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| In the yahd, not too fah from the cah  |
I'm going to try and make this as non-confusing as possible. Just looking for a second opinion on one part of a financial plan put forth by my financial advisor. We get free seminars/analysis meetings through a financial advisor as part of a deal with our union. One of my biggest goals out of the financial planning is to be able to retire as early as possible (I'm currently in my late 30s). To get my pension my minimum age is 55 but to max out my pension based on my age/when I got hired is 64. Pension maxes out at 80%. Retiring early it could be maybe around 60%? Or lower. I'm honestly not 100% sure yet. I've been padding my pension by contributing to a pre-tax deferred compensation program since I got hired. One program has around $120k in it and was severed when I switched departments a couple years ago. For transparency, I also have some stocks/mutual funds in a brokerage account in the mid 6 figures. My FA has laid out a plan including leaving the brokerage acct as is, transferring the severed deferred comp account into a BlackRock managed fund instead of a municipal managed fund in order to be more aggressive to try and build it up but with time to go until my min retirement age. He also recommended another managed brokerage acct with BlackRock as a 90/10 ETF. The one thing I'm not sure about, is he recommended opening a whole life insurance policy in order to build cash value to use for expenses in the event of a downturn in the market after I'm retired. I used to work in the insurance industry but other than being required to peddle life insurance, I never knew a whole lot about it. Obviously with whole life there's a guaranteed death benefit, but is it really worth it or am I better off reinvesting that money myself for a better ROR? The current annual investment into that would be $7500. If I can provide any other info to make this make more sense please let me know. | ||
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| No More Mr. Nice Guy |
If you are disciplined, which it appears you are, imo you would be better off with term life and investing the remainder yourself. Whole life has an advantage of existing perpetually as long as the premiums are paid, and eventually there will be enough income to pay those premiums. Iow, it doesn't expire after some specified number of years. You could stop paying premiums at some point in the future and the insurance will continue, though not gain more cash value. This can be of value if you have a disabled child for whom you want to fund a 3rd Party Special Needs Trust. This is a niche situation for sure, but it can be brutally expensive to continue term insurance policies when you are in your 80's. Otherwise, your insurance needs would be to fill the financial gap of losing your income when you die, if others depend on you. For most of us, when the youngest child graduates college you don't have need for life insurance. Or if your spouse doesn't earn a substantial enough income and you die during the empty nest years before retirement. Term is the obvious answer for these needs. A disadvantage for whole life is that the surrender cash value may be a lot less than you expect. That's what happened to me. Even though the cash value printed on the monthly statement said a nice number, after the various fees and taxes it wasn't much at all. I am not a financial professional. Just my opinions and experience. | |||
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| Member |
A financial advisor is not recommending whole life insurance unless they are getting paid a commission on that insurance. Typically commission on Whole Life starts with pretty close to 100% of the first year premium I worked for a life and health insurance company for many years, including in commission accounting. | |||
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Lost |
What Fly-sig said. Cash value life insurance does have its uses, but only very special situations. Tax-shelter for very high income individuals, or maybe to fund a large inheritance. It can work as an inefficient forced retirement plan for undisciplined investors, but that doesn't sound like you. | |||
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Fighting the good fight |
Bingo. You need a new financial advisor. He's the salesman type of "financial advisor", not an actual fiduciary financial advisor. | |||
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| Member |
Agree with the above. Not trusted. Advice worth what you paid | |||
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| Green grass and high tides  |
The more diversified you are the better off you will be later. A smallish whole life policy could of been of some benefit to you at an earlier age. I would not suggest it for you at this point. "Practice like you want to play in the game" | |||
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| Member |
BlackRock is not known for its returns for the small investor. Its politics are also far left DEI. There are many better firms and options out there. I would find a better advisor. | |||
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His Royal Hiney |
