- An insurance company can credit four to five times
the interest that banks do with greater safety.
In this episode, I'm going to address how a max funded IUL
can earn tax-free returns that are safer
and higher than banks offer
or credit unions for that matter.
Get ready, a lot of people do not understand
how money works.
(bright music)
So I'm Doug Andrew.
I've been a financial strategist
and a retirement planning specialist now
for more than 48 years,
helping people to optimize their financial assets,
minimize taxes, empower what I call their authentic wealth.
And in my educational events
and in the 12 books that I've been blessed
to have authored thus far, I address how money works
and a lot of people go,
"Wow, I've never been taught this before."
And I begin to tell them about how banks
and credit unions operate
and I begin to teach things, like the velocity of money
and they're like blown away.
They sit there with this deer in the headlight look.
And so I usually start out and talk about,
you know, there's four things you can do with money.
You can spend it,
lend it,
own with it or give it away.
And they say, "What do you do, Doug?"
And I say, "Well, I sort of double dip.
I own and loan on the same assets."
And they go, "What?"
Okay, now when you put your money in a bank
or a credit union or an insurance company for that matter,
it's in a lended position, okay?
You're lending them your money.
In fact, banks call it OPM other people's money.
Now, are they just a benevolent institution
paying you interest
while they have your money sitting in a vault?
No.
Most people realize that banks
are taking your money on deposit
and they're taking a portion of that
and loaning it back out again.
Now, they have to have a certain amount on hand,
liquid and safe in case there's this run on their bank
and people want all their money out,
so that we don't have happen
what happened that caused the Great Depression and so forth,
in the movie, "It's a Wonderful Life" and so forth
and so that's why FDIC was created and what have you,
to be able to prevent people from panicking,
but truth be known,
a lot of banks and credit unions
will take a portion of their tier one assets.
What's a tier one asset?
This is money that they have to have on hand so to speak,
liquid and safe, that they can grab within 24 to 48 hours
in case of a run on their bank
and so they will put 30 to 40% of their tier one assets
into multi-trillion dollar insurance companies.
Why?
Well, because if you look at periods of time
like the Great Depression,
there were banks closed
and there were 40% that never reopened again.
Some real estate dropped 80%.
There was not one single legal reserve insurance company
that went under in the Great Depression.
That means they have to have reserves
on hand liquid and safe.
Where do insurance companies have their money,
which is money that you've deposited in there?
In AAA and AA bonds and those are very liquid.
They have money loaned out on skyscrapers
and shopping malls, but they only loan
maybe 50 to 60% loan to value,
whereas banks loan out 80% loan to value.
So if an insurance company has to foreclose
on a skyscraper or a shopping center,
they usually come out smelling like a rose.
And so a lot of banks will take their tier one assets
and put it into these insurance companies,
because they weathered the Great Depression
with flying colors, crediting two, two and half, 3%,
not one single legal reserve insurance company went under
in the Great Depression.
Same thing happened in 2008 when 400 banks went under,
900 more were on the watch list,
on the brink of going under
and the federal government asked
the five major banks in America to disclose
where they had their tier one assets
for liquidity and safety.
And they had 30 to 40% in BOLI,
bank owned life insurance.
Corporations had it in COLI, corporate owned life insurance
and the banks were actually borrowing the public's money
at 1% or less.
So every million that people put into banks,
loaned the banks,
they were paying 10,000 a year in interest
but they turned around,
they were making at that time,
four or 5% in the insurance company,
how much more is 5% than one?
Don't say four, it's five times.
It's 500% more.
They pay 10,000 a year in interest,
they turn around and make 50,000.
Again, I've said this many times on these episodes.
Would you hire an employee for 10 grand
that made you an extra 50 grand?
Yeah, that's a 500% return on employment cost.
Would you buy a widget machine for 10 grand
that made you an extra 50 grand?
That's a 500% return on equipment cost.
So that's how money works.
So when we talk about how these insurance companies
can do this, they're able to earn tax-free returns safer
and pay higher interest than the banks offer,
because the insurance companies are diversifying
and putting it out there into the economy, what have you.
Now, one of my favorite vehicles
is a max-funded indexed universal life.
Indexed universal life allows the insurance company
to pay me whatever an index or indices may grow by
in a given year if the economy
or the market goes up in a given year.
