Single People’s Most Impactful Finance Choice (and Understanding the Dual-Income Household Edge)

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Many of you have asked: “How the heck do I make it work on a single income? What can I possibly do?” We’ll look at the levers you can pull (one in particular) and the context of how we got to this point. Plus, we respond to some of the feedback we received from our recent life insurance episode.

Rich Girl Roundup is Money with Katie’s weekly segment where Katie and her Executive Producer Henah answer your burning money questions. Each month, we’ll put out a call for questions on her Instagram (@moneywithkatie). New episodes every week.

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Mentioned in the Episode

• “The Two-Income Trap” by Elizabeth and Amelia Warren

• Article on the collapse of housing due to a lack of building

• How the back-of-the-napkin math determined 35% of all households are married dual-income: This census data from 2020 and this Pew Research data from 2024

• 2024 SmartAsset analysis: Salary needed to live comfortably

• Median income in 2023 (CNBC)

• MIT Living Wage Calculator

• Gender wealth gaps in the US (St. Louis Fed)

• Blog post on home sizes

• Personal Finance 101 course

• The Money with Katie Show episode on life insurance

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Katie:

Welcome back, Rich Girls and Boys to the Rich Girl Roundup weekly discussion of the Money with Katie Show. I’m Katie Gatti Tassin, and on Monday mornings my executive producer Henah and I use this segment to talk through listener questions, interesting money stories in the news and more casual financial topics…right after a quick break.

Before we get into it, this week’s upcoming main episode is about something we’ve been seeing all over the headlines lately, the panic about lower birth rates. So we’re going to dig into the concerns, especially because it’s primarily framed as an economic issue as well as why a lot of the discourse out there seems to be kind of missing the mark, in my mind. So strap in.

Okay. Onto the roundup. Henah, how are we doing today?

Henah:

We’re good. I’m excited for that episode because I haven’t read it yet, your script, so we’ll see where you land. But this week’s question came from approximately 1 million people during our recent call for questions including from Rich Girls: Carly, Kara, Cassandra, Katie, Shelagh, Ashley and Claire, lots of C and K names.

Katie:

It’s a lot of ‘90s babies right there.

Henah:

And so the general question was how do I make my financial dreams and goals come true on a single income? And so the fact that we’d gotten this question so many times struck me—your favorite term—as something we should address, particularly because we have talked about wage stagnation and unaffordable housing and inflation, and obviously that can be much harder for single income Rich People and that doesn’t even include single households with children. And when I started doing some research, pretty much every piece out there was like, “Have a side hustle” or “Be introverted and thrifty,” which not great, but…

Katie:

Be introverted.

Henah:

So we can get into the actual stats and data around wages and all of that. But Katie, when we first talked about it, you sent me an interesting message of the first thing that came to mind when the question came up. So I wanted to hear your thoughts on that first.

Katie:

Yeah, so initially what it reminded me of was this book that I read a couple years ago. It came out in 2003. It’s called The Two Income Trap by Elizabeth Warren. Yes. That Elizabeth Warren, and her daughter Amelia. And this book basically points out that the inadvertent consequence of having more households in a country with two earners is that it now means that every household is now competing for goods and services with households that have two incomes and not just one. So I think it’s worth noting because I do have some other feelings about this argument that I’m going to share—as everyone probably expects—but almost always the example that’s given for what specific good people are competing for is housing. So for example, if you’re in a bidding war with another household for a particular home, and that household that you are in the bidding war with has two earners and your household has one earner, you are going to get outbid nine times out of 10, right?

And so the theory is that, okay, if this happens at scale, that’s going to drive up prices. How true is that? Here’s the thing, I think there is a kernel of truth to this argument, but not really. And I say not really because intuitively it sounds really good. It makes a lot of sense. And again, kernel of truth, it’s not that there’s nothing to it, but if you consider the fact that they made this argument in 2003, housing prices were about as affordable as they had ever been, until about 2021.

