Customer Reviews

The Last Chance Millionaire: It's Not Too Late to Become Wealthy

5 star:		(9)
4 star:		(9)
3 star:		(7)
2 star:		(2)
1 star:		(5)

 

 

This book is primarily a sales pitch aimed at getting you to borrow against your home to buy indexed universal life insurance. The author advises you to not only not contribute to a 401(k) or IRA but encourages you to withdraw the funds to buy insurance. His illustrations regarding the tax consequences of distributions from your tax deferred retirement accounts are simplistic. He also omits entirely the tax savings you have when contributing to a 401(k). If you contributed $20500 (the limit for 2007 for someone age 50 or over to a 401(k) and were paying a marginal tax combined state and federal tax rate of 33%. (A rate the author uses in many of his illustrations) you would save $6765 in taxes immediately. The tax savings can also be invested in either a taxable account or possibly a Roth IRA or even a nondeductible traditional IRA. You would then have $26,765 (not including the employer match) working for you instead of just the $20500 that you would have paid in premiums for the universal policy. The author does not mention this possibility at all. He compares a pretax 401(k) contribution to an after-tax insurance premium. He states that the 401(k) distributions are taxable when received (a true statement)and therefore you have not improved your retirement situation. However, you will have been able to save more than 30% more each year than you would have put into the insurance policy and since a significant portion of the total retirement balance will have already been taxed you can pay taxes from that side of the savings.

The author is several places compares the returns of a mutual fund to the universal life policy by assuming a 10%-11% return to both investment vehicles, conveniently ignoring that you must pay substantial insurance expense and mortality charges from the returns. If both a index mutual fund earns 10% and index universal policy earns 10% before expenses, you must compare the two vehicles after charges and expenses are deducted. In that case the mutual fund may have a 9.5% return while the insurance policy would have a 7-8% return. Although the policy credits are not subject to income taxes, the net after-tax difference is not as large as first appears. However, this is only comparing the after-tax rate of return on the policy. You must also compare the balances which will earn those returns. You will pay substantial commissions (loads) to buy an index universal policy (generally 5%-12% of the premium). After commissions you will have considerably less money working for you. You could pay as much as $24,000 in commissions on a $200,000 premium. This means that your policy will have a much lower balance than your investment for several years. See the author's illustration of values on pages 292-293. While looking at that table also note that the illustration has an initial premium payment of $62700 while he compares it to a 401(k)/IRA contribution of approximately $35,000 for a married couple (and ignores the tax savings which can also be invested). He also assumes that the 401(k)/IRA are subject to 3% sales charges and a 1% expense ratio. You can buy no-load index mutual funds all day long with no sales charge and expense ratios of less than 0.25%. In this illustration he assumes contributions to the alternative investments all cease after 10 years at age 60 and that the couple will retire at age 70 and begin taking distributions. Having shown a comparison of smaller contributions to a 401(k) with larger contributions to the retirement account, he then "proves" that the insurance policy will last longer than the 401(k)! I can present an analysis to my clients which shows that the same after-tax investment in a combination of a 401(k) and taxable account will be far superior to the insurance policy.

The advice to continue refinancing your mortgage ignores the costs of refinancing. You will incur transaction costs in refinancing. Although some mortgage brokers will advertise no closing costs you must compare the effective annual percentage rate of the loans offered. The mortgage brokerage business can be just as deceptive as the insurance brokerage business. The author also ignores the itemized deduction phase-out and alternative minimum tax consequences of his strategy to refinance and use the proceeds to buy life insurance.

I could go on for hours about problems with this author's strategies and the misleading arguments he makes. The long-term rate of appreciation on residential real estate is aproximately 6% or 3% above inflation, which coincidentally, is approximately the market rate on conventional mortgages. The current housing credit crunch is a product of strategies such as those presented in this book.

If you wish to assure an insurance agent and a mortgage broker of a good retirement, follow the strategy. Otherwise consult a good fee-only financial planner for sound planning advice. You can buy a lot of advice for the commissions you will incur following this author's sales pitch.

When did Life Insurance become a good Investment?
Did they stop charging those 90% plus commissions on target premiums?
When did the Life Insurance Agent become a charitable organization?

Anyone who is believing this so called NEW way of thinking is either really bad with math or simply does NOT understand Life Insurance. There is a REASON you don't see REAL professionals using this concept they KNOW the TRUTH!!!

