First job out of college (part 9)

A safe investment that paid 8% per year was something that I could only dream about. Sometime during the beginning of 2011, I started to put my life down on spreadsheets. I was on track of saving $1000 each month. At the rate I was going, I could save up $12000 each year. I had a lot of money that I could invest but I lived through the financial meltdown of 2009. The stock market was the last place where I wanted to put any money. I wasn’t going to risk high losses for high gains. I’d rather just save up my money and know what I would have. I only knew of one place to invest though. In the past, I had put money away in certificates of deposit just to make some interest. The first time I opened up a certificate of deposit was in 2006 and I got an APY of three percent per year. The highest rate I ever received was five percent in 2008. In 2011, I put $10000 into a CD that earned 2.40% APY. Interest rates for CDs were pretty low but I was hoping they would increase again in the future. As long as the rate on a CD was two percent or greater, I would invest in a CD. Unfortunately, after five years of waiting, I’ve never seen CD rates exceed 2.40%.

Faye printed off a projection of what my policy would look like if the markets stayed consistent with growing more than 8% per year. By the time I was 40, the cash value of my policy would be over $30,000. By the time I was 50, the value would be $90,000. By time I was 60, the value would be $220,000. Since I was 22 at the time, in shape, and a nonsmoker, Faye told me that I would be in the preferred elite risk category. I would have the cheapest premiums for the policy. For a policy with a death benefit of $300,000, she quoted me a monthly premium of $120. Could all of this be a scam? Sure it could be a rip off. Historical rates are never a guarantee of future performance. It would also take a few years for me to realize any benefit from the policy. During the first five years, the surrender value was $0. The surrender value would not match the cash value of the policy until I was 33. Also, the break even point where the cash value meets the total premiums paid would not happen until I was at least 36. Lastly, I had to keep life insurance. I couldn’t just have a financial product where I could have an account indexed to the markets and not have to pay for the life insurance which I did not need. Or if such a product existed, they didn’t tell me about it at the time. I also had the concern that I could lose the entire policy if the insurance company tanked however the told me that reinsurance would take care of me in that situation.

Was it a risk? Of course it was a risk. However the potential for gains was large and the cost was only $120 a month. I could afford the premiums and still save $1000 each month. At that point, I was more worried about passing up a great opportunity than wasting $120 each month. I decided to commit myself to the investment in July of 2011. Unfortunately, it wasn’t over yet. After I purchased the product, they immediately wanted to recruit me to the company. The insurance policy I bought was their flagship product and they wanted me to join to sell products for them. I was incredibly resistant to the idea and drew my line in the ground. I’d only join if I could work part time on the weekends and see if I could make money that way. I already had a full time job and didn’t have a lot of time to spare. This wasn’t really an option so I rejected the offer, however they did everything they could to try to motivate me to join.