Some IUL policies earned 158 percent in one year. In this episode, I'm going to
explain how you can earn 2.7 times what the market does using multipliers. Get ready,
a lot of financial planners and especially insurance agents do not understand this.
So, my name's Doug Andrew and I've been helping people optimize their financial assets for more
than 47 years and if you've watched very many of my YouTube videos they're educational and
one of my favorite vehicles for people saving for long-term goals like retirement is a maximum
funded indexed universal life insurance policy. This is where uh for a 25-year period I was able
to earn average returns of 11.17% netting cash on cash 10.07 percent. Meaning, golly if you're earning
10% your money will double every 7.2 years. Every million you end up accumulating at retirement when
you start taking income can generate a hundred thousand a year of tax-free income into perpetuity
if you live to be 120. This has been true for many many people who have properly structured
and maximum funded indexed universal life policies. Now, a lot of times when people learn about indexed
universal life IUL they watch some of my educational videos on this very channel
and they understand okay, so Mr. Andrew has helped many people earn average returns of
7, 8, 9 10 percent some years higher some years lower using the indexing strategies.
So, let me start out and explain the basics of linking to an index of your choice
with maybe a one-year point-to-point a two-year point-to-point or a five-year point to point. But
here's where multipliers can dramatically increase your rate of return. You ready? So, when you have an
indexed universal life policy and let's say you've accumulated a million dollars of cash
value in there and we have many clients that have way more than that less than that but you can
extrapolate from a million. So let's say you have a million dollars of cash value and you feel
bullish about America at this point in time and so you tell the insurance company link. What you're
doing is you're giving up the for sure general account portfolio interest rate that the insurance
company is earning on their portfolio of assets. So, back in the 1980s I was earning 11 and three
quarters to 15 and a half percent on the general account portfolio. But as interest rates came down
in the 90s and the early 2000s indexing was introduced in 1997
because the general account portfolio rate of insurance companies ended up being around four
five or six percent. If they were earning six they needed one of those percentage points for their
profit and I would net five. If they're earning five and netting four they would pay me for
right now let's say. So that means on a million dollars if i feel like, "Oh, we're headed for a
recession", I can just hunker down and settle for four percent which is way more than banks
are paying they pay less than one percent. So, on my million they would pay me 40,000 and it's tax-free.
So, I can do that if I want. But if I feel bullish about America I can opt to link I could go link on
July 15th or November 15th or I could say link and they can take one twelfth of my million and
link it July to July, August to August, September to September, October to October, that's called
dollar-cost averaging and what they do is they say how do you want to link what strategy.
Now, the most common is an annual point-to-point. So that means if I link in July on the 15th
I wait until July of the next year and then they measure if the S&P grew. If it grew 10%
if it was a thousand when I started and it's 1100 that's ten percent. On my million they must pay me
a hundred thousand. Now, the key to indexing is my million has to stay safe in the insurance
company. So if the economy or the market crashes I don't lose. So, how can they afford to pay me if my
money's not in the market. It's because I gave them the interest the four percent the 40,000 they use
that to buy upside options or to fund an options budget and they buy upside options in let's say
the S&P if that's the one I chose. So, if the S&P goes up 10 that 40,000 gives them the ability
to pay me a hundred thousand. It's just it's how options work. Now, in other videos I explained that
they can cap you at 10 and a half percent or you can say, "You know what, I want a one-year point to
point with no cap." So, then they'll pay me whatever the S&P does if it grows to 20 or 30 or 40 percent
but they may subtract 5 or 10 percent that's called a threshold spread and so if the market
went up 30 or 40 instead of paying me 40 they pay me 30 because they may subtract 10 percent.
Now, you can do that with no cap and many people did that from March of 2020 when the
market crashed during the Covid19 pandemic. My sons told their clients okay link used the one
year point to point with no cap and a year later they were able to see 66.33% increase but they
subtracted 5 percent the threshold was a 5 charge they netted 61.33%. We had clients that had $872,000
in his policy he ended up with a million 370,000 one year later. Made over half a million bucks in
one year, 61.33 percent. I want you to remember that because I'm going to teach you about multipliers.
Now, what is a multiplier? Now, when you say link to an index most of the time the insurance company
is only using the portion of your general account portfolio that makes sure that if the
market crashes you will still have your principal of let's say a million in this example at the end
of the year. So, zero's your hero you didn't lose. So, they only use as much money as they can afford for
the options budget to be able to do that. But you know sometimes people go, "Well, you know what I want
to go for it", what if I gave you authorization to use seven and a half percent more of my million?
Well, if the market goes down you would lose seven and a half percent of a million. You'd lose 75,000.
Well yeah, but the upside is much greater. That's better than if the market crashes 40 percent.
