Should You Really “Buy Term and Invest the Difference”?
Most financial experts recommend “buy term and invest the difference,” but this advice fails most families. Term premiums start low, about $30/month at age 40 for $500,000 coverage, but rise sharply to $150 - $400/month at age 60, and up to $800/month after 65. Most people drop coverage as it gets expensive, losing all benefits. Over a lifetime, the average person pays $10,000–$20,000 or more in term premiums and receives nothing if they outlive the policy. As part of this mainstream strategy, people are told to put the “difference” (what you’d pay for whole life insurance premiums, for example) into 401(k)s, IRAs, CDs, bonds, and other investments, often spreading savings across multiple accounts and vehicles. But these assets are subject to market fluctuations, taxes, penalties, and are typically spent down in retirement. Average lifetime savings of $150,000 may experience exceptional growth throughout your life or they may experience periodic losses due to market downturns. To finan...