Do what the wealthy do. In this episode, I'm going to address the question. What is the
smartest way to access cash out of an IUL indexed universal life? Get ready, I'm gonna blow you away.
So, my name's Doug Andrew and I've helped people now for more than 48 years optimize their
financial assets. I'm a financial strategist a retirement planning specialist. But in that process
I'm very passionate about helping people minimize taxes so they don't outlive their money. Because
there are three big dangers that cause most people to outlive their money during their golden years.
Taxes, inflation, and market volatility. So, one of my favorite vehicles that I recommend that
retirees have anywhere from 40 to 60 percent and some of our clients even have a hundred percent
of their money in these. We've taken some couples from the highest tax bracket to a zero percent tax
bracket. But I would recommend generally between 40 to 60 percent of your retirement income
should not even show up on your 1040 tax return. People go, "I've never heard of this before", the
IRS will get hold of this one. No, the IRS they're the ones who set the rules. Okay, this has been a
sacred tax-free cash cow in the internal revenue code for over a century and so in other episodes
and in the various books that I've authored. I talk about this instrument it is a max funded indexed
universal life and if it's structured correctly and funded properly it's what I call a laser fund.
Now, laser is an acronym this stands for liquid assets safely earning returns. No,w long story short.
This is where I've been able to experience now for more than four and a half decades rates of
return averaging between seven to ten percent. If you understand rule of 72 math. If you were to earn
a 7.2 percent your money doubles every. 10 years. If you earn 10 divided into 72 your
money doubles every 7.2 years. Actually through 30 years of history I've probably averaged about 9.6%
9.62 to be exact. 9.6 will double your money every seven and a half years. So what does that mean?
Well, I've actually had clients who started out with 500,000 and it doesn't matter if you start out with
10,000, 100,000 a year, 500 a month it doesn't matter. It's not what you begin with
accounts it's what you end up with. But with five hundred thousand one time never adding a dime that
500,000 has doubled to a million. A million double to two million, two million double
to four million, a four million double to eight million in 30 years every seven and a half years.
And now, we actually have people that have eight million dollars in their portfolio of IUL policies
and they're generating very conservatively between 600,000 to 800,000
a year of growth or tax-free income for as long as they live without depleting principal.
Now, the IRS knows they're receiving this but it's tax-free. It's not deemed earned passive
or portfolio income and did you know that since 1986 tax reform those are the only three types
of income you pay income tax on in America? They're on the front page of your 1040 tax return. So, many
times when people would come to me with all of their money and yet to be taxed IRAs or 401ks
and then say, "Hey, we've saved you know three or four million bucks Doug. We figure we can
experience about 200,000 a year of income." I go, "Well, that's great, way to go high five. But the
big problem I see it's all showing up on the front page of your 1040 tax return", and they go, "You mean
there's a better way?", I go, "Yes." The better way is making sure that your serious cash passes the
liquidity test safety test and rate of return test with flying colors. Tax benefits are icing on the
cake and that's why I call it a laser fund when a max funded indexed universal life is structured
correctly and funded properly. Now I have several episodes on this very channel that talk about that
criteria. So I would recommend that you search this channel but more than anything subscribe.
Click on the bell to be notified every time I post an in-depth answer to a financial question which
I do almost on a daily basis. But I have over 500 educational episodes on this channel to empower
you. This isn't about me this is about you and your brighter future. So, subscribe and share this video
but let's go back to this liquidity safety rate of return here. See, I want to have my money liquid.
Liquidity is the ability to access my money when I need it with an electronic funds transfer or phone
call. I want to have safety not only safety of the institution where my money is is socked away
but safety of principle. I don't want to lose what I've set aside and any year that I make money. I
want that money I just made last year to become newly protected principal. I don't want to lose
in future years what I made in previous years. You wouldn't believe how many financial advisors don't
know how to do what I just said. That's what the laser fund can do. You lock in your gains every
year and you reset so that after experiencing like in the year 2021 when I'm recording this episode
we've had many clients lock in gains of 28%, 32% 61%, even some at 158 percent. It means if the next year
a recession hit a crash happened and the market dropped 40 percent. They would not
lose one dime of the money they made this year. In 2017 we had many clients lock in gains of 16%
and 25%. I had a client with a million dollars at the end of that year he had a million 250,000.
If the next year by the way 2018 was a ho-hum year. But if that next year had been a major crash
he would have ended up with still the million 250,000 he started with. He may not have made very much
but he didn't lose if the market went down. This is through indexing that's a strategy. I'm not
talking about index mutual funds here. So be sure and watch episodes on this channel. I'm talking
about an indexed universal life and when you accumulate money inside one of these you do it
so that somewhere down the road you can access the money. So, this episode is about how do you access
that money the smartest way. Are you ready? So in my various books sometimes I oversimplify and I say
there's three ways you can access money out of a maximum funded insurance contract. The sad way,
the dumb way and the smart way. Now, in a nutshell, the sad way is by dying. It's one heck of a return
but I don't recommend that one. But if i put in you know 10,000 dollars or a hundred
thousand and the death benefit is two and a half-million or whatever and I die the next
day that's one heck of a return. I leave behind two and a half million tax-free but it's sort
of the sad way to do it. But that comes along for the ride in case you happen to
pass away. What about the dumb way in the smart way? Money inside of an insurance contract you
can access that money in the internal revenue code under what is called FIFO tax treatment. Most
investments are taxed LIFO. What's LIFO? Last in first out. It simply means this. The last money
you're earning is the first money that has to come out and be taxed according to the internal revenue
service. If you put a half a million dollars into an annuity that's tax LIFO. If you were earning
10 percent let's say and most annuities don't pay that. But theoretically you could pull out 50,000 a
year and you would not deplete your principal. You're gonna have to pay tax on that 50,000
right off the bat. Because it's the last money you're earning your interest is the first money
coming out. Most investments are taxed that way LIFO. Insurance contracts are taxed FIFO first
in first out. If I put a half a million in and I started pulling out 50 grand a year assuming a
10% return to make apples to apple's comparison here. It would take 10 years before I recovered my basis
of the 500,000 I put in first money in is the first money out. It's tax-free until I've
recovered my basis. That's dumb because after 10 years I would then trigger unnecessary tax.
