Investor Behavior: Did you ever meet anyone who actually "bought term and invested the rest"

For years, people have debated the merits of term life insurance versus variable or whole life. The argument for term life insurance has always been that if you paid the less expensive premium of term insurance, and invested whatever the difference would have been to purchase a variable life policy, you'll end up with more money. However, how many people have you met that actually followed these guidelines?

Along similar lines, when deciding between a Roth IRA and a deductible IRA, most investors will view a $2,000 contribution to a Roth IRA as the same as a $2000 contribution to a deductible IRA. The deductible IRA is in fact less expensive because of the tax savings. Most investors will not set aside this tax savings for investment. This is why investment in a Roth IRA is in most cases preferable. With the Roth IRA, you pay the tax before the $2,000 limit is calculated effectively allowing you to contribute more of your pretax dollars.

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