Author: Chris Tingom

Clockify adds spyware to feature list?

What do you think of these crazy features apparently coming from Clockify?

As a paying user of one of their competitors, I’m just hoping this doesn’t become a trend.

Employees would totally hate this! This is the page where you can see these features on their 2021 roadmap.

Punchtime Time Tracking App

Intelligent Time Sheets in the Cloud

Punchtime is a SAAS solution for businesses to keep track of employee time & location.

  • Punchtime app is installed on the employees smartphones, all the data gets pushed to the Punchtime cloud
  • The employer can access all the time & location data with any smartphone, tablet or desktop
  • iOS app is available in the app store.  The service works on all other platforms using any web client that supports HTML5.  Android app is currently in development.

time-entry-by-location

Key Points

  • Well designed, easy to use
  • Quick signup, no contract
  • Affordable, starts at $3 a month per employee
  • Integrates with existing payroll packages to help automate payroll
  • Supports Geo-fencing (automatic clock in/out)
  • Dashboard with project management features (time spent per job, total travel time, average start and end times etc.. )
  • Sent automated notification to employees when entering specific location or work area

Packages

3$ a month per employee

  • Time & Location data
  • Automatically calculates hours for payroll

$9 a month per employee

  • Geofencing
  • Project management features
  • On site notifications
  • Integration with accounting and payroll systems

Why is Punchtime on an invite only basis?

We are currently testing Punchtime with a group of companies.  Our invite process allows us to be selective with our first batch of users.  During this time, we are working closely with these companies and welcoming feedback, bug reports and feature request before opening sign up to the general public.

Learn more on their web site: punchtimeapp.com

Timely

Just ran across this app while browsing the excellent “Product Hunt” web site. Looks like a really clean UI with a fast design.

Timely has a free plan, that allows 1-user to have 3 projects. The next plan for one user with unlimited projects comes in at $14 per month. Slightly more than comparable products.

On that note, while the picture they show on their home page shows an iPhone, they also have a view designed for desktop – in the browser.

I went ahead and created an account on the free plan, since it was free!

I like how when I first signed in it had a sample project pre-made so I could see how the app looks with real information.

The interface is super clean, and fast.

What’s cool is that when you are looking at your calendar view, you can see your week and all of the time you have entered so far.

There’s something here that is rarely seen in time tracking apps: The ability to see gaps in your time entries.

Boom! I can’t tell you how many times I’ve requested this feature from time tracking apps.

Oh, you know what else is cool? You can begin a timer, pause it, and then continue. On that note, it fills up the gap you just created. Not sure if I like that, but, you could always make a second timer.

A time entry can also be an item on your calendar. That’s neat. So, I can create a time entry for next week… and then it’s some scheduled time. I’m not really sure how that works with billing. What if I forget to remove an item?

I’ll includes some screenshots below.

Reports:

timely-reports

Users:

timely-users

Projects:

timely-projects

Calendar:

timely-calendar

Home Energy Audit

I was part of a 12 month pilot program that my electric company sponsored. For no charge, they gave me a GE Nucleus system which basically provides me with a desktop application so I can see my real-time energy usage.

For example, here’s a screenshot I just captured:

ge-nucleus

It’s a pretty cool program. For some reason, the actual dollar amounts stopped showing up as soon as the pilot program ended, but the energy usage is still accurate because it is pulled from my smart meter.

As part of this pilot program APS gave me a free home energy audit (paid for by my power company, APS).

The home energy audit was really cool, but in my case, I think I’m already rather efficient.

Here’s an email I sent to the company that did the home energy audit.

James,

I did a little bit of sleuthing on the APS site this morning.

It looks like my actual energy usage cost is only about 41% of the APS annual cost estimate of $5,680. that you included in the APS document.

