IUL passes the liquidity test far better than most money in IRA's and 401ks.
In this episode, I'm going to answer the question. How liquid is money
in an IUL? Indexed universal life. Get ready, far more liquid than maybe you think.
So, my name is Doug Andrew and I've been a financial strategist and retirement planning
specialist now for north of 48 years and so sometimes people may go, "Well, what does he know?".
Well, I actually began selling universal life when it was first introduced by EF Hutton back in 1980
and when indexed universal life came out in 1997. I was one of the very first proponents of indexed
universal life and so, I've written several books about this topic. In fact, I've been blessed in my
life to have authored thus far 12 books and at the end of this episode, I want to gift one of
those books to you if this is intriguing you. But I get asked questions all over the country because
I've spoken to live audiences more than 90,000 hours in my life and many times people have the
question when they learn about IUL index universal life. They go, "Well, come on Doug, really. How liquid
is the money in that IUL?", because maybe they've had naysayers say, "Well, I don't believe you can earn
rates of return of eight to ten percent average in those and what have you", and I go, "Oh, you have
no idea." So, get ready, I'm going to talk about how liquid money is to access for emergencies
or business opportunities or whatever you need the money for out of an IUL. Actually far better
than money that you might be tempted to grab out of an IRA or 401k or money in a mutual fund. So
here we go. So, life is unpredictable and things happen where sometimes we need to access money
in an emergency. Now, most emergencies do not require that we have to have a drive up window
to go down and access money within an hour. But if those emergencies happen you can actually arrange
to get money pretty quick out of an IUL policy. Most emergencies if you could access money
10,000, 50,000, 100,000 a million dollars within 3 to 5 days
that's usually adequate. Because most emergencies don't require instant money in your hand. So,
let's go through a few scenarios. Many times as I listen to my clients and my students.
If something comes up an opportunity or an emergency and they need money
many people go, "Well, golly, I don't have access to any. I don't have time to apply for a loan
and get approved from the bank or credit union", and so they look at their resources where they
have money. Now, most Americans unfortunately, have most of their money sort of trapped
in traditional accounts like IRA's and 401ks, 403b's and the like or annuities. Maybe money in
the market in mutual funds or stocks and bonds. So, can you go get money in those? Yes. Are they
liquid? Yeah. You can access money but what normally happens when you access money out of an IRA 401k
and if you're under the age of 59 and a half. What's going to happen? They will penalize
you and I'm talking about the IRS. There's a 10% penalty and you're gonna have to pay tax.
So, if you pull out you know $100,000 you may have to pay tax that year on that
money that you withdraw. Because now you've taken money out and it becomes taxable. But there's a 10%
penalty. So, if you are in a 30% combined federal and state tax bracket plus the 10% penalty you're gonna
pay 40 cents on the dollar. You pull out 100,000 you're really only netting
60,000 because of the taxes and the penalties. So, sometimes, you can borrow money
out of an IRA or 401k if your employer you know allows you to do that out of a 401k. But
you must pay it back and maybe you don't have the wherewithal to do that. So, there's usually issues
from a tax standpoint and a penalty standpoint if you're under the age of 59 and a half.
Now, what about money in the market? Let's talk about that. If you have money in a mutual fund
or stocks bonds or whatever and you need to access some of that the market may be down.
And so, if you redeem your mutual fund shares or you sell your stocks it may be poor timing and
you may be tempted to go, "Golly, I got to time the market. I've got to wait until the market comes
back. It's we had a crash yesterday and it dipped 10 percent. I don't want to sell my shares low",
and we could because we have a tendency to want to take out or sell our shares redeem them in a
mutual fund at the high water mark the highest point it's been to. So, sometimes market timing
interferes and causes frustration and heartburn when you access money out of the market via stocks
of mutual funds or what have you. That's why I love accessing money out of an IUL policy. In fact,
it's one of the purposes it can become one of the best emergency funds ever. Now, some people say well
maybe you ought to have some money in a bank or credit union because they have a drive-up window.
Yeah, why would you put money in a bank or credit union especially a
hundred two hundred thousand or more when they only credit you less than one percent?
You know, you're rolling upstream at the rate of one mile an hour so to speak and the current
of inflation's coming down at the recording of this video the actual rate of inflation is over 15%.
So you're going backwards. So, IUL becomes the superb emergency fund to access money because
you're earning a higher rate of return and it's actually safer than money in a bank or
credit union because frankly that's where banks and credit unions put your money up to 30 to
40 percent of their tier-one assets are in insurance companies for liquidity and safety.
I said liquidity. So, let me address how easy it is to access money out of an IUL. Now, if
this is already intriguing you, I would strongly recommend that you subscribe to this channel. Why?
Well, I post an in-depth answer to a question like this almost on a daily basis. It's a
free subscription and click the little bell so you'll be notified every time I post a new video.
