Lucia - Introduction

General TSP Discussion.

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evilanne
Posts: 2067
Joined: Thu May 14, 2015 6:52 pm

Re: Lucia - Introduction

Post by evilanne »

So who is $&¢ and why are they pushing a book for Universal Life Insurance? Not sure what chapter 19 is about.

$&¢
Posts: 10
Joined: Sat Feb 28, 2015 8:04 am

Re: Lucia - Introduction

Post by $&¢ »

from Lucia's post:
...My rental property is taken care of by a property manager so the goal is to use the rental income to pay off the mortgage earlier.

...I look forward to benefiting from your collective wisdom/guidance in our journey towards a well funded, fat and happy retirement. Good trading!

So, I am a regular Joe TSP participant wanting to help Lucia enjoy retirement to its fullest. Since he brought into his discussion investment outside of TSP, I wanted to make sure he was informed of the benefits of a financial tool with guaranteed cash growth, no market worries, as an addition to his other investments. That way if he decides to stay in and shoot for E9—or higher if USAF has E to O commissioning programs—then he can start planning for it now. Yes, it is expensive—but if one can afford it, and it sounds like he might be able to, then it is an extremely powerful fiduciary concept.

When I sought a financial adviser to look for additional options, as more disposable income became available, he informed me about that type of investment...and I wished I had learned about it earlier.

As I made rank over the years, I reduced my TSP contributions and invested in a universal life policy. It has returned 5.5% average each year since I purchased/converted it from another whole life policy (2007), and my projections, based off of my selected death benefit amount, will allow me to take a loan against the policy starting at 65 years of age. Since interest rates have been low...the policy has the potential to earn higher rates, however that would only be icing on the cake since my projections are based off of the 4.5% guaranteed annual return on the policy. Loans aren't taxed, and it's against the policy not from it, so the entire balance continues to build interest. Plus, I get to leave a fairly healthy benefit to my wife if I go first, at any time. And the insurance is permanent, forever—no need to worry about carrying term later in life. I still finesse my TSP account for fun.

Just trying to spread the word so Lucia has something else to consider.

skiehawk11
Posts: 2116
Joined: Wed Jan 05, 2011 2:32 pm

Re: Lucia - Introduction

Post by skiehawk11 »

$&¢,

I've never heard of doing this before. Is the 5.5% after fees and other overhead? And what kind of risk do you take on by loaning against your universal life insurance? I assume that the rate of the loan against your universal life policy should be less than or equal to it? And once you pass or breakeven, you convert your universal life insurance to pay off the loans?

I'll need to do additional research. What provider do you have?

crondanet5
Posts: 4330
Joined: Tue Aug 19, 2008 8:51 pm

Re: Lucia - Introduction

Post by crondanet5 »

Aiitrus, before we get lost in Universal Land I wanted to pass on one more thing about unleashing motivation to do something. Humans, especially Americans who did not have the manpower to perform sufficient manual labor, have a historic inner urging to accumulate tools and modify them to perform better. If our minds are open to receiving new ideas and researching them to apply in our daily lives it can lead to wonderful opportunities to learn and grow. Some of this involves "chewing the cud" by tossing a comment or idea around in your mind when you have a moment to reflect on it. Then the world of the internet can lead us to information about the topic that make it helpful in our lives. For instance. I have a 1952 Case VAC tractor resting comfortably next to the shed. Someone enquired about making it pasture ready. That got me thinking. I entered the name of the tractor on the Windows screen, added the word "parts", hit enter and walked into a world of vendors with all kinds of parts for it. If we keep our receptors open to new ideas we can become better than we were and fix old problems. And that comes to promotions and pension benefits as well. Stay open to the idea of getting promoted. Okay?

$&¢
Posts: 10
Joined: Sat Feb 28, 2015 8:04 am

Re: Lucia - Introduction

Post by $&¢ »

Skiehawk11, to answer all of the questions I think you will undoubtedly have, the book says it better than I could. Or, if you track down an adviser who specializes in these financial vehicles, probably your better bet. My "Eclipse Indexed Life" policy is covered by Minnesota Life, through Equity1inc., a financial advising firm based in Chesapeake, VA. Yes, slightly above 5.5% after commission and expense charges.

People don't hear about it much because it doesn't result in ongoing market transactions, which keeps money from entering the stock market, which results in no commissions fees for brokers and the like. It doesn't get as much media play because it's not exciting (ups and downs) because it's set as a contract. And lastly, it's expensive, similar to the amount of a mortgage payment if one wants $100,000+ per year loans against the policy starting around mid 60's, while still leaving a seven figure death benefit.

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ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: Lucia - Introduction

Post by ArrieS »

I'm just wondering if Lucia bought any stocks and which ones.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

Lucia
Posts: 36
Joined: Wed Dec 30, 2015 1:46 pm

Re: Lucia - Introduction

Post by Lucia »

crondanet5 wrote:Your first and primary retirement source will be your military retirement. You need to work on getting the most you can from that source. That means getting a promotion to TSgt. It's been a long time since I've seen a WAPS test so not sure how they operate. If things have not changed that much you need to be studying every night and every chance you get to get promoted the first cycle you can. And repeat to MSgt. Study that whole WAPS promotion sheet to understand where you can gain points and take action to put those points on your own sheet. I saw a lot of qualified people not get elected because they did not want to leave their current base. Come retirement they weren't making as much retirement pay as they could have. The name of the game is promotions and filling squares. The best thing about this process is you become a better you by achieving these things. Start studying.
Cronda circling back to this--I heeded your advice; thank you very much. Since then I made TSgt and MSgt, pinning the latter on in March. In case you didn't know, they just removed WAPS testing for MSgt and moved entirely to board only. I was in the last FY group that WAPS tested for MSgt.

