- IUL is a bucket
to hold and grow cash.
In this educational episode,
I'm going to address how should IUL
be structured properly.
Get ready because I would dare say
that over 99% of insurance agents
do not know how to structure an IUL properly
to perform at the best internal rate of return.
(bright cheerful music)
So I'm Doug Andrew
and I've been a financial strategist
and retirement planning specialist now
for nearly five decades.
And during that period,
I've actually began to have two sets of clients, okay?
One set continues to be the general public.
And so that's why on this YouTube channel,
we have over 1,000 educational episodes
where the general public can learn
about financial strategies,
how to accumulate access and transfer their money tax free.
One of my favorite financial instruments
is a max-funded indexed universal life insurance contract
as long as it's structured correctly and funded properly
which I'm gonna talk about here in just a moment.
But so many of the general public,
they get duped into putting money
into traditional IRAs or 401ks
which used to be a good way to go.
Now, it's only a poor way to go.
The best way is to accumulate access
and transfer your money totally tax free
by using a LASER fund, okay?
LASER is an acronym
that stands for Liquid Assets Safely Earning Returns.
My other set of clients are financial advisors.
From 2003 to 2007,
I ended up training over 3,000 financial advisors,
CPAs, and tax attorneys.
They paid between 6,000 to $8,000
to come through a three-day training.
Now, a lot of them went back out
and they didn't help their clients.
They said, "Doug, we don't have time
to educate people like you do.
We just wanna sit down
and get their money, you know, slam, bam!
Thank you, ma'am."
And so forth.
And then, you know, they would say,
"You know, what the public doesn't know won't hurt them."
Well, it did.
The reason why many people came through that training
in 2003 to 2007 is to learn
why none of my clients lost a dime
in their accounts
due to the 9/11 terrorist attacks.
And so they came to learn about indexing,
indexed universal life.
Well, then they didn't wanna go through
and take time to educate people.
They're, "Oh, what the public doesn't know won't hurt them."
Well, it did in 2008.
For the second time in a decade,
most Americans lost 40% again.
And that's when I sort of kept
all of this stuff in a vault.
I said, you know,
I'm just gonna go back and help people
and have a small nucleus of financial advisors.
Well, I have unlocked that vault
and now I have a thousand financial advisors
and that's growing every two weeks substantially,
advisors that are wanting to learn how to do this
and they're serious about it.
See, and so years ago,
I had a coach that said, "Doug, you know,
you're so preoccupied selling the cake, so to speak,
to your own clients.
You need to sell your recipe to other financial advisors.
You need to make your competitors your customers."
And so I did that.
Well, Time Warner back in 2005 with my second book,
we went through a half a million copies.
They estimated there were about 50,000 financial advisors
buying my books in bulk by the case on Amazon
and passing them out like loose cannons.
And they would sometimes just tell their client,
"Just read the first three chapters.
And then, I'm gonna do something else with your money.
Don't read the rest of the book."
And they buggered up a really good strategy
of liquidity, safety,
and earning predictable rates of return.
So in order to separate the sheep from the goats,
I train advisors who want to do this the right way, okay?
Now what I do is I show how to accumulate access
and transfer money tax free
by properly structuring
a max-funded indexed universal life insurance contract.
So I often use the metaphor of a bucket
in my books and my training.
So simply put, a bucket is an IUL policy.
It's a repository where you're going to accumulate
and grow cash.
And so what you're doing,
when this was first introduced in 1980 by EF Hutton,
they were the original brainchild.
They said what we're trying to do
is get the least amount of insurance
that the IRS will let us get away with
because money inside of an insurance policy
is the only vehicle in the Internal Revenue Code
that allows you to accumulate money tax free
under section 72e of the Internal Revenue Code.
And then, section 7702 allows you to access that money,
turn on tax free income out of that.
And then ultimately when you pass away,
anything left in the insurance policy, in the cash value,
blossoms and transfers income tax free
under section 101a,
meaning if I died right now,
every million I might have
would blossom about 2 million
and transfer tax free to my heirs.
And people say, "How much does that cost?"
Well, it's nothing, it's free,
but it doesn't cost me anything.
It's being paid for with a minuscule portion of money
that would otherwise go out the window
in unnecessary tax if you followed the herd
putting money into traditional IRAs and 401ks.
Getting back to the bucket metaphor,
when you design an IUL policy,
most agents don't know how to do this.
My IUL policies have averaged 11.17%
since 1997 when indexing came out.
Now before that, we just had universal life in 1980.
