This knocks the socks off most investments. In this episode, we are going
to address the question 'How does IUL compared to other investment
alternatives?" This is episode 17 out of 21 in a series titled Secrets To A
Tax-Free Retirement. It's a free course. Invest about 4 to 5 hours
immersing yourself in education that will empower you to accumulate an extra
million bucks that can generate a hundred thousand a year of tax-free
income for as long as you live.
My name is Doug Andrew. And I've been a financial strategist and retirement
planning specialist for more than 45 years.
My favorite vehicle I call the Laser Fund which is the max-funded, tax-
advantaged insurance contract. This whole series has talked about why it's my
favorite vehicle and why it passes the liquidity safety rate of return tests
with flying colors and it's tax free to boot. That's why in my most recent
best-selling book The Laser Fund, there are 4 pillars where I score
investments based upon a scale of 0 to 10 on liquidity, safety, rate of return
and tax benefits. But it's more than just those 4 pillars. So, in this episode, I'm
going to show you how a max-funded insurance contract especially indexed
universal life compares to a lot of other alternatives like IRAs and 401Ks,
municipal bonds real estate and what-have-you because inside the book, I have
a very detailed chart and it shows all of the different features that most
people would prefer in a place where they put their serious cash. You'll be
shocked when you study this how many investments fail in so many of these
areas. And so, I want you to listen close as I go through various financial
alternatives. But for years, when I would sit down with clients and they wanted to
prepare for retirement and I could see that they were headed for a very high
tax bracket because they had all this money in yet-to-be-taxed IRAs and 401Ks.
Or they had money in real estate and their rate of return was a pathetic 2%.
And I said, "Whoa! You can do better than that."
And so, I would advise them, "Hey, you may want to reposition some of these
non-performing assets." Or these ones that are that are not tax-free. They're
tax-deferred. And over a period of five years we would reposition them into a
properly structured maximum-funded in Universal Life Insurance contract where
maybe up to 60% of their income would be tax-free at the end of the 5 years of
funding. We would strategically roll money out of IRAs and 401Ks. Get that
taxes over and done with sooner than later. Reposition the after-tax money
into a vehicle that's going to be tax-free. After I would look at all of
the assets they wanted to reposition, I would show them accumulating their money
tax-free from that point forward. And then I would show income at the time in
life they wanted to start taking out the income and have it last until they were
aged 120 without depleting principal. Then I would show a
comparison to various alternatives. They were often shocked that the money in
their IRAs and 401Ks even assuming a yield of 10, 11
12 percent but having to pay tax on the back end would run out of money at
age 80, 85, 87. Municipal bonds earlier than that. Whatever other alternatives
they looked at, I would highlight when they would all run out of money. And the
insurance contract, The Laser Fund would keep generating the income for another
10, 15, 20, 30 years to age 120. It was a no-brainer. But unless I showed them how
inferior the other investments were, they thought, "Well, golly. Is this as good as
the others? Or are these really that good?" And then they could see the difference
over 20, 30 years of an extra $100,000 of income. Every 10
years is an extra million bucks. This is not pie in the sky. So, let me share with
you some of the criteria besides liquidity safety rate of return
in tax benefits to measure how a max funded insurance contract compares to
other alternatives. So, in my most recent best-selling book, The Laser Fund, chapter
10 is dedicated to comparing max-funded indexed universal life insurance
contracts with all kinds of other different financial vehicles than most
people put their money into. And so, chapter 10 is titled comparing different
vehicles but it's summarized on page 165. This is why I would love to gift you a
free copy of this book so you can read and study these charts. But this is
summarized on this chart here and I'm going to refer to this so that you sort
of understand the other criteria. So, of course, we go through different types of
investments and we look at how they fare as it relates to liquidity, safety rates
of return and the tax benefits. But also, it's not just tax-deferred, its tax-free.
