What are safer than banks? In this episode, I'm going to address
why does a max funded iul provide liquid access to money in times of need
better than a bank. Get ready, by the end of this episode, you will understand why legal reserve
insurance companies survived the great depression when many banks didn't.
So, I'm Doug Andrew, I've been a financial strategist and a retirement planning specialist
now for more than 48 years and I've helped a lot of people optimize their financial assets, minimize
taxes, and empower what I call their authentic wealth. So, on this three-dimensional wealth channel
I'm very passionate about giving you insights into opportunities that maybe you didn't know existed
before. So, if you watch a lot of the episodes on this channel one of my favorite financial
instruments that allows people to be able to have liquidity and safety and predictable rates of
return tax-free is a max-funded indexed universal life insurance contract. Which in my opinion
blows out of the water traditional IRAs and 401ks invested in the market and so forth. Because
you eliminate the dangers of taxes, inflation, and market volatility. A lot of financial advisors
do not understand what I mean by max-funded IUL. Now, I'm going to admit that probably 99%
of IUL insurance policies out there in America would not be deemed a laser fund which is what I
call a properly structured maximum funded index universal life. Makes all the difference
in the world so that you can earn internal net internal rates of return cash on cash
of 8, 9, 10, percent and even higher tax-free. I've averaged nine point six two percent
ever since 1997 when indexed universal life was first introduced. Some of the key elements
of a prudent investment are liquidity, safety, and predictable rates of return.
So, in this episode, I'm going to talk about liquidity. Now, liquidity is the ability to access your money
when you need it. Maybe with an electronic funds transfer or a phone call, okay.
Sometimes people get confused with convenience. What gets a lot of business owners and real estate
investors in trouble is lack of liquidity and so I've always said uh leverage without liquidity is
stupidity. Because every story I've ever heard of people that leveraged owned a lot of properties
but they didn't have any liquid money available it was all tied up in the equity of their property
because they borrowed 80% loan to value and then they took all of their positive cash flow
and plowed it into the mortgage to try to get out of debt the dumb way, okay. You kill your liquidity
because then when you get into trouble the only way you can access that money is to
borrow it back or sell it and when you need it the worst is the hardest to get to be able to qualify
to borrow it out and or sell it in a soft market. So, a lot of times business owners when
they get over-leveraged if they lack liquidity they get into trouble and they end up going out
of business or they borrow at exorbitant interest rates and so forth and that causes them to go out
of business sooner or later. So, there's a lot of scenarios where real estate investors,
business owners, just general you know people in America they get into trouble, they lose their home
in foreclosure, because they lacked liquidity. They thought they were doing the smart thing taking all
of their money and giving it to the mortgage company and not having any liquidity and then when
things go bad they lose their job or the market goes down, I'm talking about the real estate market.
They have to sell. They lose all that progress they made by sending extra principal payments
to the mortgage company because now it's all for naught. Is this making some sense? This is critical.
Liquidity is the number one rule or the number one key element to a prudent investment in my opinion
and so many times people put it you know third or fourth down the list. Before I go any further,
I'm going to explain the biggest mistake people make confusing liquidity with convenience. I want
to encourage you to share this video with someone who ought to watch this information, post a comment,
click like. But I would really encourage you to subscribe it's free and when you do you click
subscribe you also click that little bell. Because then you'll be notified every time I post a new
episode which I do almost on a daily basis. So, this is about you, it's not about me. I want to educate
you. I'm 70 years old and I don't want to go to my grave without helping you avoid some of the
mistakes I've made throughout my life and way back early in life, I learned that lesson the hard way
that you must have liquidity. So, let's talk about how people get confused. Sometimes people think
liquidity means convenience because they tell me, "Well, I have x amount of dollars
down at the bank or the credit union because it has a drive-up window and it's just down the
street", no, that's convenience. "Well, yeah, but it's liquid. I go get my money and they even give me
a sucker a treat for my dog if my dog's in the car with me you know". I go, no... Truth be known
a bank or a credit union under federal law regulations. If things got really... bad and
there was a run on the banks, banks can say, "Sorry you cannot have your money on deposit here for
six months until things calm down", or until the federal government bills them out in FDIC. But FDIC
is just an insurance. FDIC, federal deposit insurance corporation but who's running that
insurance company? It's the federal government. They're not very good at running things and
that's why FDIC has been technically broke a few times. The first time you know that I remember was
when they bailed out the savings and loans. But see, the federal government has the ability to
print money and taxes and so people feel pretty good with FDIC. I'm not trying to scare you here
but the fact of the matter is if they are insuring your deposits and they're running that insurance
company they have to print money sometimes to be able to meet that obligation. why not
use the multi-trillion-dollar legal reserve insurance industry which is where banks and
credit unions and the government goes to when they get into trouble. Because they have reserve
requirements that they have to have money on hand liquid and safe in the event of a
catastrophe a run on the financial institutions. So, let's talk about how many banks went under
in the great depression and let's go to 2008 to help you understand this. In the
great depression banks closed, 40 percent of banks never reopened again. They were gone permanently.
