Having money safe, liquid and accessible to you, such as in a dividend-paying whole life insurance policy, doesn’t take away any of your options — it actually gives you more options
As a part of my series about “Investing During the Pandemic”, I had the pleasure of interviewing Pamela Yellen.
Financial security expert Pamela Yellen investigated more than 450 savings and retirement planning products and strategies seeking an alternative to the risk and volatility of stocks and other investments. Pamela is founder of Bank On Yourself and the author of two New York Times best-selling books.
Pamela’s latest book is Rescue Your Retirement: Five Wealth-Killing Traps of 401(k)s, IRAs and Roth Plans — and How to Avoid Them. It’s the culmination of 20 years of research into the hidden pitfalls of conventional market-based retirement accounts.
Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?
My husband and I had invested in all sorts of financial products and vehicles starting in 1987, but we never came close to getting the returns we were told we should be able to get.
At one point, we figured the problem must be us. You know how some people seem to be unlucky in love? Well, we seem to be unlucky in investing. So we decided to hire an expert to manage our money for us. We ended up hiring three pricy top experts… and all three of them ended up losing us money during what turned out to be the longest-running bull market in history up until that point!
We didn’t quit, though. We dusted ourselves off and continued searching. Since 1990, I’ve coached tens of thousands of financial representatives on how to build their businesses. That allowed me to be exposed to a multitude of financial vehicles and products. I ended up investigating more than 450 different financial products, strategies, and vehicles, but only a few passed my due diligence tests. And even those few turned out to be disappointments.
Finally, one of my financial representative clients told me about a little known twist on a financial asset that has increased in value every single year for more than 160 years and can be used to bypass Wall Street to grow wealth safely and to fire your banker and credit card companies to become your own source of financing. That strategy is now the foundation of our financial plan and the subject of my books.
The strategy involves high cash value, dividend-paying whole life insurance that is nothing like the kind of whole life insurance policies most financial representatives love to hate. These policies grow much faster than a traditional whole life policy and pay the insurance agent 50 to 70% less commission, which grows your cash value faster and allows you to use it as a powerful financial management tool right from the start.
Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?
I started my current career as a professional speaker, which led me to speak all over the world and provided wonderful experiences and opportunities.
But when I started out, I had the absolute worst case of stage fright! I would forget my own name and nationality if I was speaking in front of more than two or three people. But through some deep introspection and coaching from some of the world’s top coaches, I came to realize that you can only have one thought in your mind at any one precise moment. And that thought can either be worrying about yourself (“What if I trip on my way up to the podium?” “Do I have toilet paper on my shoe?”)… or your thought can be about your audience and what value you can provide them.
It really was as simple as taking the focus off of myself and my fears and focusing on loving my audience and providing them the most value possible. I have since spoken to audiences as large as 6,000 people with virtually no feelings of nervousness.
Are you working on any exciting new projects now? How do you think that will help people?
The biggest financial fear people have today is that their money won’t last as long as they do. So my latest project is focusing on financial products that can provide people with a guaranteed lifetime income they can’t outlive and explaining them in simple, easy-to-grasp ways.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
I have been fortunate to have several mentors, and I would say the business guru Dan Kennedy has had the most impact on my career and on my life. Dan taught me many fundamental lessons about marketing and life that have served me well along the way, such as the importance of developing immunity to criticism, time management, and the distinction between direct response advertising and brand advertising.
Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?
This has been an extremely hard and stressful time for most people. It was very difficult for me in the beginning, until I remembered that, as the saying goes, “It’s not what happens to you; it’s how you respond to it that matters.”
As Sara Blakely (founder of Spanx) says:
“When something I can’t control happens, I ask myself: Where is the hidden gift — where is the positive in this?”
And that’s what we have been focusing on in our household. I write in a journal every morning, and I fill up at least 6 to 10 lines with things that I am grateful for — even if it is the tiniest things. Look for those things and write them down.
And I regularly examine the good things that have come out of the pandemic and the shut down. For me, that includes realizing how many things I thought were essential turned out not to be, and that I can have a very rich life without having all of that stuff and doing all those things.
I appreciate that I’m not rushing off to this appointment and that appointment. And I’ve been using much of that “found” time to meditate and center myself and to appreciate the simple things in life.
It all gives me a very freeing feeling. And when you share that with those who are close with you, it starts to rub off on them, too.
Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing $500 every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?
I would ask them if they know the difference between “saving” and “investing”. Most people think they are one and the same, but they absolutely are not.