So the reason that housing is really expensive right now is not because women are in the workforce, it’s because there is a giant homebuilder monopoly that just won’t fucking build houses, not because more households have two incomes.

Henah:
That’s our first F bomb of the episode.

Katie:

How long did it take? Three minutes? Yeah. Great. Love that for us, really earning that explicit label on this show. But anyway, there’s actually an amazing article that I am going to link in the newsletter and we’ll link it in the show notes too about this home builder monopoly and how the NIMBY/YIMBY argument is what usually takes the forefront about why a building isn’t happening, but that this kind of consolidation of power and monopolization of the home building industry might actually be the true driving force of the under building that has been occurring.

That argument, again, it sounds good on paper, but I do think that it does deserve a little bit more attention. And so you mentioned stats about wage data and such. I think that we should get into that. The other thing that I want to call out is to just put some scaffolding around the household formation in the United States and how many households have more than one income.

So overall, 50% of households in the US are married couples, 30% are single people living alone. And then the other 20% is other family types, so unmarried living together, single living together, intergenerational living, what have you. And when you look at that specific married bucket, the half of US households that are married people under one roof, the change in how the one income to two income trend happened is interesting.

So in the 1960s, 40% of those households, those married households had both spouses working. So almost half even in the 1960s, by the 1980s, it was up to 50% of them; by the 2000s, 60%. Today it’s around 70% of married households that have two incomes. So if you combine those two statistics and you do some quick back of the napkin math, assuming my back of the napkin math is correct, it’s around 35% of households overall that have two adults who are both earning money. So it’s not the majority of people. And the other thing that I think is interesting is the fact that DINKs are kind of like the financial winners in this game since married couples, even those who have two working people in the household, those with children have high additional expenses that single people without kids don’t have. So what we can really hone in on is those who are financially most competitive are the DINKs.

Henah:

Yeah. That actually aligns with some of the data that I found. So I found this SmartAsset study or analysis that was done of how much you would need to live comfortably as a single person in 99 of the largest US metro areas, and it compared how much you would need as a single person as well as what you would need for two working adults with two children. And there was a huge difference. So I mean, as you can imagine. So the median income you want to live in, one of the 99 largest US metro areas was $93,933. And so that’s—

Katie:

What you would need or that’s what people have?

Henah:

That’s what you would need. So they defined that as the income you’d need to cover a 50/30/20 budget.

Katie:

Interesting.

Henah:

So they extrapolated the income needed from that and then used data from the MIT Living Wage calculator to get that info. And so the ranges are from $75,000 as a single person to $175,000 for two adults, two children in Houston, which is the lowest cost of living out of those 99. And then New York City was the highest, and that ranged from meeting $138,000 as a single adult to $318,000 as to working adults with two children, which I mean not surprising, but also such a huge number.

Katie:

So wait, it’s saying that in order to have a living wage in New York City, a single person living alone needs to make $138,000?

Henah:

Comfortably based on the 50, 30 20 budget. Yeah.

Katie:

Geez. Okay. I guess it’s that crucial. If you want to save 20% of your income, this is what you would need.

Henah:

And I think that there’s places that people probably cut. But I more so looked at it because the median income across the US in 2023 was $48,000. And so there’s a huge discrepancy between what comfortably needed and the wage is offered. And so I really wanted to empathize and call out how tough it is from the jump for all these people who were asking like, yes, I see you and I see how hard this must be.

And the median income in the lowest state is $37,000 in Mississippi. So I can actually link the MIT Living Wage Calculator in the show notes, and you can look it up for where you are in your area for you’re curious, but I think it’s important to look at this context because we exist in the context.