The data I exported, which was 24 months of billing history, looks like the following:

Most recent 12 months: 11/7/13 – 10/8/14

$2,333.80

The previous 12 months: 11/6/12 – 10/9/13

$2,464.81

Next, I looked at some of the solutions you suggested, and adjusted the estimated annual savings to reduce them to 41% of their previous totals. I believe the efficiency gains are probably accurate, at least I’m assuming they are. So, this feels like a fairly accurate way to figure things.

Here’s the updated efficiency improvement numbers:

Cooling system (new HVAC on west side): Since I already need this, not even worth calculating. Just need to determine when to do this.

HVAC System Efficiency – Air Duct Sealing: $154.57 / year

If it costs me $1,200 for the Aeroseal (that includes the $400 rebate), then it’s a 7.7 year ROI (it’s 10 years without the rebate).

Windows: $116.44 / year

If this costs $245, then payoff sounds like it would be only 2.1 years (ROI).

Pool pump: $154.16 / year

Your document said $376 per year in savings, so I’m figuring if I reduce it to 41% of that, then I’m figuring maybe $154.16 in annual energy savings due to a new pool pump.

The trouble is, the new pool pump costs $1,695 (oh, only $1,545 when you include the rebate) and that means my actual payoff is around 10 years. Ouch! Sounds like it’s definitely a worthwhile investment if you already need one, but the current pool pump works just fine so tough one to swallow.

Chris

Update: 

Variable speed pool pump: I did some basic math on the pool pump to get an approximate idea of annual savings. It came to around $216/year in savings (see attached) if I were to get a variable speed pool pump. At $1,545 for installation of a new pool pump it averages out to around a 7.15 year ROI. Considering the existing pool pump will likely fail in that time frame anyways, it just feels like the sort of thing I’d be better off doing after my current pool pump bites the dust.

pool-pump-energy-efficiency

LED Lights: I did replace about 25 or so incandescent light bulbs with LED ones I got at Costco. According to the math I did, that should have an ROI in about 12-18 months. I was pretty impressed with this. All of the LEDs work great, and I am actually quite impressed. So far, I haven’t gotten an electric bill to compare, though.

HVAC System Sealing: Based on a $59/year HVAC system efficiency improvement to do the duct sealing, I think that’s not really useful either. That actually has a 20+ year ROI, so not really even worth thinking about.

Window Screens: The windows… will probably do that once summer hits. Send me photos whenever you get some and I’ll show them to my wife. At $37/year it has a ROI after 5 years so it’s not that much of an efficiency boost. But, I do plan to move my office into that back room. So, it’s also a comfort thing… so that seems wise.

New HVAC: Yeah, thinking about this. Right now, I’m thinking about just doing it in the first quarter of 2015. No major reason in particular, but my wife is due for a baby in the next 2 weeks so I wasn’t really rushing. I’m going to get 1 other quote on this. The $1,000 for the roof repair is what throws me off. It feels like I could get a roof guy out here for much less, so it made me wonder. I think that number is a guess on your part… the estimate says “Need pricing for foam repair” and since it’s a cool $1,000 it seems like it’s a guess.

I thought the updated APS report was useful. I think the overall audit was a real learning experience for me and it helped me realize my home is pretty energy conservative. It’s something I’d recommend to other people, but I also slightly realize that it is the big energy devices that end up really using lots of electricity.

Pomodoro Timer App for OS X

I’ve been tracking my time on a daily basis for almost 8 years now. It’s something of a habit at this point. I’m even detailed when tracking my own non-billable time.

I’m serious about tracking my time because I’ve needed to be efficient every day, and avoid distractions. I’m my own boss, and since my time is what I sell, it’s important for me to stay focused.

Because of that, I keep my time tracking widget visible at all times on my computer, so I can see exactly what I’m supposed to be working on. I write a detailed description of the task at hand, and start the timer… having that clock ticking… and assigned to a client and project, keeps me on track. I don’t want to have to adjust it later, since it’s too much effort.

I think the Pomodoro technique is perfect for people that don’t want to go to this extreme to track their time. The Pomodoro Timer for OS X doesn’t even have long-term tracking, and doesn’t allow you to enter a description of what you’re working on. It simply exists to keep you focused on your task, and reminds you to take a break at set periods.

