Real Tales of a Professor’s Finances: When Insurance-Based Retirement Planning Misses the Mark
Meet Professor David M.
David is a respected professor in his early 60s who’s spent over 30 years in higher education. Like many academics, he tried to make smart decisions about his financial future. Over the years, he bought several financial products—an Indexed Universal Life (IUL) policy, a variable annuity, and a whole life insurance policy—believing they’d help him retire comfortably and leave something for his family.
But now, just 5–10 years from retirement, David is starting to worry.
These policies haven’t delivered the kind of results he expected. Growth has been slow, fees are higher than he thought, and one policy (whole life) requires expensive ongoing payments. David isn’t in crisis—but he’s realizing that what seemed like smart, “safe” choices may not actually support the retirement lifestyle he’s hoping for.
What David Bought—and How It Performed
David spent $390,000 over 8 years on these three products:
1. Indexed Universal Life (IUL)
o Invested: $200,000
o Value after 8 years: $295,571
o Return: ~5% per year (after fees)
o Why: Promised market growth with “safety” from losses and tax-free income in retirement.
2. Variable Annuity
o Invested: $150,000
o Value after 8 years: $174,319
o Return: ~2% per year
o Why: Guaranteed income for life and a “personal pension.”
3. Whole Life Insurance
o Premiums paid: $40,000 (so far)
o Still owes: $20,000 per year
o Death benefit: $500,000
o Why: To leave money behind and build value while staying insured for life. Total Value After 8 Years (not including whole life’s cash value): $469,890
The Real Problem: Slow Growth, High Costs, and Little Flexibility
David thought he was making safe choices, but here’s what he’s learned:
• The IUL promised stock market exposure but delivered just 5% growth due to fees and limits on how much he could earn.
• The annuity barely beat inflation after all the hidden costs.
• The whole life policy requires big yearly payments, which restrict his budget— and it’s hard to get cash out without tax issues.
He could keep paying into these policies, but the returns have been disappointing. Worse, he has limited control and access to his money.
A Better Option: A Simple, Balanced Investment Approach
What if David had invested that same $390,000 into a basic investment portfolio—60% in stocks, 40% in bonds—with an average return of 6% per year?
After 8 years, that portfolio might be worth: $620,100
That’s $150,000+ more than what his insurance-heavy plan produced—and that doesn’t even include the extra $20,000/year he’s still paying into his whole life policy.
Life Insurance: Whole Life vs. Term Life
David bought whole life insurance to protect his family. But term life insurance could have done that job for much less.
• Whole life: Costs $20,000/year
• Term life (for a healthy 60-year-old): Around $2,500–$3,500/year for the same $500,000 coverage
Over 15 years, that could save him more than $250,000.
What If David Changes Course Now?
Let’s say David decides to pivot. He could:
• Cash out his IUL and annuity (~$470,000)
• Stop paying into the whole life policy
• Replace it with a low-cost term life insurance policy
• Invest everything into a moderate growth portfolio (about 70% stocks / 30% bonds)
If he does this at age 62, by age 70 he could have:
• Total investment growth: ~$930,000
• After cost of term insurance: ~$853,000
If he sticks with his current plan, he might only have around $450,000.
Why This Matters for Professors
David’s story isn’t rare. Research from the TIAA Institute and the Employee Benefit Research Institute (EBRI) shows that many professors:
• Rely too heavily on complex insurance and annuity products
• Underestimate fees and overestimate returns
• Lack flexibility and control over their retirement savings
• Confuse life insurance with a good investment (it’s not)
For faculty members who already have pensions and stable careers, adding high-cost, low-flexibility insurance products may not make sense.
What Helped David Get Back on Track
David realized he needed expert help—someone who understands the academic world. When he hired a financial advisor who works specifically with university professionals, everything changed.
Together they:
1. Reviewed every product and its costs and benefits
2. Surrendered underperforming policies (carefully, to avoid tax issues) 3. Built a new plan based on low-cost, flexible investments
4. Replaced expensive insurance with affordable term life coverage
Now, David is on track for a more flexible, confident retirement—with better growth and less stress.
Lessons for Professors Planning Retirement
• Don’t assume insurance products will do all the heavy lifting.
• Focus on low-cost, diversified investments.
• Only use life insurance for protection—not growth.
• Watch out for high fees and limited access to your money.
• Work with an advisor who understands university benefits and pensions.
Key Takeaway: Insurance Has a Place—But Use It Wisely
David’s experience shows how even careful, thoughtful professors can end up with a financial plan that looks safe—but falls short. Retirement success isn’t about picking complex products. It’s about building a clear, flexible, and cost-effective plan that matches your real goals.
If you’re unsure where you stand, now is the time to review your accounts, question the costs, and consider simplifying your financial future.
1 - https://www.wtwco.com/en-us/insights/2024/06/indexed-universal-life-persistency-risks-abound-dont-repeat-the misestimations-of-the-past
2 - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=952727
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