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Minnesota Life Equity Index Universal Life Policy Gets Better September 12, 2013

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My #1 rated EIUL is currently The Eclipse by Minnesota Life.  This month it improved the future performance by adding in a interest bonus.  As usual they accomplished this in a way that allows for better performance and safety.  Since inception 11 years ago this has been the top performer in the industry.  I think this change keeps it there.  Also of interest is that the change applies to anyone that currently owns the policy.


The way the bonus works is that a bonus interest is added to the account value every year after year 10.  The bonus is calculated by adding up the previous 10 years worth interest credits and multiplying by 1%.  Once the bonus is received it is then counted in the addition for all future years so it is a compounded interest credit.

The company has calculated that this will raise the accumulated cash and potential distributions by between 13% and 18%.  I ran my first illustration using the bonus and it really adds value.  Obviously the longer you have to get the bonus the more value.  

I also recently had a very good underwriting decision for a client, the best I have seen for this particular situation.  

When I look at which EIUL to suggest to clients I look at the entire picture:

Minnesota Life

  1. Retroactively added in a benefit to existing policy holders;
  2. Added in a bonus that provides additional performance along with safety; and
  3. Great underwriting decisions for clients.  

Three more reasons to keep Minnesota Life #1!


How Theories can help or hinder your investing. October 18, 2012

Posted by shaferfinancial in Finance, paradigm shift.
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I have been a big critic of efficient market theory, still am. Here is a link to a book review that you might find interesting.

But the most recent theory of human behavior that has caught my eye is chaos theory.
First described by a meteorologist, it is simply the idea that small, seemingly inconsequential variables, can create huge differences in outcome. Often the idea is explained by the thought that butterfly’s in a meadow in Asia can cause weather patterns over North America to deviate. In science “chaos” is described as underlying interconnectedness that exists in apparently unrelated events.

Moving from a rational theory like efficient market theory to a theory that states you can never totally record the variables that create change is a difficult one for investors. That is why EMT is held on so tightly by many. This scientistic culture that sees the world in terms of analysis, quantification, symmetry and mechanics has really created a prison of the mind or an allusion that we can control outcomes.

Embracing chaos theory is really embracing what we experience of the world. The first allusion that must be dealt a death blow is control. This is where the EMT has really led folks down a wrong path. The thought that by rational explanation one can create an investment strategy that will control risk is a faulty assumption as we got recently reminded. If we give up the thought of controlling all risk with a single investment strategy, then we can open ourselves up to a more creative and ultimately satisfying investment life.

As we see the devastation brought on to individuals retirements by adherence to these rational investment theories that didn’t account for the real risk [it was known] and certainly didn’t see the 2008 melt-down in all asset classes some folks have stepped away from the common strategies in surprising ways.

Unfortunately, many folks are simply ignoring the reality or so emotionally tied to the old ways of thinking that they can’t change. Worse, is the new generation of folks that are being pitched the same old tired ideas like buy term and invest the difference [in mutual funds] or asset allocation theories or buy and hold stocks that have failed. I am shocked when I talk to people who either don’t remember or have pushed 2008 out of their memory. Especially coming on the heels of 2000 tech break down. Did you know that in 2000 the Nasdaq was over 5000 and now resides at 3100+? People forget that in the 1990s tech stocks where all the rage and investing in the Nasdaq considered a no-brainer for indexers.

Truth is that the government and Wall Street have created a perfect storm convincing people to invest in stocks for their retirement. And small seemingly inconsequential variables will to continue to crop up and destroy those folks happiness.

Recently, I had someone tell me about a particular strategy where a relative had received double digit returns for 3 years. He also seem to indicate that double digit returns were a logical expectation. I didn’t ask him if that was 10-12-15 or 20%!

Expect the unexpected is the only rule to investing today. Don’t try to control it, just adjust your strategy assuming it will happen. Look for creative investing strategies even if that means taking on old ideas that were thrown on the dust bin of history by the experts pushing mutual funds, asset allocation, etc.

In the near future I will explore what this all means to me and why I have done the things I have done for my finances.