Do you use the Pomodoro technique to stay focused in your daily work? If so, leave a comment here about how the technique has affected your day.

In America, you can make mistakes, fail, and it doesn’t matter.

My brother in law posted this link to Facebook today. My initial reaction was aww about how different Japanese culture is from American. But then, the very last paragraph stuck out to me.

In America, you can make mistakes, fail, and it doesn’t matter. It is a fundamental feeling that to sometimes be incorrect is natural. In addition, rather than thinking about mistakes and failures, American’s have curiosity and say, “Let’s try anyway!”

There it is. That’s what describes Americans. It describes American attitudes towards life, business, and work.

The article describes Japanese thoughts about failure. Here they are:

In Japan, there is great fear of failure and mistakes in front of other people. It is better to do nothing and avoid being criticized than to taste the humiliation of failure. As a result, there are things we wanted to do, but did not, and often regret.

Rather stunning, isn’t it? It sure makes you realize how often we fail. We fail every day when we aren’t able to cross everything off of our to-do list. But that’s what  is so great about a week. There are 5 working days. So, we can try tomorrow.

Here’s to trying.

“Success is the ability to go from failure to failure without losing your enthusiasm” ― Winston Churchill

 

GIUL Policy Calculations

Last summer a friend of mine went to work for an insurance company and since I needed life insurance, I said… hey, can you give me a quote for life insurance. The next thing I knew, they were attempting to sell me the following products: A Global Indexed Universal Life Insurance Policy (GIUL), Term with Return on Premium, a Variable Annuity for Roth IRA, and Disability Insurance. They also wanted to manage the rest of my investments. Seriously? All that I asked for was a quote on life insurance.

I explained that all I really wanted was simple term life insurance, but despite asking for this they proceeded to pitch me on all of these services which I didn’t need, and most of which are a horrible, horrible product. I say horrible, and that’s really how I feel.

I sent my friend a number of emails attempting to persuade him that they were a horrible product, but he was too far down the rabbit hole to see clearly, and I ended up not buying anything from them.

Here’s what I wrote to him about the GIUL policy:

GIUL Policy

couple-smiling

After really looking at this one, I’ve come to the conclusion that I don’t believe that I can afford this policy because it forces me to invest in the same way for a 30-50 year timespan. I think that I would rather have m

ore control over my investing choices. I’d rather be able to change my mind and invest in different sectors like real estate. It doesn’t appear that I would have th

at control here, but correct me if I’m wrong. Also, it’s like a forced savings plan, and it just feels unsafe in that I’d have to make that payment every month.

Since there’s basically no benefit for the first 7 to 10 years (except the life insurance death benefit which is an important benefit) I felt like the next 7 to 10 years are the ones I would like to have liquid assets (and, working on paying off house).

Assuming a term life policy only cost me $100 month during that period, I would be only down $24,000.

I took the last 20 years of the S&P 500 and it looks like it had an annual rate of 6.24% from Dec 31, 1992 through Jan 2, 2013. Investing $338.06 per month for those 20 years would have resulted in a return of approximately $162,692.37 which is more than the 20 year net surrender value of the GIUL policy. The GIUL policy has a surrender value of $149,307 (page 20) at 20 years (assuming 8.5% return). If I were to die 20 years from now, and carried a term policy at that time, I’d have the death benefit from a term policy + my investment return as well. I am having difficulty seeing why I wouldn’t want to do that. From the looks of it, by going with a GIUL I am running the risk of losing my additional investment if I were to die. But, I understand there’s the tax-free aspect… but not until I’m 70.

online-mortgage-calculator

From what I can understand about this policy, the death benefit would be all I would get if I were to die before an older age. If I am wrong about this, please correct me. That’s just not a good investment practice from my understanding. Why risk that? For less money, I can have a term life insurance policy that protects me, and then anything I invest I know I will have access to. Way more liquid. I’d much rather wake up 20 years from now having “invested the difference” and have a liquid nest egg than have it be tied up in an insurance policy. I do understand the loan lets me get access to that money, but there are some tax implications there that can’t be overlooked.

