- What is the biggest mistake
IUL agents make when selling an IUL policy to their clients?
In this educational episode,
I'm going to address the question,
why isn't your IUL performing as well as it should?
If you are wondering that,
and you own an IUL, and you're going, "Golly,
this isn't performing as well as I thought."
Get ready, I'm gonna show you the reason why.
(upbeat music)
So, I'm Doug Andrew.
I've been a financial strategist now,
and a retirement planning specialist
for nearly five decades,
and I've been helping thousands of people in America
optimize their assets, minimize taxes,
and empower their authentic wealth.
But also, I love to help them eliminate the dangers
of taxes, inflation, and market volatility,
when they retire.
Those three dangers cause most people
to outlive their money.
Now, one of the best financial vehicles
that eliminates those dangers,
and especially during your golden years,
is a Max-Funded Indexed Universal Life Insurance contract.
But it must be structured correctly,
it must be funded properly,
and it will knock the socks off
of most people's IRAs, and 401ks,
and other types of financial instruments.
And I can prove that to you all day long.
But a lot of people
that watch my educational videos on this channel,
or they read my books,
I've written 12 books on this,
they go seek out their brother-in-law,
or their nephew maybe who has an insurance license,
and, "Can you help me set this up?"
And they do it,
and then they come maybe five, seven years later,
or they hear me on the radio, or on YouTube where
I talk about, "Oh, well,
in the last seven and a half years,
your money in your IUL should have doubled, okay?
If you had a half million seven and a half years ago,
you should have at least a million today."
And they go, "Well,
I had a half million seven and a half years ago,
and I only have 400,000 now, what's up?"
Oh, it makes me sick.
Because they miss out on so much money.
And so, they often say, "Well, why isn't mine performing?
Isn't it the right company,
even the right product that you talked about?"
And I'll go, "Oh yeah,
that's one of the projects I was talking about.
But who designed this thing for you?"
They had no clue what they were doing.
Oh my heavens, that was an expensive relationship
to have your relative set it up for you
if they didn't know what they were doing.
So, let's go into this.
I teach professionals how to do this correctly.
And in my book you could learn about this.
But when you set up an IUL policy,
you wanna take the least amount of insurance,
the IRS will let you get away with.
And you wanna put in the most money,
the most premium,
the IRS allows as fast as they allow,
so that your money will grow tax-free under section 72 e
of the Internal Revenue Code.
And then whenever you access money,
or take income out of it during retirement let's say,
under section 7702,
it will be income tax-free for the rest of your life.
You wanna be grandfathered that it's tax-free.
And at the end of the day, when you die,
anything that you leave behind in there that cash value
will blossom and transfer tax-free
under section 101 a of the Code.
Now, I teach this to CPAs and tax attorneys
with advanced continuing education,
because they don't even need to know this
to get their LLM degree, a master's in taxation,
and they sit there with their mouths open.
But I always ask them, "Show me any other financial vehicle
in the internal Revenue code that does that."
And they have never come up
with anything that does what I just described.
Now, if you understand the background behind this,
these laws or these sections of the Code have been
in the Internal Revenue Code
in one form or another for 108 years.
But when EF Hutton came out with this idea
of using life insurance for living benefits,
and taking the least amount of insurance
you could get away with, and put in the most money,
it got challenged a few times.
The IRS went to them and took them to court,
and EF Hutton won.
They knew what they were doing.
But then the IRS went to Congress and said,
"We have to make sure
that we do not violate the definition of insurance
under tax-free here.
If you violate these tax laws,
it moves over to the taxable portion investments
that are normally volatile too, okay?
And so, in 1982,
they passed the Tax Equity Fiscal Responsibility Act.
In 1984, the Deficit Reduction Act.
And then in 1988, the Technical Miscellaneous Revenue Act.
These are acronyms, TEFRA, DEFRA, and TAMRA.
TEFRA and DEFRA dictates
the minimum amount of insurance required
based upon the person's age, gender, and their health,
in order to accommodate
the amount of money you wanna put in there.
But it gives parody, it doesn't matter.
Back in 1980-81,
I had a friend of the family that was 78 years old.
He had three blocked arteries, adult onset diabetes,
a prostate cancer episode,
six sisters predeceased him and three brothers.
And when we sent in his insurance application,
he was rated Table D.
Under TEFRA and DEFRA,
I was able to squeeze down his death benefit,
so that he could earn 11,
and net 10% rate of return on his insurance policy,
just like a 22 year old athletic marathon running female.
Now, what I just said,
you wouldn't believe how many insurance agents
don't know how to do that.
They would've sold a policy,
and it would've cost him an arm and a leg,
because they didn't understand
how to squeeze down the death benefit,
so that he can earn 11, and net 10.
He wanted to net 10% tax-free.
He didn't care about the insurance.
Does that make sense?
TAMRA came along in 1988 to slow the flow.
The bankers and the brokerage firms said, "We can't compete,
but we don't want to kill these,
because this is where banks and credit unions put 30 to 40%
of their Tier 1 assets for liquidity and safety."
In insurance companies,
they own these on people, okay?
It's the owner who gets all the benefits.
When you apply all of these,
I've used the metaphor of a bucket for years.
You design an IUL, like a bucket or repository
to accommodate the amount of money,
the contributions you wanna put into it.
You don't have to put that much in,
but you can't put in more than that.
But to make it perform really well,
it would be who of you to fill it up to the level
that you designed.
So, let's say that's 500,000.
You could take 20 years to do that, 30 years to do it,
or you can take five years,
and fill it up with $500,000, okay?