What is the ROI on my home Equity? MORE THAN ANY LIFE POLICY!!!!

After you learn how to subtract out all the commissions and fees, then the REAL cost of the death benefit, loan fees for your house loan fees for the life policy let's sit down and compare which approach works best. Having my house free and clear with NO COMMISSIONS to pay, no loans, and no INCREASING internal costs for the life insurance will BEAT any Life Policy I GUARANTEE IT!

Here is a shocker to reality. If you bought into this BS and mortgaged your house and placed the money into a life policy order a current statement for your policy showing the SURRENDER CASH VALUE in the first year, HOW MUCH did you LOSE? Then look at the 5th year how much have you LOST? Tenth year? Do the REAL MATH find out the REAL FACTS.

LIFE INSURANCE is one of the HIGHEST commissioned products in the financial industry if not the HIGHEST FACT! Where do you think that money comes from, YOUR POCKET. 90% first year target premium commission and then about 6% commission each year thereafter. Do the math if the insurance company is paying out 90% of the first year target premium in commissions and 6% each year how long does it take for YOU to make MONEY or even breakeven on your so called investment? It will take OVER 20 YEARS!

Here is a little KNOWN FACT there are currently MANY so called experts out there today TRAINING for a large fee many other life insurance agents and mortgage brokers how to SELL LARGE COMMISSIONED life insurance policies. They don't care if you need a policy or NOT they only care about SELLING a policy. Check the facts. Some are even paying for cruises for Seniors then encouraging them to apply for insurance. IT IS HIGHLY PROFITABLE to someone BUT NOT YOU the policyholder.

You will see many lawsuits in the coming years from these abuses when the you know what finally hits the fan.

By the way did you know that it was illegal for you stock broker to encourage you to take out a mortgage to buy an REAL INVESTMENT? It should also be illegal for Insurance Agents but it's not, well not YET, time will tell.

I wish more people would ask the harder questions before believing this new line of BS.

FACTS: Insurance agents make about a 30-50% commission on term life insurance and around 90-95% commission on whole life products. Keep in mind that this is the first year commission on the premium and subsequent year commissions are much lower with an average of 6% per year for whole life products and 4% per year on term life insurance products.

One of the great problems with whole life is only an expert can tell if a policy you own or are considering will ever become a decent investment. James Hunt, actuary for the Consumer Federation of America, who has analyzed thousands of policies, notes that whole life policies hardly ever yield a reasonable return unless held for 20 years or more.
So if you buy one be prepared to pay into it for the very long haul.
The key to a whole life policy is its internal rate of return -- the yield on the policy after all fees and charges are subtracted. A competent analysis can determine at a minimum whether the weight of the fees and charges built into one of these policies will ever allow a worthwhile return. Such an analysis will also pinpoint the minimum amount of cash value that you can derive from a policy at any given time interval.
Some financial planners, actuaries and accountants can perform internal rate of return analysis on your policy. The Consumer Federation has a service that will do this, calculating the real return year by year and comparing it with other investments.

The Last Chance Millionaire's title reveals the author's selected audience very clearly: the retirement or slightly pre-retirement crowd. As a member of that group, I wanted to read this book to explore alternate investment strategies from a high-profile financial professional like Mr. Andrew.

The author's approach is very different from old-school thinking toward personal long-term investing, as you might expect. Mr. Andrew continues with the theme he revealed in Millionaire 101, which includes having interest-only mortgages with side investment vehicles to protect real estate equity, insurance products that offer high interest rates, flexibility, and easy transferral to heirs, and more. The key investment strategy is to finance to the max, and invest the equity elsewhere at a higher rate of interest. This approach makes sense if everything continues to work as it should, if real estate values remain constant and if you are able to continue to make those higher payments.

In a declining real estate market such as we now find ourselves, selling property may be difficult and may result in a sale for less than the mortgage balance, which will cause the owner to have to fork out cash at the closing, and in some cases, a lot of cash. The current proliferation of real estate foreclosures has been caused, in part, by over-zealous real estate investors divesting themselves of property with low cash-down mortgages and thus, not much to lose. Selling real estate at a loss, foreclosure and other mishaps can wreak havoc with cash flow, credit worthiness, and long term financial plans. If you choose this investment route, make sure you understand the downside as well as the upside, and make preparations to be able to respond if things head south for awhile.

