Stop Comparing Whole Life Insurance to This Product Walter Young

 This commenter says, whole life is trash. Why not just take the money that you would put in there, put it in dividends, stocks, live off the dividends, and because you have a dividend stock, it's less volatile. Goldfish measures itself by its ability to climb a tree of forever-befresh. Hey guys, I'm here in Denver, Colorado with Walter Young, the author of Fifth Option. We had a really deep dive episode on his book, The Fifth Option, and it was super well-received, Walter. There was thousands of people watch this on how to think about retirement, and you had laid out multiple options, and you articulated things very well. We do have one comment though, of someone who's maybe saying, hey, appreciate this, but whole life is trash. Before I dive into the comment, how are you doing? Welcome to Denver, Colorado. I'm born and raised Denver, so I'm back home. All right, so if we just had to give a quick summary of your book and your philosophy, why don't you give that? Obviously, I would encourage everyone to watch our entire episode where you did the deep dive. But if you had to give, like, a large elevator going up, and you're like, hey, tell me a little bit about your book, what would the thesis be? Yes, sure. I think the important thing to take away is that there's a lot of research that's coming about in terms of how to optimize retirement income, and removing away from kind of the traditional planning, which was an acid-based plan, where you try to save it as much money as you can, and then you live off the 4% rule, and then you navigate your retirement that way. The pitfall with that is that for a lot of people, 3 or 4%, you can't save enough money for that to be equal enough money to live on. You're used to a certain lifestyle, and when you think about 3 or 4%, you just can't get that kind of savings. A lot of research coming out from the academic world that say that there are some better ways of doing that, and that is by combining actual science and the investment world, which is essentially saying that if I can combine the insurances and assets together to create a better opportunity. Most people, and they do the 3 to 4% rule, and they're frustrated, they're given 4 pieces of advice, right? So the traditional planning is to save more money, which is not always easy to do. And if I am, I'm actually fighting between my current lifestyle and my future lifestyle. Second is I could try to take more risk, right? Try to get a better return, but a lot of folks, as they get closer retirement, or trying to do the opposite, third is to work longer, right? Well, you don't always get that choice, and maybe you don't want to work that much longer. And quite frankly, the people, what people mostly say is, then I'll just have to live on less, right? And that's when you have the sad conversation of all the trips and all the things they're dreaming about. Suddenly you start hearing things like, well, I don't really need to do those things to be happy, and you just see that their eyes just kind of change because their economics aren't where they want it to be. So I call those the four frustrating options, but luckily, there's a fifth option, which is the name of the book, which really tells us how to combine the different sciences in order to give us a much more robust income with the same asset base. So you're, and since our conversation, we were talking about like, how could it be to build some type of calculator that reverse engineered around the nest egg? So you figure out what cash flow your desire is, and then based on different options that you laid out, this is how much you need if you're going to do the 3% rule or the 4% rule. This is how much you need for this strategy, and this is how much you would potentially need if you took actual aerial science and put it together with your assets, and all you would see is that number would be a lot smaller, because this whole concept is what if you could create more cash flow with less, and that should resonate with a lot of people. Right, I kind of use this now. There's two camps of finance. There's personal finance and corporate finance, and they both share the same word finance, but they manifest themselves differently. Corporate finance is all about cash flow earnings, money-moving, right, and then you go on to CNBC, the CFO is always bragging about what their earnings, you know, per share reserve, what their profit is. When you go to the personal finance side, it's about balance sheets, it's about how much money do you have, and so we understand that the corporate world is rewarded for showing how much cash flow is going to come out of their assets. At the personal financial world, we just say save as much as you can, and hope the 3% or 4% works. When we should be thinking about how do I optimize cash flow from the asset base that I do have. Right, so a lot of financial gurus out there are focus all on net worth and rate return, and so the reason they couldn't go to hate life insurance or hate annuities is they look at these as inefficient vehicles, and they are if you just compare to net worth and growth, but what I don't see a lot of financial gurus talking about is retirement distribution. Right, right. So this is a conversation that I think is going to be talked about more and more, as people are getting older, and but I think as people like you are actually articulating this in a way that's powerful, and there's channels like ours that are trying to get this information out to more people. Anything you want to say before I give you your lovely comment on YouTube. One last thing, I think one of my favorite quotes from Einstein is that if a goldfish measures itself by its ability to climb a tree, you'll forever be frustrated. And so I think that's true in the financial world, which is when we compare products incorrectly, then we're going to get this kind of agitation of back and forth, is a newbie's better, life insurance better, nothing beats the markets, but when we think about it in terms of their jobs, we know the markets tend to be the best growth vehicles, we know the insurance products tend to be the best distribution vehicles, well what happens when we marry the two together? We get the best of both worlds. So let's jump into the comment