I also am having a hard time coming to terms with the idea that if I died within 7-10 years I am not further ahead than if I “invested the difference” (but, I can see that I’m further ahead if I lived to 70 or 80).

On the other hand, I can see the value in a forced investment approach. Will I really invest the difference?

Questions to ask your insurance salesperson: Is there a cap on how much I can earn on the investment? I also read somewhere that dividends earned by the S&P 500 aren’t paid out, is that true? What are my approximate fees? From reading an article, I get the idea that long-term it actually pays off admirably.

Ask yourself if it is wise to place a sizable percentage of your income for the next 30+ years into one investment method.

It might sound like I’m completely against the GIUL but I’m not, I just am having a difficult time accepting such a large monthly expense especially compared against the fact that I want to also fund my Roth IRA to the max ($5,500/year), pay off my house early, and grow my liquid nest egg over the next 10 years. If I had an extra large emergency fund laying around, I would feel a lot safer about a monthly “cost” like this and I’d probably be okay with the costs considering the rewards.

Looking at it further, if I were to die at 63 (age my mom died) after 30 years of investing in the GIUL policy I would have invested $152,444.88 over that time. The death benefit is $500k and the Net Surrender Value is $380,194. If we take the S&P 500 average over the last 30 years we get 8.120% return. After 30 years of investing $338.06 on a monthly basis I would end up with $507,944 which is more than the death benefit. Let’s guess over that period I would have paid out $36,000 for a 30-year term (might be low). Even taking half of the proceeds for taxes and fees, with a term-policy my wife would be left with a term-life death benefit and the “invest the difference” investment of maybe $250,000. I guess in summary the way I understand it, the GIUL looks like a really good deal if I don’t die.

Related articles:

Counting verbally or visually

I’m not sure what this exactly means for most of my readers, but I thought it was interesting:

I read somewhere that when asked to count in their minds, people count in one of two ways. It’s my understanding that the majority do so verbally, sounding out the words in their minds. But some people count visually, by visualising the numbers, picturing them scroll past on a tape, for example.

Those that verbalise couldn’t simultaneously do another verbal task, while the visualisers couldn’t do another visual task, suggesting that separate parts of the brain were involved, and occupied by counting.

From a discussion on Hacker News, here.

How much time do American’s waste on the internet every day?

“I need to start feeling shame for time wasted on the Internet.”

I saw this in my Twitter feed this morning. It was a friend that posted it. My initial reaction to this was: “Wow, I wonder how much time I waste online.” I mean, do I actually get any value out of social networks? I’m sure that question has been asked a thousand times over.

So, what is my recommendation to this friend? My answer is: track your time religiously. Personally, I track all of my time using a timer-based app installed on my computer. On a constant basis I can see what I am doing, and it’s right in front of me.

Since I only earn revenue when I’m billing for my time, there’s a constant pressure to perform. Since I also work for myself, and don’t have someone I call a boss, I am accountable to myself. I have to keep myself in check, otherwise at the end of the month there’s no income to report.

So, that’s my recommendation. I track my time throughout the day, and I do track both my billable time, and my unbillable time. This helps me see how much time I did waste (and what percent was billable). My billable utilization is an incredibly useful tool in determining several factors:

  1. It helps me quote future jobs
  2. It helps me know what I will likely be able to produce next year based on hourly rates
  3. Helps me understand how much work I can get done in a month (useful for estimating)
  4. Keeps me motivated

I highly recommend tracking your time. If you need a time tracking system, check out this useful list of time tracking apps.

Republic Wireless Review

I’ve just signed up for Republic Wireless. This is a new company based in the United States that provides extremely affordable wireless phone service using a combination of WiFi and the Sprint network. Since it includes free roaming, and 5 GB of data transfer, it’s an amazing deal.