I am fine with everything up until the whole life insurance part. If you had other options other than black rock, explore those options. I agree with the 90/10 etf because you’re young at 30. When you get to 50, you’ll need to review the risk/reward - volatility/return of your overall portfolio and dial that volatility down. Heck, you can use Grok AI to help you select. Input your age, when you expect to retire, and let Grok suggest an etf for you. Just keep an eye it recommends a 90/10 etf. As for whole life: here’s the thing. You have to understand where, how much, and for what your money is going to and evaluate whether you are getting the most benefits for your money. So you want some of your money to go to insurance which is a great idea. Insurance is the hedge in case you die before retiring and the insurance is to cover the loss of your income for your beneficiaries for however long you think they’ll need to recover without you. If you’ve done your job at setting aside money for retirement, by the time you retire and you’re still alive, you don’t need insurance anymore because the amount of savings you have will suffice for your beneficiaries. Whole life is the most expensive insurance you can get because of the savings component which is designed to keep your premiums the same throughout your lifetime guaranteed. Universal life is less expensive because even though there is a savings component to supplement your premiums as the internal costs increase as you age, it’s not guaranteed to keep your premiums the same. But consider, you’re already saving for your retirement. The money you put into retirement will earn a higher return over your life rather than putting the money into the savings component of a whole life or universal life. Hence, I would suggest you buy a term life that will last you until the age you expect to retire. It will keep your premiums level. If you want to lower your overall premiums, you can “ladder” your term insurance based on the idea that as you age, your retirement savings grow, and you won’t need as much. Just for example so I can put numbers, let’s assume you’re 30 now, expecting to retire at 50 and you need $100,000 insurance should you die tomorrow. You can buy two term insurance policies of $50,000 each with one term for 10 years and the other for 20 years. When you’re 40, you’ve saved some but you still need insurance so the first term insurance dies but you still have $50,000 coverage that will last you from 40 until you’re 50. You can adjust the amounts, quantity of policies, and terms as you see fit. In practical terms, you'll need a fairly high level of insurance for much of the front end until your total savings grow exponentially at which point your insurance needs will drop off to zero.This message has been edited. Last edited by: Rey HRH, "It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946. | |||
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Member |
To bad Bob Brinker is gone. My favorite of all time financial guru. https://en.m.wikipedia.org/wiki/Bob_Brinker | |||
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Don't Panic |
As noted above, you got what you paid for, sadly. First, while it can be argued life insurance is part of a financial plan, be aware: a) the 'cash value' that is 'building' is what is left over after the huge commissions and expenses (and the actual actuarial charges for the actual insurance part), and b) that the returns from captive investment funds within an insurance firm are generally lower than their outside alternatives. Second, Blackrock is expensive compared to other options - if you can transfer your severed account there, you could also transfer it to a financial firm with lower fees (Schwab, Fidelity, Vanguard,....) and as many, if not more, alternatives for investments. It sounds like you have 20+ years before retiring and a good start saving for it! | |||
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| Member |
His son has taken over the operations and still does a newsletter. A friend of mine still subscribes and occasionally sends me an electronic copy of it. FWIW, it currently has subscribers pretty much holding cash, waiting for a new "buy" signal from the newsletter. | |||
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| In the yahd, not too fah from the cah |
Thank you all for the input I greatly appreciate it. I'm going to hold off on the whole life for now. That $7500/yr can definitely be invested in better ways. | |||
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Member |
Melissa is 100% spot on. Given this, I highly advise you read any and all prospectus on any investments this "advisor" is recommending. Beware of front-end and back-end load funds and other investments. BTDT many decades ago. Given all the information and research available, you can do this yourself or, at a minimum, confirm or contradict what your "advisor" is recommending. We took out $15K whole life policies on our two kids shortly after they were born as their youngest uncle was a Type I diabetic and we wanted to ensure they had guaranteed insurability. It was cheap back then. As others have said, there are numerous good investment choices with Fidelity, Vanguard, Schwab, etc. Good luck. _________________________________________________________________________ “A man’s treatment of a dog is no indication of the man’s nature, but his treatment of a cat is. It is the crucial test. None but the humane treat a cat well.” -- Mark Twain, 1902 | |||
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| No More Mr. Nice Guy |
I'll second that advice! It really isn't difficult to put together a good, diversified portfolio using very low expense ETFs. Rather than try to pick individual stocks, just have a variety of funds from well established institutions such as Schwab, Vanguard, Fidelity. There are quite a few good sources. Pick both growth and value funds in each of large cap, mid cap, small cap. Perhaps add a tech growth fund, and maybe a good dividend stock fund. This exposes you to a cross section of sectors. Index funds are fine and have very low costs, or choose a managed fund if it has a good track record (it will have slightly higher costs but maybe better returns than an index fund). There are well established alternate strategies such as a whole-market fund that follows the Russell 2000 index, or a mix of S&P500 and Nasdaq index funds. Lots of ways to diversify and capture excellent returns with minimal long term risks. Buy high quality bonds. Not a bond fund, but individual bonds. Bond funds can lose money even when bonds are doing well. I buy US Treasury bonds directly through Schwab. The key is to keep the bonds all the way to their maturity. That way you never lose money unless the issuer defaults, so if the US government defaults I am screwed, but otherwise I will never lose money on my Treasuries. If your bonds gain value in the interim, you can always sell for the profit if you want to. The return is about 4.5% per year right now, so not astronomical but a solid bulwark against losses in the stock market when it is down. Around 60% stocks, 40% bonds is a good mix during the build-up years. Within about 10 years of retirement a lot of advisors suggest transitioning to the reverse by the time you hit retirement to reduce risk. That's it. It really is easy as long as you don't try to trade. Trading is gambling, investing is strategic. So just be Steady Eddie and reap the rewards. Hiring a good certified planner who doesn't sell any investments can be very worthwhile. Someone who works with retirees and knows those realities would be my choice. | |||
