Missed Fortune or Messed Up?

I have just started reading Missed Fortune 101 by Douglas Andrew. His thesis turns everything I've learned about retirement planning on its head. He basically eschews the IRA/401(k) model of retirement because he believes that the taxation on the withdrawals puts you in a higher tax bracket and negates much of the lifetime of savings that you've assiduously put aside. Instead, he advocates that there are more attractive retirement benefits.

Andrew writes that "The reality is that other, non-qualified retirement vehicles may provide greater net spendable retirement income." He also posits that proper equity management can assist in financing these vehicles which include investment-grade whole life insurance and second homes.

I would never have actually considered any of this prior to reading the book but I recently had a very interesting conversation with my Dad who was actually complaining about the fact that he has to pay an inordinate amount of taxes on his IRA/401(K) withdrawals and he is planning on taking equity out of his house by refinancing in order to seek the tax benefits of writing of interest to balance the higher taxes. So, that being the case, I see Andrew's point. However, in my Google search, I ran across a scathing criticism of Douglas Andrew's book from Mighty Bargain Hunter. Here's a snippet of the review:

"This book has got to be about the biggest billboard advertisement for mortgage brokers and life insurance companies that I’ve ever seen. You definitely can’t judge this book by its cover — you need to read the majority of the book before you get to this!

It beats the tax savings of mortgage and home equity debt to death over the first eight chapters. It rarely, if ever, mentions that you’re paying a lot more in interest to the lender than Good Old Uncle Sam will ever give back to you in tax savings through the mortgage interest tax deduction."

So, I'm not sure what to believe but I plan to investigate further. It's an interesting premise for sure and, as I mentioned, my father, who's now unbelievably irked by the taxes he's paying on his IRA distributions, is considering all sorts of alternatives. Andrew's suggestion might not be the best solution for most people and, in light of the "credit crunch", I don't know that anyone even has access to their equity right now even if they wanted to try this approach.

In any event, Mighty Bargain Hunter's post created a firestorm of commentary. It seemed like it was 50/50 in support versus against. Here's a comment that I'm going to look into from MRL "— My financial adviser took the course with Douglas Andrews and he put me in a policy called Master Choice Group Flexible Premium Life Insurance with Equity Index option by OM Financial Life Insurance company. I think it is out of Amsterdam. It follows the Index 500 with a minimum of 1% cap and a maximum of 17% cap. It also has an annual reset period which reestablishes my initial investment yearly and never lets it go below that point. This was for the equity money that I had in my house. It has averaged 9.18% over the last 17 years. It has no lapse guarantees and decreasing insurance premium rates because the insurance premiums are high at the beginning but only 1% of the policy value. My 401K was put in a different type of insurance policy with a little more risk but is being actively managed by Foxhall Capital Management Inc. which charges approximately 1.2% but has averaged 12.5% return over the past 12 years. Hope this helps.– S"

This might be worth checking out!