Yesterday I promised a look at a very conservative asset class with very low management costs and no current personal taxes. I proposed a comparison to a very large, conservative mutual fund. Over the past five years it has produced yields before fees and taxes ranging from 4.7% to 8.6%. With that choice, the investor’s problem is twofold.
The proposal is to gradually move the asset into a participating life insurance policy. The asset mix is nearly identical so there will be no market changes that can be better for one than the other.
The advantage is that the insurance policy has:
In this case the advantage to switch is material. Around life expectancy, the estate is more than 50% greater.
You are offered two solution that have the same financial input, similar underlying investment characteristics, and large financial institutions in the background. One accumulates to about half again more money about the time you expect to need it. Not a difficult choice if you know it exists.
The trick, of course, is to know how many of today’s dollars are going into the last dollar category. Fortunately the amount is not ground into granite. You can adjust later.
If you hold very conservative investments with a view to never spending them, you may have a better choice.
Ask for help.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.