Buy term and invest the difference tax-free. In this episode, I'm going to
address the question "Should I buy term and invest the difference?" You're going to be
shocked with what I teach you. Get ready. Put on your seat belt. You're going to be blown away.
My name's Doug Andrew and I'm an old geezer. I've been around the block for a long time.
I'm going to turn 69 here shortly. My wife and I have 6 children and 20
grandchildren. But I've been helping people for more than 4 and a half decades optimize
their financial assets, minimize taxes and empower their authentic wealth. I began back in 1974.
I originally had an insurance license and a Series One securities license. That allowed me to sell
any stock bond mutual fund or anything. And I used to be a big proponent of buy term insurance
and invest the difference. I still am. But I do it now tax-free. But I've been around the block and
from 1974 to 1980, I actually became responsible for over 3,000 clients in 13 western states. And
we were helping them buy term insurance and investing the difference. But it was couched
so that their money would get invested. Because a lot of times, people when they're told to buy term
and invest the difference, they don't invest the difference. So, what good did it do? You
but see I had all kinds of charts and graphs that showed that if you bought term insurance
and you invested the difference instead of buying permanent whole life insurance,
and if you got a nice rate of return in a portfolio of mutual funds (and I had several
at my fingertips) that if you could earn 9% even 12% rates of return, at the end of 30 years,
you could finally have enough money where you didn't need the life insurance anymore and you
could let it go. And that's what buy term invest the difference proponents show you. If you do
the math in about 30-35 years, you will no longer need the insurance because you'll have the money.
Well, why do so many 60 and 70 year old people in America buy more life insurance at that age than
ever? Have you ever thought about that? Now, back in 1980, EF Hutton... Now, you may not know
who that is but when EF Hutton talks, people listen. Okay, now they were a brokerage firm.
They weren't an insurance company. And so, back in 1980, they were trying to help people
invest in mutual funds. My brother-in-law was a manager, of one of their branches.
And I had so many clients in mutual funds. And we were trying to earn an average return of 12%. We
actually were doing a pretty good job. Have you ever played red light green light when you were
a kid? You know sometimes, we would have periods a year or two where you might be able to make 20%?
But then you have to take steps back, like red light, green light. And so, we're going up and
back up and back. I used to describe the stock market as like a person with a yo-yo, okay?
Going up and down the market goes up and down but you're hopefully going up some stairs. So,
as you have this up and down, you're hopefully making money in the long run,
okay? Because of that volatility, a lot of times people get frustrated because when you lose money,
if you take 20 steps forward and 10 steps back, you often have to make up for that lost time
period. Like in 2001 to 2003, most Americans lost 40% in their money that was in the market in their
IRAs and 401(k)s. It took 4 years to make back what they lost. And so, it was like seven years
they had to put off retirement. And then many Americans lost 40% again in 2008. And it took
4 years to make back what they lost. So, I said, "Enough already with that". And EF Hutton said,
"What are we doing?" Because if you could earn 12%, let's just say that you finally accumulated
a million dollars and you're earning 12%. Now, in actuality, most Americans are not averaging 12%.
There's some years they make that. But do you know that Dalbar who studies investor behavior says the
average American who has money in the market is only really earning 3.49% on the average? 3.5%.
This is why the financial services industry came out with the 4% rule. What's the 4% rule?
Before I explained the 4% rule, if this is intriguing you, share this video. Click like,
subscribe to this channel. Stay with me to the end and I am going to gift you a copy of my
most recent 300-page best-selling book called the Laser Fund. Now, the 4% rule is what the
financial services industry came out with because in reality, most Americans especially retirees,
they're only averaging 3.5%. So, they only want you to pull out 4% a year out of your nest egg,
if your money's in the market. So, that means if you had a million bucks,
they only want to give you 40,000 a year because they don't want you to outlive your money.
If you're earning 3.5 and you're taking out 4, you're slowly going to deplete your nest egg
but not before your L/E. What's L/E? Life expectancy. But see, they don't want to be sued
for you out living your money. If you take out more than 4%, you have to sign a waiver that
you will not sue them for outliving your money. That's called the 4% rule. So, let's do the math.
You pull out 40,000 a year from your million and you have to pay tax on that. Even in a 25%
tax bracket, you're paying 10,000 of the 40,000 in tax. You're netting 30,000. A lot of these
money managers, they charge 1% in fees on the million. That's another 10,000. Let's
not even talking about that. So, you're lucky to net 3% after tax. Folks, that's pretty pathetic.
Do you save a million-dollar nest egg to have a measly 30,000 a year, 2,500 a month? No. What
I've been earning for years is more like 9%, 9.6%. Let's just round it down to 9. How much more is 9
than 3? Don't say 6. It's 300% more money. It's 90,000 a year of income that's totally tax-free
on my million-dollar nest egg. 90,000 is 3 times or 300% more than 30,000 which is the net out of
IRAs and 401(k)s. Would you like to have 3 times the income? Stay with me and I'll show you how to
get this. But see, the 4% rule in my opinion is pathetic. So, what happens is when people
have their money in the market, they are subject to that volatility. EF Hutton back in 1980 said,
"What are we thinking? If you have to pull out 4% and you're only netting 3,
even if you earn 12% if you could pull out 120,000, you have to pay a third of it in tax.