I have been NASD and SEC licensed, and worked in the tax-deferred annuity, pension, and investment field. Our rule of thumb was this. Prepare for the future. Protect the basics, like your home, your car and your income. Invest aggressively at a younger age to accumulate for the future.

I have mixed feelings about this book, and the predominant reason I gave this book 4 stars is that I feel that this book is better suited to younger investors, with lots of time for cash to accumulate, time for a couple of missteps, and plenty of time to make any corrections, well before retirement time. As a general investment book, it offers a creative approach to wealth accumulation that may appeal to many. And if you're equity-rich and cash poor, this book will show you the way to re-adjust those imbalances.

I have read both "Missed Fortune" and " missed Fortune 101. I learned allot from both books, and picked up even more from "Last chance Millionaire". I'm only in my early thirty's but these books have change my approach at retirement. This book is better suited at a person or couple ready to retire. But I feel everyone could benefit. Mr. Andrew's techniques for creating an income that will never run out and is left to your heir's tax free is golden. I also feel that other key point of this book is to not just leave money to your family and spouse when you die but "teach them to fish" and create their own wealth. I have completely changed my approach to retirement and wealth. I was at first skeptical of insurance contracts, but after careful research I determined that the "fee's" that may scare someone off are a drop in the bucket. In the end plus I will have tax favored returns. I'd rater give my hard earned money to a company that will in turn offer stable rate of return and security. Besides the government will get their's when I spend my money in retirement. I now have two insurance contracts and have re-fi'd my home to an interest only. This isn't a get rich quick scheme, but a technique for lower taxes in retirement and never ending income with out depleting your principle or being taxed on the back end. Go into this with an open mind and I don't think you will be disappointed.

I listened to the whole audio book. To summarize the book:

Don't pay off your mortage, pay interest only; don't deposit to 401K, cause you'll pay more tax afterwards; the only solution: buy Universal Life Insurance with all your money.

I am suspicous the book is endorsed by the insurace industry, since the pitfalls of Universal Life Insurance are all well known.

This book essentially shows how to take equity out of real estate to reinvest elsewhere at a higher rate of return. The idea being that if equity can be reinvested in a tax favored vehicle, such as cash value life insurance, you can build a larger "retirement fund."

The concept of building wealth through refinancing is a terrific way to enhance your retirement if it is done the right way! The idea of borrowing money from a home and repositioning the money into cash value life insurance can make sense if you can get a higher rate of return and if you can afford the payment. However, readers need to be aware of the laws regarding the deductibility of interest when you refinance your home, especially if you use the borrowed funds to purchase cash value life insurance - with the contemplation of borrowing from it.

Make sure you consult with a qualified professional who understands this strategy well and how to implement it. If you are interested in this subject, I highly recommend Securing a Retirement Income for Life by Bill Griffith, Jr., CFP. In his book, Mr. Griffith discusses the concept of Equity Management and other retirement income strategies. Since the success of this strategy depends on personal factors such as your age, your health and your income tax bracket, you should choose a financial advisor who is knowledgeable about mortgage financing, insurance and tax issues and one who has practical experience helping clients implement this strategy.

Overall, this book offers an approach to building wealth by unlocking the equity trapped in your home. It is a practical guide for anyone interested in acquiring a basic understanding of the concept before contacting a knowledgeable professional.

I can't help but wonder if Andrew would have written the same book a year later. I'm adding this review because the two highest reviews when I checked today are seven months old, and the real estate world has changed a lot in those seven months. As noted in the other reviews, the gist of the advice is to get as much equity out of your house as possible and invest that money in universal life insurance instead of a paid-down mortgage.

Today, you'd have a hard time getting an interest-only loan, let alone a negative amortization loan, at an interest rate that's competitive with other investment options. In many parts of the country, real estate is not appreciating and may not recover its 2007 valuations for years. I don't do "money math" myself; I pay a financial advisor to help me. So do your own number crunching.

Mostly? For the best ROI, get the book from the library. The logic of NOT paying off a mortgage is informative, and I'll discuss my own retirement plans with my advisor a little differently as a result. I may not pay off my HELOC ahead of schedule; I might do something else with the funds I'd earmarked for principle-only payments. But the alternatives and actual mechanisms of what to do instead of paying down a mortgage are probably already out-of-date.