When is it time to start your financial plan? May 1, 2012

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Truth, that is a loaded question. Implicit in the questions is that you have a well thought out financial plan. But most people just go about their financial planning doing what everyone else does, or what some designated “expert” tells all their clients to do. Usually, there is some enterprising financial expert pushing their products as the “first” thing you need to do and we can do some planning as long as you buy my product first. My advice is simple: think outside the box of 401k, IRA, Mutual Funds, Term Life Insurance, and yes even Whole Life policies. Get ahold of someone that has made money in real estate investing and learn how to get started and what you will need. See if that is a doable investment for you both financially and emotionally. Talk to me about EIULs and whether that would be appropriate for you. Research dividend producing equities. Line them up and decide which one’s, if any, are appropriate for you and what order makes sense for starting.

On Mavericks and Success February 20, 2009

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I swim most mornings at the local pool.  There is an older gentleman that I see there often.  He likes to talk.  This person has a ton of master’s world records and world championships.  He has a master’s swim club called the Mavericks.  Was talking to him yesterday and he told me he got his PH.D. from Indiana U. and Doc Counsilman was his dissertation advisor.  Then he tells me Doc Counsilman was his asst. coach (swimming) at Iowa.  Now I know he is going to try to recruit me for his swim team (for about the 20th time!), but this really perked up my ears.  Doc Counsilman is an icon in the swimming world.  He coached at Indiana U and won many NCAA championships, had multiple great swimmers like Mark Spitz and John Kinsella, and wrote the bible of swimming technique books.  In fact his book (The Science of Swimming) was the first book using modern techniques like video taping and applied science to any sport. Soon all sports used the techniques Counsilman figured out for swimming.

So he tells me this story:  When he was a swimmer at Iowa, the common assumption was that to swim faster you should kick harder and faster.  So the head coach was advising him of this when the lowly assistant coach, Counsilman, piped up with “I not sure about that, try kicking less, I think you will swim faster!”  Now to counter your boss is balsy enough, but to do it in a way that challenges a cherished assumption is just crazy.  But Counsilman did it, and he was right.  My pool friend did swim faster when he lessened his kick!

Counsilman was a MAVERICK that challenged the status quo his whole life.  He revolutionized not only his sport of swimming but all sport.  He became the oldest person to swim the English Channel at 59.

Understand that it is the mavericks that accomplish much in our society.  If you don’t want to end up where the herd is going, then you have to become a maverick.  I have posted many times about the herd and where it is going financially.  The choice is yours, but I suggest taking on some of that maverick behavior.

Risk IV; Longevity Risk October 2, 2008

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Among the assumptions we make in our lives, is how long we are going to live.  I am not going into whether one should be pessimistic or optimistic about getting old, but will say that this risk is often not thought about except of course when those pesky life insurance sales people are banging on your door.

Longevity risk is the repercussions of living to short a life to create assets for one's family or the risk of living too long for one's accumulated assets. Both, have drastic repercussions, but have very different risks. A 35 year old male has a super low .16% chance of dying. Even at 50 the chance is only .56%. While there is a greater than 90% chance of someone outliving their money. This skewed risk pattern requires real clear thinking about personal finance. Clear thinking that most insurance agents and financial planners fail at!

Not until age 59 does the chance of dying move about 1%, it goes above 2% at 67, 3% at 71, and then starts up a steep slope breaking 10% at age 84. Now you know one of the reasons term life insurance is so cheap! The other is that people tend to drop the insurance after a couple of years. The life insurance company rarely (less than 1%) pays out on their term policies. Yet, life insurance agents and financial planners are always pushing term life insurance.

But the real and present danger for folks is the other side of the coin. The likelihood of running out of money before you die. We have record numbers of people having to work well into their 70’s; not because they are bored, but because they have to in order to have a place to put their head down at night or buy gas or buy food! This risk is real and present danger that anyone can see around them, yet not really dealt with by most people!

Regular readers of this blog, recognize I talk about this risk all the time.  In fact it might even be my primary directive to help people understand this risk and guide them to a wealth building plan that will eliminate it!

Living in a post-fact world? September 21, 2008

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There have been much commentary and books written about how easy people find it to ignore inconvenient facts. “True Enough: Learning to Live in a Post-Fact Society” by Farhad Manjoo is a great account of this phenomenon.  Many, including this author, point their fingers at the web as starting this process.  However, I think it goes back much farther than this.  After all, scientists have always had their critics, long after their discoveries had moved from theory to established fact (Think Darwin!).

Currently, much of the critique is centered on politicians and voters.  Politicians lie and we don’t care seems to be the refrain.  OK, tell us something we don’t know!  But even more insidious is the constant bombardments of lies coming to us on a daily basis from industry.  I think if I have to look at another commercial from an oil company or domestic car manufacturer telling me they are really environmental friendly I will barf! 