I'm gonna use that as an example.
If you comply, then this 500,000 can grow to millions,
and it will be totally tax-free,
because we complied with TEFRA and DEFRA.
TEFRA and DEFRA says, "If this is a male age 60,
then the minimum amount of insurance is a million dollars."
Now, yeah, a 60 year old could get way more
in life insurance death benefit than that with 500 grand.
That's not the objective.
We wanna know the least amount.
And so many times,
insurance agents don't know how to do this,
how to figure this out,
and they don't know how to be able to fund it
and fill up the policy in compliance with TAMRA.
Because, if you want to have tax-free income,
you want to fill it up
over the five year period of you're age 50,
is basically what you do
about a hundred thousand dollars a year.
Technically speaking, you put a hundred grand
in the first day of the first year,
first day of the second year,
and after four years and one day,
it is full of 500,000,
and this turns into a tax-free cash cow.
You could start taking income out of that,
probably around 50 grand a year tax-free.
Or you can let it sit and grow.
If you earn the average return like I have since 1980,
even before Index Universal Life.
When Universal Life was first introduced,
I've averaged 9.62%.
Since Indexing came out in 1997,
I've averaged 11.17 using indexing and diversifying,
like I'm gonna show you here,
and by rebalancing.
So, this 500,000 at 9.6, divided into the rule of 72,
this will double in seven and a half years to a million.
I've had many people,
500,000 doubles in seven and a half years to a million.
Some, they just left it there,
1 million double to two,
two double to four, 4 million double to 8 million.
That's 30 years down the road,
their 500,000 has grown to 8 million bucks.
And we have a couple with that much
that they could pull out out 800,000 a year
of tax-free income without depleting principle.
They're only pulling out 300,000,
that's all they need,
because it is totally tax-free.
Now, here's another thing
that a lot of agents don't understand.
You use the level death benefit
if you're gonna fund it within a five or 10 year period,
and that's your objective, is the best rate of return.
You put in 500,000,
and that qualifies as part of the death benefit.
When you have 500 in there,
the insurance company's only charging you
for the remaining net amount at risk, which is 500,000.
When this doubles to a million, now you're self-insured.
That's like by term, invest the difference on steroids.
In 12 and a half years, many of my clients,
their cash value equaled
and began to exceed the death benefit.
If that doubles to 2 million, okay?
Then if they happen to die,
the insurance company pays out 5% more
under TEFRA and DEFRA.
But they're only charging you for a hundred thousand,
because if you die, they're gonna pay 2,100,000,
5% more than the cash.
But they're only charging you on the spicing on the bucket,
the actual cost of the insurance.
If it's structured correctly,
the insurance should get cheaper as you get older.
You can't believe how many people don't realize that,
and how many agents don't understand how to do that.
If you use the increasing death benefit
that's not gonna happen, okay?
And so, that's just a little glimpse
of how it should be structured correctly.
And if you're wondering why it's not performing for you,
it should usually because
they put way more insurance than they need it.
You haven't filled it up correctly yet.
It wasn't designed. The spigot is not getting smaller.
They use the increasing death benefit instead
of the level death benefit,
or they didn't switch when you finished funding.
There's so many nuances here that you need to be aware of.
Also, using Indexing, you need to diversify.
You don't just usually keep it in one.
You might use a 40% of your assets.
If you have a million dollars of cash value, 40%,
it can be a hundred thousand,
I'm just using a million as an example.
40% in a 1-year, 40% in a 2-year,
and 20% in a 5-year.
By diversifying, you tweak your rate of return to 11.3.
People say, "Doug, how do you earn 11?"
Well, this is the average on most 20 year periods,
if you're diversified.
And when the market goes down,
your agents should be calling you up and saying, "Hey
let's switch 50% in a 2-year, 50% in a 5-year."
If you've got five years or longer down the road
before you're gonna probably start taking tax-free income.
Why?
Because it boosts the average crediting rate up to about 14%
based on actual history.
You can't believe how many agents don't know how to do
what I'm talking about here.
And so, when we show 'em statements like this where
we diversify this client's money
into five different strategies,
they get credited 14.89, 10.25,
15.07, 8, and 13.
Yeah, I mean, that's pretty doggone good.
These are very common type IUL statements
from people who have had their policy structured correctly.
So, if you wanna make sure yours is designed correctly,
I would recommend you get educated by reading this book.
I'll gift you a copy here.
I'm gonna show you how to claim your free copy.
If you go on Amazon, they're 20 bucks,
plus the shipping and handling.
And if you do that, thank you.
But I'll gift you a copy.
You just need to cover the shipping and handling,
and I'll pay for the book.
And if you study this, you'll know how to do it correctly.
There will be questions in there,
you can ask an agent,
and if they don't know the answers off the cuff,
that should be a red flag to you.
But this is about you,
I don't want you to miss out on thousands.
So, you simply go to laserfund.com,
L A S E R fund dot com,
or click on the link below.
You contribute a nominal amount
towards the shipping and handling,
and I'll pay for the book,
and I'll cover the rest of the shipping and handling
if that doesn't cover it.
And I'll pay for the book and fire out a hard copy to you.
Now, when you're in there,
if you like to listen and learn, and watch and learn,
there's all kinds of options for that.
You can also register for a free educational webinar
that we hold on a regular basis.
We also have the opportunity for you to fill in your name
and an appointment slot to talk to an IUL professional
who I oversee that I know,
does it right, okay?
And so, this is about you,
and making sure that your IUL performs properly,
and it's structured correctly,
so that you don't miss out on thousands of dollars.
(upbeat music)