Now, I don't have to do that.
If I feel nervous or bearish about America,
I can just settle for the general account portfolio rate.
Let's say the insurance company
on their portfolio of assets,
in this low interest environment we're in
as of the recording of this episode, let's say it's 4%.
So I can just settle for 4%.
If they need one of those percentage points
for their profit, I'm gonna net three.
So on, let's say I have a million dollars of cash value
that I've built up in my IUL policy.
That would be 30,000.
I can settle for 30,000, it's tax-free.
But if I feel bullish about America,
in a year I can link to an index or indices,
several indexes of my choice that they offer.
The S&P, the Dow Jones, the Russell 2000, whatever.
So let's just keep it simple and say it's the S&P.
What am I doing?
I'm not telling the insurance company
to invest my million dollars in the market, in the S&P.
My million has to stay safe in the insurance company,
earning let's say four.
I'm relinquishing that 4% or 40,000 in this example,
and I'm saying, you can use that 40,000,
you don't have to keep it on hand to credit me.
I will settle for no interest this year,
but don't risk my million.
And you can use that 40,000 to have the wherewithal
to pay me whatever the S&P does.
So this is a no brainer for the insurance company.
They take that 40,000 bucks, the interest on my million
and they buy upside options in the index, the S&P.
And if the S&P goes up 8%,
they have the wherewithal to pay me eight.
If it goes up 12, maybe they pay me 12, but they may cap me,
but the floor is zero.
If the market crashes, the options expire worthless,
but I didn't lose my million.
And as Will Rogers once said,
"People get more concerned about the return of their money
when things get bad, rather than the return on their money."
So zero is your hero when everybody else in America
might be losing 20, 30 or 40%, like happened in 2008.
None of our clients with IUL lost a dime
due to that downturn in 2008.
In the first 90 days of 2009, many locked in gains of 16%,
because you pick up where you left off
and so when you are linking,
the insurance company is buying upside options
which gives them the wherewithal
to pay you whatever the index does, maybe up to a cap,
but some years like in the year 2020, March of 2020,
COVID-19 pandemic, the market dropped 30%.
Our savvy advisors told their clients
to link to a one year point to point with no cap,
but they're gonna subtract five percentage points
off the back end, which is normally too expensive
in just a normal market.
Where the market goes up 12, you're only gonna net seven.
That year, March of 2021, 1 year later,
the market was up 66.33%, minus five percentage points.
Our clients got credited 61.33%.
This is incredible.
We had a client that had about 850,000 before,
that was in March of 2020,
a year later, he had 1,382,000.
He made over a half a million tax-free
on his indexed universal life.
And if the next year, the market would've crashed,
which it didn't, but if it would've,
he would've not lost one dime of the 500,000
he made the year before,
'cause you lock in your gains every year.
You need to search this channel
to learn about lock in and reset.
So this is incredible when you understand
how to accumulate your money tax-free in a laser fund,
participate when the market goes up
by linking to an index, but not lose if the market goes down
and this usually tweaks your rate of return
by two or three percentage points
over the general account portfolio rate,
which might be three or 4% in an IUL policy
in a low interest environment.
The point is this,
you can look at any serious period in American history,
the Great Depression or the Great Recession,
and you'll see how people came through with flying colors
by bypassing banks and credit unions
and putting their money directly into insurance companies,
where the banks and credit unions
take a portion of your money to increase their liquidity,
safety and rate of return.
Does that make sense?
If you wanna learn more about this,
I want to gift you a free copy
of my most recent 300 page best-selling book called,
"The Laser Fund".
This retails for $20 or more on Amazon.
You don't need to pay that, I'll pay for the book.
Here's how you claim your free copy.
You go to laserfund.com,
l-a-s-e-r-fund.com
and you contribute a nominal amount
to the shipping and handling, I'll cover the rest of that.
And I will pay for the book and fire out a hard copy to you.
Now, you can click on the link below to do that,
but also when you're in there, there's options there
if you like to listen and learn, watch and learn.
Check out some of the online educational webinars
that we do and you can even talk to a professional
to see how these strategies may apply
to your particular set of circumstances.
But folks, this is about you and your brighter future.
Do not miss out.
(lively music)