An interest bonus can cover the cost of insurance.
In this episode, I'm going to address what is an interest bonus on an
indexed universal life insurance policy and how it can cover the cost of insurance.
My name is Doug Andrew and I've helped many people prepare for a comfortable retirement.
To not outlive their money and I do that by directing them and educating them on superior
capital accumulation vehicles. Now, sometimes people here capital accumulation, what's that? That's money.
Okay, money is capital and I've helped many many people optimize their financial assets
and have their money earn more than they do even by age 32. The favorite instrument that I use for
serious cash is what I call the laser fund and so much that I have a book by that title laser
fund and I'll gift you a copy of this 300 page book at the end of this episode. Because
you know I'm 69 years old right now and I'm passionate about enlightening and educating
as many people as possible before I graduate so to speak. So, I am passionate about giving you insights
into opportunities that maybe you didn't know existed before and my favorite vehicle is the
laser fund where I recommend that people as they approach retirement. That they allocate
40 to 60 percent or more some people do 100 of their money into what I call the tax-free bucket
and by far the best instrument in that bucket that allows you in America to accumulate your money
tax-free and then be able to access the money tax free if you retire at age 60. We have some people
retiring when they're 35, okay. But whenever you start taking out income you don't have to wait
till you're 59 and a half or anything like that. But you can take out income tax-free for as long
as you live if you live to be 120 and the average returns when a laser fund is structured correctly
and funded properly. The returns have been between seven to ten percent. Now, many
years it's much higher than that. Some years when the market crashes 40 percent our clients have not
earned anything but they haven't lost a dime. So, the strategy is called indexing and there's a lot
of episodes on this very channel that talk about indexing and how you can diversify using different
indexing strategies and I would encourage that you watch those and also I want you to take advantage
of reading this book that I'm going to gift you at the end of this particular episode. But when people
learn about indexed universal life they start hearing different terms such as linking. Linking
means you're not letting the insurance company take your money and put it at risk in the market.
You're linking your return to an index like the s&p standard force 500 the dow jones the russell
2000 whatever. It means that your money always stays safe in the insurance company earning the
general account portfolio rate that the insurance company earns on their investment portfolio
and they usually invest in very conservative investments. That's why there's never been a legal
reserve insurance company not honor a legitimate claim. They've weathered the great depression with
flying colors when you know 40% of banks never reopened again after the great depression. In 2008,
400 banks went under. Not one single legal reserve insurance company went under in 2008. In fact, this
is where many banks who stayed afloat would put 30 to 40 percent of their tier-one assets. What's
a tier-one asset? It's money that banks and credit unions have to have liquid on hand and safe in
case of a run on the bank or credit union people rushing the bank to withdraw their money. They
put it into insurance companies for liquidity and safety. If you connect the dots here you can bypass
the middleman is what I'm saying. You don't have to have your money in a bank for liquidity and safety
when banks are simply taking your money and putting it into insurance companies to increase
the liquidity and safety by six notches. So bypass the middleman for long-term goals. A bank or credit
union might be good for a six-month goal where you're saving up for a car a jet ski or a boat
or something or a baby in nine months. But do not use banks and credit unions for long-term goals.
You use long-term investments for long-range goals and that's why a maximum funded indexed universal
life policy when it's structured properly and funded correctly will knock the socks off of most
IRAs and 401ks other types of mutual funds and investment accounts. Because you don't lose when
the market goes down and you make money when the market goes up but it's tax-free. I only have to
earn nine percent and net eight percent after the cost of insurance is deducted and index universal
life. If I have my money in the market I have to earn 12 or more to net 8 percent because I
have to pay tax in an IRA 401k. There's fees on it and so forth and so I prefer tax-free returns
rather than tax-deferred or uh taxed as earned rates of return in a portfolio of mutual funds.
When we look at universal life. The linking, means your money is not at risk in the market.
Then you can link your returns to a one-year point-to-point so they measure from let's say July
15th if you linked in July you can do it any month you want to July 15 to the next year and then they
credit you up to a cap of whatever the s&p did. If it went from a thousand to eleven hundred they'll
credit you that ten percent increase. If you have a million dollars in your policy they discredited
you a hundred thousand bucks they can afford to do that. Because the options that they purchased
with the interest on your money because they can't risk your money in the market. Your money has to
stay safe in the insurance company. The interest on your money is what you sort of relinquished
to buy upside options but if the market crashes those options expire worthless and you don't
earn anything but you didn't lose your principal your million you started with. So, indexing is a
great way to participate when the market goes up and not lose when the market goes down.