on YouTube, and what will be fun is you as the listener, you should see if you can answer this question because we've kind of been a broken record here, but it'll be fun to see how you answer this question. So someone says this commenter says, I understand the math and concepts brought up here, but the math also tells a story that whole life insurance is a trash product period. On many basis, if you don't want to pull out your nest egg and are afraid of it, it makes a powerful statement for dividend funds. Have you take the same amount of money you would have paid into a life insurance product and invested it in dividend funds? You could live off those dividend payments and not sell the stocks when it is down. This is implement, he's pretty much made the statement that dividend stocks are less volatile. And so how would your response be to, and my summary of that comment is like why, like whole life is trash, why not just take the money that you would put in there, put it in dividend stocks, live off the dividends, and because you have a dividend stock, it's less volatile. That's a good question. I think first of all, I always say it start by saying that there's multiple ways they handle retirement, right? And there's no question that dividend stocks can be part of that conversation. I would beg to differ that whole life is a trash vehicle. I think when you objectively cite something like that, then you really don't understand how whole life could be used, right? We talked about that a little bit. So I think what we have to understand is that we're looking for the most efficient withdrawal rate there is. Dividend stocks can work just fine. The question is how many millions of dollars of dividend stocks do I need to have to equal some of the other choices you might have throughout the retirement options, right? So it's not that a big robust dividend portfolio can't work. It just means you might need to have more of it than you would on other strategies. I would also argue that likely you don't have just a 100% stock in retirement. There's likely to be some sort of diversification amongst bonds or other less volatile asset classes, in which case, wouldn't that be whole life insurance, right? Couldn't that be part of that allocation piece? And last I would argue that dividend starts are not infallible, right? That doesn't mean that they can't go down. It doesn't mean that dividends can't be cut. It doesn't mean that some company goes broke or gets bought or changes its function where you lose those dividends. And so I think you still have the ability to have that two bucket approach where you have your dividend stock where you're comfortable with the markets. But when the markets are negative, then maybe you do pull from some of that cash value policy to help offset any loss in that portfolio. And maybe you do balance them also from a tax perspective, right? Maybe there's some tax-free income that you're marrying with the capital gain tax and really reducing your taxes and your after-tax retirement income as well. So I think we have to be very careful about this. It's only one way to do retirement, right? There's lots of ways to get there. What we're looking for kind of through the eyes of a corporate lens is what would Jeff Bezos or some other CEO say, what is the most efficient way to get there? That's what I'm looking for. And there may be a couple of different competing options that all can work. And maybe you do based on your personality types gravitate towards one of the other. But I don't ever think that there's a room where we could say some product is trash or it doesn't work or the dividends will always work. We can't say that in those certain term terms. So just think about if your house was a business and you were the CFO and you had your shareholders out there and you had to declare what your strategy was, is it the most efficient one you have? Or are there some other options? Would you be open to hearing about other efficient choices that might work to you? And on paper you can see a lot of different, like on paper the stock market is perfect. If you if the numbers work out and if you take an average average rate or turn is different than actual rate or turn. And so there's just like on paper's one thing, but it's like the other concept of this fifth option is getting you just different options and different diversification for the unknowns. And so when I think of more options I just think of more areas to pivot in an unknown future. And so yeah I mean if someone wants to do that awesome but at the end of the day I wouldn't feel great. I would not feel great to have all my eggs in one basket. And obviously you have one option. That one option is you hope your portfolio is out of place. Doesn't go down, kicks off dividends and you better hope that that bucket doesn't get shaken up. And then from an efficiency standpoint what attacks is going to be in the future. Like there's other questions that need to be brought up. But I think this question embodies just what a lot of people may be thinking. And so it's just good to hear. Yeah. It's really the traditional planning. You can see that maybe he's opening his eyes a little bit to moving away from just a balance sheet approach. I need a huge portfolio to be able to get real create the income I want versus moving into saying I still am a portfolio driven person. But I might have a secondary bucket that just gives up some fortitude that if the markets aren't great I still have another safe place to take money from. And I think the two together he would be surprised at how much more income and efficiency and safety and predictability that would bring us to his life. You know funny thing about averages is that I have a bucket of zero degree water and a bucket of 200 degree water. And I put a foot in each bucket on average that should be comfortable but I really have two unhappy feet. Yeah that's really good. We have to be really careful about how we use the term averages. Walter young thank you for coming back on the show. You are going to be speaking at our event. And so I'm excited to see your TED Talk style on the fifth option and you brought a bunch of books for our attendees and I'm just very grateful for your friendship and excited for what the feature holds. Yeah pleasure thanks for having me.