Katie:

Coconut, coconut, coconut, coconut. Yeah, you know what? I do think that that’s helpful because there are a couple different threads that I want to pull on here. So I guess first before I get into the specifics of single finances, I can also hear someone listening to this being like, so at what point are you going to tell me how to get rich as a single person? I think that in general, the reason that sometimes the way that these conversations are framed, which is see how much easier things were when women didn’t want to work outside the home. You could support your family on a single income or see this is why everyone should get married because look how much easier your life is. And again, kernel, the smallest little kernel of truth in that. But I think whenever we talk about that, almost always what people are referring to is the 1950s and 1960s and the way that life worked back then. And I think it just ignores an enormous amount of context about all of the other things that have changed since the 1960s that have made it very difficult to live on a single income. I feel like whenever these types of conversations come up that kind of marry the financial outcomes to family formation, things can get really creepy and sexist really quickly. So I just always like to be like, yeah, let’s also though take a look at all the other things that have changed since the 1960s that might explain why the median wage is, what did you say?

Henah:

$48,000?

Katie:

Yeah, that is a really important piece of the puzzle to talk about.

Henah:

Yes, actually. And I think part of this is we often hear about the singles tax or the fact that married filing jointly people get a tax break and look at the other things that all these single people have to pay more for. And so it kind of places that idea in your head that I should get married because I do get all these other things easier. But again, to your point, maybe look at the root causes and not just the solution that you think might make it easier.

Katie:

Yeah. Actually I’m glad you brought up taxes because it kind of emphasizes that yes, systemically marriage is rewarded. A lot of these financial systems were designed with married couples in mind, and so saying there’s a singles tax is correct in that respect.

Something else that I found really fascinating about the data when I was looking into this is the gender wealth gap is way smaller for single men and single women than married men and women. So obviously in this dataset there are a lot of different ways to slice and dice it. So in this particular dataset from Fred, they’re looking at the gender wealth gap by race and by household formation status. So single married, white, Black, Hispanic, what have you. And the average white married man is the person in this group that has the most money of any other race or household type.

Henah:

Color me shocked.

Katie:

So the average white married man has the most money of any group, the most wealth $333k. The average white married woman is the second highest group of wealth of any of these, but she has way less than the average married man. She has $199,100 of wealth. That is a 67% wealth gap.

Compare that to, again, just holding the whiteness consistent for that variable. But then looking at the singles, the average single white man has $92,000. The average single white woman has $85,000, so like a 7% wealth gap. So I find that fascinating though because that trend holds true that the married couples actually have bigger wealth gaps than the singles do. And my hypothesis was that because of the gender wage and wealth gap that yes, married women will be better off than single women because they are financially tied to, in the case of the white man and the white woman, the highest most well-paid demographic group in our society. And they are, but they’re at a much greater disparity than their male counterparts. And I don’t know, I’m like, I’ll y’all use your imaginations to fill the gaps there about how that happens.

Henah:

Wonder why…

Katie:

That really interesting of there must be something about being a married man that makes your life easier such that you can make a lot more money.

Henah:

What could it be?

Katie:

What could it be?

Henah:

I’m not sure, scratching my head. I mean it’s an interesting point, right? Because this is also for the white American dataset and that wealth disparity just probably grows and continues to grow if you’re not white or in other demographics.

To get back to the housing question that you had alluded to, I think there is something there about the high cost of living in housing being kind of the biggest lever that you could pull in this, how can I make it financially game? But it was interesting because I then also saw so many posts that were like, I’m too old to stomach roommates. I’m just going to make it work as a single person and as an introverted person. I understand, I hear you.

But I think this also relates back to that loneliness epidemic and focus on single family homes and being siloed off within a community and this idea that if I bought a home, I’ve made it even if it’s just for one person.

You had done a really interesting piece a couple years ago about the size of homes, and I think that also relates to this larger conversation.

