weren’t you talking about your understanding of saving for retirement using a whole life insurance policy???
{{{My understanding is, Whole Life or Universal Life policies are structured such that:
They “pay off” ie pay you pack the amount of the policy if you haven’t died in the mean time after 20 or 30 years or whatever the contract was for.
After a certain amount of time the policy itself throws off enough investment returns to pay the premiums for you and you can actually stop paying into it.
When the policy is “due” or whatever its called, it can be converted into an annuity which is a private, non-cola’d pension
It doesn’t really matter. Depends on your lifestyle and your expectations. My older brother is a hippie. He is totally happy having and living what most would consider a lower-middle or upper-lower class lifestyle. Have former co-workers that were miserable with their upper class lifestyle earning in a month what many earned in a year.
As I suspected. Just another case of somebody responding to a post nobody made. Nice (not really) attempt to change the subject. My words obviated your response but I know you loved giving it. Continue.
You’d don’t need a STEM degree to invest in an index fund. And after the fees and expenses of an annuity, you’re getting half the investment return of the S&P 500, which means you have to save twice as much money for retirement. The “skim” is what’s preventing people from retiring.
And your investing period is likely much longer than 35 years. For most people, it will be 25 or 30 years saving for retirement, and God willing, 25 or 30 years spending money during retirement. Over a 50 or 60 year period, even Vanguard’s Financial Advisor Service with a 0.30% annual fee claims about 10% of your wealth. The average person has no idea of how much a 1/4 point fee takes from them over a lifetime. It’s just 5th grade arithmetic, but the investment industry and the politicians who take their money have a vested interest in you (them) not understanding it.
Yes. The move from a corporate defined-benefit pension plan to having everyone individually manage their retirement assets was a disaster for 80% to 90% of workers. If you understood investing and kept your financial advisor fees, commissions, trading costs and taxes low, you likely did well to outrageously well. If you were day trading or buying bitcoin, your Wall Street broker’s “stock of the week”, etc. you did less well than you would have under a corporate pension.
But it didn’t have to be that way. The Thrift Savings Plan (TSP) for Federal Employees (and Members of Congress 401k retirement assets) has appropriately low fees. Too bad the average worker didn’t get the same deal. Instead he had Dave Ramsey telling him to call one of the “Endorsed Local Providers” who pay Dave a commission and that it was perfectly fine to pay a 5% load on a mutual fund purchase.
Dave Ramsey’s time share fraud is small potatoes compared to what he’s cost his listeners on retirement investing.
Your ability to save is completely unaffected by the “skim rate”. Your ability to save depends entirely on keeping income greater than expenses.
The skim rate affects your returns in a negative way.
Yes, you could analyze the skim rate as a current expense which reduces your savings. But I think it’s more useful to think of it in terms of your investing returns. If the skim rate is so high that it reduces your returns to zero, you don’t have a problem with savings. You have a problem with investing those savings. The solution isn’t to work more and save more, or to cut expenses elsewhere to save more. The solution is to invest differently to reduce the skim rate.
Sure. But if you’re paying the Wall Street average 2% per year skim, they take about half your wealth over a 50 to 60 year investing lifetime. Thus you’ll need to save twice as much money to get to your retirement nest egg goal. The amount of money you need to save each month to get to a given “retirement number” is highly dependent on the skim rate.
In this context, the skim rate is the costs related to investing - brokerage fees, asset management fees, transaction fees, and the like. It has nothing to do with other workers.
I do not see this as a zero sum game. I do see this as winners and losers economically. Those assets you just asserted are corporations charging as much as they can very often to workers who can not afford the goods. That is a form of skim that works only for a few equity holders.
Also up a little higher last I heard Wall Street gets 1% of the GDP each year not 2%. I do not have a link. That was somewhere on TV or radio.