- An IUL audit may save you thousands of dollars.
In this educational episode,
I'm going to address the question, what is an IUL audit?
Well, I'm Doug Andrew
and I'm gonna share with you some things
that a lot of financial advisors don't understand
so get ready to learn.
(bright music)
So I've been helping people optimize assets
and minimize tax now for nearly five decades.
Helping people prepare a lot of times,
for a comfortable retirement
so they will not outlive their money
so that their retirement income is tax-free
and they will be immune from the negative impact
of taxes, inflation, and market volatility.
And so when people come to me for all of the years
that I've helped them optimize their assets,
their goal was to use life insurance for living benefits
because they would read my books or come to seminars
or hear me on the radio or watch YouTube videos.
And so they would go, "Golly, this sounds intriguing, Doug
but I always thought insurance
in general was a poor investment."
I said, well, actually we agree
'cause it's really not an investment.
It's a tax-free insurance contract.
Investments are taxable
and we don't wanna be one of those.
But unfortunately, a lot of agents
do not understand how to structure them correctly
so that they can perform at their optimum level.
So let me talk about this frankly with you right now
and help you understand why an audit may be a good idea
for you if the professional or the person,
if they weren't professional, that set it up for you,
didn't understand what they were doing.
And that's why in my book, "LASER Fund"
that I'm gonna gift you at the end of this episode,
there's actually 14 questions in there
that you can ask an advisor.
And if they don't know the answers to those 14 questions
off the cuff, that should be a red flag.
But there's some other ways to look at it.
So let's talk about the general theory
behind max funded IUL.
You're trying to put in a set amount of money.
Reposition assets ,sock away 500 bucks a month,
1,000 a month, 10,000 a year, 25,000 a year.
Sometimes we work with people that are already retired.
And so off times, the 55 to 75-year-olds,
this is what they come wanting
to reposition money that they have trapped
in their IRAs or 401(k)s.
So for years it was very common
for a client to come in and they were sick and tired
of the volatility in the market
and that's where their IRAs and 401(k)s were.
And they were savers
and they could see they were not gonna be
in a lower tax bracket.
So they wanted to get the taxes over and done with
sooner than later rather than continue to defer
and procrastinate to some future perceived unknown advantage
and then pull the money outta the IRAs or 401(k)s
10 or 15 years down the road
when it's bigger and taxes are higher.
That doesn't make sense.
So when they finally got that epiphany,
they would come in and say,
"Well, Doug, I wanna reposition some money
out of my IRAs of 401(k)s.
$300,000, but I'm gonna have to cough up 100 grand in tax,
and so I need a net of 200,000."
So that's what I'll net after tax
and I want it to be tax free from now on
and I don't want to be subject to taxes, inflation,
and market volatility hurting this account anymore."
I'll say, "Well, it's IUL that will solve that."
So they might wanna reposition 200,000.
They may have a rental home that they're sick and tired
of being in the landlord and taking out the trash,
evicting the tenants, fixing the toilets and so forth.
And so they wanna get rid of this albatross
around their neck and they sell that rental property
and they have another 200,000.
And then maybe they have another 100,000
that is underperforming or non-performing basically
in a bank or credit union rowing upstream
at the rate of one or two miles an hour,
that's one or 2% interest.
And they know the current of inflation's
coming down faster than that.
They're going backwards where they have that.
Whenever people came to me,
I was trying to optimize assets to increase what?
The liquidity of their money, the safety,
the rate of return, and the tax benefits.
And the best vehicle is a laser fund
because that's what laser means.
Liquid assets safely earning returns.
So when they would come in, I would design their bucket.
Now, most of my clients
have been between 55 to 75 to 80 years old
and they were going to be funding their IUL policies,
their buckets, usually within five years
and less than 10 years.
But most of the time within five years,
and they had to spread it out
over five years to comply with a Tamara tax citation.
And so if they wanted to reposition in that example
I just gave you 200,000 from IRAs or 401(k)s
200,000 from the Sullivan rental home
and another 100,000 underperforming
in a bank or credit union, that's a total of 500,000.
Well, unfortunately, if we put that all in at once
it would only grow tax deferred in an IUL.
If they died, it would blossom and transfer tax-free.
But the goal is have tax-free income.
So you have to comply with Tamara.
You have to spread it out.
Now usually, if you're over age 50, we say,
well, it's about five periodic payments.
Technically speaking, if I add 500,000
I could put $100,000 in the first day of the first year.
$100,000 the first day of the second year.
So that's one year and one day.
Two years and one day, three years and one day.
In four years and one day, you could get all 500,000
into the bucket.
And then all of the growth
and all the income thereafter when you do it
the smart way is totally income tax-free.
And it knocks the socks off of IRAs at 401(k)s.
This is where I've averaged 11 and netted 10
by rebalancing and diversifying between indexing strategies.
So if you have a million dollars in there
or for every million you've accumulated,
it can generate as much as a 10% payout.
$100,000 a year tax-free
for as long as you live based on actual history
and the strategies on turning on tax-free income.
The smart way.
So when they come in and they meet,
this is sort of a simplified version.
If they're older and they're going to fund that IUL
within five years, let's say,
then I wanna use the level death benefit.
Because that will be the cheapest insurance
and they will be self-insured maybe within 12 years.
Because they put in $500,000,
they can get away if they're age 60
with only a million dollars of insurance.