Can you deduct what you put into it? Also, is it tax-free when you die when you
transfer that wealth? Is it penalty-free? Because sometimes when you access money
out of an IRA, 401 K before age 59 ½. There's a 10% penalty. Not sometimes,
most of the time. And can you use it for leverage to borrow? Can you use it for
collateral for loans and so forth? Is there a self completing provision if
you get disabled? There's a lot of other factors besides liquidity safety rate of
return and tax benefits. So, on this chart, we actually go down and compare with all
of those features that people want. These are optimal features based upon a
traditional IRA or 401K in the market, mutual funds, your home or other real
estate. CDs and bank savings, annuities and how that compares to The Laser Fund.
Now, you can't see this very well but it's shaded in my book. And it will go
through and analyze that an IRA or 401K it does not pass the safety test if it's
in the market. You don't get predictable rates of return, it's not tax-free, it's
only tax-deferred. And so you get one advantage. You get to fund it with
pre-tax dollars. But those are the only 2 advantages in there. You cannot
access the money without penalties. You cannot use it for leverage. You cannot
use it for collateral and so forth. When you go over to mutual funds,
you have liquidity? Well, yeah. Most mutual funds you can access your money as long
as that's not an IRA or 401K. But it does not pass the safety test, the rate of
return test with predictable rates of return. It's not tax-advantaged. You
have to pay taxes you go. Or if it's in an IRA or 401K, it's taxed when you take
it out. As far as deducting what you put into it. Nope. It blossom and transfer
tax-free. There may be penalties involved but maybe not. You can't use it as
leverage in most cases. But you could use it as collateral for a loan. So, there's
only maybe 3 positives out of all those. When you look at your home, there
are only 2 that are advantageous with your home. Because home equity does not
pass the liquidity test. The safety test, you can lose the value of your house
when the markets drop. Your rate of return on real estate is always zero. And
if you don't understand that, you'll need to read my book. And so, real estate or
your home actually is pretty pathetic as far as these optimal features are
concerned. And sometimes people learn that the hard way when things get tough
and they can't sell their home and they lose it in foreclosure. Because it's not
liquid, it's not safe. It goes down and value. CDs and bank accounts may be safe.
But the rate of return is really pathetic and they don't have tax
advantages and so forth. The bottom line is this: When you go through and study
this, most of these various alternatives where Americans put their money only
have 1, 2 or 3 of these features. A Laser Fund has all of the features
with the exception of tax-advantaged funding. You fund it like a Roth with
after-tax dollars. Now, actually, I get my tax deductions another way. But just in
and of itself, you cannot fund a laser fund with pre-tax dollars. You can do it
indirectly through other strategies. But that is the only difference. Everything
else it passes these tests with flying colors.
So, I would advise you to study and compare and
especially not only during the accumulation of money because in every
illustration that I've ever shown for long term investing, a laser fund will
grow to more money in most cases. But you don't choose investments based upon
which ones grow to the most. You choose them based upon which ones generate the
most at the time in in life you're going to be using the money the most. And that's
why this software that we use illustrates, "Okay, at age 60-65, whenever,
let's start taking out income net spendable income to buy gas groceries
prescriptions golf green fees. Net after tax and fees, let's pull it out." Out of a
laser fund, a million dollars can generate 100,000 a year
tax-free. That's your money. In an IRA 401K, you'd have to pull out 150,000
to net 100,000 and a 33% tax
bracket. Most mutual funds you can't do that. This is why other investment
alternative will crash and burn. They will run out of money long before you
run out. And so, what's the consequence? You outlive your money. That's why I
choose the laser fund for my serious cash so I will not outlive my money. And
it knocks the socks off of most other investment alternatives. So, this is
episode 17 of 21 in the series Secrets To a Tax-Fee Retirement. I would advise
you to watch this episode next. And watch all of them and invest about 4 to
5 hours and immerse yourself in this free course. But if you would like to
read and learn and see charts and graphs... I would love to gift you a copy of this
book for free. I'll pay for the book. You simply go to laserfund.com. And you pay
$5.95 shipping and handling. I'll pay for the book, you pay for the
shipping and handling. It's a 300-paged book full of charts, graphs,
explanations. So, you can learn that way and also it contains
62 actual client stories of people who have successfully used the
laser fund for everything from retirement, colleagues funding, real
estate management, emergency funds, business planning and so forth.