Alright in this video
we are going to take a look
at a split study
based on the new 7702 rules
and we're going to give everyone
exactly what they want to see.
We're not going to look at a policy
where we fund it for 5 years
10 years
we're going to look at a policy
where we pay into it forever.
We're going to attach a term Rider
to both a 10/90 split
and also a 25/75 split
we're going to fund it for 7 years
I'm sorry we're gonna max fund it
for 7 years
up to the 7-Pay limit
about $100,000 per year
and then after that
we're going to drop the term Rider
and pay in just $25,000 per year
indefinitely
up until just about age 100
and we're going to look at
the dividend values
because based on the new 7702 rules
we have a higher
surplus crediting rate
a higher dividend
which since dividends
are more favorable
on base premium dollars
that should result
in greater long-term value
especially if we keep on
pumping money into it
but is that the case?
So we're going to look at the
dividend values
and then also the guaranteed values
so we can just have full transparency
to see what type of design
I should go with
if I am very very interested
in the long term cash value
but also I value my money
all the way through
so I want to see the short term as well
so here we go.
We are going to look at a product
that is purely designed
for strong long term performance
and L99 is paid up at age 99
but for the split study.
So we've got $100,000 per year going in
and what that means
with a 10/90 design
we're going to have a
$10,000 base premium
it's actually a little bit less than that
the base premium is about $9,000
we have a term Rider attached as well
so what that means is we have a close
just about a net of $10,000 per year
whereas with the 25/75
we've got a term Rider
that literally costs
a couple hundred bucks
we cut it off after year 7
and then fund
just the base premium thereafter
which is a very
very common strategy we see
when it comes to a 25/75,
a 40/60, whatever type of design it is.
But what we want to do here
to be very very specific is the funding
is going to be $100,000 per year
for 7 years
and then after that
it'll be $25,000 per year
for the rest of my life
and this is on a 40-year-old individual to start.
So what that means
is with a 10/90 split
beginning year 8
he's still paying the base premium
of about $9,000 and change
and everything else is going into
PUAs [Paid-up additions]
and the policy does not
MEC [Modified Endowment Contract]
based on the guaranteed values
dividend values
nothing like that
this way I can see the numbers
and make an informed decision
to know what design
will benefit me from a
minimum premium
and maximum cash value standpoint.
This way if your value is maximized
you can use it for whatever you want
or need to over the years
because you've got the most money to do so
so let's get on into it.
What we will begin with?
Dividend values
so on the left
we've got a lot going on here
I'm going to walk through this very slowly
so this is all based on the new products
with the 7702 change.
Dividend values
L99
base premium
and this includes the term Rider as well
about $10,000
again it's a little bit less than this.
PUA Rider $90,000.
Annual outlay
represents his total out-of-pocket
year-over-year.
1st-year cash value
about 83% in this example
the break-even point is year 6
normally this would be year 5
with this type of product
I'm sorry with this company
and the product we often use
but we wanted to maximize
the long-term internal rate of return
as much as possible
long-term cash value
long-term death benefit
and this one gave a little bit more long term
than the guy that breaks even year 5
not a big difference though.
So positive year 6
what do I see in the funding?
$100,000 per year
after 7 years
my base premium remains constant
at $10,000 per year
we're going to assume
we keep on paying it
year in and year out
but what do you see here?
So through the 7th year
your PUA payment was $90,000
and when we drop the total payment
to $25,000 per year
$15,000 per year
is allocated toward paid-up additions.
So we've got our cash value
and death benefit growth over time
we did use a blended PUA Rider
a 1-year term
which is why you see it level
for the 1st 7 years
that's a good indicator to know
if you have a 1-year term attached
and then we chopped it off after year 7.
Compared to the guy on the right
the 25/75 split
dividend values
so $25,000 base premium
$75,000 PUA
net out of pocket $100,000
cash value $69,000 right off the bat
almost 70%.
Now before the 7702 change
that would be a bit higher
be closer to $75,000
we've got the higher PUA load
now that exists
with this company and product.
But there's your death benefit
and there's your immediate impact
about a $14,000 difference in cash value.
