(Written with aid of ChatGPT. This article doesn't serve as a financial guide, and the author myself doesn't assume any legal and financial responsibility.)
Money: Master The Game is the first book that Tony Robbins talks about investment and retirement. Because there are plenty of articles summarizing this book, I will focus on the questions I had in mind instead. In the meantime, I'd like to disclose the answers are provided by ChatGPT. So, please read it with a grain of salt.
1. Annuities: Growth, Security, and Why They're Not in Buffett’s Portfolio
Tony Robbins' View:
Robbins acknowledges that most annuities have high fees and poor returns, making them unattractive. However, he highlights some that offer a combination of growth and security, such as fixed indexed annuities. These products promise a minimum return while allowing limited participation in market growth.
Warren Buffett’s Exclusion:
Annuities are essentially insurance products, and Buffett's 90/10 portfolio emphasizes simplicity: 90% in a low-cost S&P 500 index fund (VOO) and 10% in short-term government bonds (BSV). His philosophy leans on long-term market growth rather than the guarantees of annuities.
Reddit's Perspective:
Critics argue that annuities can lock you into long contracts with high surrender fees and suboptimal growth. The financial landscape has also evolved, with low-cost index funds and ETFs offering more flexible and cost-efficient options for retirement planning.
Let me take Fidelity for example. Here is a direct quote from their website.
5. According to 12/31/23 data on non-group open variable annuities from Morningstar, Inc., at 0.25% Fidelity Personal Retirement Annuity's annual annuity charge is significantly lower than the national industry average 1.03% annual annuity charge. Underlying fund fees also apply.
For reference, a passive ETF—Spartan 500 Index Pool Class D has an expense ratio of 0.013%. An active managed ETF—Fidelity Contrafund Commingled Pool Class F has an expense ratio of 0.37%. So now you see why annuity is not an ideal investment.
2. Life Insurance: Tax Advantages and Alternatives
Tony Robbins' View:
Robbins highlights life insurance as a tax-advantaged vehicle, especially cash-value life insurance like whole or universal life policies. These allow tax-deferred growth and potential tax-free withdrawals (via loans).
Warren Buffett’s Exclusion:
Buffett's 90/10 portfolio avoids life insurance because it doesn’t align with his low-cost, high-return strategy. Instead, Berkshire Hathaway operates as an insurance conglomerate, earning from premiums and investing those funds. Buying Berkshire stock isn’t the same as buying insurance but reflects Buffett’s ability to generate returns from managing insurance float.
Reddit's Perspective:
Many financial discussions criticize life insurance as an investment vehicle because of high fees and low returns compared to index funds or ETFs.
Concluding Thoughts
Robbins emphasizes diversification, risk management, and tax efficiency, but some of his recommendations, like annuities and life insurance, may not suit all investors. Platforms like Reddit and Buffett's approach focus on simplicity, low costs, and long-term growth through equities and bonds. Understanding your financial goals, risk tolerance, and time horizon is key to selecting the right tools for wealth building.
Critics aside, I had the opportunity of learning about Ray Dalio's All Weather portfolio and Warren Buffet's 90/10 portfolio because of this book. As a result, I am still grateful!
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