Trying anything to nudge myself into the Christmas spirit, I figured a quick stroll to the mailbox might help. I trundled up the driveway with eager Christmas card anticipation featuring pets, college updates & humble bragging. Instead, I was greeted with the third weekly round of Boston Proper, Venus and Frontgate catalogs. Michelle might as well serve on their boards. Shoulders slumped, I resigned myself to Plan B: watching Pee Wee Herman’s We’re Having a Reggae Christmas video. Just as I was doing a U-turn, I heard “Excuse me fine sir”. Looking around for the nearest uncle or tax payer, I soon realize that it was I being addressed.
Out of nowhere, a nattily dressed gentleman in a fedora appeared. “Hello, I’m Clarence Odbody”. “Hi there” I grumbled – still focused on Pee Wee & Bryan Adams. Further engaging, Clarence said he couldn’t help but notice my downtrodden body language. Clarence said he wanted to share a quick story of a fellow Huntertown acquaintance. Reggae could wait; I was all ears.
Without going too deep in specifics, Clarence (we’ll call him ‘C’) said a dude named George B was contemplating a jump off the Kel Road bridge into Shoaff creek. Doing some quick math, I deducted “That’s 6 feet down into 2 feet of water – was he trying to sprain an ankle”? “Well, I’m not sure he was thinking straight; it seems George was crocked from a few-too-many at The Willows down the road.” “Yeah, my bro-in-law is on a first name basis there” I quipped. “It seems George has some money issues and was just turned down at the Gump Savings & Loan for a line of credit.” “Bob that bastard” I muttered.
C continued: “George has a wife, young children and needed immediate liquidity.” “Today’s generation opens a Draft Kings account” I asserted. C stressed: “Well, it’s a bit more involved than that. George also feels he hasn’t properly planned for college funding, income replacement nor paying off household debts. All he has is a modest 401k.” “So, he really shouldn’t tap that. What about life insurance”? I asked.
“Well, that’s where I started to try reassuring him” Clarence said. “He’s a vibrant young man in textbook health”. I queried “Isn’t there some sort of health rating system?” “Yes, there is. There are five classes from Preferred Plus to the lowest, Substandard.” “I’d probably be around that Preferred Plus class right’? I asked. Spying my 2 lower shirt buttons crying uncle, C just furrowed his eyebrows. Clarence endured: “I shared with George this insurance actuarial rate table. As you can see, term life is quite reasonable”.
“Interesting. Whole Life is much more expensive. I guess because of cash accumulation” I quizzed. “Correct. Finding a low expensed policy is the key. Preferably under 1.5% annually to cover mortality and administrative costs – and no surrender charge schedule. A good whole life policy should be viewed more as savings than investment; 5% annualized return is not unheard of. George should stick with well-run Mutuals – which are run for the benefit of policy holders & don’t have to share profits with other owners. And you can borrow against it but if you fail to repay in a timely fashion, it becomes a taxable event. Term life, which typically does not accumulate cash, is more attractive as pure insurance to bridge life events economically.”
“Hmm. My dad started a whole life policy for me as a baby. I still pay $34/year to keep it in force. Cash value is now $7000 with a $15k death benefit. I have to sleep with one eye open” I boasted. Checking his watch, C persisted: “I suggested George call a local agent named Anna. She’s a lovely whip with short black hair. She’s going to set up a health screening & then shoot him some quotes.” “I don’t trust any girl with hair shorter than me” I bellowed. “Two words: Rachel Maddow.”
Sighing, Clarance was starting to suffer from engagement remorse. Back tracking, I asked, “So it sounds like you helped put George at ease”? “Yes. He is now aware of other financial avenues for his family’s well being. It doesn’t necessarily amend his very short term need but I think I can persuade Bob to show some holiday compassion.” “Well, I have a sneaky good feeling about a 6 team parlay this weekend” I mumbled at my shoes. As I looked up, Clarence was gone. Poof. I grinned, did an about face and began my trek back home to Pee Wee. It was then I heard a faint bell ringing in the distance. Merry Christmas.
Fiscal Fitness is a publication of Houlihan Asset Management, LLC for the benefit of its clients and friends. Houlihan Asset Management. Wealth Counseling/Asset Management. Copyright 2023