Savvy millionaires use the 3 marvels of wealth-building inside a tax-free umbrella.
In this episode, I'm going to address the question, "How do millionaires build wealth
using life insurance?"
Get ready.
You're going to gain insights in the opportunities that you never knew existed before.
So, I'm Doug Andrew and I've actually helped people optimize their financial assets and
minimize unnecessary taxes and prepare for a comfortable retirement for more than 4 and
a half decades.
And they're shocked when they come and I teach them about my favorite financial instrument
to allow them to have tax-free retirement income and how you can double your money conservitably
every 7 to 10 years totally income tax-free.
Now, the secret to wealth accumulation isn't to make pie-in-the-sky rates of return.
It's consistently setting aside money and having it earn compound interest and do it
in a tax-free environment and also using what we call safe positive leverage.
So, I'm going to share with you the 3 marvels of wealth accumulation.
Do you know that life insurance has helped many, many multi-millionaires that you may
know or have heard about --Walt Disney, he actually saved Disney Land.
He came up with the idea and he was able to save Disney Land at the beginning because
he had money inside of a tax-free life insurance contract where he was accumulating money.
Who else?
JC Penny.
Used life insurance to build and protect and preserve his wealth.
Also, Ray Kroc.
Who is that?
He is the funder of McDonald's, okay?
He also has used life insurance to accumulate money.
And he was able to use that like his own banker like many business owners do.
David Walker, who's that?
He was the controller general of United States during the Bush administration.
And also during the beginning of the Obama administration when he finally resign because
in 2008, we came so close to a total financial collapse in this country.
He wanted to tell the American public the truth and they wouldn't let him.
So, he resigned.
He went around in America speaking and teaching in about how economics works and taxes and
the negative impact of taxes and what have you.
And he revealed when he would speak to audiences that his favorite vehicle was max funded life
insurance.
So, get ready to understand why that is so powerful and why it's used by many, many multi-millionaires
and billionaires to build and protect and continue to perpetuate wealth.
So, let's talk about some of the key elements of prudent investing.
And this is a lot about what billionaires do and multi-millionaires to build wealth.
And they do it using life insurance because life insurance has all of these features that
many investments or typical places where most Americans put their money do not pass what
I call the laser test.
So, laser is an acronym that I've used for years that stands for liquid assets safely
earning returns.
The first most important key element of a prudent investment is liquidity.
When you set aside money, it's imperative that you can access your money when you need
it.
Maybe with an electronic fund transfer or phone call.
Too many investments are not liquid.
If you access the money, it triggers a penalty from uncle sam.
The IRS, you have to trigger and pay tax on accessing money out of a Tax-deferred IRA
or 401(k).
Sometimes money tied up in real estate is not liquid.
You want to be able to access money without having to sell assets or borrow the money
or what have you, okay?
Number 2 is safety.
And I'm not just talking about the safety of the institution but the safety of the principal.
That whenever you set aside money, if it's serious cash you do not want to jeopardize,
you want to make sure that you have it in a position where you will not lose due to
forces, economic forces out of your control.
A terrorist attack, a recession, a pandemic.
You want to make sure you have safety of your principal but second, any year you make money,
that becomes newly protected principal.
People go, "Whoah!
How do you do that?"
The 3rd key element would got liquidity, safety.
The 3rd key element is rate of return.
You want to earn a rate of return that typically that has beaten inflation.
You can't be rowing upstream but the rate of 1, 2, 3 percent interest or 3 miles and
hour when the current of inflation is coming down at 5 or 6.
You're going backwards.
So, you want to have a predictable rate of return.
But they don't have to be pie in the sky rates of return if they are tax-free.
That's the 4th key element of a prudent investment is the tax treatment.
Tax-deferred is okay but tax-free is far, far better.
So, when we talk about how millionaires build wealth using life insurance, you're going
to learn here that life insurance passes the liquidity, safety, rate of return test with
flying colors and it's tax-free to boot.
And next, I'm going to share with you the 3 marvels fo wealth accumulation and how this
relates to life insurance being by far the best option for accumulating money under a
tax-free umbrella.
So, let me share with you what I call the 3 marvels of wealth accumulation.
And again, the wealthy have been using this strategy for over 100 years.