So that takes us to the smart way where it stays tax-free. Are you ready for the smart way? Now I'm
going to start with the milk and go to the meat on this one and be sure and subscribe to this channel.
If you can think of somebody who might benefit from hearing this. When you go to the insurance
company and let's say that you have a million dollars accumulated and it's retirement time.
It doesn't have to be retirement time. You can access money in your 30s or 40s there's no penalty if you
touch money before age 59 and a half. For the sake of simplicity, I have earned average returns of
about 10.07% let's just round it down to 10. On a million dollars theoretically you could pull out a
hundred thousand a year. You can go there and say, "Well, I can take out a hundred thousand a year
up until I've recovered my basis", but most savvy smart people the wealthy people they
go, "Why would I do that?". Because you can tell the insurance company to loan you
the equivalent of your interest. Why would you do that? Why would you borrow your own money?
Because wealthy people understand how money works. Here's what happens. If I have a million dollars of
cash in there that's my collateral. If I leave it there it will keep growing. If I take it out it
won't grow anymore if I start taking the money out. So I tell the insurance company leave my million
there and I'm earning 10% 100 grand loan me the equivalent of the interest and so they
loan me a hundred thousand but it has to be a true loan. Now, why do I want to borrow my money because
loan proceeds are not deemed earned passive or portfolio income they're tax-free. It's that cut
and dried it's tax-free. The loan is never doing payable during your lifetime. Did you hear that?
The insurance company has to keep a ledger. See, your cash that you left in there is the collateral for
the loan and it keeps growing with interest. So, here's your million dollars compounding
tax-free. Here's this loan balance this phantom loan balance a hundred thousand the first year and
they charge you a nominal interest rate like two percent. But on the collateral that collateralizes
this they'll charge they'll credit you the same two percent. This is called a zero wash loan.
So here is this it's growing and this one is a loan balance it's not due and
payable during your lifetime. It's sort of paid off or washed away when you die
and it's growing at two but this is growing at two percent this two minus that it's called a
zero wash loan. But the rest of your cash value is compounding at let's say an average of 10 percent.
What happens? Listen, close to this. Let's say you go 20 years into retirement
and you pull out a hundred thousand dollars a year for 20 years. You have a 2 million dollar phantom
loan over here. You don't have to pay it off. It'll be paid off when you die. But now this million is
worth 3 million, 3 million minus two million is the same million you had if you had pulled it out the
dumb way and paid tax. But this way you complied with the IRS and it's been tax-free. So far so good?
Here are two other reasons why it's the smart way. If you want, you can use an index loan.
You can tell the insurance company, "You know what, I think the economy is going to grow this next year.
Charge me a higher rate like four percent or five percent. Charge me five percent on this loan
but credit me whatever the market does", what does this mean? In 2017, I had a client borrow a million
out of their policy their index universe life. They were charged five percent on their balance sheet
on their statement that's 50,000. Guess how much they made on the million over here?
25%. They made 250,000 minus the 50 they made a net of 20% or 200,000 tax-free on their million
while they were using a million in their real estate investments. He was making 20% net borrowing
his own money at five while he continues to earn 25 inside the insurance policy while he's using
the money in his business. This is working capital for business. But the other reason why it's smart
is because let's say 20 years down the road you have this two million dollar phantom loan balance?
You don't ever have to pay it back. It's washed away when you die with the death benefit. Doesn't
mean you can't pay it back. The biggest issue I see with people is they end up with an inheritance a
windfall. They sell their business. They sell their apartments or whatever and they have this money
and they go, "Golly, I'm not healthy enough to qualify for another one of these. Where can I put
this money?", and I go, "You're in luck". You don't have to pay back this 2 million but you can if you want.
The insurance company calls it a new investment. The IRS says you were paying back a loan.
You put the 2 million in and you hit the ground running on your 2 million with a grandfathered
contract that is tax-free and you're earning interest immediately instead of jumping through
all of the hoops that you had to jump through to establish the contract in the first place.
Now, if that went over your head you need to read my book. Here's how you can claim
your free copy. So, here's how you can learn more about this concept you'll be blown away.
I want to gift you free a copy of this most recent best-selling book called the laser fund
how to diversify and create the foundation for a tax-free retirement. In here you'll learn how
to access money the smartest way and you'll learn about these strategies
index loans and so forth when you study this book. It's actually two books in one this site is 200
pages with all the charts and graphs. This side has 62 actual stories and examples of how people
have used these strategies with their max funded indexed universal life insurance contracts that
I call the laser fund. So, simply go to laser fund laserfund.com click on the link below contribute
a nominal amount towards the shipping and handling. I'll fire out a copy to you and this will be the
beginning of your learning and insights and enlightenment. There's also options there to
listen and learn and watch and learn. But here is to your brighter future. Claim your copy now.