What’s even better, is you can sign up and get a 30-day money back guarantee. They provision your phone with a temporary phone number (you can port a number in at any time).

I just signed up for the $5 month plan for starters. What this gives me is unlimited phone calls as long as the phone is connected to a WiFi connection. I am going to port my office phone line over to Republic Wireless. Since I’m planning to have my voicemail and phone also ring on my Verizon Wireless phone number I’ll be saving some money.

republicwireless_logowbg

How am I saving money? Well, currently I’m paying $20 each month to Cox here in Phoenix just so they can forward my office phone number to a Google Voice phone number. Yeah, so I’m already spending $20 every single month for a stupid service. For some reason, I can’t port the number to Google Voice, but I can port the number over to Republic Wireless.

I ordered the Moto X phone ($299) with the service, so my initial cost was about $320 (includes a few taxes and the first month of service). After nineteen months, I’ll hit that magic break-even moment where I’ll be saving $15/month compared to my current situation with Cox. Since I’ve been paying Cox to forward this line for the last 7-8 years, it was an easy decision.

Oh, and did I mention there is no contract? I can cancel at any time. Here’s the link to the Moto X $299 No Contract from Republic Wireless.

I’ll post another review here once I’ve had a month to use the service. My phone should come within the next two weeks. I don’t know how long it will take to port the phone number, but probably not too long considering it only takes a few hours for other phone companies to do the same.

Side note: As a web designer, I was extremely pleased with the Republic Wireless site. Not only did they answer all of my questions, but the site was easy to use, and generally worked as expected. They even have some awesome forums for members who are wondering if there is good service in their area.

Update: I’ve had Republic Wireless for a few months now. It took about two months to get my phone number ported from Cox (Arizona) over to Republic Wireless. The issue was on the Cox end and not Republic Wireless.

Watching movies while you work on the computer

Occasionally instead of listening to music while I work, I’ll put on a movie. Either something I’ve seen before, or a new movie or TV show. Strangely enough, at times this can help me to concentrate on the task at hand — by giving me something to watch and listen to so I don’t browse the internet.

I’ve got to say, it’s a strange thing, but it keeps me focused to have something on to distract me. It’s as if half of my brain is bored with my task — maybe a mundane task — and just wants to be entertained.

While the rest of my brain works — on paperwork, design, or whatnot.

Tablet Employee Time Punch Clock

There are a lot of options for business use of time tracking, but an interesting one is the employee punch clock.

Many businesses rely on the old fashioned stamp based time punch clock. Moving to a newer tablet based system that is mounted to the wall in your lobby has several benefits, including:

  1. Automated calculations of clock in, and clock out times in a spreadsheet
  2. Detailed reporting
  3. Tablet can take photo of user during interaction points
  4. Save a lot of time during payroll processing
  5. No need to purchase time slips
  6. Thumbprint reader

There are software solutions for both Android and Apple tablets. This is a fairly new market, and lots of options exist.

 

The best loan customer is someone who has no passion whatsoever

This is a fascinating point from Scott Adams. I’m going to be thinking about this for a while.

But the most dangerous case of all is when successful people directly give advice. For example, you often hear them say that you should “follow your passion.” That sounds perfectly reasonable the first time you hear it. Passion will presumably give you high energy, high resistance to rejection and high determination. Passionate people are more persuasive, too. Those are all good things, right?

Here’s the counterargument: When I was a commercial loan officer for a large bank, my boss taught us that you should never make a loan to someone who is following his passion. For example, you don’t want to give money to a sports enthusiast who is starting a sports store to pursue his passion for all things sporty. That guy is a bad bet, passion and all. He’s in business for the wrong reason.

My boss, who had been a commercial lender for over 30 years, said that the best loan customer is someone who has no passion whatsoever, just a desire to work hard at something that looks good on a spreadsheet. Maybe the loan customer wants to start a dry-cleaning store or invest in a fast-food franchise—boring stuff. That’s the person you bet on. You want the grinder, not the guy who loves his job.

Read the article here.

