Become a millionaire with 500 bucks a month. In this episode, we are going to
address the question, "What is the minimum amount
that I can put into or invest in an IUL, indexed universal life?' You're going to
see it's not what you begin with that counts,
it's what you end up with.
So, I'm Doug Andrew and I've been helping people with max-funded IUL,
since universal life has been around in 1980.
I started as a financial strategist in 1974.
But when indexed universal life came out in 1997,
I was all over that. And my average rate of return
went from 8.2 percent up to over 10 percent since that
time. And so, I'm a big proponent that people as they prepare for long-term
goals such as retirement or maybe in their business or with their real estate
management, college funding for their kids that one
of the best places to accumulate their money
tax-free safely where it's liquid it's safe
it earns predictable rates of return between 7 to 10 percent is what
I've averaged for 45 years. And I don't have to pay tax
when i take it out. And I don't have to pay tax when i
transfer it to my heirs. When I'm 6 feet under, there is not an
income tax due to whoever I leave it behind
to. There's very few vehicles that give tax advantages like that. In fact there
is no other vehicle in the internal revenue code
that allows you to accumulate access and transfer your money totally tax-free.
But when it transfers, it blossoms in value. So, my average returns
as I alluded have been between 8.2% up to
10.07. Even though some years I've earned 25%, okay?
Other year, 16%. Other years when the market totally crashed,
I didn't lose. I didn't make anything maybe but I didn't lose.
But see I've averaged a rate of return between the 8 to 10 percent range.
So, when the question is asked "What's the minimum amount I can put in?"
Well, you have to cover the cost of insurance
that was dictated under the tax citations
under TEFRA, DEFRA, TAMRA to accommodate the maximum amount you wanted to put in.
So, the real question is, "Well, what's the most that you want to
put in?" And generally, this is called the guideline
single premium. This is how much you want to be allowed
to put into the policy over the life of the policy and no
faster than the first 11 years. And so, let's say it's 500,000.
Now, you don't have to put in 500,000. That's the
most you could put in over the first 11 years. In fact, you could probably put
that much in in the first 5 years but then you're done. There's
no limit to what it can grow to. It can grow
to millions and millions of dollars
tax-free there's only a limit to how much you can put in.
So, if you're trying to set up a contract, a policy, a savings vehicle using indexed
universal life with the least amount of premium, then
you want to think about "Well, what's the least amount
that i could probably average on a monthly basis?"
I remember when my wife and i raised our six children, when they were born,
shortly after, we would take out a universal life insurance policy on them
and start socking away 25 bucks a month. Now, that was 40 years ago, right? And so
25 bucks a month putting into their policies and then adding more money
later and so forth grew to hundreds of thousands of dollars just
at 25 bucks a month. I would say right now, if you can set
aside 500 a month in today's dollars, 500 bucks a
month, that's 6 000 a year. Now, you can put in more than that. You
can put in less than that. If you put in more, you can coast. So, if you
throw in 10 or 20 thousand and then you have to stop and not put
anything in, you can do that if the minimum amount was 500 because
you just divide that into how much you've already put into
the policy. It allows for flexibility. That's why it's called
universal life because it's universally applicable
to minimum funding, maximum funding. But the question is
"How much do you want to accumulate to generate tax-free income at the end
of the day?" And so, I back into the minimum amount when i talk
to most of my clients. Here's how. So, based upon the rates of
return that I've quoted that I have achieved... And not just
me. Heavens! Thousands of our clients that we've
helped with this have achieved incredible results. Let's
use the rule of 72.. See, the rule of 72 says that you take
the interest rate that you're earning on any
investment and divide that interest rate into the number 72. So,
8 into 72 means your money will double every 9 years.
If you're earning 10 percent, your money will double every 7.2 years.
If you're earning 7.2% which is the average that people earned in the
worst decade since the great depression,
2000-2010, just falling asleep and waking up 10
years later, people doubled their money. The average
return was 7.23%. Let's use 7 ½.
If you started stalking away 500 bucks a month
and you earned an average of 7.5%, you would have a
a million fifteen thousand dollars in 35 years.
So, I guess the quick answer is "Well, the minimum might be 500 bucks a month if
your goal is to have a million bucks and you've got 35 years to get there."
Or if you had a lump sum, how much could i set aside so that 30 years from now i
have a million if i have 125,000 right now? Well,
125,000 right now, if you're earning 7.2%,
it will double every 10 years. So, 125,000 grows to
250,000 in 10 years. 250 doubles to 500 in the next 10 and 500 doubles to a
million in the next 10. And so, it's it's quite simple. But what I
alluded to is when i met with people, I would say,
"How much money do you need in today's dollars?" And
they would say, "You know, this would be like 30 years ago."
Well, I need at least $3,000 a month on top of
social security to buy gas and groceries. I go, "Okay."
3,000 bucks a month. So, that would be
some type of an investment vehicle that would generate
36,000 a year of of cash flow at 3,000 a month.
But we have to take into consideration inflation. What do you think inflation
will average? And they'd say, "Oh, let's say 5%." Well, that means the cost of
living will double every 15 years. That means
that 3,000 a month will only buy what 1500 a
month bought 15 years earlier. So, you're going to need 6,000 a
month and 15 years to buy the same gallons of gas and loaves of bread that
three thousand a month bought 15 years earlier. And if you are
looking 30 years down the road, it doubles again.
So, 6,000 goes to 12,000. You're going to need 12,000
a month to buy the same gallons of gas and loaves of bread that 3 000 a month
buys today. So, in order to have 12,000 a month that's
144,000 a year. We're going to have to if we
assume a 7% rate of return or a 10 rate of return.
We back into it and we go we need a million and a half, we need 2 million. We
need 3 million dollar nest egg to hit your goal. And so, it's really a
function of not what's the minimum how much do you
need to set aside and then with flexibility
the allowed to put in nothing or a very low amount. But it's really what's the
most that i can put in to achieve my goals.
So, yeah. You could become a millionaire by
socking away 500 bucks a month for 30 years at 7.5%
interest. If you're in 10%, you'll do it
quicker. But maybe a million is not going to be enough. And so, you may
need to accumulate 2 million or 4 million.
Can I tell you people who have used max-funded indexed universal life, IUL
where it was structured correctly and funded properly
under the TEFRA, DEFRA and TAMRA guidelines,
this has turned into a cash cow for them. I call it the
the Laser Fund,. It's the title of my most recent book.
It has actually two books in one. A left brain side and a right brain side that
has stories and examples. You will see in here that there are
people who started out with $500,000. Maybe 30 years ago.
And so using the same math 500,000 doubling every
7.2 years... Because they have averaged 10 like I have. So, 500,000 doubles to a
million in 7 ½ years, let's say. In
15 years, it's doubled from a million to 2 million. In 22 and a
half years, it's doubled again to 4 million. And at
the end of 30 years, their original 500,000 in the laser fund
is worth 8 million bucks. And that 8 million dollars at 10% is
generating 800,000 a year of tax-free cash flow
for as long as they live. Do you know what any other vehicle that does that?
If you want to know how and why, that's why i wrote this book. It's my 11th book.
I'll pay for the book, you pay $5.95 shipping and handling and i'll fire one
out to you. Just go to laserfund.com and you learn how to be able to have
this work for you and not outlive your money.
And to be able to have a vehicle that will accumulate your money
tax-free. And it doesn't matter what you put into it.
It will knock the socks off of any other investment vehicle that's only tax
deferred especially in the markets where it's
volatile. Because this is stable.