I mentioned Walt Disney.
Ray Kroc, the founder of McDonald's.
JC Penney and also, David Walker who was the US former contoller general for the United
States of America.
And one of his favorite vehicles is tax-free, max-funded insurance what I call the laser
fund.
So, what is it that these people know that you don't know?
Well, I created this cartoon being inspired by a friend of mine Jack Tilton years ago.
And here's a depicted beaver looking at a stick.
And he looks at that and he says "Ah, that's breakfast."
Whereas the caveman looks at the same object and says, "Oh, that's firewood for warmth."
[???] looks at the same thing and says, "Ah, a lever to move the world.
See, they all perceive the same thing differently.
And I've discovered that millionaires and billionaires are looking at the same things
you're looking at but they perceive it differently.
it's sort of like when I teach people about these marvels of wealth accumulation.
And I say, "You know what?
Here's taxes and interest".
Most people view those as negatives.
Most wealthy people view paying tax and interest as a negative...
You can turn that into a positive by theoretically move into fulcrum here.
And I'm shocked how many times accounts, attorneys, and financial advisors are going, "Ah, what's
a fulcrum?"
They don't even understand leverage, how to leverage.
So, I used to be a pilot.
I owned a couple private airplanes.
And one of the things that a lot of pilots forget when they're flying is the 3 forces
that have to overcome gravity or the weight of an aircraft.
Especially forget the 3rd one.
So, when an airplane is trying to get the tarmac and fly, there is weight that is holding
it to the ground because of grvity.
And I equate that to taxes and inflation.
A lot of people think, "Golly, those are holding me back from accumulating wealth."
Yeah.
But there's 3 forces that helped you overcome that.
Number one is lift.
Now, I equate lift to compound interest.
So, that's the first marvel of wealth accumulation.
Compound interest.
A lot of people think they understand it and they don't.
But that's the number 1 marvel is compounding.
Albert Einstein said this is the 8th wonder of the world.
But it was Rothschild who said, "No.
Tax-free compounding is the 8th wonder of the world."
So, when you have thrust, you can have a propeller engine which would be like a tax-deferred
IRA or 401(k) financially speaking.
But I like a jet engine.
And that would be totally tax-free.
So, thrust would be a tax-favored type of savings or compounding.
But what's the 3rd marvel?
It's what I call safe positive leverage.
What's that?
The ability to own and control assets with very little or none of your money tied up
or at risk in that asset.
Did you hear that?
Now, I'm going to do a different way.
And it's drag.
And most people say, "What?
Drag?"
Yeah, most people view paying interest on a mortgage as a drag.
But I can assure you someone like Donald Trump, if he was going to be by in a skyscraper,
he doesn't just pull out a checkbook and pay cash.
No, he ask his advisor, "What's the least amount that we have to tie up of our money
to gain ownership of this skyscraper and they mortgage or finance as much as they possibly
can.
And every 3 or 4 years, they refinance it again and again and they keep the equity separated.
They keep it leveraged.
And so, the drag of paying interest and so forth is actually their benefit because they're
borrowing money at a lower rate than their earning.
Many of them are earning like I do 8% compound interest tax-free.
The mortgage, even if they borrow it at 6% is a net cost of 4% after the tax deduction.
How much more is 8 than 4?
It's 100% more.
They're making 100% rate of return regardless of whether the piece of real estate appreciates
in value.
This is how you can soar financially.
So, where do savvy millionaires and even billionaires keep their serious cash and continue to build
wealth?
Many of them use max-funded life insurance contracts.
Now, what is that?
This is where you put the most money into a life insurance policy that the IRS allows.
You take the minimum death benefit they will let you get away with and you fund it as fast
as the IRS allows.
And it turns into a tax-free cash cow.
In other words, there are many people who have funded a life insurance policy with a
million dollars, 5 million dollars, 10 million dollars and they were able to put the money
in over a 5-year period under the Tamra tax citation.
I have educational videos that talk about these tax citations.
Let me tell you what it does.
When they reposition let's say a million bucks, they know that once that million goes into
a max-funded insurance policy, the cost of the insurance in the insurance policy goes
down as they get older.
Have you ever seen a life insurance policy that gets cheaper as you get older?