Katie:

Yeah, I think housing is the crux of this. It makes sense that it would be too because it is most people married or not most people’s biggest expense. So the fact that that is where you’re going to see the biggest economy of scale come in makes a difference. But if you were to boil this down to the simplest explanation, I think the question we have to ask is tax code aside, married filing jointly, tax breaks aside, why would a couple have better financial outcomes than a single person if a couple is theoretically just two individual people pooling all of their income and all of their expenses, if the couples reliably have better financial outcomes, which the data indicates they do, either there are a couple potential things that could be happening here. Either the tax break is so advantageous that it explains the discrepancy. I don’t think that that’s true. It is advantageous. I don’t know that it’s advantageous enough to explain to—

Henah:

That degree.

Katie:

Exactly. Or it must lead to higher net incomes aka omething about the concept of being married enables you to earn more money. I think that in some cases that is true for men. I think the opposite is probably true for women, potentially. And I think this is what we’re probably going to end up landing on, not to spoil the ending, but lower net expenses in some way.

Henah:

She said not to spoil the ending 20 minutes into the episode.

Katie:

Hahahaha. Everyone’s checking their watch. So when are you going to get to the tactics, idiot?

There’s only one area where I can see a meaningful opportunity for achieving economy of scale. And it is housing because on some level there really is no “hack,” hack that I can offer here in good faith beyond the obvious thing, married people have roommates, one another. So getting a roommate is kind of like that’s how you take the wind out of the sail of the big financial benefit that married people have. And it’s probably worth noting at no point in my life could I ever afford to live by myself when I was single, from the time that I graduated from college to the time that I got married, I always lived with a roommate and split rent with that person. And so in that sense it was like I was a little bit like a faux marriage from a cost perspective of you’re splitting rent, you’re splitting utilities, and I just kept coming back to that of everything else about married life and the amount of money that we have to spend.

In some ways it got more expensive because of one particular category, which is food. I noticed that everybody asked this question was a woman, but my husband eats so much fucking food and when I lived alone, I spent maybe $300 a month on groceries. We probably spend four times that now. So obviously he’s also bringing his income to the table. So it’s not like it’s on me to supply that alone, but we got more space, we buy more food, we’re now buying two plane tickets instead of one plane ticket. So in my experience, there are a lot of things that just scale up proportionally rather than achieve an economy of scale. Housing is kind of the only exception to that, at least from what I’ve observed.

Henah:

No, I agree with you in the expenses front because my husband eats so much more than I do, and when we go on Costco runs and it’s like $400, 75% of that is his. So I was also thinking on the flip side though, there are other expenses I wouldn’t even have if I didn’t have a partner. I probably wouldn’t have multiple pets, I wouldn’t have gas, I work from home. I probably wouldn’t need to pay for double the car insurance or all of those things. So I do totally understand your point

 I do also think though that bar moving and finding a roommate, we often talk about these levers that you can pull, right? What is in your control? If we know that housing is unaffordable, can you look at your expenses or your income? And I don’t want to be that person that’s like, just cut your Starbucks and you’ll be fine. But if you aren’t a place…

Katie:

Have you considered saving more money? Can I recommend perhaps spending less?

Henah:

I’m trying to give an answer. So it’s like could you look at increasing your income? Easier said than done. I know, but Katie, you actually, you did this. It was a Personal Finance 101 course that we have, and in the lesson you were like, actually look for a higher income. I know that sounds wild, but have you done it? Have you actually considered doing this? And at first I was like, damn, she went for the carotid artery right away. But I was like, fair point, fair point.

Katie:

Yeah, at least try. No, I get you. I think here’s the thing, the message, oh, it’s all in your head. It’s not more expensive to be single. It is more expensive to be single. You are paying more in taxes and you are almost definitely paying more for housing. And maybe there are other things. Obviously we are talking two people’s experiences.

This is not a universal representation of every married couple, but I do think that to stick on the housing piece, another thing that occurred to me is that the single family home thing and this idea of wanting to buy a home as a single person, it is just true that the down payment is going to take a lot longer to save because you are in that respect, competing with some households that have two earners. This is where the Elizabeth Warren argument comes back in where I was like, there is a kernel of truth here.

