- If your IUL is structured incorrectly,
you will miss out on thousands of dollars.
In this educational episode,
I'm going to address why do you want an IUL insider
to design your IUL correctly?
So get ready, you may not even know
that there's such a designation or organization.
Yeah, there is. I oversee them.
They are called IUL insiders.
And I would strongly recommend
that if you're gonna have an IUL policy structured
that you seek out an insider to do it for you,
so you do not miss out on thousands of dollars.
I'll explain why next.
(upbeat music)
So I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist now
for just about five decades,
helping people optimize assets, minimize taxes,
empower their authentic wealth.
I have a three-dimensional approach shown here.
But many times, as I have trained now over 5,000 agents,
I've noticed that those agents that come in,
they're learning how to structure IUL correctly.
Because at one point back in 2005,
Time Warner, my publisher of my first four books,
"Missed Fortune" and "Missed Fortune 101",
estimated that there were about 50,000 advisors
that were buying my books in bulk by the case of 20.
And they were passing them out like loose cannons,
tearing out certain pages and whatever and saying,
"Okay, well, don't do that. Do this."
And they were really ruining an incredible instrument.
And it really made me sad when I would meet people,
and they had had their IUL policies
for two or three or four years.
And I would take one look at it in less than 30 seconds,
I would go, "Oh man, who designed this for you?"
And they said, "Well,
it was our nephew or my brother-in-law.
They had an insurance license."
And I go, "Oh golly, that was an expensive relationship.
You've missed out on about a quarter of a million dollars
you could have had.
Instead of earning,
in the last few years, 11% and netting 10%,
you have only been grossing about 9 and netting about 4,
because they had way more insurance in here than you needed.
I don't know who designed this,
but I really feel bad for you,
'cause you've missed out on thousands of dollars."
I hated to tell people that.
And so they had to like start over again.
And I had to sort of correct
or get them out of that trap and correct it.
But they wasted several years of growth.
And it really upset me.
So when you go to an IUL insider,
they will understand very thoroughly.
And in my book "LASER Fund",
there are about 13 questions you should ask a producer,
an IUL agent.
And if they don't know the answers to those questions
off the cuff,
that should be red flag. Okay?
But basically, the members of the IUL insider network,
they are taught
how to structure these IUL contracts correctly.
So they perform like an incredible tax-free cash cow.
There's three sections of the Internal Revenue Code
that they must understand.
Section 72(e) talks about how money accumulates tax free
inside of an insurance contract.
But you have to be compliant
with the TEFRA, DEFRA, TAMRA tax citations
passed in 1982, 1984 and 1988.
This allows money to accumulate tax free.
And then 7702 gives you the parameters
in which you can access money income tax free
or turn on tax-free income
so that every million dollars of cash value
that you might accumulate can generate,
you know, 89 to a hundred thousand dollars a year
of tax-free income for as long as you live.
Section 101(a) is about, at the end of the day,
when you pass away,
anything left in the policy will blossom,
increase in value and transfer income tax free.
Now, nothing else does that in the Internal Revenue Code
allows you to accumulate money tax free,
access it tax free when your die and blossoms
and transfers tax free.
I've asked many CPAs and tax attorneys
that I teach in advanced continuing education,
show me any other financial instrument that does that.
And they've yet to come up with one.
Now, these IUL insiders are trained thoroughly
on the TEFRA, DEFRA, TAMRA tax citations.
I don't need to go into detail.
I have other episodes here that'll teach you about these.
But these two dictate the minimum amount of insurance
that must be attached to the account
in order for it to accommodate the amount of money
that you want to put into it or reposition
or save for your future.
So many times, people would come to me,
and they wanted to optimize underperforming
or non-performing assets.
They wanted to sell a rental property.
They were sicken and tired of of being the landlord.
And they wanted a place to put that money when they sold it.
Or maybe they wanted to roll money
out of an IRA or 401(k).
And they needed to do it strategically
and put it into an IUL policy.
They might have money in banks or credit unions
earning pathetic rates of return.
And they want to increase the rate of return
and bypass the middle man,
because insurance companies are where
banks and credit unions invest 30 to 40%
of their tier one assets for liquidity and safety. Okay?
Once people understand and learn this,
they want something like this.
But you're doing the opposite.
You're taking the least amount of insurance
under TEFRA and DEFRA that you can get away with.
And you're gonna put in the most money that the IRS allows.
