Dave Ramsey is wrong...

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Baby steps. Debt snowball. Rice and beans.

Dave Ramsey is right about a lot of things, but life insurance ain’t one.

Maybe.

He is staunchly opposed to “whole” life insurance plans, also called “universal” life insurance.

(see for yourself, clickbaity headline inbound) 👇️ 

Too long, didn’t watch: his premise is that financial companies bundle life insurance with investment products, and overcharge you for both. So instead, you should buy “term” life insurance, and invest on your own what you saved buying a cheaper product.

It makes sense at first glance.

It made sense to me in my early days of investment curiosity and enlightenment.

But hidden inside that point of view is one big assumption: taxes will always be this way (or even lower).

If you ask me, that’s a big bet.

Despite the promises of an endless train of plastic-smiley politicians, I don’t think low taxes are the future.

NYC is about to elect a bona fide communist as mayor, for Pete’s sake.

US interest in communism is on the rise in the past 10 years. So is so-called “late stage capitalism”.

So can you kiss the free market goodbye? Nobody knows for sure.

I wouldn’t think that the economic framework that built the most prosperous society in the history of mankind would disappear in our lifetime… but I believe that social programs are going to continue to creep their way into culture, and historically the best way the people in charge find to pay for them is by you, and by me. The taxpayers.

For that reason, my investing premise is that taxes are going one way: up.

And that’s where Uncle Dave’s plan starts to unravel.

When you consider taxes even as they are, term life is a tough sell. Much less when taxes go up.

That’s because the money you’re saving, that you should be investing, is going to get taxed. It will get taxed pre-growth (like in a Roth IRA), or post-growth (like a 401k).

(Not to mention that if you lack discipline at all, the Ramsey method falls apart before it even starts)

The magic of a Universal plan is in the borrowing. At any point in your life, you can borrow from your “cash value”, which is your investment+growth. You can pay it back, which means that you act as your own bank. Or, if your cash value is large enough, the interest you’re making on whatever you don’t borrow might be able to pay itself back over time.

When it comes time for retirement, you can “borrow” from it every year, every quarter, or heck every month if you want to. And it keeps growing. Which makes it a free loan from yourself to yourself.

And here’s the superpower that nobody talks about: on paper it really is really is a loan, and NOT a distribution. You don’t pay taxes on loans. So even if you overpay for the original product, when you consider a 24% tax rate (or much higher in the future), suddenly it makes a LOT of sense.

Are you team Universal, or team Term?

P.S. – This program 👇️ is “Baby Steps” but for business.

Profit Hiker is my program to help business owners discover hidden profit, create margin, avoid financial struggle, and finally feel the freedom of a business that works for you.

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