I don't want you to miss out and I have over 725 educational videos on this channel. But stay with
me to the end because I'm going to gift you a copy of my most recent best-selling book
it's 300 pages called the laser fund and it will explain what I'm talking about even in more detail.
So, an IUL policy most of my students that I mentor and my clients for years. They came to me
not necessarily wanting or needing life insurance for a death benefit that wasn't their primary
objective. It was to be able to put their money somewhere that was liquid safe earning a great
rate of return for goals such as retirement and in other episodes, I talk about why a max
funded IUL will knock the socks off of most IRAs and 401ks from a tax standpoint rate of return and
so forth. Let me just address the liquidity. So, if you're putting in the maximum amount of money
because that's the objective with a max funded IUL. You want to put in the most money that the IRS
allows as fast as they allow and take the least amount of insurance you can get away with. So, let's
say you're 60 years old and you want to reposition 500,000 well about the fastest you can put that
500,000 in to grandfather yourself so that you can access money anytime without triggering tax
would be about 100,000 a year maybe up to 125,000 a year. So, let's say this is your
policy and sometimes I compare this to a bucket. So you're going to put in a hundred thousand to
125,000 a year and you put that in and the policies maybe only 20% funded. Well, what if you
need some of that money? You can actually access that money with an electronic funds transfer phone
call if you need to or in another episode I'll talk about how most people do it if they're not
in a hurry. But the point is this if you if you put in a hundred thousand and that policy is only 20%
funded you could still access probably 20, 30, 40,000 by just withdrawing it but that's not the
smart way. In another episode, I'll talk about that the smartest way versus just withdrawing the money.
But you can do that but most people you know if they're setting it aside and they had
other money they go there for liquidity not the insurance contract until it's fully
funded. So, you put in 100,000 another hundred and let's say in four years and one day
you finally have paid all five payments into the policy now you have 500,000 in
there. Well, what if you need some money? You can go access about 90, 92, up to 95 percent of that
and you want to do it the smart way. So check out my other episodes that talk about that
and you simply access the money is extremely liquid. Are there any taxes that are triggered?
No, not if you do it right. There's no penalties by the IRS. You don't have to wait and time the market
and so you don't have any of those issues and you can access that money and if that half a
million in seven years like with a lot of my clients it doubles in seven years to a million.
You can access that money very easily. So, let me make sure you understand the liquidity of an IUL.
So, in other related episodes, I'll talk about three ways to access money out of an IUL.
The sad way, the dumb way, and the smart way. Make sure you watch that because you want to access
the money the smart way and you're going to be blown away with why that is so critical. But in
this episode, I just want to assure you that when you set aside money and accumulate it in a maximum
funded indexed universal life policy it passes the liquidity test with flying colors on a scale of
one to ten. One being a very illiquid ten being super liquid I would rate it nine or ten only
during the first few years. If you needed access to one hundred percent of your money then maybe you
might not be able to do that while you're still in the funding process without sort of killing
the policy or causing it to lapse or cancel it. So, I'll give you one last little example here.
Years ago, I had a woman come to me her name was Beverly and she gave me 200,000. This was before
the TAMRA law and she dropped it in the policy. She says I'm not going to touch this for 20 years.
Well, it wasn't even six weeks and she had an accident. She called me from California she said, "Doug, I got
to have 120,000 of that 200,000. How long will it take?", and I said, "Oh, just a few days". She called
me two days later and said, "Doug, how long will that take again?", and I said, "Have you checked
at home?", and her brother was there and federal express because I arranged for that had already
delivered the hundred and twenty thousand dollar check. In this day and age, she could have done that
electronically. So, how liquid is money in an IUL? Extremely. You can access money when you need it
even with an electronic funds transfer or phone call. So, again if this is resonating with you
subscribe to this channel. But more important than that I want to gift you a free copy of my most
recent best-selling book. This is what I mentioned the laser fund that's what I call a max-funded IUL.
This will teach you how to diversify and create the foundation for a tax-free retirement
and why a max funded IUL is like a financial swiss army knife and one of the functions other than
retirement savings, working capital for business, real estate management. The people set up IUL
policies is for an emergency fund because of the liquidity. So, if you click on the link below or go
to laserfund.com and you contribute a nominal amount towards the shipping and handling I'll
cover the rest of that cost and I'll pay for the book and I'll fire out this 300-page copy to you.
Now, it's actually two books in one. This side is 14 chapters about 200 pages with all the charts and
graphs and explanations. If you're more of a right brain thinker, you flip it over and read this one
100 pages, 12 chapters, with 62 chicken soup, for the financial soul stories. If you want
to use both your right brain and left brain you can read both okay. So, go to laserfund.com click
on the link below and then when you're in there there's also options and opportunities for you
to subscribe to educational webinars retired by design events. So be sure and check that out.