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About David Shafer

Hello. I have been fortunate to combine my two professional interests, finance (B.S. Florida State Univ.) and social science (Ph.D. Brandeis Univ.), into my work as a Wealth Coach. This blog is dedicated to creating knowledgeable consumers who with a better understanding of wealth creation, finance, and money will be able to build a better future for themselves and their families. I believe the current state of financial/retirement planning is really about what Wall Street and the Lenders want individuals to do, as opposed to what the evidence demonstrates works for folks. This adherence to the actual data makes me a financial gadfly.  Being a gadfly means presenting information to people that can make them uncomfortable or even angry sometimes.  Hope you find the ideas and information useful, educational, and entertaining.  If you find this blog unique and interesting please go to my Equity Indexed Universal Life Insurance web site: www.shaferfinancial.com.  For a small amount of money, you can hire me to help you build a wealth creating plan from the ground up and put you in control of your money. 

Yours in wealth creation,

David Shafer

Comments»

1. Mark S - October 25, 2008

Can you compare the Aviva EIUL to what I just got from another company this year (2008)?

For 36 yrs old with preferred elite health:

EIUL (based on S&P 500 Index)

Guaranteed minimum return: 1.0 %
Potential maximum return: 12.5 %

Average return from past performance: 8 %

$500K Death Benefit (Increasing)

$301.00 – min. premium per month

Monthly Charge (for the next 10 years):
Policy charge: => $8.00
Per unit of coverage charge: $0.14 x 500 => $70.00
———————————————
Total: $78.00

Cost of Insurance: $54.00

Investment: ($301.00 – $78.00 – $54.00) $169.00

Note:
Monthly charge after 10 years will be: $4.00 (down from $78.00)

Thanks.

2. shaferfinancial - October 27, 2008

Mark,

Sorry about the delay, but weekends are mainly for my family.

It’s a little difficult for me to make direct comparisions because I never set up my policies in the manner yours is seemingly set up. So I have used Aviva Lifetime EIUL, which is best for cash value buildup. There are others which have lower up front expenses, but don’t perform as well over the long run.

$500,000 face value/ 36 year old male, highest health rating available.

Premium $301/month.

Cost of insurance $46.83
Expense Charge $15.08
Policy Fee $8.00
Policy Expenses $85.83/ after 10 years $35.82

Minimum Guarantee 2%
Maximum indexed rate 30%/two years point to point S & P 500 Index

Hope this helps. Hope you are not judging a policy by expenses, it is a bad way to look at policies for some very basic reasons. One expenses are manipulated by insurance companies all the time and are not contractually obligated. Two, when comparing policies in my opinion the strength of the company must be kept in mind. Three, I always set my policies up with a minimum face value for the premium allowed under IRS regulations. This maximizes the cash value build up and allows for best performance. It is the quality of the life insurance agent and his/her thinking/planning that will make the difference.

Kinda like all those folks who got a option arm mortgage thinking their interest charges were 1% or 2% when they were really getting charged 1-2% above the going rate for fixed rate mortgages. All those folks giving mortgage advice to consumers are now out of work and the mortgage companies are defunct and the consumers are waking up to being way upside down on their properties!

Anyway, not sure why you wanted to compare to AVIVA, but there it is for you!

3. shaferfinancial - October 27, 2008

Mark,
By the way, for a $301/monthly premium you could have dropped the initial face value down to $100,000 increasing db or $248,000 level db and had some really large cash value buildups. I really don’t like the increasing death benefit strategy. This also reduces the policy expenses to $42.58 until year 10 where it drops to $17.58. Cost of insurance obviously drops to $23 year one and drops from there. When you set it up right, by minimizing your face value or death benefit down as far as IRS rules allow you, EIULs really perform best.

Once again, a knowledgeable agent who alligns your interest and his/her interest with a real wealth building plan will always do better for you than worrying about expenses!

Commissions are based off of face value by the way so most agents are reticient to structure policies minimizing face value! Not saying this is what your situation is, just pointing out facts of the industry.

Really hope this is a learning moment for all my readers. Thanks alot for posting!

4. moneysomethings - December 30, 2008

Hi David,
Your blog and career choice look really interesting. I will be reading through the archives for more great thoughts on wealth building. I just started blogging about life and personal finance as a 20 something engineer trying to avoid 30 more years of cubicle life. I would love to add you to my “blogs I read” on my site. This kind of dialogue is so important in this economy!
Best, Laura

shaferfinancial - December 30, 2008

Thanks, Laura. Please do add me as a “blog you read.”

5. Brad Manuel - April 20, 2009

Hi David,

I recently discovered your blog post, unfortunately 3 years too late. I had an EIUL Vista Elite Series II set up with Aviva 3 yrs. ago. I recently changed my plan to 100% of my premiums going to the 2yr. PTP as recommended by Wayde McKelvy for max long-term growth. My current death benefit option is set at level. My current face value is 336,000. I was planning on reducing it to 100K if possible as I’m assuming this is the minimum I can go on my policy.