So when I tell you that Wall Street is lying to you, many people will sluff that off as “tell me something I didn’t know!”  But, the point is that the lies of Wall Street are going to impoverish you when you can least afford it.  If I sound strident at times, it is because I know that you can do better with your finances.  It is because I know you can learn to differentiate financial fact from fiction.  On this Sunday morning before I take my son to Sunday School, I am going to repeat a chart from yesterday to drive home the point.  Once again, I am not a brilliant stock picker, nor lucky, only made a decision to look at facts instead of fictions!


For the last year, HCN up 25% (+6% dividends), Berkshire Hathaway up 10%, S & P 500 down 18%.

My portfolio up around 15% mutual funds down around 20%, a 35% difference!

John D. Rockefeller, Debt, and Wealth Creation March 26, 2008

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The Shafer Wealth Academy (www.shaferwealthacademy.com) is dedicated to teaching people about how wealth is created and making a independent life.  We can learn from the success of others.  It is really unfortunate that so much is not taught in schools about wealth creation and the financial world. John D. Rockefeller was the wealthiest man in the history of the world even more wealthy in his time than Warren Buffett and Bill Gates are now.  He was known as an exacting, very conservative, man whose first job was a bookkeeper.  To him the business world was an exacting world where numbers spoke volumes and everything else was secondary.  He spent his last 40 years of his life in retirement and is known as one of the greatest philanthropist ever. His Standard Oil company was demonized by the press and broken up as a monopoly by the politicians.

But how did this bookkeeper, who grew up relatively modestly, become wealthy?  His first company was a partnership with two older gentleman (he was 20) that was in the commodity business.  He felt his partners were purely speculators and wildly unpredictable.  He was the sober one, that constantly reviewed the books and made decisions based on pure rational thought and the numbers.  Where did the division appear between the partners and John D.?  In the 1860’s, during the Civil War, Rockefeller borrowed $100,000 from the banks to expand his oil refinery business.  The partners, these wild speculators, were aghast.  Now, $100,000 was alot of money back then and the companies profits were less than $17,000 at the time, so we can see that there was some reason for their concern.  But to the not yet 25 year old Rockefeller, this was what the numbers told him.  He believed the oil business was here to stay and he wanted to be a big player in it.  So for him, borrowing this amount was not a risk, but a neccesity.  His main concern was that the bankers would look at his partners and decide they were too great a risk.  So Rockefeller used this schism to jettison the partners and buy the company for himself.  The bankers trusted the sober, meticulous, Rockefeller and had no problem lending him more money as the numbers told Rockefeller to do.  Later in life, after he was already the richest man in the world, he would eschew the banks and borrowing money, but that was more about his personal issues with bankers like JP Morgan, and his lack of need for more capital than anything else.

Borrowing allows one to create leverage.  It is why most people are able to create wealth through their homes.  And it is why most people fail to create wealth elsewhere.  Understanding the numbers and what they tell you is not as hard as most people would have you believe.  The Shafer Wealth Academy will teach you how.

Now, there are many people out there that will tell you debt is bad and should be avoided at all costs.  No doubt credit card debt to buy consumer goods is not the best thing to do; John D. would be flabbergasted at such outlandish consumerism!  But, debt to take advantage of business opportunities is a different animal.  Financial leverage, building business leverage, and leverage to create value is one of the basis for creating wealth.  When evaluating investments the first thing one should look at is the leverage created.  If no leverage is created, then the returns can only be miniscule.  It is the law of money.

I wonder if all those financial planner folks who advise their clients and write books about avoiding debt, really understand that they are making sure their clients will not become wealthy?  I assume they are more concerned with not getting sued than in helping their clients create wealth.  At the least they are participating in what many workers for Wall Street companies describe is their goal; Turn your clients wealth into your wealth!  Warren Buffett describes Wall Street as a place where people drive their Rolls-Royce to Wall Street and turn their money over to people who ride the subway to work!  

Learn about wealth.  Learn about Leverage.  Don’t turn your money over to Wall Street.  Sage advice from those that have created wealth. 