It is true that you are going to be competing with people that have two incomes, and the size of a house is a lot harder to scale down for a single person because most housing is developed with families in mind, with couples in mind. So it’s a lot easier to find a one bedroom, one bathroom apartment than inventory for a one bedroom, one bathroom house. You are kind of forced to scale up in square footage if you buy a single family home, even if you’re going to be the only person living in it because the system was designed for families and couples. And so it kind of gets us back to this place of the way that society is changing.

And again, we’re going to be talking about it on Wednesday with the birth rate panic, but yes, more people are choosing to remain single, more people are staying single longer, whether it’s like I’ll get married eventually, or I have no interest in ever becoming partnered, whatever that path may be. And so now it just feels like what’s slowly occurring is the recognition that, oh, these are choices that people are making for themselves in a context that was developed for them that would assume they would make a different choice. And so now what has to change? Is it, oh, well then we should look at this breakdown of households in the US and go, there should probably be more inventory that is conducive for just a single person living by themself who doesn’t need four bedrooms or three bedrooms, what have you.

Henah:

Actually, yeah, we’ve gotten some emails that are like, can you explore modular homes or tiny homes or prefab homes, things that are built more for one or two people. And so I do think that it’s one option. I don’t think it’s the option for everybody, but it is one option to look into if you would like the quote unquote home but not pay hundreds of thousands of dollars.

Katie:

Maybe it is a house hack, maybe it’s a duplex and you’re doing one side of the duplex. I don’t know. I’ll be curious to hear what feedback is for this one if people are like, no, y’all don’t get it. Because you’re forgetting this.

As I sat with this one and looked at the data and just kind of tried to think about the, I don’t know, five or so years that I spent living as a single person, but living with a roommate, I just kept coming back to the housing. I was like, there really isn’t anything else in the that didn’t just double Everything else that I buy, we’re just paying for it now for two people. So yeah, we have two incomes to do that, but there isn’t really a huge benefit to it. So I guess taxes and housing are the only things that I could think about that really felt like it explained what was happening.

Henah:

So we got a lot of feedback from our episode on life insurance. And if you’re not familiar with the episode, we did an episode about two weeks ago on kind of life insurance that is worth looking into and some kinds of life insurance to avoid. And we got some emails that helped save people from enrolling in predatory life insurance policies. And we also heard from a lot of people who were pretty upset that we had kind of cast things in this light. So I wanted to share a couple emails and things that came in. And Katie, maybe you can kind of explain the thought process we put into the episode and how we landed on publishing it just to give people some more insight.

Katie:

While I didn’t include any of the conversations in the final cut of the episode that everyone would’ve heard when I was in the researching and writing phase of this episode, I spoke with several wealth managers and CFPs to get their gut check on my perspective. So we got an email from someone who was pretty angry whose husband sold life insurance, and she was like, this is so you just don’t understand how VUL works. You should have talked to an expert. And I just want to clarify that obviously I had a strong perspective in that episode, but it wasn’t as though the strong perspective was something that I pulled out of my butt. And so when we started getting this feedback and the reason that we want to talk about it is because after the fact, I then went and consulted a few more people to be like, hey, this is what I’m hearing. What do you make of this? And because it’s such a hot button, controversial topic, we felt like it was worth addressing some of this on air. So maybe you can walk us through some of what you saw come in as the person that monitors the main inbox.

Henah:

I think the fact that we got so many that said totally different things is indicative of why this whole industry deserves a second look and why things can be predatory and scammy. Because one person emailed us and their name is Deanna, basically they were disappointed that we wrote off whole life insurance as the simple option of a bad decision. And they talked about why they think that it is worthwhile. And they said, whole life makes sense. IUL is terrible…

Katie:

IUL/VUL being the type that Zoe had purchased. That was kind of like the crux of the episode.

Henah:

Yes. And then separately, someone else messaged and said, this isn’t well researched; cash value is not a trap. You need to look at infinite banking, IUL is bad, but whole life can be a huge tool for wealth transfer. And you’re mistaken saying that the estate tax already protects an estate and it doesn’t and the death benefit is protected.