Now, how many legal reserve insurance companies went broker under in the great depression?
Zero. Now, they came through crediting two, two and a half, three percent but they're the backbone
of America because they have legal reserves, They have to have on hand. They don't loan money
out on real estate at 80% loan to value. If they loan money on a big skyscraper or shopping
mall maybe it's only 50 or 60 percent loan to value. They have huge cushions. If they have to
foreclose on a skyscraper they usually come out smelling like a rose okay and so they buy triple
a and double a bonds. If they get into stocks it's very conservative stocks and so forth but
this is why the legal reserve insurance industry has weathered those kinds of storms when
banks went under because a lot of their money was loaned out to the general public. In fact, the only
safe money in banks was what they invested into insurance companies. So, let's fast forward to 2008.
In 2008, 400 banks went under. 900 more were on the brink on the watch list
and so the federal government and by the way a lot of Americans don't understand how close we
came to a total financial collapse in 2008 in America. I'm not going to go there right now
but the federal government asked the five major banks in America to disclose
where they had their tier-one assets for liquidity and safety in case of a run on the bank. They
disclosed that 30 to 40 percent of their money was invested into the legal reserve insurance industry.
Sometimes in the form of BOLI that's bank-owned life insurance.
Who do they own it on? Doesn't matter. They're stockholders, they're chairman, or whatever. They own
the insurance policies. They get all the tax-free accumulation and growth and they were borrowing
our money at one percent or less. In other words, there's only four things you can do with money.
Spend it, lend it, own with it, or give it away. When you have your money in a bank or a credit union
or an insurance company it's in a lended position. Are they just a benevolent institution paying you
interest but your money's in a vault? No. What are they doing with your money? They're loaning it
back out again. They pay you one percent and they loan it back to business owners or people who
are buying homes or whatever at five percent. How much more is five than one? Don't say four
it's five times, its 500 percent more. On every million they borrow they pay one percent 10
grand and they turn around and they make 50,000 or 5%. Hello? Would you buy a widget machine for
10 grand that made you an extra 50 grand? Would you hire an employee for 10 grand that made you
an extra 50 grand? That's called a 500 percent return unemployment cost or equipment cost.
But see, the banks disclosed in 2008 that they had it in insurance companies earning you know five times.
So, you can bypass the middle man and increase the liquidity and the safety by just putting your
money directly into an insurance company. Even an emergency fund because you can access your
money with an electronic funds transfer phone call. It's very very easy. So, if you need to access money
out of an insurance contract my favorite vehicle is what I call the laser fund.
Laser is an acronym that stands for liquid assets safely earning returns. So, if you need to access
money out of an indexed universal life policy I have many savvy business owners that do this.
They just say, "Oh Doug, I need you know 100,000, 10,000, a million", in 2017, I had
a business-owning client that needed a million dollars out of their IULpolicy and they know
how to do it. They say, "Send me that that form". I email over the forms one page they put their name
and their account number which is their policy number and then they have one of two choices.
Do you want to withdraw a million or do you want to borrow a million? Now, they understand
how money works. They could withdraw a million but now they're not earning interest on that anymore.
Now, the loan if you use that provision people say, "Why would you borrow?", well, the insurance company
will loan you a million based upon the million of collateral, you have sitting in your policy.
So, why would you do that? Well, there's two ways to borrow. You can borrow let's say at a zero
washer zero cost loan and in order for that money to be tax-free the IRS says they have to
charge at least a minimum interest rate. So, they charge you two percent on the million-dollar
loan but they credit the million that you have as collateral with that same two percent it's called
a zero wash loan. You know what many savvy business owners do? They say, "Well, charge me five percent",
why? Because they'll credit you whatever the index does that year. In 2017, this client earned 25.
So, they paid 5% on a million 50,000 they don't have to write out a check for that. But they made 250,000
minus the 50 they netted 20 percent or 200,000 tax-free on their million
while they were technically using the million in their real estate investments. People go, "Whoa,
I've never heard of this before", see, the reason why they are savvy because they understand liquidity
is the key element of prudent investing but you want to leverage with liquidity. If you leverage
without liquidity that is stupidity. So, if this is intriguing you, I want to show you how you can
learn more about a max funded IUL and why I think it passes the liquidity test with flying colors
and that's where I keep my serious cash in case I need to access it. So, I want to gift you a copy of
this best-selling book it's flying off of our warehouse shelves it's called the laser fund
which is actually two books in one. This white covered side is 200 pages 14 chapters.
It has all the charts and graphs and explanations of how to diversify and create the foundation for
a tax-free retirement. If you learn more by stories and examples you flip it over and read this one.
This is 12 chapters a 100 pages with 62 actual client stories. If you want to use both your right
brain and left brain to read both of these books. But you simply go to laserfund.com click on the
link below. You contribute a nominal amount towards the shipping and handling. I'll cover the rest of
that cost and I'll pay for the book. I'll fire out a hard copy to you 300 pages but there's options
there to listen and learn watch and learn. There's even an 18-hour master class if you like to dive
deep and optimize your assets and increase the liquidity, safety, and rate of return of your money.