Year 2 same payment goes in
you've got almost
a $28,000 difference in cash value
here's the main reason why
this is a traditional
whole life insurance product
with traditional policies
what happens in the 1st and 2nd year
in respect to base premium dollars?
If you've seen
any of our policy design videos
base premium dollars
do not show up in cash value
in the 1st and 2nd year
that's why we see this
10/90 design
really pull ahead
in the 1st and 2nd year
so if I'm running a race
I'm out of the gates much quicker like
with this guy
and I have to make up for lost time now
this one's compounding quicker as well
so as I look at things over here
what happens each year?
So we're going to fund
the exact same pattern
$100,000 for 7 years
there you go.
What do you notice?
Almost $50,000 less in cash value
than that guy.
Now time continues to pass
what happens?
We start to see the 25/75
start to pick up the pace
but it's very slow
it's slowly tracking down the 10/90.
And by the way
if you raise that base premium
and make it a 30/70 or 40/60
with the new 7702 laws
makes things even worse
meaning it's further behind.
So what happens?
Let's look 50 years down the road
he's pushing 90 years old
let's go all the way down actually
to about 100 years old.
If we look at age 90
in the 10/90
about $8,200,000 in cash value.
In the 25/75
what do we notice here at age 90?
$8,150,000.
What's the difference in cash value?
We're almost back
to where we were in the 2nd year
it's about $25,000 to $26 000 difference.
The death benefit
is actually a little bit higher
at this point in time
with the 25/70
which is somewhat common but still
not much of a difference in the cash value.
But here's the thing
all the way through
we had between $20,000
and call it a little over $50,000
or less in this guy
especially in the early years
what is that?
We've got the word opportunity cost
a huge difference there
so if all things are equal
at the end of the road
why would I not take the example
or the policy
with the same company and product
that has more money all the way through?
Like why would I not do it?
Makes more sense
I've got more value as a consumer
I have less money
as an agent
from a compensation standpoint
which is good to know
for full transparency.
So those are the dividend values
that is what is not guaranteed
let's take a look at the guarantees.
So everything is identical here
pulled directly
from the illustration software
which we always do
10/90 on the left
all the same
base premium, PUA allocation
1st-year cash values are identical
because with this company
no dividends are paid in the 1st year
expenses are identical
so there's no difference.
But what do you notice here?
Breakeven point
7702 update
this is where it hurts
used to be between years 5 and 8
depending on how long you're funding
now it's year 10
guarantees we're looking at here
compared to the 25/75.
All the way at the bottom of the screen
year 14 is your breakeven point.
I'm going to scroll up
but as I do that
look at that difference in cash value
$75,000 less
with the higher base premium design
compared to the 10/90 design.
Which one do I like more?
Yeah, the lower premium
because it's what's guaranteed.
Do I want what's guaranteed
or do I want to take a policy
with a higher base premium
for the hope
that right now is non-existent
but for the small hope
that I might have more money long term?
Like I wouldn't
I go with what is true
what is proven
what's guaranteed
with that minimum premium.
And this is regardless
if I'm in the industry
regardless if you work with us or not
if you've spoken with any of our agents
and it was a competitive case
like you know how we treat that
we provide information
we love it if you decide to work with us
but at the same time
competitors
if they're doing the same thing
they're doing the right thing
they might even work with us
in our coaching and training business
so we're not going to try and
cut their legs out from underneath them
that would be wrong.
Let's go all the way down
just like we did in the last example
and what do you notice here?
Look at this
it's not a $20,000 difference anymore
so based on the non-guarantees
the 25/75 produced
between $20,000 and $50,000 less
all the way through
based on the guarantees
by the time we're kicking the bucket
it's $400,000 to $500,000 less in cash value
if we look at the death benefit
that's significant as well.
So this is the kind of stuff
I want to be aware of
upfront as a consumer.
Clear comparisons
same term Riders
everything used to truly
maximize both examples.
So if you have questions
please feel free to reach out anytime.
I do hope this helps
and we will talk to you soon.
Hey guys Steve Parisi here.
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