And so I know that you kind of reached out to the different resources that you had to see how they felt, but we got a lot of people who gave us very different ideas of which things were good and which things were bad based on their own experience. So yeah, what did people say to you and the people that you talked to?

Katie:

So I think that the point that you’re making that some people wrote in were like, you’re wrong because VUL is actually great and here are all the ways you don’t understand why it’s great and you’re just missing the point. And then we’d have other people that were like, well, yeah, obviously VUL is a scam, but this other kind isn’t a scam. That variation was interesting.

There was one piece of it that I heard from a couple emails that came to my personal email that were basically saying there are use cases for whole life that makes sense. And so I still feel pretty comfortable writing off the VUL, the IUL. The whole life is the one that I was like, okay, explain to me why. Give me the sales pitch on why. And one of the ways that I wanted to get a couple more unbiased opinions was I reached out to three different people.

One is a very wealthy and intelligent friend of mine. They’re worth about $8 million. They are an incredible personal finance. I kind of sent them a message being like, Hey, what’s your thought process here? What am I missing? I know you’re the expert optimizer. I know if there is some hack to be gained here, you have looked into it and you have executed on it. So what’s the deal on the infinite banking thing? He was like, okay, I went on a super, super deep dive into that. It’s pretty much trash. There’s really nothing there worth knowing. I was like, okay, cool. Sent me this long explanation and this was the part that I found really, really persuasive. He said, the way I look at it, there’s no magic new money coming into the system, but there’s definitely fees and reduced flexibility and reduced investment choices and added complexity going out. So the only thing that can turn it into a good deal is tax savings. The estate planning savings is a bit of a red herring since you can make an equivalent annual gift to your kids rather than paying premiums. So you’re left with this tax savings that you’re paying yourself interest and able to write it off as an expense without counting it as income. I’ll admit I haven’t done a deep dive analysis on that and I can see that at a top marginal federal tax rate in California with 50% tax liability, there could be value there. I just doubt it’s enough to overcome all the fees and bad investment options, but I suppose it’s possible, even if it is marginally ROI positive, is it worth all the complexity? I feel like you would get more ROI investing that time into something else. I had asked them about permanent life insurance. So by that, that encompasses kind of all of these different types, really things with the cash value. So I thought that was interesting.

I also reached out to two different CFPs, both of whom basically exclusively work with people whose net worth is over $5 million. When I asked, can you think of any instances for your clients where you would recommend whole life insurance as part of an investment strategy or tax planning option that makes the most sense for them? For whom would that product be the best choice? One of them responded, estate and legacy planning for the ultra, ultra high net worth death benefit can be used to pay estate taxes, but that is about the only use case where I have ever seen it make sense.

The other said, keep in mind, I said, can you think of an option where, and this would make sense and explain it to me? And she responded, no. Is that too subtle? It’s expensive and not a good investment because of the fees for insurance. Term insurance is so much cheaper. You can take the difference in premiums and invest. It used to have a purpose when estate taxes were a thing and some people needed liquidity at death to pay the taxes. Since the estate tax exemption is over $13 million, not really an issue right now. One caveat could be key person insurance for a small business owner, this provides liquidity in the event of their death to either have the other partners be that share or to make sure the family will be okay. So I thought that was interesting. Again, it’s like both of them are kind of bringing in these edge cases of okay, it could make sense in these examples, you could see whole life coming into play and these specific examples and I was like, alright, that’s totally fair.

We’ll concede that. I don’t know. I’m left with the same feeling of, I recall in one of the feedback emails that we got from the experts that we’re talking to, they’re mostly like, yes, it can come into play strategically if we’re talking about ultra-high net worth people.

But one of the emails was like whole life insurance is there are so many people who die and have nothing and then their family has nothing and they can’t even pay for the funeral and the whole life insurance is what pays for the funeral. And it’s like, yeah. And in that case, they probably would’ve just been better off saving and investing the money they spent on the premiums than buying the whole life insurance.

