Podcast Episode - Don't Make This Mistake


401k, Financial Independence, Life Insurance, Podcast, Retirement, Roth IRA


June 09, 2022

Listen to Podcast Episode:

In this episode of Women & Money, Suze addresses special concerns from two nurses, Denise and Turquoise, who were misled into investing in an insurance policy.


Podcast Transcript:

June 23, 2019. So over the past few podcasts, I've been looking at them, and there's so many of them that deal with emotions, and abuse, and what's going on with personal things. So today I want to talk more about finances with you. And the reason I want to do this is I am pissed. I am pissed at the number of emails that I am getting from teachers and nurses, two groups of women, mainly women, and I understand there are men in this group as well. But the emails are all from women. So I'm going to address women on the Women & Money podcast, that are talking about you are being suckered into investing your money in life insurance policies for you to save for your future. How many times do I have to tell you that life insurance is life insurance, investments are investments, and they never, ever, ever should be combined. It's one thing when you're getting in a life insurance policy or an annuity or something like that that's giving you lifetime income and that gives you security. There are places for that in your life. But there are no places in your financial life for you to purchase an insurance policy, where you invest in this policy to get tax free income later on in life, to get growth, and to replace retirement savings for you. It is driving me crazy. Now before I go into all of this, the emails that are coming in are being sent to asksuzepodcast@gmail.com. You can write me and I will read them. I read every single email that comes in. And to this date, I have answered every single email that comes in. Yes, I have personally answered you. And so many of you are wondering, why at this point in your career are you really answering our emails? And the answer to that is simply, because I can. And because I want to. And because I don't like getting the emails that I am currently getting, which tells me so much about the bad financial advice that happens to be out there. Now, I get that people love to make a target out of me. I get that. I get that sometimes magazine articles can be written about me, and just say what does Suze Orman know? Well, here's what I know. I know that I care about you. I know that there isn't one other financial expert at my stature that takes their personal time to answer your emails. I know that most of the money podcasts that are out there are out there for what? For getting your money. So they can make you their client. They're talking to you about this, they're talking to you about that. But most of them are not talking to you about the fact that you don't have any money. All you have is credit card debt. You've been in a relationship for 30 years, and now that relationship is down the drain. And how do you start over without absolutely nothing! Now this is a one-of-a-kind podcast. This is a valuable podcast because in this podcast, you and I talk about the things that most other podcasts don't even go near. Most other magazine articles don't even go near. It's about you, your money, what your money reflects in your life, how you never fix a financial problem with money, and the gift of understanding who you are and becoming the strong, smart and secure women I all want you to be. That gift can turn your life into solid gold. But that can't happen if our teachers and our nurses are all being taken advantage of. So today on this podcast and as I was just saying, you can write in to asksuzepodcast@gmail.com, and if your email or your question is chosen, I will read it on the air. So if you don't want me to read it on the air, or if you don't want me to use your real name, just say so. Just say so. I'm not just doing this so that you write me in, and I choose all these emails for the air. I'm doing this because you deserve that. You got this ladies, you got this. Now here's what I'm gonna do today. two people have written me, and here's the first email, it's from Denise. She says Hi Suze. This product was sold to me as a savings account for nurses. It is actually a whole life insurance policy. I bought it as a new grad nurse in 1992. It is $75 a month. What do I do with it? The reason that I chose Denise's email and question to read to all of you even though I know this isn't ask Suze, this is about Suze's pissed off about something today, and I want us all to go to Suze School. But I'm reading this to you because this is what will happen to you 27 years from now. Because that is how long Denise has been paying for this. This is what will happen to you if you don't understand right here and right now why whole life insurance is not an investment that you want to touch on any level. Denise sent to me all of her illustrations that she was given when she purchased this. And if you look at the illustration that she was given, you would see, and I want you to learn from this now. You would see that there's a guaranteed cash value, a guaranteed death benefit on the illustration, and there's also a projected cash value illustration, and a projected death benefit. Her projected illustration showed her that after 27 years of putting in $75 a month, that she would have $52,000 of cash value for her to take out. Fabulous when you look at it. She also looked, I'm sure, at the projected death benefit of this illustration which was $200,000. After we communicated for a bit, Denise actually contacted this company, and here's what she found out. She found out that she put in $24,300 over 27 years, and if she was going to cash out that policy today, oh no, no, she would not be getting $52,000, she would be getting $28,399. In 27 years, she made $4,000 dollars. You think you could retire on that, that kind of returns? You really think so? And the death benefit was only $136,000. Now the question is, what could Denise have done if she simply had gotten great financial advice? So pretend now that you are Denise. That somebody is trying to sell you a whole life insurance policy. That you are a nurse, you are a teacher, you are anybody out there, and they're telling you what a fabulous investment this is, and they're showing you the projected illustrations of what it's going to be worth. You need to disregard what they are projecting, and look at the guaranteed cash values, and the guaranteed death benefit. And if those numbers impress you, fine. But they won't. They won't. Because all of that money is going to pay what for is the insurance agent's commission, for the insurance company, for everybody else to make money off of you than you. Do you know that if Denise simply had taken $75 a month and invested it month in and month out for 27 years in a good no load Standard and Poor's 500 index fund like a Vanguard fund that just returned an average annual interest to her, or returned to her 8% a year, she would have $82,000 today versus $28,399. Oh, but you're thinking to yourself, but Suze, she didn't have any insurance. Do you know that back then she could have purchased a $200,000 level term policy, and that would have cost her $15 a