December 13, 2018 David McKnight
The White Coat Investor Responds (and I rebut his response)

The White Coat Investor responded to my critique of his blogpost.  I subsequently responded to his response.  Take a look at the exchange.  I think it’s an interesting window into the tactics anti-life insurance advocates take in trying to bolster their case:

Wow. 3500 word comment posted on a blog post written 5 years ago that is only 1400 words long. That’s impressive, even for an insurance agent. You are an insurance agent, of course, even if you call yourself a “comprehensive financial advisor.” So no surprise that you think insurance is a great investment. It’s not, even if one can borrow against it tax free. The returns aren’t even bond like in anything but the very long run, and even then, they are lower than bonds. For the first decade they’re generally negative. How is that bond like? Would you buy a bond knowing you would have a negative return for a decade? Of course not.

At any rate, a real financial advisor doesn’t sell products, they sell their time. Just like an attorney, an accountant, or a physician. You sir, are a financial salesman. Your book is used by agents to sell whole life insurance inappropriately. Most purchasers of whole life insurance regret their purchase. A recent survey I did of physicians showed 75% of those who have bought it regret it. 80% of purchasers surrender it prior to death. That’s terrible for a product designed to be held for your entire life. The statistics are very clear. This is a crummy product designed to be sold, not bought.

Time is NOT vindicating the strategies in your book. You asserted in the book that tax rates were likely to go up, when, in fact, they went down since the book was written.

I love how you slip little words into your sayings to make them technically true, but misleading. Such as this one:

When WCI makes the categorical claim that all policies charge a NET interest rate for loans, he reveals an inexperience and unfamiliarity with the various policies available in today’s market place.

I did not make the claim that all policies charge a net interest rate. In fact, it is possible to buy a policy where the dividend rate matches the interest rate. That, however, does not mean it is an interest-free loan.

The fact remains that a goal of a 0% tax rate in retirement, the entire premise of your book, is counter productive. Tax diversification is good. Roth conversions can be good. Even a whole life insurance policy can be good in the right circumstances. But going for 100% tax free income in retirement is not. You owe the world an apology for writing that book. I don’t expect to see it though. Your argument is wrong. I’m not sure if you’re making that argument out of ignorance or because you’re trying to sell more whole life insurance or to help other agents to sell more life insurance. But the argument itself is wrong. That’s the problem.

David McKnight | December 13, 2018 at 8:25 am MST

My response was 3500 words long because it included your 1400 word response as well. I think this is fairly typical of your M.O. You seem like a bright guy, and come across as pretty congenial on youtube. But I don’t think your answers are forthright. To wit, this is what you said in your post;

“…and the life insurance cash value grows at 4% and then borrowed tax-free (but not interest free).”

You didn’t say most policies charge you a net rate of interest. You said life insurance cash values are borrowed against tax-free “but not interest free”. The unwitting reader can only conclude that you’ve done your research and determined that all life insurance policies charge a net rate of interest. This is plainly not the case. There are multiple companies who credit the exact same interest that they charge and it’s guaranteed in the contract. If you aren’t being forthright about this small little detail, what else aren’t you being forthright about? The reader can only wonder.

I also note that you didn’t touch the central premise of my book (or my response to your blog) in your response, that the evidence from academia overwhelmingly suggests that tax rates have to rise precipitously to keep our country solvent. You can’t just gloss over this in your response because your readers have a lot hanging on it. Even if we table the discussion on cash value life insurance, you owe it to your readers to give a more compelling explanation for why you believe tax rates will remain level or increase only slightly over time. The brightest minds in Academia and Government disagree with you.

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