They're not doing it for the insurance,
they're doing it for the living benefit.
But that's the minimum amount that's required by the IRS.
Well, when they get that $500,000 in there, if they earn 9.6
like I've averaged since 1980, that 500 grand
will double to a million within 7 1/2 years.
So many times in the 12th year, many of my clients,
their cash value equals the death benefit.
So this is why this is like buy term,
invest the difference on steroids
because you're now self-insured.
Your cash value equals the death benefit
and it will continue to grow.
A million can double to 2 million and if you die,
the insurance company pays out 5% more than your cash
but they're only charging you
for that little net amount at risk.
Now, a lot of agents don't understand that.
There are agents out there that just have a cliche,
"Oh, level is the devil."
And I go,' Oh brother
you have no clue what you're talking about."
Level is the optimal way to make the cost
of the insurance get cheaper as you get older
until it costs you virtually nothing in as soon as 12 years.
So that's for people who are putting money in
in large lump sums, repositioning assets,
usually between the ages of 50, 60, 65.
And so this is a bucket builder.
And so when we do audits,
we're auditing a policy to see what kinds of assets
they were going to reposition
and how much they have repositioned.
And are they doing this on schedule?
Because if you don't maximum fund it,
it's not gonna perform like you originally intended.
But the first thing I do, I go through
and I calculate, well what is the bucket size?
What's the death benefit?
And all of a sudden, I go, "They're putting in $500,000.
They only need at eight 60, a million dollar death benefit."
Why did you sell them 2 million?
"Well, I don't know.
Nobody taught me how to do this right."
What is the ramifications
of having more insurance than you needed?
I don't care if it's two or 300,000
more than a million.
That means if you could earn 11, you won't net 10.
If you earn 11, you might only net six or seven or eight.
But unfortunately,
that also tells me they don't know what they're doing
if they just sold you an indexed insurance contract
and then they walk away.
You need to be able to diversify
into one, two, three or four different indices
or strategies and then you need to rebalance every year
and reallocate.
That is what takes a return from 7% up to 11%.
People say, "How did you get 11?
What universal life did that?"
Well, it is several universal life contracts,
blended and diversified and rebalanced every single year.
That's what you do to get 11.
And so unfortunately, a lot of people
don't realize why their IUL is not performing.
And so if they're younger
and they're just putting it in five or 600 bucks a month,
then you would use an increasing death benefit,
we use the same formula except we maybe have
to divide it out over a seven-year period
but you only use the increasing death benefit
up until the time that you stop putting money
into the policy.
When you stop paying premiums of the policy,
you flip over to the level death benefit.
The only advantage
of the increasing death benefit is the ability
to put in more money.
But pretty soon, you're paying for more and more expense
of insurance the older you get.
Because the increasing death benefit
means if you put in 500,000 and you die
and the original death benefit was a million,
the insurance company will pay out a million and a half.
But they're gonna keep charging you
for that original million dollars of life insurance
instead of charging you for only half that
in five years when you get a maximum funded.
So you need to make sure what your goals were
or in alignment with how your policy is structured.
That's why I recommend you have it audited
by an agent that is proficient,
that can analyze what was this designed to do
and then was it structured correctly
so that you don't have any more cost for insurance
than needed and that you're on track to put it in there.
Or if you're using the increasing death benefit,
that that's in alignment and that you're gonna stop
and switch to the level death benefit
as soon as you've stopped funding it.
Otherwise, you're missing out on thousands of dollars.
So hopefully, this video is helping you understand.
If you're interested in learning more,
I would recommend you study this book
called "The LASER Fund."
It's my 11th book.
It's been flying off of our warehouse shelves
and you can get it on Amazon for 20 bucks
and of course, you'll pay about an extra 10 bucks
for shipping and handling.
If you do that, thank you.
But I'll gift you a copy
and it'll be absolutely free for the book
but you need to have a little bit of skin in the game.
So you simply go to LASERfund.com.
L-A-S-E-R fund.com or click on the link below
and I ask you to contribute a nominal amount
towards the shipping and handling.
I'll cover the rest of that cost and I'll pay for the book.
I'll fire out a hard copy to you via priority mail.
And when you get it, it's actually two books in one.
This side is for left brain learners
200 pages, torch graphs, explanations.
If you learn more by stories, you flip it over to this one.
There's about 100 pages, 12 chapters
with 62 stories of how IUL structured correctly
is like a financial Swiss Army knife.
It has all kinds of uses.
It's a dream solution.
So this is not about me,
this is about you and your brighter future.
And when you're in there claiming your book,
if you like to listen and learn,
if you like to watch and learn,
check out the audio and video formats.
We also teach educational webinars on a regular basis.
They're free, no charge.
And there's also an opportunity,
you can put your name in to an appointment slot
and actually talk to an IUL specialist
that has passed proficiency exams and I oversee
and they will show you
what one structure correctly looks like,
and they'll help you implement it.
But there's no cost or obligation if you do that.
So is that fair enough?
So hopefully, this video
on what an IUL audit is, has helped you.
I have trained many IUL professionals
how to audit other IUL policies.
They call them orphan policies
where the agent is no longer selling insurance anymore.
They've gone off to something else.
And if you don't have your policy audited,
if your agent hasn't been getting back to you
on an annual basis, I would strongly recommend
you reach out to somebody who's in it for the long haul.
And I can point you to people if you do not know of it.
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