Ever since 1980,
I have averaged 9.62%.
So that's tax free.
Let's round that down to 9.6.
9.6 divided into the Rule of 72
means your money doubles every seven and a half years.
Yeah, I've had people
in 1980 that put in $500,000
and that 500,000 doubled
in seven and a half years to a million.
And then in another seven and a half,
it doubles to 2 million,
another seven and a half to 4 million,
and another seven and a half years to 8 million.
At the end of 30 years,
their 500,000 is now worth 8 million
and it's totally tax free.
And it's generating, you know,
750 to 800,000 a year of tax-free growth
or income without depleting principle.
It knocks the socks off of IRAs and 401ks.
But in actuality, since 1997,
by using indexing
when it was introduced and rebalancing,
I have averaged 11.17 and netted 10.
Now, when I say earn 11 and net 10,
that means one percentage point
is paying for the cost of the insurance
over the life of that, you know, 30-year period let's say,
retroactive back to day one.
So I've averaged 11 and I've netted 10 cash on cash,
meaning that a million dollar nest egg
will generate 100,000 a year of tax free income.
If an advisor does not understand
how to structure a bucket correctly,
if you were to earn 11,
you might only net six or seven
because they didn't know how to do it correctly.
Or maybe you may not even earn 11,
you may only earn seven or eight
because they didn't structure it correctly.
So it's extremely critical
that you understand how to do this right.
And unfortunately, a lot of advisors and insurance agents
don't know how to do this.
So when you design a bucket,
you're trying to take the least amount of insurance
that the IRS will let you get away with
based upon three factors,
your age, your gender, and your health.
And so these are dictated under tax citations
TEFRA and DEFRA
and they were passed in 1982 and 1984.
It dictates the minimum amount of insurance
but it doesn't matter how old you are
or even how unhealthy you are.
You can squeeze down the death benefits
so that you can earn 11 and net 10,
just like a 22-year-old athletic marathon running female.
A lot of agents don't know
how to squeeze down the death benefit.
Or if you're totally uninsurable,
you can use a surrogate.
You can put the insurance on this bucket,
on your spouse, your kids, your grandkids.
It's the owner of the insurance policy
that gets all the tax-free accumulation and tax-free income.
You don't have to be the insured to be the owner.
You can own this on your spouse and your kids, okay?
So TEFRA and DEFRA dictates the minimum death benefit
so that you can tweak the internal rate of return
to be within 1% of the gross rate of return
over the life of the contract,
you know, retroactive back to day one.
Now, TAMRA dictates how fast you can fund it.
Generally speaking, if you're over age 50,
you have to spread it out over about five years.
And so let's say the bucket that you're designing
is to accommodate 500,000.
Now, you don't have to put in 500,000
but you don't wanna make a bucket any bigger
than what you will likely put into it.
And so you could take 20 years to put in the 500,000
but a lot of my clients,
they wanna fund it as fast as TAMRA allows.
TAMRA basically was passed in 1988
and there's been one change to it since then.
And this came out in the year 2020, 2021,
where you can actually get away with less insurance
and get the money in even a little bit faster.
I'm gonna simplify it here.
It means that if you wanted to put in 500,000
in one fell swoop,
you can do that
but your money will only grow tax deferred.
If you die, you know,
and you put in 500,000,
you'll leave behind a million.
But the purpose of it
for most people is living benefits.
So if you wanna have tax-free income,
you have to comply with TAMRA
because if you violate TAMRA,
it's called a modified endowment contract or a MEC.
And so that means if you put in 500,000,
if it's earning 10%,
you start pulling out 50 grand a year
you have to pay tax on the growth
just like an IRA or a 401k.
No, you don't wanna pay tax on that.
So you have to comply with TAMRA.
So the most you could put in,
if the bucket was designed to hold 500,000,
the most you could fund it might be 20% a year,
100,000 a year.
You don't have to do it that fast.
But if you did it,
you could put in 100,000
the first day of the first year,
100,000 the first day of the second year.
So after four years and one day into the fifth year,
four years and one day,
you now have your 500,000 let's say.
There's nothing magic about the number 500,000.
I'm just using it as an example here.
You could design a bucket to accommodate 100,000,
a million, 10 million.
But if you comply with TAMRA,
now whenever you access money
out of this insurance contract,
this bucket is totally income tax free.
And so that's why most people do that.
Now, when you're doing that,
the minimum death benefit, for a 60 year old let's say,
if you wanted to put in $500,000,
the minimum death benefit now is about a million.
