These are the days of my blog. This post is both too easy and necessary, for my sanity. I’m supposed to be running an MLS software company. That’s my day job. Or it’s supposed to be anyway. Over the last week or so, however, I’ve found myself 100% distracted by what can best be described as non-essential activities.
First, by claiming that 401k plans are “a scam”, Jeff Brown over at the Bloodhound has distracted me into researching equity indexed universal life (EIUL) insurance. I’ve learned more about EIUL over the last few days than necessary, that’s for sure. My wife has asked me many times why I’m researching life insurance, thinking maybe I was doing it for her mom whose husband just passed away, and I sheepishly had to say, “no, it’s about the blog.” (She shrugs and walks away, an all too common response due to my fixation.)
Now, to be fair to myself, I was fundamentally curious (and a bit lot frustrated) how someone could claim with a straight face (actually, I think it was more of a righteous glare) that $500 a month invested for 20 years (and then left “to stew” for another 10 years) could produce $100,000 of tax-free income a year for life. I’ve yet to hear the full story from Jeff on that one and he promises more, but one thing looms clear after my nightly toils: This alchemy doesn’t come from EIUL policies alone, which, on a good day, earn a return of maybe 8% after all is said and done.
EIULs have their place for those seeking an after-tax investment that can shelter future income, but the EIUL won’t turn $500 a month into $100k tax-free for life all by itself. (Supplement: For the EIUL — or any other investment — to do so on its own, you’d have to invest $500 a month after tax and the EIUL would have to return 10% a year, which is unlikely given the costs and return caps inherent in the plans). I’m sure Jeff has a very good and purposeful plan for doing that for his clients through real estate investing. That’s all fine and good. We love real estate investors here at FBS Blog, especially if they happen to belong to an MLS that uses our software. I just wish I hadn’t chased myself down the rabbit hole trying to figure out what I was missing, because it turns out I wasn’t missing anything.
And I think that’s what rose my ire so much in the first place about Jeff’s post. One of the benefits of blogging is learning from others. But Jeff seemed more intent on convincing than explaining. And that takes me to my next dramatic addiction, which goes something like this:
Then, thankfully, Athol Kay jumps in, thinking he’s the subject of Mr. Swann’s ire, and injects a huge dose of levity that finally shakes me from my addiction. (Though I think I may be just shifting it to Athol’s posts, instead, but at least I’ll be laughing.)
To wrap this up, though, I agree with Greg that blogging deserves our best. Posts of enduring interest should be about more than selling something or popularity. Transparency is not just a buzz-word, it’s about “improving your own mind and the minds of those people gracious enough to lend you their attention”. Do not assume everyone around you is an idiot, but instead assume they can understand the facts and so the facts must be presented. If that (transparency) happens, perhaps I won’t find myself staying up late at night researching insurance. Instead, I’ll be staying up late at night watching videos on Athol’s blog. Much better. Now back to work.
Prologue: Another positive thing that came from my late night insurance research is that we expect to be adding a Roth option to our 401k plan. A Roth 401k works like a Roth IRA (invest after-tax dollars, with principal and earnings withdrawn tax-free), except that the company match still applies and the annual contribution limits are raised to the 401k limits of $15,500 per year. With this option, our employees can bet however they want on which way they think their personal tax rates will move between now and their retirement.