In the meantime, an article appeared in yesterday’s Wall Street Journal that calls into question the good Professor Siegel’s stats you cited.

Here’s a link to that article, titled, Ten Stock-Market Myths That Just Won’t Die. See Myth #2 for the low-down, but the entire article is well worth reading.

And as far as a 401k goes I can only speak for myself, in the last 14 years I have invested 6% of my income and been matched 50% by my employer. I have gone over the numbers and for some reason I keep making money. I have read your reasons why not to invest in a 401k but why would you give away money your employer is willing to match? Maybe I am in the only good 401k out there.

And according to the US tax code, selling gold is considered a collectible and because of that you will incur a 35% tax, that is in the 2009 tax code, I bet it will be in the 2010 code as well.

As far as Dave and Suze go, they are right, you should never use a credit card or buy a car on time. There is NEVER a good reason to, unless you want to give your money away. Only the banks win when you do, been there done that.

I guess I will keep getting confused by the facts, thank you for your time.
Jim

“The highest form of ignorance is to reject something you know nothing about.”
– Dr. Wayne W. Dyer

Obviously you don’t have clue about the hidden costs and pitfalls of investing in a 401k.

And you haven’t read my book or done your research, or you’d know that the interest you pay on policy loans ends up back in your policy, if you’re using a dividend-paying, non-direct recognition policy.

But I would let yourself get confused by these facts.

I appreciate both your skepticism and your attempts to get to the bottom of this, so to speak.

Let’s look at it this way. As you correctly stated, base policies for most top mutual whole life carriers show a 3 to 4% internal rate of return (IRR) currently.

Say that advisor who sold you a policy designed it the traditional way – your premium is ALL base premium (nothing going into the Paid-Up Additions Rider), and let’s say your premium is $500/month.

Now let’s compare that against a policy with the same premium, but this one was designed by a Bank On Yourself Authorized Advisor.

Your total monthly premium is still $500/month; HOWEVER 60% of that – $300 per month – is going into that wonderful Paid-Up Additions Rider. 94% of that $300 goes to work for you immediately (it’s buying you additional fully paid up coverage or death benefit at the lowest cost, which then accumulates its own cash value and dividends).

Now I don’t have an MBA (but please don’t hold that against me either ), and I’m not great at math. But it seems pretty obvious (to me anyway) that if most of 60% of your monthly premium is now growing in the most efficient way possible in a whole life policy, the 3-4% IRR you’d get in an all base premium policy could easily be increased by at least 50%. Which means your IRR is easily going to be 4.5% to 5.8% – even though you’re putting in the exact same total amount of $500 per month.

And, since it’s possible to access that equity without tax consequences under current tax law, just as I originally stated, someone in a 35% tax bracket would have to get as much as almost 8% in a taxable account in order to net what they would be getting in a properly structured Bank On Yourself-type policy. You’re welcome to check my math, however, you’ve already admitted several mistakes in your own calculations, so I’m not going to put a lot of faith in any new ones you come up with.

Some companies’ software can calculate the IRR, based on various factors, such as if there’s a Paid-Up Additions Rider and/or if you’re using the policy to finance things, etc. I have seen the calculations, but I do not get into posting illustrations and IRR calculations for many reasons, including the fact that I’m not a licensed insurance agent, so I’m not supposed to.

I can tell you are “sold” on several of the benefits of this product/method, but if you think Bank On Yourself and my $100,000 Challenge is about ‘rate of return” and being able to beat the S&P 500, you’ve missed maybe 90% of the point of this whole concept. So, please take the Challenge, read my book and this website and then you’ll know at least 15 reasons why Bank On Yourself makes the best financial foundation of any financial product or strategy.

I merely did some illustrations and looked at competitive data with an agent of a top Fortune 500 mutual carrier which has the PUAR and NDR. I do have an MBA, but please don’t hold that against me.

I also made a mistake on the projection above since it was late at night. My bad and I apologize if it confused some people. $1000 invested in the S&P in a IRA-like account for the 20 year time frame from 89 to 09 would have grown to $5427, not $1093 — even with all the swings in the market — equating to 9.27% compounded. Yes there is tax you’d take out at the end for both S&P examples.So after 35% tax hit from an IRA withdrawal, the $5427 would be around $3528 or reduce it to around 6.51% compounded. I’m not going to do a rate for the $1000/yr for 20 years but the uptick after 20 years is $5427 before-tax and $4666 after tax vs. the base 20K contribution, It’s a tad more for the same reason the PUAR increases things in your policy. But don’t claim the contribution as a return, that is, don’t claim the $25,427 as a return. The best insurance carriers don’t and they’re doing fine.

The base policies for topmost mutual whole life carriers are themselves quoting 3 to 4% IRR in recent sales literature on the same 20 year time period on a $250K policy, The PUAR accumulates more through contribution, plus slightly more compounding on that at the same rate, but since there’s more to compound earlier, it grows faster. It’s all good. Just not as good as you’re claiming. Somewhere between Ramsey and BOY resides the truth on these very special policies.

Safety and death benefit works for me. Getting a 1.5 or 2.5% loan using insurance as collateral works for me also. As does the tax deduction on that interest.

So I think you can beat BOY with the S&P during the last 20 years by a smidgen. I don’t want the $100K, but I’d like a clear illustration for the last 20 years.

I’d love to be proven wrong, by the way. I, like most on this site, would love for this to work the way you claim. 8% tax free is just “too good to be true”