- IUL is like a financial Swiss Army knife.
In this episode
I'm going to address what purposes can IUL be used for?
Get ready.
You're going to understand.
It's the dream solution for many financial goals.
(bright music)
So I'm Doug Andrew.
I've been helping people optimize assets,
and minimize taxes now for nearly five decades.
And people normally come to me
through what I call the financial dimension
and they usually are wanting to learn
how to not outlive their money during their golden years.
Most people come to me
usually around five years before they retire
because at retirement planning
is something totally different
than what you did for your retirement planning.
And so I have to usually utilize strategies
like strategic rollouts.
These are not rollovers.
This is getting money rolled out of IRAs and 401(k)s
to get the taxes over and done with
in today's lower tax rates and reposition that money
into something that's gonna be tax-free from now on.
Well, what is that vehicle?
It is a property structured,
maximum funded index universal life insurance contract
but it has to be structured correctly
and funded properly so that if you earn like I have,
an average of 11%, I've averaged 11.17
since 1997 when indexing was first introduced.
Prior to that I earned an average
of 9.62, and your money doubles
about every seven and a half years if you're earning 9.6.
But see, I'm able to earn 11 and net 10 on the average
meaning only one percentage point
over the life of the policy actually goes
towards the cost of the insurance that the IRSs
has to be there,
so that if I end up accumulating a million dollars
and I look back retroactive back to day one
if I averaged 11, I was netting 10% cash on cash.
And it means that if I have a million dollar nest egg,
I can pull out a hundred thousand bucks a year
without depleting principle.
A lot of people say, what do you mean by 11 and net 10.
That only one percentage point
is the cost of the insurance
because agents who do not understand
how to structure an IUL properly,
you may only earn six or seven and only net two or three.
No, I wanna earn 11 and net 10.
And so this is done by using indexing,
structuring it correctly and rebalancing.
And that's why we teach financial advisors
who are interested in learning how to do it the best way
how to utilize this correctly.
Now in this episode
I just wanna highlight some of the benefits,
how it can be used, what purposes IUL can be used for.
So I usually can illustrate with no question
why a property structured IUL policy will knock the socks
off of the same amount of money
deposited into IRAs and 401(k)s.
In fact, usually people have to perform a strategic rollout
and that's a tax reduction strategy.
But see, indexed universal life,
even though most people come to us
wanting to not outlive their money,
they wanna optimize their assets and minimize taxes.
So they're using it for retirement planning.
And if you understand IUL,
you still have to have a death benefit
and you have to have a reason
and justification for the amount of insurance applied for.
But what you're doing is you're taking
the least amount of insurance the IRS
will let you get away with and you're putting in
the most money or the most premium the IRS allows
and this turns into a tax-free cash cow.
And so in other episodes I talk about
if I have a 60-year-old and they're coming
and they want to deposit $500,000 into an IUL policy,
we structure it to accommodate 500,000 bucks.
But you could buy a ton of life insurance for 500,000.
That's not the objective.
Your objective is to have your 500,000 grow
at an average, let's say, of 11 and net 10.
So you want to get away with the least amount of insurance.
And so under some tax citations called TEFRA and DEFRA
you can calculate that.
And to accommodate $500,000 of money you wanna put in
a 60-year-old can get away with about, you know,
a million dollars of death benefit.
And when you put in the 500,000
that actually qualifies as part of the death benefit
the insurance company's only gonna charge you
for the difference between your money
and the original death benefit.
So once you get 500,000 in there, they're only charging you
for the remaining 500,000 of insurance.
You're, you're paying half as much
for the insurance as you did when you started.
And then as that half a million grows, let's say at 9.6%,
it'll double in seven and a half years to a million.
Well, now your cash equals the death benefit.
So the insurance company's not charging you anymore.
But under the tax citations TEFRA and DEFRA
the death benefit has to be 5% higher than your cash.
So if you happen to die, when you have a million in there
the insurance company will pay out 1,050,000
but they're only charging you for 50,000 of insurance.
When that million doubles to 2 millionو
if you die, the death benefit is 2.1 million.
But they're only charging you
for a hundred thousand of insurance.
But see, the interest you're earning
on 2 million bucks is way more
than the cost of insurance on a hundred thousand.
This is how your insurance gets cheaper as you get older.
So you use it for retirement planning
so that every million can generate, you know,
80, 90, $100,000 a year of tax-free income.
It knocks the socks off of IRAs or 401(k)
invested in the market
where the financial services industry only wants you
to pull out 4% a year.
40,000.
Huh, I'd rather have 80 or a 100,000 instead of 40,000.
And it's tax-free.
Well, people say, well, can I use IUL for other purposes?
Absolutely.
If you're saving in a 529 college savings plan,
this'll knock the socks off of that.
A 529 college savings plan,
you can only use the money in that for college.
What if your son or daughter
or grandchild gets a scholarship
and they don't need the money
and they want to use it for a down payment on a home,
or, you know, to start a business.
They now have to pay tax.
Why do you wanna mess around with that?
And you can only put in a certain dollar amount.