Lego Calendar for Google Calendar

I don’t quite understand this entirely, but it appears a company has set up a bunch of legos that can be imported as calendar entries in Google Calendar. Quite interesting!

The system works by taking a picture with your smart phone, and then loading it into some software they custom coded that reads the grid and colors to create a calendar matrix. Then, they upload that to Google Calendar for you. The company has plans to make the code public.

lego-calendar

lego

The software is custom code written using openFrameworks and openCV to read contours of the Legos. The code looks for the three long boards, for each month, and then splits the entire image into little blocks for each day. The actual calendar was designed to be as machine readable as possible (hence the wee white strips between each day). The software then uses a known pattern on the left side of each month row to calibrate for each colour, that was so they can get around different cameras, white balances and light conditions.

Click here to read more.

Charge hourly vs fixed cost

There are two excellent resources available for free that discuss whether you should charge hourly or fixed cost. The first is a free online book from Harvest called The Harvest Guide to Pricing. The second is an eBook from FreshBooks called Breaking the Time Barrier.

freshbooksThe book from Harvest can be broken down into the following topics: hourly, fixed-fee, retainer, and iteration. The Harvest book appears to be saying that a client-retainer model is the best option long-term if you’re going to be doing a lot of business with a single client, and frankly I agree. It resolves a lot of issues that can pop up with a client that is doing a significant amount of work on a monthly-and-ongoing basis.

The book states that:

Retainers give you more access to the client, more flexibility in what you produce, and allow you to (somewhat) get off the exhausting new business cycle. But they don’t always last forever, depending on the quality of the work or the clients’ revenues. You can’t get too comfortable or else you’ll under-deliver, and you need to have a diverse set of clients so that you’re not too reliant on any one retainer.

The book from FreshBooks is written in the style of The E-Myth, and is even endorsed by Michael Gerber. This book definitely endorses the idea of charging for value, not time.

Anyways, I just wanted to bring these two resources to your attention!

Clockwork for Harvest

I must admit, if I had a newer iPad I would rush and get this Clockwork for Harvest app. It just looks cool! It’s an iPad app (free at the moment) for iPad that let’s you interact with Harvest (for time tracking).

As a person who makes a living as a UI designer (in Phoenix, AZ) I can see some fairly significant issues with this design, but it’s cool and I like how different it looks. It looks like a nicely designed form from the 60s made with letterpress.

clockwork

If you only track your time to a couple of projects, this would be a sweet way to track your time every day.

FunctionFox

FunctionFox is the leading provider of time and project tracking software for small creative companies. TimeFox, its web-based timesheet and project management software, is the number one ranked time-tracking system in North America. Graphic design, advertising, communications, marketing, multimedia, public relations, and interactive firms all choose TimeFox as their web-based time and project management application. TimeFox is currently used by thousands of customers in Canada, the US, Europe, Asia, Australia and New Zealand. For more information visit: http://www.functionfox.com

1 minute overview: http://www.youtube.com/watch?v=DdOuHBS3n1

TimeFox-iPhoneTIMEFOX TIMESHEETS

  • Timesheet with Stopwatch Timer
  • Tasks with Editable Rates
  • Personal Calendar and Contacts
  • To-Do Lists with Email Alerts
  • Timelines with Milestones
  • Document Exchange
  • iPhone App & Mac Widget

PROJECT MANAGEMENT

  • Unlimited Clients & Projects
  • Project Calendar and Scheduling
  • Project Costs & Expense Tracking
  • Manage Estimates, Quotes, & Budgets
  • Instant Reporting for Tasks, Personnel, Productivity, Estimates and Expenses
  • Advanced Reporting Templates
  • QuickBooks for the PC Support

Harvest Time Tracking Tips

Here’s a 5 minute long video from the folks at Harvest detailing some of the nuances of time tracking on the Harvest platform. Learn more about Harvest here.

I’ve been using Harvest since October, 2012, and love it! I create over 500 separate time entries every month by tracking my time religiously. I love tracking my time, and it makes me more productive. It’s like having a little boss over there telling me I should keep on task, and be productive.