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| Fighting the good fight |
I agree with your premise that a basic retirement portfolio is easy to craft for yourself using a few index funds. But I disagree with the above statement. While every investor's goals and personal risk tolerance are different, 60/40 is generally going to be way too conservative for most folks who are more than a decade or so away from retirement. If you're still in your 20s/30s/40s, your goal is strictly growth, and those 40% bonds are just going to be holding your growth back. To the tune of a couple percentage points in returns compared to a more aggressive ratio. 60/40 is more for those nearing retirement age. As long as you're broadly diversified across the stock market (either the S&P500 or the entire market as a whole) instead of being concentrated in just a few stocks, 80/20, 90/10, or even 100/0 is what's typically recommended for those with longer term horizons. If you're more than 15ish years away from retirement, you can afford to take those bigger risks on a stock market heavy portfolio for bigger rewards/growth, and then taper towards a safer but slower ratio in your 50s and 60s. You just need to have the intestinal fortitude to set it and truly forget it. Don't panic when there's a sharp market downturn (like we saw last month for a couple weeks, or in the first months of COVID) and resist the temptation to fiddle with it if you open your brokerage account and gasp at a recent big loss. The market will always come back and then some (often just as sharply - again see the last several weeks, or mid/late 2020), and even if it takes a few years like in 1929 or 2008 these younger folks still firmly in their growth period have plenty of time before retirement for it to do so. By holding strong and sticking with that growth-heavy allocation you are well-positioned to take great advantage of the rebound, realistically no matter how long it takes. | |||
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| His Royal Hiney |
I strongly agree. See Grok’s explanation below: Summary • 10-Year Period: The probability of the stock market (S&P 500) having positive nominal returns over any 10-year period, even with a downturn, is approximately 88–90%. • 20-Year Period: The probability of positive nominal returns over any 20-year period, even with a downturn, is approximately 99–100%. These probabilities are based on historical S&P 500 data (1871–2023) and account for downturns like bear markets and recessions. For more precise or real-time analysis, I can search recent web or X posts for updated market data if needed—let me know! Details To estimate the probability of the stock market having positive returns over 10-year and 20-year periods, even with a downturn, we can analyze historical data, as it provides the best basis for understanding long-term market behavior. The S&P 500, a broad measure of the U.S. stock market, is commonly used for such analyses. Below, I’ll break down the probabilities based on historical performance, incorporating the impact of downturns (e.g., recessions, bear markets), and provide a clear answer. Key Assumptions and Methodology • Historical Data: I’ll use S&P 500 performance data, as it’s a reliable proxy for the U.S. stock market. Data from sources like Robert Shiller’s dataset (1871–present) or similar long-term indices provide rolling period returns. • Positive Returns: Defined as a nominal total return (including dividends) greater than 0% over the specified period. • Downturns: Downturns include bear markets (declines of 20% or more), recessions, or significant corrections. Historical data accounts for such events (e.g., Great Depression, Dot-Com Bust, 2008 Financial Crisis, 2020 Crash). • Rolling Periods: To estimate probabilities, we consider all possible 10-year and 20-year periods (e.g., 1920–1930, 1921–1931, etc.) to capture overlapping cycles and various market conditions. • Inflation: Unless specified, I’ll focus on nominal returns, as the question doesn’t explicitly ask for real (inflation-adjusted) returns. • Data Source: While I don’t have direct access to real-time databases, historical studies (e.g., from Vanguard, Morningstar, or Shiller’s data) consistently report probabilities based on S&P 500 or similar indices. I’ll rely on these aggregated findings, which are well-documented up to 2023 and align with market behavior through 2025. 10-Year Period Probability For any 10-year period, the stock market has historically delivered positive returns with high consistency, even when downturns occur within the period. Based on historical S&P 500 data (1871–2023): • Probability of Positive Nominal Returns: Approximately 88–90% of rolling 10-year periods have positive nominal total returns. • Impact of Downturns: Downturns (e.g., bear markets or recessions) often occur within a 10-year window (e.g., 2000–2009 included the Dot-Com Bust and 2008 Crisis). However, the market typically recovers within a few years, and dividends contribute to total returns. The worst 10-year periods (e.g., 1929–1939, 1999–2009) saw negative returns due to severe, prolonged downturns (Great Depression, Global Financial Crisis), but these are outliers. • Why Positive Returns Are Likely: The market’s long-term upward trend (driven by economic growth, corporate earnings, and inflation) and the compounding effect of dividends mean that even a significant downturn (e.g., a 30–50% drop) is often offset by recoveries within 10 years. For example, after the 2008 crash (S&P 500 down ~50%), the market recovered by 2013, yielding positive returns for most 10-year periods starting before the crash. 