Finally, the content of the book could probably be reduced significantly if all the times the author says, "I'll tell you how to do this in a later chapter" were cut out. Another plus for libraries, IMO.

Many, if not most, older Americans are ill prepared for retirement. They have less than $50,000 saved and most have far less. So there is a real need for a book that will help this large group learn to catch up. Unfortunately, this book does not live up to that promise.

The bottom line: Buy insurance. I don't think so. While I'm not a financial genius, I do know that you don't use insurance as an investment. Not the way the book describes.

There are many ways to accumulate money and one must look for ways to pay as little tax as possible. So to that extent, I agree with the author. But the book is a lot of fluff and very little substance.

If you follow the author's advice, you could get into some trouble. And, having sold insurance myself, I can tell you that there is no insurance product designed to provide a tax free income or any income short of an annuity and disability income. And an annunity is of limited value and only to some people.

In addition, one could argue the value of a home and mortgage payments as tax deductions. There are other authors (for example Ramsey) who will advise you to pay off that mortgage and be free of it; that it's not that much of a tax deduction.

I'm not taking sides on that issue. But I'm merely saying that you can get both sides and each makes good arguments.

I don't see how not taking out an IRA at any age could not be a good thing. As long as we must pay income tax, why not put all we can in an IRA or SEP-IRA or whatever and pay less taxes? Of course it's tax deferred and not tax free. But one would assume that when one actually takes out the money, one will be in a lesser tax bracket. And yes, there are rules and regulations that can be harsh. But there's no way to beat the system. It's too bad we have to plan our lives around taxes to begin with!

I got nothing from this book that would help me. Perhaps you will. But I wouldn't count on it.

Very little new in the newest Andrew's book. Probably makes more sense to buy Missed Fortune 101.
Once again the strength of this book is the strategy outlined. Keeping your cash in the walls of your home, in the form of home equity makes little sense. Getting it out with a cash-out refinancing and saving/investing it not consuming it, does make sense. Keeping it in a vehicle that doesn't lose principal, is liquid, and makes a moderate rate of return is sage advice.
The weakness of this book are the specific products he suggests. Though the products might be the best advice for some, for others there are more appropriate products to get the strategy done.
For example, an appropriate mortgage for this strategy is not the option arm (negative amortization) he suggests. Even the interest only loan is not necessarily the right loan. The reason is simple. In the mortgage business (disclaimer: I am a mortgage broker) the more risk the lender see's in a loan the higher the interest rate. Therefore the option arms have an interest rate 1-1.5% higher than the conforming rate. The interest only 3/8 point higher. This can and does make a difference when you are arbitraging like the strategy suggests. Remember for the first 5 years of a fully amortizing loan you are paying mostly interest anyway, so you mamimize that tax deduction. Does this extra interest paid make up for the added cash flow of a interest only loan? Perhaps, but it is very individualized.
There are other places to put your home equity than universal life insurance. Is the EIUL best for you? Maybe, maybe not, again it is a individual decision based on your current situation.
Finally, there are complicated tax laws that must be accounted for, which he doesn't.
Personally, I have taken home equity and purchased a EIUL policy. I am happy with it. It is not the only retirement strategy I employ. My family is protected if I die. I have a place to get large amounts of cash that doesn't cost me. And if all goes well it will give me quite a bit of tax free retirement income. Call me a satisfied customer.
And best of all I fear not hurricanes, sickness, etc. will devastate the family finances.

My goodness, people expect so much from a $20 book. There is no simple recipe to make you an instant millionaire, despite the title ..., gotta sell your book. The ideas are well expressed and it is easy reading. I got several ideas and have already integrated them into my investment plan:
1. I took out a large equity loan on my home
2. Bought a new rental home with a $200 positive cash flow
3. Bought $1,000,000 Equity Universal Life policy with a long-term care rider
4. Stopped putting money into my 401K and diverted it into a Roth IRA
5. Am making plans for 2010 to convert some of my 401K to the Roth IRA.

I employed the ideas in an already mature investment plan. Sure real estate has plunged, but so has the stock market and the insurance companies are teetering on the edge. Even money markets are at risk. Andrew's ideas just help us diversify more ..., not just in the stock market.