That's 40 grand. You're only netting 8. You have another 1% in fees. That's seven." They said, "Why
don't we put our money into the multi-trillion dollar insurance industry?" That is the backbone
of America and the backbone of the world. Do you know that just one insurance company where i put
some of my money manages about 4 trillion dollars? That's as much as the IRS collects in taxes in an
entire year. That's one insurance company. See, the multi-trillion dollar insurance industry,
they came through the great depression with flying colors. Banks closed their doors. Only 40%
reopened. Real estate dropped 80%. Guess how many legal reserve insurance companies went under the
great depression. Zero. Many of them came through with flying colors paying 2.5, 3.5 percent.
What about the last big crisis? We came so close in 2008 to a total financial collapse in America.
We had 400 banks go under in 2008. 900 more were on the brink of going under on the watch list.
Guess how many legal reserve insurance companies went under in 2008? Zero. In fact, the federal
government asked the 5 major banks in America to disclose where they had their tier one assets.
This is money they have to have on hand liquid and safe in case of a run on the bank,
okay? Guess where the 5 major banks had 30 to 40 percent of their tier one assets? In
legal reserve insurance companies. Because it increases the safety usually by about 6 notches.
A lot of banks are rated triple B. Most insurance companies where I put my money are rated triple A.
That's 6 notches higher in safety. So, the bank is taking our money that we deposit in the bank
and they're paying us 1%. On every million they borrow from us, they pay 10,000. And they put it
in insurance companies and increase the safety by 6 notches higher and they earn 5%. From 2000
to 2012, the average general account portfolio on the insurance companies were paying 5%. How
much more is 5 than one? Don't say 4. It's 500% more. They were making 50,000% tax-free.
They only had to pay 10,000. Would you hire an employee for 10 grand that made you an extra
50 grand? Would you buy a widget machine for 10 grand that made you an extra 50 grand? They're
making 500%, five times. That's a 500% return on employment costs or equipment costs is what I just
shared with you. Business owners understand this. You can bypass the middleman. So, EF Hutton said,
"Why don't we just put people's money into these insurance companies." And back in 1980,
the insurance companies were earning 11. 11 and 3 quarters, 15.5. I never earned less than 11 and
three quarters from 1980 to 1990. I was earning 11 and netting 10. Let's go back to red light green
light. I was taking 11 steps forward and only one step back because it wasn't tax. It was tax-free.
The 1% is the cost of the insurance that the IRS says has to be there or it will not qualify to
be tax-free. Because money inside of an insurance contract has been a sacred tax-free cash cow for
over a hundred years because the government wants to allow you to accumulate access and transfer
your money totally tax-free because you take pressure off of the government to provide welfare
benefits for widows and orphans and retirees that are trying to save and be responsible and
accountable. If you want to learn more about this, you need to study my most recent best-selling
book. Because Hutton came out with this idea and said this is, "Buy term and invest the difference
tax-free. This is buy term invest the difference on steroids." I got it immediately
and I had 3,000 clients who switched over to what I now call the Laser Fund.
This is indexed universal life insurance contracts but you're doing it the way EF Hutton designed it.
You're using it for living benefits, okay? It's life insurance. Not death insurance.
People use it to be able to put in the most money the IRS allows as fast as they allow and it turns
into a tax-free cash cow. Long story short, I have earned average returns net cash on cash of 8.2%
even 10.07% on many my accounts for the last 25 years. Which means every million dollars
that you accumulate can generate 70 thousand, 80 thousand, 100 thousand a year of tax-free income
without depleting principal. How much more is that than the 4-percent rule. This is
why I believe in buying term and invest the difference couched under a tax-free umbrella.
And that's what the Laser Fund can do for you. So, if this is intriguing you, I wish I had more time.
But here's the deal: I am passionate about educating people like you. And I've written
11 books. My 12th one's coming out shortly. But this one has been flying off of our warehouse
shelves every single day. I will pay for the book. You contribute a nominal amount towards
the shipping and handling by going to laser fund, LASERfund.com. Just click below here. And I'll
fire out a free copy for you. There's also other options in there if you like to listen and learn
watch and learn. This is a 300 page book. It's actually 2 books in 1. This one is all the charts
and graphs and explanations about 200 pages. Or you can flip it over and read this one which
is 100 pages 12 chapters with 62 actual client stories. But this will empower you on how you can
diversify and create the foundation for a tax-free retirement. And you'll learn why I love the laser
fund for my serious cash as the dream solution for many financial goals. Not just retirement,
college funding. It knocks the socks off 529 plan. Business working capital, emergency funds. Because
you can have the greatest liquidity safety and predictable rates of return. That's the acronym
laser. L is liquidity, okay? The S is for safety. The R is for rate of return.
But L-A-S-E-R means liquid assets safely earning returns. And that's what I want for you.