Is Bigger Really Better?

Have you heard about the Pyle brothers?

They did most things alike. They married sisters, lived in the same neighborhood, and worked for the same employer. Both planned for retirement.

Here’s how the brothers were different. 

Big R. Pyle didn’t think much about life’s risks. As a kid, he routinely defied his mom’s “no swimming for 30 minutes after you eat” rule. As an adult, he drove without a seatbelt, and he scoffed at the idea of life insurance. 

Bet R. Pyle was more cautious. He always obeyed his mother and was more conservative with his investments. Against the advice of some, he even bought a large, whole life insurance policy. 

At retirement, Big R. Pyle had the bigger, flashier portfolio. He gloated to his brother that he was now “self-insured.” (Good thing since when he priced small term policies for a man his age, he nearly passed out.)

Big R.’s plan was something he’d read once in a book: “Each year, I’ll take 5% of my total retirement investments and live off that.” Foolproof, right? 

Except that interest rates plummeted. Big R. saw that the amount he was earning on his now “low-risk” investments wasn’t anywhere close to 5%. So, he moved his assets back to the stock market in search of higher returns. Unfortunately, he got there just before a big market drop.

What about Bet R. Pyle? He doesn’t have any worries about running out of money. When Big R. asked him, “What’s your secret?” Bet R. replied with a wink, “I’ve got seatbelts on my money.”

Bet R. entered retirement with a smaller portfolio than Big R. But with his large whole life policy (in addition to his other investments), he’s enjoying more options and benefits:

  • Fixed premiums (no increases)
  • Lifelong coverage (as long as the policy’s premiums are paid by him or the cash value in the policy)
  • A guaranteed—and sizable—death benefit (ensuring his wife will be taken care of). 
  • Significant cash value (which Bet R. can access via loans or withdrawals—or convert into an annuity which will pay a guaranteed amount for life).  
  • Tax advantages (Unlike the money in Big R.’s IRA, Bet R. doesn’t owe taxes on his policy’s cash value and his heirs won’t pay taxes on the death benefit.)
  • Dividends (that Bet R/ can reinvest in the policy to grow its value)

(Remember, always consult a licensed insurance agent when considering any insurance purchase.)

The surprising bottom-line? Cautious Bet R. Pyle is actually in better shape than risky Big R. Pyle.

The lesson? You don’t just want to aim for more wealth. You want to balance your wealth with the right benefits.

I’ll close with this…maybe you’re right where the Pyle brothers were: making big retirement plans and decisions.

If so, I’ve got a free tool that can get you started. It’s called the RISA (i.e., Retirement Income Strategy Assessment). In less than 10 minutes, it can show you what kind of retirement income plan best aligns with your personality, goals, and lifestyle. There’s no obligation, and you can access it by emailing me (bmoore@argentadvisors.com).

Then if you want to discuss your results further, give me a call!

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

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