month, and she could have invested the $60 a month difference between the $75 she was giving this company, and after 27 years she'd have $65,000 invested in that Vanguard Fund. Really? $65,000 vs $28,000? The point that I am making here is if anybody and I mean anybody approaches you, and I don't care if they get to come into your hospital and speak to you. I do not care if they get to come into your school and speak to you. I do not care if they show up on a military base. They are not sanctioned by the hospital, they are not sanctioned by the school, they are not sanctioned by the military, or the church, or the synagogue or wherever you go. And you hear these people, these are people wanting to make money off of you. So if you ever hear anybody say to you, oh, I have a great way for you to save for your future tax-free, and they mentioned the word insurance in there on any level, you get up and you walk out. Just that simple. But it wasn't just Denise that this happened to 27 years ago. Last October, this happened to a woman by the name of Turquoise, and she just wrote in to the asksuzepodcast@gmail.com, and here is what she says. Hi Suze. My name is Turquoise. I'm a 32-year-old nurse from the Bay Area. I've started listening to your podcast, and I am so scared that I made a huge mistake. I had met a financial advisor, and after several no-strings-attached meetings, decided to invest money in a life insurance policy. I opened it with $5,000, and have been giving him $600 a month since last October. As I am recording this podcast everybody, it is June, the middle of June in the year 2019. The way it was explained to me, multiple times because numbers aren't my thing, was that this was to be considered like a savings of sorts. Should I need money, I would have access to it. If I die, my children will get money, I have two young children. And it would be there when I retired to use to supplement my 401K as tax-free income. Warning bells. Warning bells. The reason I know I am reading you an email even though it isn't Ask Suze Anything on Thursdays, is because you have to learn from this. And this is a serious email, because this woman, thank God Turquoise wrote in and she's only been doing this since October, and again we're in the middle of June so alright we're not losing that much. But at 32 years of age, we do not have $9,000 to lose or $5,000 to lose. You don't have a penny to lose. So therefore, that's why I'm doing this today. She goes on to say, I asked about an IRA, but it was explained to me that I make too much to have one, and I would have to fund it in some convoluted way at the end of the year instead of just steadily adding money every month. It wasn't the first time I've heard that, a rep from Merrill Lynch once told me the same. The reason the Women & Money podcast is so important, is that you have got to understand how everything works yourself. If you just decide to rely on financial advisors from these major brokerage firms, or wherever you are finding them, or wherever they are finding you, and you are not aware of how everything works, you are going to be taken advantage of. You absolutely are. And I don't want that happening to you. So I obviously I wrote turquoise back. And after the shock of her realizing it was really me, here's what went on. I wrote her and I said, can you imagine. For $600 a month, you could at your age, assuming, let's just say, assuming she was in great health, she could have purchased a 30-year level-term policy for $300 a month with a death benefit of $500,000. More than this was giving her. And then she could have been using the $300 a month difference, because remember she was investing $600 a month, to fund a contributory Roth IRA. And in 30 years at an 8% annual average rate of return, she would have $500,000 that would all be tax-free. Turquoise was simply looking for a way, again, to invest, so that it could be tax free, she could have access to it. You understand when you put money into a contributory Roth IRA, you can take out any money you originally put in without taxes, or penalties whatsoever regardless of your age, or how long that account has been open. So that money, a lot of it, what you're putting in, is liquid to you. And so now I'm conversing with her, and I'm telling her this. And again, it goes back and forth, but I can't have a Roth IRA. I make too much money. I asked her some questions and she absolutely could have a back door Roth IRA. That convoluted IRA, that one of the advisors told her, oh, you had to fund it all at once at the end of the year, who cares, all Turquoise had to do because she had no other IRAs whatsoever, is open up a nondeductible IRA, and convert it to a Roth. That's all she had to do. That. Was it not so complicated? It's actually, in her case, quite easy. So now I'm telling her all right, I want you to cash this policy out and stop it. Now. Now she has put in, in total, $9,900. Do you know how much how much she's going to be able to get back? Of the $9,900 that she put in? Of this investment that the advisor told her she could get her money anytime she wanted with just a little penalty. It wasn't a big deal. She's only going to be able to get back $5,112. I don't know. I think almost $5,000 penalty in a few month period of time is a serious deal. Serious. I asked her, did you know how much commission he made off of you? You know, I have no idea. So again, you're listening to me. If you make an investment with anybody, they need to tell you how much commission they made. You don't need to ask him. They should be telling you. And if they're not telling you, you should get up and walk out. Because you deserve to know how much you are paying for something. And for some reason women, you get afraid to ask. I'll hurt his feelings, I'll hurt her feelings. It's alright. I trust them. You should not. You should not trust anybody but yourself. And so therefore, you don't trust somebody, you educate yourself. You learn at what you're investing in, or don't invest. How many times do I have to say to you? It is better to do nothing, than something you do not understand. So on this Sunday, which is when this podcast normally comes out, I know I tell you stories, I tell you stories about people, and relationships, and things like that. But this is the story you need to hear, because this is the story of your life. This is the story of what could go wrong. This is the story of Denise, and Turquoise, and how many other women and men who are teachers, who are working as nurses, who are working, serving everybody. And yet, we are just allowing them to be ripped off. But no, we're not allowing them to be ripped off. They are allowing themselves to be ripped off. Because they did not take the time to get educated. I am using them as examples for you. Because if something goes wrong in your life, financially speaking, and you know that this podcast is here, you know that you can write in and ask, and if you don't, I can't help you. But you can, you can help yourself. Listen to this podcast. Tell everybody you know about this podcast, make this podcast a part of your life, so that you can become the strong, smart and secure women that you were born to be.


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