Why You Don’t Want to Buy Term and Invest the Difference

In the 1970s, A.L. Williams popularized a financial philosophy known as “Buy Term and Invest the Difference.” This approach encouraged people to buy term life insurance—typically less expensive than whole life insurance—and invest the money they saved in the stock market. The strategy caught on, especially during times of high market returns, as it seemed like a good way to achieve financial growth and insurance coverage.

The “Buy Term and Invest the Difference” concept rests on some assumptions that don’t always hold up. Some argue that you won’t need life insurance as you age because your investments will have grown enough to sustain you and your family. They also assume that these investments will outperform the benefits of a whole life insurance policy. While this might sound appealing during a bull market, there’s no guarantee that investments will deliver high returns over time or at the specific times you need them.

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If stability is what you seek, building a financial foundation with guaranteed benefits may be a wiser choice. Whole life insurance offers both a guaranteed death benefit and cash value accumulation, providing a degree of certainty that investments simply can’t promise. It’s not that investing is bad—strategic investing can be a valuable part of wealth building—but it’s essential to balance it with a stable foundation.

When it comes to planning for the future, don’t trade guaranteed financial security for the chance of speculative gains. Start with a solid base of guaranteed benefits, then consider additional investments as a secondary layer of your financial strategy.

Resources:

Buy Term and Invest the Difference? – Video Example with ROR

How to Build a Secure Financial Foundation – Video with Ben McFie and a Donut Stack