So it’s this weird discrepancy and so is it good for poor people or is it good for rich people? The inability to get a really straight answer here and the amount of complexity that even came out in the feedback emails is just making me be like, I’m still not sold on this. I still don’t think that there’s really much going on here that’s worth spending your time on.

Henah:

We did get a couple emails who were like, whole life is the way to build wealth. And then we got an email from someone named Hannah, not me under a trade name, but it said, I grew up in an upper middle class household. My dad is an MBA undergrad, double major in finance and investments. He used to work as a stockbroker before taking over the family real estate appraisal and insurance business. Don’t worry, no life Insurance hills here. But we’ve had long discussions about how he was always taught that one of the best ways, albeit lengthy to positively change lower socioeconomic status folks, a situation is term life insurance. Obviously this is very nuanced because if you’re low income to begin with, you probably don’t have extra amount sitting around for life insurance. But similarly, this demographic is likely more financially illiterate than others. In addition, if an error were to inherit a large amount of money, they may not have knowledge of how to best invest it, but on paper it does make sense that if lower income folks prioritize life insurance, it could greatly impact generational wealth and truly change the course of low income families.

Katie:

I don’t actually think that what this person is saying is in opposition to the message in the episode, which was buy term life insurance. If you have dependents, you should have term life insurance such that there is a set period of time that if you were to pass away, there is a large death benefit that would get paid out to the people who rely on your income. And so I see her point about if you’re low income, you really don’t have the ability to save and invest meaningful amounts of money that it might actually be the better economic outcome to pay the $20 a month for the $500,000 policy that if you were to die between now and 30 years from now, your heirs would get $500,000.

Someone else, another financial advisor, not somebody that I know personally, but a separate one. They didn’t say what kind of qualifications they had. They just said, I’m an advisor. They wrote, “A buddy of mine turned me on to your latest episode and I was wondering if you have any interest in discussing an alternative viewpoint in the future. I’m a financial advisor that often recommends life insurance, specifically a hybrid whole life structure as a wealth accumulation vehicle for clients. I don’t think it’s an awesome investment vehicle, but the data shows that it’s better than bonds for the long term like retirement investing and target date funds by definition have people using bonds for their safe money. My thoughts regarding universal life pretty much mirrors your perspective in the episode. I have never recommended it and do not plan to in the future unless new data convinces me to change my perspective. Ultimately, I think we should look at the data to support our recommendations. Yes, insurance strategies can be new and complicated. That’s why I typically spend more than an hour educating new clients to make sure they have base level understanding of what they’re getting into. And even then, it’s not uncommon that I field new questions for the year or so after they become a client.”

So I had responded to this person actually this morning is when I saw this one. So I answered them and just said, can you share more about this research? That whole life is going to net better outcomes than bond fund investing. I’m surprised that the overperformance was strong enough such that it can outpace the fees and the other charges and stuff that you’re going to get into with a whole life policy. He said insurance as a wealth vehicle is probably most widely used by high net worth individuals. I work primarily with airline pilots, but ultimately I think it can be properly structured for any person that’s actively investing and wants at least some of their budget in a safe environment.

As for research, it’s fairly straightforward. I just look at historical bond fund returns in taxable accounts and compare them to the after cost return and insurance policies that are properly structured for wealth accumulation, which is crucial and probably fairly rare. Unfortunately. Ultimately, insurance is a crappy investment compared to the equities based indexes, but I don’t recommend it to replace equities. I recommend it to replace bond funds and provide for in retirement. Downside market protection and bond funds are historically worse. The after-tax return can be close to zero or even negative and many CFPs bag on permanent insurance strategies while having no problem recommending that their clients invest directly in bond funds or use target date funds.

