LogFAQs > #972474014

VeggetaX posted...

This life insurance lady told me to buy life insurance that includes an investment portfolio and she told me the interest returns are so much better than Roth IRA or anything else really. She's saying the national average return on these kind of portfolios are 12% which is better than any 401K or Roth IRA.

Please run away from that person. Life Insurance is absolutely teeming with shady salespeople. If you think your local shady car dealer is shady, they pale in comparison to how shady life insurance people get. That's not to say life insurance isn't a useful product for people (not everyone) but based on what you say, she's obviously the shady kind.

You can immediately tell because her statement doesn't make any sense. To be clear, 401ks and IRAs can invest in (almost) anything. They're not investments on their own, they're just buckets that you invest within - and then those investments get tax advantages. Well technically in 401k's you're limited by the fund selection your employer gives you but these days most 401's have a variety of stock and bond choices. And in an IRA you can invest absolutely anything you want. If your life insurance salesman was investing in something that gets 12% returns then you could invest in whatever that same thing is in your IRA too. With that being said, the 12% number is obviously made-up too. Keep in mind Bernie Madoff promised his ponzi scheme buyers "only" a modest 10% return. Consistent 12% returns don't exist.

The life insurance salespeople have other weasely magic words they say about their products too. Like how they're "tax-free" because you can borrow against your own cash value and death benefit, and let you make your money work in multiple places at the same time, or allow you to do "infinite banking" and other buzzwords. Or worst case, they guilt you about how much happier your family would be with life insurance money if you died suddenly right now. It's all scammy.