I’m not sure how I could find out what my minimum db could be. I’m currently paying $330.00 per month. Is there any way I can change my policy type from Vista Elite II to the Lifetime? Thanks.

shaferfinancial - April 20, 2009

Brad,

Good move on setting it to the 2 year point-to-point. I own an EIUL in the Lifetime series at Aviva. Don’t move the death benefit down. The expenses are set for your current death benefit and they won’t decrease when you move the face value down. I’m not sure why you are unhappy with the current policy, but feel free to contact me to talk about it.

6. Brad Manuel - April 20, 2009

David,
I just wanted to get the most out of my policy in regards to long-term cash value build up and just realized this is not happening through your posts. I don’t think my current monthly premium of 330 is set up for the minimum db I could have had. My wife pays $250 per month into her policy that has a db of 330,000. In your previous post to Mark, you stated he could have set up his policy with a 248,000.00 min. db with the 301 monthly premiums and had some really large cash value buildups. I’m assuming from what you say about my expenses already being established for my current db that it is too late for me. Am I correct in saying this? Thanks for your time.

When I signed up for this, my agent only asked how much I could afford to put in each month and then determined the db from there. He didn’t mention anything about minimizing the db.

shaferfinancial - April 21, 2009

Brad, maybe or maybe not depending on the particulars of your policy. In the investment world there is a saying, “losses in the past are irrelevant, the question always is what is the best decision going forward.” In order to make that decision you need to look at the numbers.

7. Adam Coovadia - June 16, 2009

Came across this article in Fortune titled “Has the 401(k) failed?”:
http://money.cnn.com/2009/06/15/retirement/has_401k_failed.fortune/index.htm?section=money_latest

Thought you might enjoy it.

Your right as usual!

shaferfinancial - June 18, 2009

Thanks for the link. Yes, I have been banging on this drum for a while!

8. Den's Aviva - February 13, 2010

Hello David, seems that you like the 2 yr pt to point strategy with the Aviva EIUL policies. What is your opinion about best indexed strategies for the fragile market over the next 5 yrs (+) ? I keep reading about possible low yields expectations for the S&P 500.
Specifically the 1 year monthly cap index strategy versus the 1 year monthly average indexed strategy.
You see, so far since inception,04-2007, my AVIVA 2 yr pt to pt. segment has ‘belched’.
Thank you in advance for your efforts to inform us !

shaferfinancial - February 13, 2010

I recently took another look at this since my personal EIUL is an AVIVA. No matter how you cut it with historic data, even the latest data, the two year point to point gives the best return. I think you are skating on thin ice to predict that the future returns will be so much different as the last 85 years. Having said that, I just posted that I thought that the index might suffer from having much more losers going forward. I caution you from the effects of recency bias which we all suffer from. Recency bias means we give more attention to the most recent time period and react to it as opposed to events further in the past. Folks who are saying they expect lower returns going forward are just guessing. I have decided to stay true to the historic data, instead of trying to predict/guess about what might happen in the future since I have 18 years before I plan on pulling income. 18 years means that the most likely result is going to be close to the average result. Hope this helps.

9. Den's Aviva - February 13, 2010

Dr. Shafer, yes your comments really help. As you have indicated in other posts, these products take alot of time to understand. I’ve spent 3 yrs now with my own policy and each time I uncover a new insight which throws my old concepts for a loop.
Likewise my policy has about 15 years to mature before I plan to make withdrawals.My current mental dissonance was indeed based on emotion, ‘fear’ , which you rightly point out has to be set aside and better look at things sensibly by the numbers etc.
Common rule of thumb, don’t act on emotion.
My unsettled mind was based on not knowing how to interpret possible future weak S&P 500 performances with regard to the EUIL index strategies. i.e. make the most of a strategy type for the index environment and keep the policy on track. On top of that comes the trials and tribulations of learning how to interpret S&P performance data (historical and current) and applying that to my EUIL policy in order to better understand it. (I think it is important to know and understand one’s own policy as best as possible).
Your comments are invaluable in what can sometimes be a vacuum of information sources ! (my current agent is like vapor)
Your time and comments are most appreciated.

10. Bharath - February 8, 2011

Dr. Shafer,
Are you familiar with Lincoln Benefit (All State) EUIL? It is apparently AA+ rated. Is that good enough? The minimum guarantee is 2% – rest of the parameters are comparable to other plans described above.
Please share your thoughts.

shaferfinancial - February 15, 2011

Sorry this took a while. Yes. I am familiar with this product. It is not one of my top rated EIULs.

11. Mike - August 16, 2011

Are the withdrawals from the policy, both principal and gains, tax free?

shaferfinancial - August 16, 2011

Yes they are Mike as long as it was set up correctly.

Mike - August 16, 2011

meaning? how?

12. shaferfinancial - August 16, 2011

There are IRS rules that must be abided by. These rules govern what is considered Life Insurance and what is considered a Modified Endowment Contract. When we set it up to maximize the internal rate of return we bring down the LI amount as low as the IRS rules allow.

13. Mike - August 16, 2011

what is the IRS tax code number? and what is LI?

14. shaferfinancial - August 16, 2011

LI is shorthand for Life Insurance.
Don’t know what the IRS tax code number is????

15. Mike - August 16, 2011

Really? Then how do you know if its true?


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