20-Year Period Probability Over 20 years, the probability of positive returns increases significantly due to the longer time horizon, which smooths out volatility and downturns. • Probability of Positive Nominal Returns: Approximately 99–100% of rolling 20-year periods in the S&P 500 have positive nominal total returns. • Impact of Downturns: Even severe downturns (e.g., Great Depression, 1970s stagflation, 2000s crises) are typically overcome within 20 years. No 20-year period in the S&P 500’s history (1871–2023) has resulted in negative nominal total returns, though some periods (e.g., 1929–1949) had low annualized returns due to prolonged recovery. • Why Near-Certain Positive Returns: The longer horizon allows for multiple market cycles, including recoveries. For instance, an investor starting in 1929 (before the Great Depression) would have experienced a ~50% drop but achieved positive returns by 1949 due to post-WWII growth. Dividends and reinvestment further bolster returns. Considerations for Downturns • Severity and Timing: A downturn’s impact depends on its severity and when it occurs in the period. A crash early in a 10-year period (e.g., 2008 in 2008–2018) is less damaging than one at the end (e.g., 2008 in 1999–2009), as recovery time is limited. Over 20 years, timing matters less due to the longer recovery window. • Recent Data (2025 Context): As of May 19, 2025, the S&P 500 has experienced volatility (e.g., 2022 bear market, down ~25%), but the long-term trend remains upward. Recent recoveries (e.g., 2023–2024) suggest that 10- and 20-year periods ending in 2025 are likely positive, consistent with historical patterns. • Real Returns: If considering inflation-adjusted returns, probabilities are lower (e.g., ~80% for 10 years, ~95% for 20 years) due to periods of high inflation (e.g., 1970s). However, the question focuses on nominal returns. "It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946. | |||
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| No More Mr. Nice Guy |
It's all academic until it is your own money losing 50% or more in a down market. When I was in my early 40's, my portfolio lost 90% in the Tech Wreck. Yup. I was in all tech high-flyers and had made a very good return. But then with various accounting scandals or vaporware being exposed, many stocks went to essentially zero. Sometimes I got stopped out and lost 10% or 20% (depending on how volatile the stock was), to then put it into the next high flyer which crashed months later. High risk does not mean high returns. It means a higher chance of losing money. A lot of people blithely assume that by choosing higher risks they are assuring higher returns, and nothing could be further from the truth. Aside from very few individuals with very specific knowledge to a particular gamble, regular investors are just stupid lucky if they win with something risky. Investing should maximize the reward while minimizing risk. Not knowing Ryan's level of risk tolerance nor how involved he will be in managing his retirement portfolio, I offered what is commonly advised by various financial professionals. Generally, the Rule of 100 is suggested, where the % of stocks should be 100 minus your age, and the rest in bonds. Frequently it is simplified to 60/40, though studies show that generally 70/30 has the same outlook, depending on thing we can't predict which will determine which is marginally better than the other. In his 30's, Ryan would be in that 60/40 to 70/30 range. Someone more actively involved in learning and watching the markets can be a little less diversified. Perhaps leaning towards or away from various sectors based on the economic cycle. Though that presents risk of missing the turn and thus missing the few big up days. At this point I emphasize that long term important investing is the opposite of gambling. For retirement, we're not looking for moon shots. We're not trading. Which stock or fund we choose is one of the least important factors, meaning chasing the best returns is counterproductive. Nobody beats the markets long term. Sequence of Returns Risk is very real, and probably the biggest determinant of financial success once in retirement. We can back that up to 10-15 years prior to retirement, because it does happen that markets stay down or stay flat for that time period. Which means by about age 50, in general terms in "average" economic conditions, one should be transitioning to a much lower risk profile. Someone who is actively watching the markets and economy can try to take advantage of conditions, but in your 50's the last thing you want is to ride down 25% or more trying to be smarter than the market. Many, even a majority of people, retire younger than they had planned, and mostly for conditions they didn't choose. Which means if this corresponds with a decade of bad stock markets, you're screwed. I subscribe to the 30/70 or 40/60 portfolio by a couple years prior to planned retirement. If you've consistently saved, you have what you have upon retirement and it will be pretty nice. | |||
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| Fighting the good fight |
Just where did I recommend gambling, trading, or taking "moon shots"? I very specifically advocated for the opposite:
Seems like you may have hijacked my post in order to try to argue against something that isn't close to what I said, and make strawman arguments about guaranteed returns or picking stocks/sectors. When in reality, you seem to be saying the very same thing as me about broadly investing in the market over the long run, rather than just a few stocks or one sector.