You're gonna use it for living benefits.
You wanna be self-insured within maybe 12 years.
TAMRA dictates how fast you can fund it
without violating the tax-free access.
If you violate TAMRA,
then it'll only grow tax deferred.
And so we talk about TAMRA,
and so I often use this metaphor of a bucket.
If you read the book
I'm gonna gift you at the end of this episode,
you'll see this metaphor.
So this bucket is a repository.
We're gonna call it an IUL policy where you're designing it
to accommodate the amount of money
that you wanna put into it.
You don't have to put that much in.
But you can't put in more than that, okay?
All of the interest on this will be totally income tax free
if you adhere to TEFRA, DEFRA and TAMRA.
TEFRA and DEFRA says that if you're a male age 60,
yeah, you could buy a whole bunch of life insurance
for 500,000 bucks.
And you don't have to put in $500,000 at once.
I'm just saying that's the total you're gonna put in
in the next five years or the next 20 years
or the next 30 years or whatever.
So that is the what's called the guideline single premium.
Now, you could buy a lot of insurance with that much money.
That's not the objective.
The least amount of insurance
is about double what you're gonna put in there or a million.
But see, an IUL insider understands
that you only take the amount of insurance you need.
Too many agents put way more insurance than you need.
And so the spigot on the bucket,
which is the cost of the insurance
that the IRS says has to be there,
or it will not be tax free,
it has to not exceed the definition of life insurance
under those three sections of the code I mentioned.
And so, but you want that spigot as small as possible,
and you want it to get smaller as you get older.
Now, have you ever seen an insurance policy
that gets cheaper as you get older?
Well, then you haven't seen an IUL policy
structured correctly.
They get cheaper as you get older.
And you're self-insured many times within 12 years.
Let me give you an example.
So if I was designing this for a 60-year-old male
that wanted to put in $500,000,
they can't put in all 500,000 one fell swoop
because of TAMRA.
I have to divide it up in about five installments.
The most I could put in would be about 20% of that,
maybe a hundred thousand the first day of the first year.
Another a hundred thousand the first day of the next year.
I don't have to put that much in.
But if you're wanting to fill it up as fast as possible,
your money will grow quicker.
Then the third year, the fourth year.
But in the fifth year,
actually, the first day of the fifth year,
which technically is four years and one day into it,
you've complied with TAMRA.
Now this 500,000 is in there,
and it's been earning interest
while it's been getting filled up.
But the money you ever generate out of this
will be tax free forever after your grandfather.
Now, here is what a lot of agents don't understand.
When you put in this $500,000,
when you're gonna fund it that quick in five or 10 years,
you use the level death benefit.
So many agents are told no,
you use the increasing death benefit.
Ah, they say level's the devil.
They don't even know what they're talking about.
See, you only use increasing death benefit
when you're putting in monthly premiums.
And as soon as you stop funding it,
you switch to the level death benefit,
'cause you want that spigot to get smaller as you get older.
Most of my clients, if they came in and put in 500,000,
let's say, in that five years or four years and one day,
now, that 500,000 is actually part of the million dollars
that's paid out when you die.
So the actual death benefit is still a million.
Yeah, you could have had it added on top.
That's not what you want to do
if you're wanting to get a good rate of return on 500 grand.
So the 500,000 is part of the million.
The insurance company's only gonna charge you,
the spigot on the bucket,
is only gonna be on the remaining $500,000 that's at risk.
'Cause if you die,
500,000 of the million is your own money.
So they only charge you for the net amount at risk.
So far so good.
If this 500,000 earns the rate of return
that I have for the past, golly, since 1980,
even before indexed universal life came out,
I've earned an average of 9.62.
Rounding that down to 9.6 divided into the rule of 72,
your money doubles every seven and a half years.
We have had many clients who started out with $500,000,
and that 500,000 doubles to a million
in seven and a half years.
In this example, that might be in the 12th year.
They now have a million dollars of cash.
Well, that was the original death benefit.
They're now self-insured.
This is like buying term
and investing the difference on steroid.
You're self-insured.
There is no cost for the insurance.
But from that point forward,
if you happen to die,
the insurance company will pay 5% more than your cash.
So if you died, and you had a million in there,
they'd pay out 1,050,000,
and that's under TEFRA and DEFRA.
But they're only charging you
for the remaining $50,000 of insurance benefit.