Set up an IUL to fund college and it will fund college
whether you live or die and it's totally tax-free.
You don't even have to use it for college.
Why would you mess around with all the strings attached
in a college 529 savings plan?
Well, what about working capital for business?
Yeah, I have many savvy business owners
they use this as their working capital.
This is the money they want liquid and safe
to buy inventory and so forth.
Many business owners
have a 100,00, 500,000, a million.
They keep that money in an IUL policy,
and then when they need money for their business,
they access it the smart way.
They borrow from the insurance company
using the cash value as collateral.
They could withdraw the money, but that's dumb.
They would not be earning interest anymore tax-free.
So if they have a million dollars of cash,
they can borrow a million
and the insurance company will charge 'em
like 2% and they'll credit them 2%
on that million dollars of collateral.
But most of my business owning clients
they use the smart way.
They use an indexed loan,
they will borrow a million and they'll pay maybe 5%
but the insurance company keeps crediting them
sometimes 10, 15, 25% the year 2020 to 2021.
Some of our business clients were charged 5%
on a million and they got credited 61% that year.
This is what business owners do.
They make money in their business
and they still make money on the money
they're using in their business.
Did you understand that?
Well, the same thing is true with real estate managers.
This is where I keep my real estate equity.
I keep my real estate equity safely tucked
in insurance contracts where I'm earning, you know,
let's say I'm only earning 9% tax-free
but I borrow on my real estate
at 4.5% tax deductible interest in a 33% bracket
that's the net cost of three.
Every million that I borrow on real estate,
it costs me 30,000 a year
but I make a 90,000 a year tax-free.
How much more is 90 than 30?
It's 300% more.
You use it for real estate management.
How about an emergency fund?
Why would you put money in a bank or credit union?
Because it has a drive up window?
You know, people think that's liquid.
No, that's convenience.
If you really understood
banks and credit unions take 30 to 40%
of their tier-one assets and put it into insurance companies
to increase the safety
by about five or six notches higher in safety
triple A instead of what their rated triple B.
And they increase the rate of return by four or five times.
They pay you 1% in the bank,
they turn around and make 5%
put in an insurance company that's 500%
just bypass the middle man with your emergency fund.
In this day and age you can access money
out of an IUL policy in a day or two
with an electronic funds transfer a phone call
or just fax or email the request
and they'll wire the money if you need to.
It's just as liquid.
What about estate planning?
You can use maximum and IUL
for estate planning and kill two birds with one stone.
You can accumulate money tax-free,
maximize what you leave behind.
And also you can pay any estate tax that may be due.
What about lump sum capital transfer?
Yeah, people get lump sums
they settle a car accident, they get a windfall
they get a lump sum distribution at retirement.
This is the best way to reposition lump sums
general tax reduction,
getting money out of IRS or 401(k)s
in a strategic rollout
and putting it into a vehicle
that's gonna be tax-free from now on
at the end of the day when you die,
it reimburses you many fold
for the taxes you pay while you're rolling the money out.
Pension maximization, what's that?
If you're a schoolteacher police officer or a firefighter
don't take the most expensive life insurance policy
you'll ever be sold by taking a survivor benefit.
Take the no survivor benefit, which is more money,
take the differential
and put it into a max-fund IUL
and you'll have way more flexibility
and a higher benefit than choosing a survivor benefit
when you retire as a school teacher.
You will be forced to buy one
of the most expensive life insurance policies
you'll ever be sold.
They don't frame it that way,
but that's what they do when you retire
as a school teacher with a defined benefit pension.
So this is why IUL can be like a financial Swiss Army knife.
It is the dream solution for all kinds of financial goals
not just retirement planning.
If you wanna learn how to utilize this,
I want to gift you a copy of this book, "The Laser Fund".
This has been flying off of our warehouse shelves.
You can go to Amazon and pay 20 bucks for it
but I'll gift you a copy free.
Here's how you claim your free copy.
You simply go to Laserfund, laserfund.com
or click on the link below
and you contribute a nominal amount
towards the shipping and handling.
I have some skin in the game.
I'll cover the rest of that cost and I'll pay for the book.
I'll fire out a hard copy to you
but check out how you can listen and learn if you want.
Watch and learn.
There's also educational webinars
we teach on a regular basis, they're free.
You can even schedule an appointment
with an IUL specialist to see how
a property-structured IUL can perform
like a financial Swiss Army knife for you
for all kinds of financial goals.
That's extremely flexible.
This is actually two books in one.
This side is about 200 pages,
14 chapters with all the charts and graphs
if you're a left brain learner.
If you're a right brain learner, you flip it over.
And this is about a hundred pages, 62, actual chicken soup
for the financial soul stories
that actually explain how a property structured IUL policy
can be used like a financial Swiss Army knife
for retirement planning, college funding,
working capital for business real estate management,
emergency funds, for strategic rollouts,
for pension maximization.
So we have actual stories
on how it is like a financial Swiss Army knife.
So claim your free copy began to learn.
And I want you to not be kicking yourself,
because you did not employ
one of the most powerful financial instruments
for your future, so you will not outlive your money.
(upbeat music)