I would lose 40%, my million would go down to 600,000. I'm willing to take a risk
of losing maybe seven and a half percent if the market tanks. Are you understanding this? So if
you tell the insurance company. Okay, in addition to the interest on my million buying options
I'm gonna let you take another seven and a half percent of my million to buy options
because I can handle a seven and a half percent loss but not a forty percent loss. But the
trade-off is the insurance company now goes, "Okay, we'll pay you 2.7 times whatever the S&P does."
So, we had clients that earned 61.33 percent times 2.7 do the math. They got over 150%
rate of return by using a multiplier. So, let me summarize this when you have IUL
using multipliers. They might charge you seven and a half percent fee on a million dollars that's
75,000. But that's the most you're going to lose and that funds the options budget with more money than
just the four percent or the forty thousand. Now, they have four plus seven and a half they have
what eleven and a half percent to buy options and they will pay you two point seven times whatever
the S&P does. If the S&P goes up ten they'll actually pay you 27 percent. It costs you seven
and a half you take that off and you actually netted 19 and a half that's usually what
happens. But my heavens those people who did it from March of 2020 to March of 2021 61.33%
times 2.7 it was unbelievable. The rate of return was 158% for those people using the multiplier. Now,
sometimes people say, "Oh, I don't want to give up seven and a half percent", so they say, "How about
five percent?", I don't want to lose any more than five percent but I'm willing to do that.
If you do that they'll pay you 2.14 times in this particular company. So, if you earn 10 they'll pay
you 21.4 and they'll subtract 5% and this is a lower fee but it's a lower multiplier. But
this is where the insurance company will buy more options to fund their options budget. So, what does
this mean? When you look at averages historically. Because some people say this is incredible. Now,
sometimes these are called performance factors but most of the time we call these multipliers. So,
the 40-year historical average returns if you had multipliers. If they were available clear back
then through the last 40 years without a multiplier you just had your money in the
market. Your return would have been 6.9 percent by using multipliers okay it went up to 10.8 percent.
So, you're able to tweak the rate of return based upon historical averages from a 6.9 average up to
a 10.8. It may be worth considering a multiplier on some of your money if you own an IUL. If you don't
own an IUL you ought to look into it to be able to earn those kinds of rates of return tax-free.
That is net of the multiplier fee, okay. The returns are approximate here based upon 40
years of history depending upon when you linked and so forth but that's the average. So, finally
let me show you a 40-year historical average return. This is a hundred percent participation
and I'm going to use a five-year index strategy which I explained in other videos. But this is
where you wait five years to see what your returns are going to be and also a two-year index strategy
to see the difference. Without a multiplier using the five year you would have averaged 9.04 percent
and that's why many times we advise clients to put in 40 percent maybe 20 of their allocation of
their cash values and their policy to a five-year strategy. A two-year strategy is 6.6 and you go
well golly this looks pretty good nine percent with a five-year with a multiplier this one goes
to 16.24%. Because you're getting 2.7 times that or you're getting 2.14 times that. This
one moves from 6.6 to 11.96. This is net of the multiplier fee based on index strategy allocation
a hundred percent five-year point point last year average. I explained that in another episode with
no cap and a hundred and ten percent participation rate. Tthe two year is a 100 participation rate
with a 19%. cap. So, multipliers can dramatically enhance your rate of return. You're willing
to give up a little bit more of your money if the market goes down instead of zero being your hero.
Maybe you're willing to lose five or seven and a half percent if the market crashes 40
but you don't lose 40. But if the market goes up you get 2.7 times whatever the S&P grew by.
That's pretty incredible that's called a multiplier and I would strongly recommend that
you look at those and not all companies offer these. But what does it mean this is an actual
statement of the client that started out with 872 786 dollars in March of the year 2020 he chose
to link to the one-year point-to-point with no cap and a year later he actually earned 61.33 percent.
He was thrilled he made a half a million bucks he ended up with a million 387 thousand. But when
we showed him golly if you would have used a multiplier you would have made 158 percent. Now,
61% is not a bad return making a half a million bucks but he like, "I could have made 158%",
sometimes hindsight is better than fortnite. But folks the point is this if you want to learn
about these various strategies and how multipliers can work for you you want to talk to an
IUL specialist. But I would recommend you read this book you go through an 18-hour master class if you
really want to learn. So you go to laserfund.com now I'm going to gift you a free copy of this 300
page book. You contribute a nominal amount towards the shipping and handling and I will send out a
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stories when you flip the book over and read the right brain side. But this is to empower you
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whenever we teach educational webinars that are free for you to attend on various topics about
asset optimization and tax minimization. So, here's to your brighter future claim your free copy now.