that not all financial advisors are created equal. It pretty much goes without saying that you don't want someone telling you how to plan with your money who isn't following his/her own financial advice. It's one thing to talk the talk, another to walk the walk and if your advisor hasn't made him or herself rich in the process of helping other people get rich, chances are over time, you'll want to find someone else who has. Granted, a person has got to start somewhere, but you basically get what you pay for: the better the advisor, the higher the cost. (reply to this comment)

From ThinkingDavinci Saturday, August 09, 2003, 21:31 (Agree/Disagree?) That's why when you meet with them they generally give you their Resume. It will detail their personal accomplishments & always includes references of their other clients. The larger firms screen their advisers so well it generally takes 7 years as an assisstant or a stock broker before you join a team of consultants, who all follow similar investment guidelines & perpetually check on each other. Many consultants are required to carry 30 % of their personal investment money in the funds they sell their clients. Big firms insist on it, so they're personally involved. & if it was as simple as "The better the advisor, the higher the cost.." I wish it was, wouldn't everyone pay more to make more? Just go no load all the way. You should pay between $ 500 & 1500 to get your entire lifelong financial plan laid out, & start a prospectus, choose investments, insurance, etc. It can take as long as you want, I took 2 weeks, calling Zack with ideas & questions, & visiting him about 4 times. From there you can change, add, cash out, modify, whatever, & pay nothing more as long as you want. If you decide you don't like your advisor you can meet others, & switch free of charge. Their payment comes from a predetermined, figured in percentage of your earnings, "No Load". If you go down in value, why should you pay? I recommend Morgan Stanley or New York Life. Good Luck! (reply to this comment)

from Joe H Thursday, August 07, 2003 - 19:54 (Agree/Disagree?) DaVinci, this is some of the best advice I've seen posted on here since the last time I posted an article. Good job! (reply to this comment)