Top critical review
19 people found this helpful
This book is just a sales pitch.
on August 23, 2015
I'm surprised to see so many good reviews. I found this book lacking for the following reasons:
1. In order to sustain his argument that tax-deferred retirement savings is bad, he makes several scare-tactic assumptions about future tax rates. At one point, he suggests that estate taxes will eat up 85% of an inherited IRA or 401k. Estate taxes are nowhere near 85% and he totally ignores the millions of dollars of estate tax exemptions.
2. The whole illustrative premise of the book is that the example character is managing to max out his 401k while making $250k a year, but can't seem to scrape together any other savings. But somehow, when he retires, he won't spend his retirement savings and then will have accumulated so many millions of dollars that he'll be subject to estate tax rates that have risen to fictitional levels. Despite having all of this money that subjects him to estate taxes, he failed to notice or plan for estate taxes.
3. Despite the fact that the example character saves less than 7% of his income (that's the math on maxing out your 401k with $250k in income in 2007, when this book was written), the solution to all of his problems is to stop investing in his 401k and put all his money in permanent life insurance. He will then borrow against the permanent life insurance to pay for obnoxiously high private college tuition for three children, but still somehow have the cashflow to keep the permanent life insurance active and well-funded into his golden years. Somehow, I doubt that someone with the kind of spending habits of this illustration is actually going to manage to make that work.
4. He totally ignores the fact that tax-deferred savings gives workers more money to invest and grow on the front end. Instead of addressing this, he simply invents new future tax rates that will be much higher than today's to bolster his argument against tax-deferred savings. He does not address the fact that by eschewing tax deferred savings in favor of permanent life insurance, the saver actually has fewer dollars to invest in permanent life insurance (not the same amount).
5. Ok - so let's assume we're all on board with tax-deferred savings being awful for everyone. He then mentioned, but ignores ROTH 401ks - stating that they are unpopular, so not worth discussing. Well, they're a lot more popular now, so I guess there's no more need for permanent life insurance? He ignores Roth conversions. He ignores Backdoor Roths. Now granted, we're getting into some advanced tax planning here - and this author is a life insurance salesman, not a tax planner, and not an estate planner. So I suppose we should forgive him for having probably never heard of a Backdoor Roth - except I don't forgive him, because he wrote an ignorant "tax-planning" book designed to sell permanent life insurance.
6. He totally ignores high commissions and fees. He makes a vague mention of 401k fees, insinuating that they are "high." But mysteriously, the expenses associated with permanent life insurance are so insignificant that they don't bear mentioning! Which is pretty laughable.
7. He touches on the fact that "in the past," universal life may have gotten a bad rap because people were sold universal life policies that had unrealistic projections. He does not address that people continue to be disappointed in their universal life policies. He does not offer any substantive reason why we should believe that insurance salespeople have gotten better at offering realistic projections. Certainly, none of the interest rates or tax rates offered by the author in this book are realistic in any way.
Here's my advice: Don't get your tax planning advice from an insurance salesperson.