JUST PLAIN TALK: Don’t confuse luck with brains

Buz Livingston
Buz Livingston

When we moved to South Walton, world-famous singer/songwriter Sheryl Crow had a home here, too. About the same time, she wrote “My Favorite Mistake” about a philandering boyfriend; my favorite mistake deals with a series of dubious financial decisions.

In the '80s, a friend of mine sold me a universal life insurance policy. It made sense, sort of. I had a young family and an insane amount of debt. Fast-forward 10 years it dawned on me I had made a financial gaffe and term insurance (life insurance for a specified number of years) was a better option. Term insurance premiums are minuscule comparatively, and while I didn’t know it at the time, the universal life policy was likely underfunded and would require additional premiums.

My next slip-up was declining to use the policy’s cash value for a paid-up life insurance policy. A 20-year term policy coupled with a paid-up policy would have been a stellar financial move. Instead, I took the cash value and bought Cisco stock. While I sold the stock at a profit, I missed Cisco’s peak by a country mile. It gets better. I miscalculated again by foolishly letting the term policy lapse. My rationale was I no longer had any debt, but it was a bone-headed move. These blunders are my favorites because I didn’t die. I outlived the term policy that I dropped, and dumped one that would have required additional premiums. I got lucky; sometimes, the ball bounces your way. It’s never too late to do the right thing; a term policy covers me thru my late 60s.

Too often people, particularly young families, have too little insurance. Friends, like mine, sell them “permanent” insurance when term is a better option. Also, people don’t realize Social Security survivor benefits for children provide a benefit similar to term insurance. A decent rule of thumb is having six to eight years of income covered by life insurance; each family’s case is different though.

Some people howl when insurance agents tout life insurance as an investment, but under some circumstances, it can be worthwhile. If you are currently in the highest tax bracket, will be for the rest of your life, can pay exorbitant premiums for decades, and have fully funded all retirement plans, it might work. Get quotes from three different agents, not just from a “friend” like me. For the vast majority, life insurance is a lousy investment for numerous reasons. Low-cost ETFs provide tax-deferred growth much cheaper than life insurance. For the first decade, permanent life insurance returns are negative; term insurance is a better use of your money. Sure whole life policies bought decades ago have highly competitive guaranteed returns on cash value, but that’s not why you bought it; you got lucky, don’t confuse luck with brains.

You can’t always get what you want but Buz Livingston, CFP can help you figure out what you need. For specific advice, visit or drop by 2050 West County Highway 30A, M1 Suite 230.