You can use one year point to point. You can link a two-year going from a specific like October
15th of one year and two years later you measure the upside and the caps might be as high as 19%
or no cap but they'll subtract a threshold or a spread and this is where many times people realize
19 or 20 percent over a two-year period waiting for two years, some use a five-year strategy. You
wait five years they smooth out the last year and average the last 12 months and people are
able to sometimes get a 50% return over a five-year period by using a five-year strategy. Now, the last
thing that people usually ask is well, what's an interest bonus on a universal life policy? So,
how can this interest bonus benefit you in the long haul when you purchase an indexed universal
life policy as a long-term strategy. Get ready, I'm going to blow you away. So, many insurance companies
will offer an interest bonus. it may not be a lot and they will do that maybe starting
the 11th year some companies do it sooner. But they will pay you a bonus on top of the normal
interest they're crediting you starting the 11th year until maybe the 35th year or as long as you
own the policy. It could be 30 basis points that's that's three-tenths of one percent. So if you had
a million dollars in cash value inside your IUL policy and you got that kind of a bonus that would
be an extra three thousand dollars. They credit you at the end of the year starting the 11th year
on the million dollars. That 3,000 may not sound like a lot but if you understand maximum funded
indexed universal life. If you started out with five hundred thousand dollars like many of our
clients did and in seven to ten years that five hundred thousand in the policy grew to a million.
The original death benefit required by the IRS that it qualifies to be tax-free for a 60-year old
may have been a million 250,000. You could buy way more insurance than that but that's not the
objective. Your objective is to take the least amount of insurance the IRS will let you get
away with. So at age 60 if you want to sock away 500,000 and have it grow like crazy. You take the
least amount of insurance that would be about 1,250,000. Now, when the half a million
grows to a million the net amount at risk is only the remaining 250,000, you're self-insuring. So, if
that million doubles again in seven to ten years which for many of our clients it did. The million
doubles to two million that's more than the death benefit. So now the death benefit stays ahead
of the cash value by five percentage points. So if you have two million of cash the death benefit
is actually two million one hundred thousand. The cost of that net amount at risk is so minuscule
at that point in time that the interest bonus in this example three thousand dollars easily
slam dunk covers the cost of insurance the rest of your life. So, basically the insurance is free
you're self-insured and any cost for the insurance is covered by a little tiny interest bonus. Why do
the companies do that? Because they're rewarding you for persistency for being a loyal client
and so many times these are called different things. They could be called additional
credit or a persistency credit or a conditional credit conditional upon you doing that. Sometimes
they're guaranteed bonuses sometimes they're not guaranteed it's based upon the profitability of
the company which brings me to understanding the difference between insurance companies. Basically
there are two types of insurance companies stock and mutual. Now there's employee-owned
companies and so forth but a stock company has to sort of look out for their stockholders.
So often a stock company is a little bit more stingy to the policyholders because they're
trying to make a profit because their first allegiance is to their stockholders. So, when
you want to see interest bonuses and to have the best net internal rate of return because over
you know 20 or 30 years an extra one third of one percent adds up. Usually, a mutual company which is
mutually owned by the policyholders will actually perform better on the average not always. And so,
if you're looking for an interest bonus to be able to help you offset the cost of insurance so that
in the long run if you earned 11 you're gonna net 10 or more or if you're nine you net eight or more.
You might want to consider a mutual company and a company that offers an interest bonus
and then put in the maximum the IRS allows as fast as they allow and within the 10-11 year period
watch by the 15th year and thereafter the interest bonus will likely cover the entire cost of the
insurance the rest of your life on that policy. The insurance is just sort of coming along for
the ride and that sounds pretty good to me. So if this is intriguing to you where can you learn more?
Well, this is why my 11th book that I co-authored with my two sons Emron and Aaron they're
two of the top IUL specialist professionals in America. It's in its eighth printing third edition
and so we constantly revise this. It's actually two books in one and I want to gift you a copy.
So, this white covered site is about 200 pages 14 chapters that have all the charts and graphs
and explanations and chapter six of this side goes in depth into indexed universal life how it works.
The various indexing strategies you can use and there's actually a subsection on interest bonuses
there if this video needs more clarification in your mind. But if you learn by stories and examples
you flip it over and read this one if you're a right brain learner. This is about 100 pages 12
chapters with 62 actual client stories of how the laser fund is used not only for retirement
that knocks the socks off of traditional IRAs and 401ks but emergency funds, college funding, working
capital for business, real estate management, estate planning, on and on, and on and if you
want to use your whole brain your right brain and your left brain you can read both, okay. But here's
how you can claim your free copy. You simply go to laserfund.com or click on the link below and you
contribute a nominal amount towards the shipping and handling and then I will fire out a copy to you.
This is about you and your brighter future and when you do that there's options there to
listen and learn the audio version watch and learn there's even an 18-hour master class that my two
sons and I teach that you can invest in to be able to take ownership of your brighter future. Because
I'm about empowering you to be able to take control of your brighter future and make yourself
immune from the negative impact of taxes inflation and market volatility. That's why I recommend that
40 to 60 of your retirement assets be repositioned at retirement into a portfolio of laser funds.
You'll understand why when you read. So, claim your free copy and here's to your brighter future.