And the cost of that insurance is so minuscule
compared to the interest you're earning on a million.
That spigot on the bucket is getting smaller
and smaller and smaller as you get older.
When a million doubles to two million, okay?
That's all your money.
And if you die, it leaves behind 2.1 million.
But they're only charging you
for a hundred thousand of insurance.
The interest you're earning on two million
dwarfs the cost of the insurance.
That's why as you get down the road
in the 25th and 30th year,
if I earn 11 and net 10.9 in that year,
because the cost of the insurance is so small.
Retroactive back day one,
if over a 30-year period,
if you averaged 11.17 like I have,
you should net 10.07.
You should net within 1% rate of return
retroactive back to the the first day.
So folks, this is explained
some common misconceptions about IUL,
is that the insurance policy will implode.
It's gonna crash and burn as you get older.
That's because people don't understand.
Agents don't understand what I just explained to you.
Another myth is that level is the devil.
No it isn't. If you're gonna use it for living benefits,
and you're gonna fund it within five or 10 years,
that will knock the socks off of any other method,
because you're gonna be self-insured.
Another is that the index universal life
is simply a permanent life insurance policy
that invest your money in an index mutual fund.
Huh! No.
That means you would've lost 40% in 2008.
No, I don't lose when the market goes down,
because indexing is a strategy.
Also, when using the banking concept,
if you've ever heard of that, becoming your own banker,
that whole life insurance is superior.
Whole life insurance,
you're hoping to get maybe a two-point spread
with index universal life.
I have had people borrow money outta their policy at 5%
and get credited 25%
on the money they left in the policy as collateral.
They have been making money hand over fist
using the banking concept with IUL.
You know this whole thing about filling up that bucket
in accordance with TAMRA,
it would be like the IRS saying,
hey, if you build a five-story building,
and if you just rent out the first floor the first year
and then the second floor of the next year and so forth,
if you'll just do that by the end of four years and one day,
you can rent out the whole building.
But all of your rental income forever after
will be totally income tax free.
I would do that. Do the math.
That is the TAMRA law.
And you can't believe how many insurance agents
don't understand that.
They think maybe you have to spread it out over seven years,
'cause they don't understand that the seven-pay test
does not apply to universal life.
It's the TAMRA, okay?
And so IUL indexing, if you're not aware,
that a good agent will diversify,
so you'll miss out on thousands of dollars.
A good IUL producer might allocate 40%
to a one-year high cap. Okay?
A 40% in a two-year and 20% in a five-year. Why?
Because you're gonna increase the average return to 11.3
based on most 20-year periods.
When you have a downturn in the market, you flip over
and maybe put 50% in a two-year and 50% in a five-year,
because the average return for a 20-year period
jumps up to 14%.
You wouldn't believe how many IUL agents
don't even understand how to diversify
and rebalance their client's portfolios.
I could go on and on with multipliers
and one year point to point with no caps.
But IUL insiders is designed to teach agents
how to do it correctly.
Otherwise, their clients will miss out
on thousands of dollars.
These are the kinds of statements you want to diversify
so that you can see returns of 14.89, 10.25,
15.07, 8% and 13%.
That's what you want to see instead of pathetic returns
down around the 3, 4, 5% range.
That's what you get when you take out an IUL policy
with someone who knows what they're doing.
So if you would like to learn more about this yourself,
and when you read this book,
you might know more than 99% of IUL agents out there.
There is a list in here, you can ask an agent.
And if they don't know the answers
to those 13 questions off the cuff,
that's a red flag.
I would recommend you search out an IUL professional,
somebody who belongs to the inside, okay?
And so here's how you can claim your free copy
of this 300 page book.
If you go to Amazon, it's 20 bucks.
And you pay another 10 bucks shipping and handling.
If you do, thank you.
But I'll let you claim a free copy of this 300-page book
by going to LASERfund.com,
L-A-S-E-R fund.com,
You contribute a nominal amount
towards the shipping and handling,
and I'll pay for the book.
I'll fire out a hard copy to you.
While you're in there,
check out if you'd like to listen and learn,
watch and learn.
There's educational webinars we do on a regular basis.
They're free.
You can even schedule an appointment
with an IUL professional that knows how to do it correctly
so that you can see illustrations done the right way.
But this is about you and your brighter future.
So make sure you seek out somebody who is a professional.
Those that belong to IUL insiders,
I assure you, they know what they're doing.
(upbeat music)