The Baggage We All Carry. March 24, 2008

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Many times I hear from clients about the past.  Usually it was about mistakes made and why they aren’t in a position to develop wealth now.  We all have made mistakes, financial and otherwise.  But, if we let that fact carry the day and keep us from making decisions then we have compounded that mistake.  Too many in our society live in the past, burdened by the baggage of things behind them.  It really doesn’t matter.  Divorce, lost money, bad career decision, etc. are common refrains.  If you live in the past, then these things will keep you from reaching your full potential.  Studies of wealth point out that most fail many times before they figure out how to create wealth.  Many a fortune has been lost and gained several times.  Remember this, it is the trip not the destination that is important.  Opportunities exist in the “now,” not the past or the future. 

I am currently in New Hampshire, skiing with my family.  They have had more snow this winter than any in memory.  It is still a winter wonderland.  Because of this snow, many are happy because it drives the economy.  During poor snow winters, exactly the opposite happens.  Even now, some folks live in the past poor winters, bemoaning the lost income.  Put yourself in position to benefit from the good, leave the bad behind, live in the now and rejoice about the trip.

Design Your Life to Be Exactly How You Want It! March 11, 2008

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Yesterday, my son and I rode downtown from our home to get a couple of items at the grocery store.  My neighborhood is right on Tampa Bay, so we ride through the neighborhood waving at our neighbors and stopping occasionally for a short chat while gazing on the water.  We then go past the Salvador Dali Museum, riding on the back side looking for dolphins in the bay.  Next is a marina with sailboats gently rocking back and forth and then a university.  Finally, past a condominium project and into the Publix parking lot.  The whole way accomplished on sidewalks, a must for the safety of my five year old.  On the way back I think, I could not have planned my life any better!  Then it hit me.  I did plan my life.  When my wife and I bought in our neighborhood, downtown St. Petersburg was not developed in any way like it is now.  There was no grocery store, no ice cream stores, no upscale condominiums.  Truth is, much of that was just starting to be put on the planning board when we bought.  But, we purchased in our neighborhood specifically because it was urban.  We felt all along that we did not want to buy into a suburb or a gated community.  We imagined, even back then, being able to walk/ride downtown to go to restaurants, art galleries, etc.  We felt strongly that if we were able to have children that is the life we would want for them.  And it happened!  Perhaps we got lucky.  But the bottom line is that we took a chance at creating our life exactly how we imagined it and it happened. 

I have taken another chance recently.  I have mentioned before that I have taken advantage of the slowdown in mortgage origination to build a new business.  This business allows me more freedom than ever thanks to modern communication methods.  It also combines my love of teaching with my wealth creation knowledge.  The Shafer Wealth Academy is now officially up and running.  If the idea of having a Wealth Coach is intriguing to you please check out my web site (www.shaferwealthacademy.com).

Helping people build wealth is something I have enjoyed doing immensely.  I think this is a step forward in that goal, allowing to more directly impact people’s wealth creation.

Please know I will continue to blog and am very thankful for my readers!

Yours  in Wealth Creation,

David Shafer

I gotta stay local? March 6, 2008

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I have  been talking to folks about an opportunity located in New England.  It is an land development investment.  It is something I have invested some funds in and find the potential worthy.  Several of the folks I talked to, flatly said they weren’t interested in any real estate deal they could not drive easily too.  This stunned me for several reasons. 

First, real estate investment in Florida, especially this area of Florida, is very questionable at this time.  We have a record supply of both new homes for sale and existing homes for sale.  Prices are high, compared to rents.  Developers are selling as much of their inventory as they can for as little as 50 cents on a dollar to major concerns who are content to sit and hold for a few years at that price.  In short, I think it will be several years before the environment makes sense to buy investment property.  Commerical property has been doing better, but over the course of the last year, vacancies has increased making it less desireable at this time. 

But other areas have different fundamentals.  Many which are much better than Florida right now.  So why not look around other areas?  I mean, if you invested in stocks, would you say I have to be able to drive to the company headquarters?  Well, no.  But, you would look at the business model, the accounting, etc. to figure out if you wanted to invest, right?  So why not the same with real estate?

Which gets me to the point of this post.  In order to build wealth you need to expand your horizons to a point where you can find deals that make sense.  And in this day and age, that is pretty simple with the communications, travel capacity, etc. that exists. 

I think that is where many amateur real estate investors have made bad decisions.  Wanting to invest in your own town is great, but not comparing your own area to other possibilities is a mistake.  Investing in your own area despite poor fundamentals, is a fatal mistake.

In our town, many people made that fatal mistake.