You haven't seen one designed like I'm talking about here.
So, you're putting the money in and it qualifies as a part of the death benefit.
Why are we using life insurance?
Because it's the only vehicle in the internal revenue code that allows you to accumulate
your money tax-free.
Access that money tax-free.
And when you die, it blossoms and transfers tax-free.
So, they put in a million based upon the average of return that I've achieved for the last
4 and a half decades.
Their money usually doubles about 7 to 10 years.
Do the math.
A million doubles to 2 million.
And then 2 million doubles to 4 million.
4 million doubles to 8 million.
We have many people who have now 8 million dollars and it's totally tax-free.
And that 8 million can generate payouts of 8 to 10 percent using the 3 marvels of wealth
accumulation.
Leverage.
They borrow money for their business ventures and so forth out of their insurance policy.
And they pay 5% interest to the insurance company so that their money can stay there
and still earn 10.
Did you hear that? in other words, if they have millions of dollars in their insurance
policy, they can borrow using that as collateral and let the money still growing in the insurance
policy.
I've had many, many multi-millionaire clients who every million dollars they borrow at 5%,
some years they have earned 10.
Some years 16, some years like 2017, 25%.
While they're using their money for other things, they are earning net rates of return
of 10 and 15, and 20 percent on their money while they're using it for something else.
Because life insurance allows them to do that.
To be able to borrow using their life insurance as collateral at 5% and they keep earning
10, sometimes 15, sometimes 25 percent or more on the money in the insurance policy.
That's the 3rd marvel or miracle of wealth accumulation is safe, positive leverage.
So, let's connect the dots here.
How do millionaires and billionaires build wealth using life insurance?
They understand how money really works.
They are their own bankers, so to speak.
So, as they accumulate money inside of a tax-free umbrella, max-funded, life-insurance contracts,
they know that by putting in the most money that the IRS allows, it turns it into this
cash cow and it's tax-free.
So, every million that they have inside of an insurance policy, if it's earning rates
of return that it can earn by using indexed universal life, they like I've been able to
achieve, 6 to 10 percent average rates of return.
Even though some years I have earned 25%.
Even 55% using multipliers.
But let's just be conservative here.
10% tax-free returns would be like earning 15% taxable rates of return.
So, they have money in their insurance contracts and they're earning those great tax-free rates
of return.
But if they ever need to access money, do they withdraw it and give up earning 10% tax-free?
No.
If they see a piece of real estate they want to buy or tie up with an earnest money, they
simply call me and they say, "Doug, give me one of those forms.
I want to borrow a million dollars out of my life insurance policy."
Not withdraw it.
Because if they borrow it, they are using the money.
The insurance company will lend them the equivalent of the mony in the policy.
But they use it as collateral.
So, the insurance company keeps crediting them 10% or some years 25% while they're using
that million because they can borrow it out.
What does the insurance company charge them?
Maybe 5%.
In 2017, I had clients borrow a million bucks, let's say.
Some borrow way more than that.
But a million dollars at 5%.
That's 50,000.
But that was covered because their insurance policy earned 250,000.
So, they earned 250(thousand) minus 50,000 of interest.
They netted 20% or 200,000 of tax-free growth on their money while they were using that
money for their business in real estate.
Is this making sense?
This is how to become your own banker.
So, how can you learn more?
If this has piqued interest, I would love to gift you a free copy of my most recent
best-selling 300-page book the laser fund which is actually 2 books in one.
This book here is about 200 pages comprised of 14 chapters with all kinds of charts and
graphs and explanations of how to diversify and create the foundation for a tax-free retirement.
Now, if you learn more right brain with stories and examples, you flip the book over and read
this one.
This is about 100 pages, 12 chapters with 62 chicken soup for the financial soul stories
like one I just told you.
If you like to use your whole brain, I would recommend you read both books.
But it's 300 pages.
This has been flying off our warehouse shelves.
I'll tell you what.
I will pay for the book.
You go to laserfund, LASERfund.com.
It's on the screen here.
And claim your free copy.
You contribute a nominal amount towards the shipping and handling.
I'll cover the rest of that cost and I will send out a book to you.
There's also options there for you to listen and learn and watch and learn.
But here's to your brighter future.