So all that to say, I haven’t double checked any of that or compared to his point about all insurance policies being different and being structured differently. So I think that my main takeaway based on much of the feedback that we received is that perhaps the only piece in that episode that I would go back and maybe phrase differently is that we kind of wrote off whole life as a straightforwardly bad option. And it sounds like there are certain edge cases where it can make sense or be used in a way that is strategic, but I think that that’s not in practice how it is often being implemented and for the people that it’s often being implemented for based on the types of emails I get from people that are like, why do I have this? They sold it to me when I was 22 and had no kids. I have no dependents. Yeah, it’s $400 a month and I don’t have any money left over to invest in anything else. It’s just in reality that does not seem as though it is typically the way that it’s being implemented. So figured that was worth including.

Henah:

I do want to add one final email that came in from someone that said, boy, do I have gossip for you. I’ve been working in the life insurance industry for 15 years now in both Canada and the US. Did you know that approximately 40% of life insurance policies are abandoned by their selling advisor? We call them orphaned and they’re never taken proper care of. Then there’s a finger pointing game of who’s responsible for taking care of the policy holders from then on, even though the contracts are meant to need servicing often for decades between the distribution channel, the selling advisor, and the insurance company. So they wrote a paper that they shared with us saying that this was through the lens of what they’ve dealt with in Canada, but the problem is actually much bigger in the US, And I thought that was interesting as well for just kind of the stories we’ve heard time and time again of people being like, I had a life insurance person, or I had an advisor, I had a wealth manager who didn’t do anything for all the years that I had them and I ended up with nothing or I paid an exorbitant amount of fees for all of that. So I do think it’s worth mentioning.

Katie:

Yeah, I think in conclusion, I think I always feel defensive when people say something that we put out as under-researched because we put so much time and energy and effort behind the scenes in making sure that the point of view that we are sharing is supported by evidence. And part of that is a quantitative process is you’re going online and you’re trying to find alternative viewpoints. You’re trying to figure out, okay, what is really the landscape that we’re playing in? Part of it is more qualitative of yes, there are rich, smart people in my life that I trust that I go to and go, here’s how I’m thinking about this. Tell me where I’m off base.

All of that went into this episode, but at the end of the day, the recommendations and the things that I say on this show, I have to be able to say with my chest and be things that I myself am following, and I can say with confidence that based on what I have seen, I would not touch a whole life insurance or any other permanent cash value insurance policy as a means of building wealth based on the information that I have seen.

And so if I wouldn’t do it and I wouldn’t recommend somebody that I know and care about do it, I’m not going to recommend it to this audience. And I think that that’s where I land. And something that I said to someone who reached out and was like, I’m not going to listen to your show anymore. This was the person who said that their husband sold life insurance. They’re like, I’m done. I’m not listening to this anymore. I’m a former subscriber of yours that this turned me off to you. And I was like, ultimately that has to be okay because at the end of the day, my job and my responsibility is to present the information and the point of view that I come to honestly. And I will change that perspective if I’m presented with compelling enough evidence that proves the opposite. But so far that has not happened on this topic and I still stand by the episode is I think how I would close this out.

Henah:

So to our two remaining listeners at this point, whether by audience size or length of episode, thanks for being here.

Katie:

Thanks for being here, to all two of you. And to be fair, we did get to your point, a lot of emails from people that were like, oh my God, this came at the perfect time. My advisor was trying to sell me a universal life policy last week and this changed my mind on it. So I still feel good about it, but it’s been a long time since we’ve gotten such angry responses to something that we’ve put out and such varied anger that it felt like something worth diving a little bit deeper in. Although I guess really it just ended up being a double down. So my apologies. My apologies. I guess it’s all I can offer you is that I still feel the same way.

And you know what? If I hear back and someone gives me really good evidence of the opposite, I will be more than happy to say, you know what? I changed my mind about this one specific thing, but so far I haven’t seen it. So alright, that is all for this week’s longest Rich Girl Roundup ever. We will see you on Wednesday to talk about procreation, panic, and possibly what we should be focusing on instead.