And that was your problem right there. Instead of diversifying your stock investments across the entire market (like I advocated in my post, and like you yourself also advocated in your earlier post and again in your newest one), you had instead gambled on a small number of high fliers. Then when that failed, doubled down with that same strategy and lost again. That's a losing hand no matter what. You ignored your own advice, and lost big. But watching your narrowly invested stock portfolio drop to near zero =/= the entire market going kaput. The entire stock market or even just the S&P 500 didn't go to near-zero, or drop 90%. During the Dot Com Burst, the market dropped about 49% from its temporarily overly-inflated bubble heights. But it took just 6 years to recover to its pre-bubble levels and continue its march upwards, and just 15 years for it to exceed even the very peak of the Dot Com Bubble just prior to bursting. (Even with the subsequent 2008 crash in the midst, for which it again took just 6 years for the market to recover.) Thus proving that my plan - and your newfound plan - of broadly investing in the market as a whole works. You yourself said it: Nobody beats the market in the long term. So continue to invest in the whole market for the long term, regardless of what it's doing right now in the short term. I'm sure it really sucked for those entering retirement in 2000 with too high of stock exposure, just as much as it sucked for those like you who bet it all on a few companies and hoped for the best only to strike out. But for someone who had at least 10-15+ years to retirement, being heavily invested into a broadly diversified chunk of the stock market as a whole shouldn't have mattered in 2000. Other than the short term heartburn, and having to resist the urge to panic, pull it all out for a big loss, and invest in Beanie Babies instead because those seem like they'll be worth something someday...  However, I understand how totally losing their shirt with some poor stock investment choices early on could render someone overly cautious and want to have that 40% bond safety net to sleep better at night, even when they're now apparently investing much more smartly across the entire market. Once burned, twice shy. But aside from that caveat about variable personal risk tolerance (which I also included in my prior post), I stand by my assertion that realistically, by the numbers and models, 40% is too heavily into bonds for a younger person who's broadly invested in the market as a whole. Because unlike your narrow portfolio in 2000, the market won't be going to near-zero, short of something apocalyptic, in which case your retirement in a few decades matters not one bit. And short of that, history has shown time and time again that even in the biggest of market crashes it only takes at most 10-15 years for a full recovery. So you should take full advantage of that long term total market growth while you can without being weighed down by significant bond holdings, and when you get 10-15ish years out from retirement then start looking at how to start tapering it back into a more conservative position that's heavier into bonds. Just as I said in my prior post. (Just for fun, you might find a stock market simulator and plug in what would have happened in you had been 100% in S&P 500 index funds or Total Stock Market index funds leading up to the Dot Com Bubble, rather than just those few tech companies you held.)This message has been edited. Last edited by: RogueJSK, | |||
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| No More Mr. Nice Guy |
Sorry, I don't have the time to respond to every point in your post in detail. My investment advisor said the same trope as we hear all the time: "Young people can accept more risk because they have time to make up for losses in a bear market". I was doing what all the big smart money was doing, because 60/40 and broad funds was less sexy. Techs were on fire and nobody expected what happened. So really a few points from that. First, as I mentioned, it is all academic when it is somebody else's money. That's why I think many advisors go wrong, and why an advisor who works with many already-retired people is beneficial because they also know the other end of the timeline. Advisors want to claim better returns than "The Market". That's why my advisor had me in techs. Fantastic returns, until it wasn't. But it wasn't his money, so he just pivots to some other new theory to attract new clients. Second, a 60/40 or 70/30 equity to bond ratio is very typical retirement portfolio advice for someone in their 30's. Over time, the typical 100-age formula does well. Any strategy is a guess and a hope. This strategy is time proven, especially for the investor who is mostly hands-off. I advocate for planning to hold all bonds to maturity to avoid the downside risk. Third, risk does not mean better returns. Many people state it as, yes, there will be more losers but there will be some big winners which overcome those losses. This is just wrong. Risk means a higher chance of losing money. There are many kinds of risk, but I think it wrong to tell young people they can or should accept more risk. Or, it is wrong to not explain what risk actually means, and to not explain how risk is structured into any portfolio configuration. | |||
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