To save means to place money you can’t afford to lose in a vehicle that is safe and has guaranteed growth. You are certain your money will be there when you need it.
In contrast, to invest means to place money in a financial vehicle or an asset that has a certain amount of risk. You hope to make a gain, but it’s not guaranteed. In fact you might even lose your entire original investment.
The only money you should invest is money you can afford to lose — or that you’re able to let languish in the market for at least 20 years if necessary, until it recovers.
Unfortunately, in recent decades we’ve been seduced by Wall Street into believing that we must risk our money in order to grow a nest egg of any significance. That boring saving stuff? Not sexy. We’re too sophisticated for that.
Instead we take risks. And we do this with our emergency fund, or children’s college fund, our retirement nest egg — the very money we absolutely cannot afford to lose! And we do this because we’ve been led to believe the big lie which is that there are no better alternatives.
According to the Federal Reserve, most people have virtually no money outside of their retirement funds invested in the market and any home equity they might have. As a result, most could not come up with $1,000 to cover an unexpected expense.
That’s a recipe for financial INsecurity and stress!
Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?
I would remind people of this profound truth from the physicist, Neils Bohr: “Prediction is very difficult, especially if it’s about the future.”
Build a solid financial foundation first, and you’ll reduce your stress and feel like you’ve regained control of your finances. That feeling is priceless.
Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?
Studies show that we human beings are notoriously poor investors, buying and selling at all the wrong times. Heck, even professional money managers have been shown to underperform the markets 80% of the time, according to the Hulbert Financial Digest.
Are there alternative investments that you think more people should look more deeply at?
I encourage people to look into alternatives to conventional retirement accounts and conventional investments that provide them the guarantees and predictability that are sorely missing from traditional financial and retirement planning.
Properly structured dividend paying whole life policies can provide you with guaranteed, predictable growth that gets better every year — no matter what’s happening in the stock market or the economy. It has survived and even thrived for more than 160 years, including during the Great Depression, the Great Recession, and the Spanish Flu pandemic of 1918 to 1919.
These policies give you access to cash when you need it, for whenever you need, with no questions asked. You don’t have to rely on banks, finance or credit card companies.
I also encourage looking into certain types of annuities, such as fixed indexed annuities with guaranteed lifetime income riders. These can provide you with an income stream you won’t outlive.
If a person in their thirties and forties came to you today and said that they have $10,000 that they want to put away today for a long term investment what would you advise them to do with it?
I would ask: How much do you have in your rainy-day or emergency fund? If their answer is equal to less than two years of their household expenses, I would tell them that they cannot afford to invest yet. The conventional advice about having an emergency fund equal to 3 to 6 months of expenses is horrible. During the last recession, millions of people were out of a job for more than a year!
Ok, thank you! Here is a more general finance question. You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each?
1. Do not wait to pay down all your debt before you start saving — you should do both at the same time
2. If everyone is doing something in the financial world, you should run from it. As Marshall Thurber noted, “All the dogs barking up the wrong tree don’t make it the right one.”
3. The true meaning of financial diversification will take you beyond stock market investing and real estate. You absolutely must have a sizable portion of your financial resources in something that will not lose money and will continue to grow, no matter what the circumstances.
4. Having money safe, liquid and accessible to you, such as in a dividend-paying whole life insurance policy, doesn’t take away any of your options — it actually gives you more options.
5. Putting most of your retirement savings into a government-controlled retirement account like a 401(k) or IRA can be hazardous to your financial health. The man who invented the 401(k) now calls it a monster that should be destroyed, and many experts now admit that it has been a 40-year experiment that has failed miserably.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
The quote that has been most powerful for me and has helped me in my darkest moments is from Dan Kennedy:
“If you don’t offend somebody by noon every day, you’re not doing much.”
Reminding myself of this has helped me get through some very dark times. I have been attacked mercilessly by Wall Street for going against what they stand for and having proof to support every thing I’ve said. And what picks me up and keeps me going is remembering that if I weren’t stirring up the waters, I wouldn’t be making much of a contribution to the world.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)
The movement I have strived to inspire is one where people are free from financial insecurity and stress caused by the conventional retirement advice that tells you to put most of your money into something that is neither predictable nor guaranteed. You should be able to answer the question, “What will my nest egg be worth on the day I plan to tap into it… and any point along the way?”
Where can we follow Pamela Yellen online?
Thank you for the interview. We wish you only continued success!