COLUMN: Food and finance at Seaside Farmer's Market

Most Saturday mornings you can stumble upon me at the Seaside Farmer’s Market. You can find bread in the same league as La Loba’s, Mediterranean cuisine, veggies along with gardening tips, seeds and plants. If soap sales are slow, you can catch local news events or gossip. Sometimes I even get reviews of Walton Sun columns. The complaints always come electronically.

Recently someone posed a complex financial question. At least they read my column. Logically I am glad, and their question inspired today’s tome.

Suze Orman is wrong and it’s not the first time.

She hates all life insurance except term insurance. Term life insurance builds no cash value and lasts for a specific “term.” For most people term insurance provides a better value rather than one building cash value (whole, universal or variable life).

Ms. Orman’s denunciation, “I hate,” might tempt you to dump a whole, universal or variable life policy and this could be a monumental mistake. The life insurance products Suze disparages have some important attributes she foolishly ignores.

If you are uninsurable and you still need insurance, dropping a current policy would be a horrific blunder. Given the cataclysmic meltdown of real estate and the tsunami of foreclosures, it staggers the imagination that anyone would ignore the protection from creditors afforded to life insurance owned by Florida residents. Foreclosure is a legal process and you should consult with an attorney before you buy a life insurance policy if you have creditor issues. 

In an older policy, the cash-value may be growing at a rate far higher than 2011 money market rates. Cash-value grows inside an insurance policy without the drag of annual taxes. As we remember from Accounting 101, cash-value of insurance is a current asset, available anytime. Don’t pick up the phone and ask for your check, your death benefit could be compromised.

Section 1035 of the Internal Revenue Code allows for tax-deferred exchanges of life insurance cash-value for an annuity. For a retiree who no longer needs the insurance, the annuity stream will provide income they cannot outlive. Raising the estate tax hurdle to $5 million may tempt you to discontinue a policy. Not too fast, the estate tax will be back with a $1 million limit in 2013. 

Many universal life policies sold during the 1980s used then-current illustrations. With dramatically lower interest rates/investment returns, your premiums could be insufficient to fund the death benefit.  Review your policy annually and make sure the cash-value continues to rise. With variable life insurance, the death benefit and cash value can fluctuate with stock market returns. In addition, cash-value life insurance often comes with steep commissions so I understand her aversion.

Suze attempts to make complex issues simple. For every complex problem, there is an answer … simple, neat — and wrong. I admire and applaud her efforts to promote financial awareness and literacy but her gig is showmanship.

In a recent interview on Kansas City’s KMBC, Suze admits she dropped the ball. She previously touted taking Social Security as soon as possible. Now she reverses herself saying, “… do not touch your Social Security until full retirement age.” She’s still wrong. In some cases, early Social Security benefits are advisable, in others delaying is the better option.

No, I don’t sell any life insurance and not as many books as Suze.

Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@LivingstonFinancial.net.