You could buy way more life insurance
than a million with 500,000.
That's not the objective.
You want the least amount of insurance
the IRS will let you get away with.
That's determined under TEFRA and DEFRA.
So you put in 500,000 for a million.
Now, there's some advisors out there that say,
"Now level is the devil."
What they mean is if you have the level death benefit,
that that's not the best way to go.
They don't know what they don't know.
The only time you choose an increasing death benefit,
meaning the cash in the policy and the growth
is added on top of the death benefit,
is if you're funding it with, you know,
like monthly payments for 20 or 30 years.
If you're putting in $500 a month,
then you use the increasing death benefit until when?
Until you stop funding it.
Then, you switch to the level death benefit
and that will make the spigot on the bucket,
the cost of the insurance
be smaller faster
and that increases the internal rate of return.
If you're gonna fund this bucket in five or 10 years,
you used the level death benefit from the word go
because if you put in 500,000
and the original death benefit is a million,
then that amount at risk
when you have 500,000 in there is the remaining 500,000.
The insurance company's only at risk for 500,000
because 500,000 of the million dollar death benefit
is your money.
And so they're only gonna charge you
for the net amount at risk.
Well, if you're earning 9.6%
and that 500,000 doubles to a million
in seven and a half years, at that point,
your cash equals the death benefit, guess what?
There is no net amount at risk.
The insurance cost is zippo.
But TEFRA AND DEFRA says the death benefit, if you die,
has to be at least five percentage points ahead.
If another seven and a half years goes by
and the million doubles to 2 million and you die,
you leave behind 2.1 million
but the insurance company's only charging you
for that last 100,000.
The interest you're earning on this
as time goes is far greater
than the cost of the insurance
because the amount of insurance is going down.
This is how your insurance becomes cheaper as you get older.
Have you ever seen an insurance policy
get cheaper as you get older?
Agents who don't understand this,
they say "Oh, this is gonna implode.
The cost of insurance is gonna be exorbitant
when you get older."
No, I am able to 30 years
into my bucket,
if I earn 11, I net 10.9 because the cost of the insurance
is only draining out 1/10 of 1%.
But retroactive back to day one, it maybe is 1%.
So the spigot on the bucket
is the cost of the insurance
that the IRS says has to be there.
It's actually watering a nice little money tree
that's going to make it blossom when you die
and transfer tax free.
But when you think about earning,
let's say 11 and netting 10
after the cost of the insurance,
that 1% is money that most people shell out
in unnecessary tax.
In fact, they would have to be earning 15 or 16%
in a tax-deferred IRA or 401k
in the market.
That's pretty scary to try to earn 15 to net 10 after tax.
I only have to earn 11 to net 10
and that's not tax.
That is the cost of the insurance
that makes the whole thing tax free.
So it's definitely not a cost, it's a benefit.
And by the way, people don't object to insurance benefits.
They object to paying for them.
I have Uncle Sam pay for my insurance
by redirecting that 1%
that most people shell out in unnecessary tax
on their IRAs or 401ks
and I get a bunch of insurance coming along for the ride.
So if this is resonating with you
and you wanna learn more how to do this correctly,
I wanna gift you a copy of this book.
It talks about how to property structure
max-funded indexed universal life.
And when you do it correctly and fund it properly,
I deem it a LASER fund.
It's a liquid asset safely earning returns.
So I wanna gift you this book.
It retails for 20 bucks on Amazon.
I'll pay for the book.
I'll explain how to claim your free copy,
but it's actually two books in one.
This side is about 200 pages, 14 chapters,
with all the charts and graphs
if you learn like Left brain.
If you learn more right brain by stories,
you flip it over and read this one.
This is about a hundred pages and 12 chapters
with 62 actual stories of clients
who have used the LASER fund max-funded IUL,
not just for retirement,
but goals for their children's college education,
working capital for business, real estate management,
emergency funds and so forth.
If you wanna use your whole brain,
read both of these books,
but here's how you claim your free copy.
Simply go to laserfund.com
or 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.
But while you're in there,
if you like to listen and learn or watch and learn,
check out those options.
And also, we teach educational webinars.
They're free on a weekly basis,
but you can also schedule an appointment
with an IUL specialist
so that you can get an illustration
of how to structure one for you correctly
so that you don't make mistakes,
so that you don't earn eight and only net four,
that you can earn 11 and net 10.
That is the difference that less than 1% of insurance agents
know how to do.
(bright cheerful music)