9/26/2005

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"Variable adjustable life insurance for retirement?"

Dear Dave,

My financial counselor is trying to interest me in variable adjustable life insurance for retirement. I’m 47-years old, married, have two teenage girls and own my own business. I was wondering if it’s just as good, or better, than a mutual fund investment?

Andy via email

Dear Andy,

You don’t have a financial counselor, you have a life insurance agent who’s about to rip you off. Get rid of him. Variable adjustable life insurance is a really bad product.

Being self-employed, you’d be much better off to first fund your IRAs and then fund a SEPP or a simple 401(k) – all in good growth stock mutual funds. Variable life has mutual funds inside it, but they take out so many fees that they end up taking away half the returns. 

The Consumer Federation of America did a study of “variable life rip-off” and found that the average net yield on the mutual funds involved was about 7.4% when it should have been 12-14%. You’re much better off going straight to mutual funds than going through an insurance product to get there.

Never buy any kind of life insurance that has a savings element built into it, Andy. They are BAD products! 

- Dave

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