Lucia
Posts: 36
Joined: Wed Dec 30, 2015 1:46 pm

Re: Lucia - Introduction

Post by Lucia »

ArrieS wrote:
Lucia wrote: My long term goal with the IBA is to invest in at least one solid growth stock that becomes the next AAPL, NFLX, GOOGL etc. I have had no success so far.
You have already found the next Apple, Netflix, and Google (Alphabet). It's Apple, Netflix, and Google.

They are still considered growth stocks because the market thins there is still growth. Don't mistake a high stock price as having run out of steam just because it's expensive. Netflix hasn't really penetrated the rest of the world or that much of the American market, Google either for the rest of the world.

Apple may be more of a phone play but it's a massive one that's still moving into China. It also pays a good dividend. In fact if you subtract Apples massive cash balance out of the stock price it trades at only 11 times earns, which is below the market value.

Also, don't forget Amazon. That is a growth stock that is still growing, also Facebook.

Plus, growth stocks are not your end all be all. Go look at two ETFs at vanguard. High dividend yield and Large cap growth. High dividend yield hasn't had as good a return as the high growth, but it is not far behind and the second best ETF for return. Dividends are important, especially for the long run because if you reinvest them you are being paid by the company to buy more shares.

If you aren't comfortable with picking stocks, and it does take a large amount of time, invest in funds that meet your desire. The Vanguard high growth and high dividend yield I would suggest. The high dividend yield provides a good amount of protect in a bear market.

Just to reiterate, don’t judge a stock by its price.
This post aged well. I integrated options (LEAPs) recently $MSFT, $AAPL, $BRK-B. Thank you for the great advice.

crondanet5
Posts: 4330
Joined: Tue Aug 19, 2008 8:51 pm

Re: Lucia - Introduction

Post by crondanet5 »

Anymore promotions?

Lucia
Posts: 36
Joined: Wed Dec 30, 2015 1:46 pm

Re: Lucia - Introduction

Post by Lucia »

crondanet5 wrote:Anymore promotions?
Nope, should be eligible for SMSgt consideration in 2022.

crondanet5
Posts: 4330
Joined: Tue Aug 19, 2008 8:51 pm

Re: Lucia - Introduction

Post by crondanet5 »

How involved in the squadron are you?

Did you get your Masters Degree?

Lucia
Posts: 36
Joined: Wed Dec 30, 2015 1:46 pm

Re: Lucia - Introduction

Post by Lucia »

crondanet5 wrote:How involved in the squadron are you?

Did you get your Masters Degree?
Not very involved. I am 2 classes from my MBA.

VAmanBulls
Posts: 250
Joined: Wed Jul 24, 2019 8:37 am

Re: Lucia - Introduction

Post by VAmanBulls »

Only buy term life insurance. You buy life insurance to cover your debts and liabilities and replace income for family when yours is cut short due to death. You don't buy life insurance for an investment. Term is much cheaper. Take your savings and invest it in a S&P index fund and you will be much better off than buying 'whole life' or 'universal life'. The only reason this is pushed is because the fees and commissions are much better for the agent selling whole life. There are more reasons to stay away from whole life so research this in detail if you are tempted. Life insurance is a must in my book if you have a family, debt or not enough investments to produce income for your family's needs when you die. But Term is the way to go.

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bloobs
Posts: 1616
Joined: Tue May 21, 2019 8:00 pm

Re: Lucia - Introduction

Post by bloobs »

VAmanBulls wrote:Only buy term life insurance. You buy life insurance to cover your debts and liabilities and replace income for family when yours is cut short due to death. You don't buy life insurance for an investment. Term is much cheaper. Take your savings and invest it in a S&P index fund and you will be much better off than buying 'whole life' or 'universal life'. The only reason this is pushed is because the fees and commissions are much better for the agent selling whole life. There are more reasons to stay away from whole life so research this in detail if you are tempted. Life insurance is a must in my book if you have a family, debt or not enough investments to produce income for your family's needs when you die. But Term is the way to go.
Agree.

The problem with whole life policies are are they conflate our (a) life insurance needs with (b) investment needs into one product, which are mutually exclusive conceptually, and in turn results in a convoluted mess that falls short of meeting either when the time comes.

Often whole life policy providers take advantage of this complexity to obfuscate the reality that these will cost you more (i.e. significantly higher premiums + lower net returns). These policies' complexities incur MASSIVE overhead costs from their providers, that are passed on to their victims, er I mean, customers.

I mean 5.5% annual returns are lower than the average investment-only focused vehicle, and there is no way I can justify paying 5-10 times more a month in premiums for one of these over a straightforward term policy. That extra money goes into my TSP and brokerage accounts.

crondanet5
Posts: 4330
Joined: Tue Aug 19, 2008 8:51 pm

Re: Lucia - Introduction

Post by crondanet5 »

Remember there is only a 2% payout from insurance companies on term insurance, and the cost goes up as you age. If you want to continue with a life insurance program for an extended period whole life may be better than term.

Additionally annuities nowadays offer tempting investment options that I think are tax free withdrawal. That might be another venue to research. Disclosure: I do know someone who is in the annuity business. She does ten million a year. Not too shabby.

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