I use the Mac desktop client, which you can learn about on the Harvest web site. A couple of interesting things to note about the Mac app:

  1. You can minimize it and track time exclusively from the menu bar at the top of the screen, if you want.
  2. I usually keep the window open, which gives me greater ability to start and stop timers, edit descriptions, and see the rest of my time entries for the day.
  3. Speaking of day: it gives you a whole-view of your day! So, at the end of the day, you can review all of your time entries and see exactly where your day went, and how many hours you worked.

Things I wish the Mac app did:

  • Displayed how much money I have earned that day. While it does show me the hours I have worked on that particular day, it doesn’t show me the revenue earned. That would be nice, although I can easily gather that information on the Harvest web app.
  • Remembered the last time entry description for each project category (I’ve written about this before).
  • Show me the gaps in my day. Currently, Harvest only shows me time entries, but doesn’t tell me that I missed a 15 minute block of time between two time entries.


And here is a quick video detailing their iPhone app, which works really well. I’ve used it a bunch of times to compliment the Mac App.

My favorite thing about Harvest is the desktop application for Mac. Ever since converting to using a Mac a little over two years ago I’ve longed for a native desktop application, and Harvest really delivers.

It did take me a little bit of time to get used to the differences in Harvest. I’ve emailed them with recommendations, and even posted some of them here, but I’ve gotten used to the way it works and it works great with my workflow.


Anyways, that’s my 5 minute review. I must say, if it wasn’t for the Mac app, I’d have looked at using a different system. It’s critical to my usage.

Term Life Insurance with ROP: Is it worth it and why?

My financial advisor (at ING) recommended that I get a Term with ROP life insurance policy. So, I did the math and decided to share some details with you.

From what I can tell, I could simply get term life insurance without a ROP rider and invest the difference. Assuming even marginal returns, I would easily out perform the return on premium.

More importantly, if I were to die and the policy is paid out, my wife wouldn’t get the additional I’ve paid into the policy to get the return on premium rider. But, if I were to invest that money and buy term life insurance my wife would receive a policy payout in the event of my death plus the investment would be safe.

When you put it that way, it seems like a no brainer to not go with a ROP rider.

The objections a insurance product broker will raise will fall along these lines:

  • First, there is an expression in the insurance business: “buy the term and blow the difference.” The reason is that at the end of the day while most people will say, ‘I’ll get the cheapest policy and invest or save the rest,’ yet they will see that extra $100 or so and put it to a night out on the town or, put it towards some other expense (even an emergency expense like car repairs). It is a device for forced savings for those that may lack the time or discipline to manage where the excess ‘premium’ goes.
  • Some brokers will tell you that you would need to locate a fund that returns 5% to hedge inflation AND beat out the tax implication (either now, for a ROTH, or later, for a traditional investment). They’ll say that IF inflation is 60% after 25 years, 40% of premium still beats 0% on a traditional term policy.
  • They’ll tell you that this is a guaranteed return of every dollar put in, and, BEING A RETURN OF PREMIUM, it is not taxed at the end. Premiums or original cash value on life insurance policies is never taxed; you already payed it. The excess ‘premium’ you disciplined yourself to allocate elsewhere WILL be taxed, either at income or capital gains rates.
  • They’ll also tell you they’ve done the math better than you have, saying something like: “From our analysis, given your age (the likelihood that you’ll live to collect the RoP) and moderate risk tolerance (again you have to beat 5%), the RoP fits your plan.”

Don’t listen to any of this! At the end of the day, the only thing that matters is that a ROP rider adds about 40% to the cost of term life insurance and if you were to die during the term of your policy, you don’t get a single penny back. That’s why it’s a bad deal, because you lose the extra you’ve paid in to ROP. How else would the insurance company make money on this? They have to make money somewhere.

Follow the advice of numerous investors, and even Dave Ramsey himself when he says “buy term and invest the difference.”