Life insurance is not an investment. In this episode, I'm going to address the question
"Is life insurance a bad investment?" Well, you're going to learn why life insurance
is not an investment. In my opinion, it's way better than one of those.
My name is Doug Andrew I've been a retirement planning specialist
helping people optimize their financial assets and prepare for retirement for more than 4 and
a half decades. I've written several books about these topics. And oftimes people will say, "Well,
golly, Mr. Andrew. One of your favorite financial vehicles for a tax-free predictable, retirement
income is a max-funded life insurance policy." And I ask people. And so, many out there say,
"Life insurance is not an investment." And I go, "Actually, I agree." And they go,
"Well. Well, isn't that where you put your money?" I go, "Well, yes." But in the financial services
industry, apparently the definition of an investment where most people put their money,
they usually have a couple of features. Number 1, most Americans have their money in investments
that can gain or lose money like the stock market, mutual funds. You can make money and you can
lose money. If you buy real estate, real estate can go up in value and then during recessions,
it can go down in value. So, most investments normally have a volatility. You can lose money.
Most investments sooner or later, you pay tax on any gains that you realize, okay? Even in
a tax-deferred IRA or 401(k). So, that's what an investment is. Life insurance is not an investment
because you do not have the market volatility. You do not lose when the market goes down if you use
the right type. And it's totally tax-free. So, I put my money into max funded insurance not because
it's the best investment. It's because it's far better than investments. So, get ready to learn
why. So, I started out this episode by saying life insurance is not an investment. In fact,
in every one of my books, I put this disclaimer. Life insurance policies are not investments
and accordingly should not be purchased as an investment. Now, I've already given you a hint
as to why. But I'm going to share with you why a maximum-funded life insurance policy
is oftimes the dream solution for many financial goals. And I'm going to show you how it passes
the liquidity safety and rate of return test with flying colors and it's tax-free to boot. So, let
me ask you this. In my most recent best-selling book, I make this statement or ask the question.
And it's a long question. So, listen close. What would you call something that you put money into
that accumulates and grows at a nice, competitive safe rate of return averaging between 6 to 10
percent totally income tax-free? Not just tax-deferred. Thereby doubling your money
every 7 to 10 years where a half a million doubles to a million. A million then doubles to 2 million.
2 million dollars to 4. And 4 million doubles to 8 million and it's all tax-free. And then at the
end of the day, that account, that place where you put that money can generate an 8% to a 10%
payout. Let's say you have a million dollars it can generate 80,000 to 100,000 a year
of tax-free cash flow for as long as you live without depleting principle? And
at the end of the day, when you finally pass away, anything that you leave behind in that
vehicle blossoms and immediately transfers income tax-free. When I say blossom, what do I mean?
Every million might blossom to 2 or 3 million and transfer totally income tax-free to your heirs.
What would you call something that does that? Now, whenever I ask that of audiences, usually,
somebody on the front row goes, "A miracle! The dream solution to a lot of financial
goals where you save money." Yeah. Well, it's not an investment as I've shared. Because
an investment usually means that you're going to have to pay tax sooner or later. And with
my favorite vehicle, a life insurance contract, it's totally tax-free if you do it the smart way.
And it's not at risk in the market. I use indexing so my money is not at risk in the market. So,
if it's not subject to market volatility and if it's totally tax-free, that's what an investment
generally is. And I don't want one of those. Does that make sense? So, when we talk about
a risk return paradigm, in many of my books, I have this chart which shows 16 general categories
of investments ranked from highest risk to lowest risk. And if you read and study it,
it'll show you that when you apply the liquidity test. This many fail the liquidity test. You can't
get your money quick enough when you need it in the event of an emergency. The safety test, you
can lose your principle in these. This many more do not pass the safety test. This many more do
not pass the rate of return test. You you have to earn a rate of return at least equal to or greater
than the inflation rate or you're going backwards financially. So, after applying these, there's
only 3 possibilities. Maybe a small handful of mutual funds. Maybe a small handful of annuities.
But by far, the best one from a tax standpoint is number 12. What's number 12? A maximum-funded
insurance contract. It's the only vehicle in the internal revenue code that allows you to
accumulate your money totally tax-free and then be able to access that money totally tax-free. And
when you die, it blossoms and transfers tax-free to your heirs. So, it's sort of like a bucket.
When you uh design an account it's like having a bucket where you're going to put in cash
contributions. And you're going to earn compound interest. But what you want is to be able to
fill up the bucket and have it grow and double every 7 to 10 years tax-free. The IRS says,
"Well, this is so good. You can't fund it all at once." And so, under 3 tax citations they're
called Tefra, Defra, and Tamra, you have to fund this account over at least 4 years in 1 day.
5 installments is the fastest. So, what you're doing in a nutshell 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 the IRS allows as fast as they allow over 5 years. And it actually waters this
money 3 down here at the end of the day. And this is actually the insurance benefit that's
going to blossom and transfer tax-free. But in the meantime, if you put in 100 thousand,
500 thousand and it grows at an average of 6 to 10 percent, it's going to double every 6, 7, 8,
9, 10 years and a half million is going to grow to a million. A million is going to double to 2
million. 2 million is going to double the 4. 4 is going to double to 8. I have clients who
have 8 million now that generates 800 thousand a year of tax-free income for as long as they live.
Would you call that a bad place to put money? I wouldn't. So, a max-funded insurance policy
can be the dream solution for all kinds of things like retirement planning, working capital for a
business, college funding, emergency funds. You can use it for all kinds of financial goals.
Most people think of it as maybe the best alternative to an ira 401(k) for retirement. But
I use it for all kinds of other financial goals because it's the dream solution that allows me
to accumulate my money totally tax-free at nice, predictable rates of return averaging 6 to 10
percent. And 6 to 10 percent tax-free, it would be like earning 12, 14, 15, 16 in a tax-deferred
account and then take out the money and only net 6 or 7 or 8 percent after tax. So, I use it for
those goals --for retirement. I can prove that it'll knock the socks off of any IRA, 401(k).
But for all of these other situations, the reason why EF Hutton came up with this idea is because
you can get rid of the risk in the market. Because in an insurance contract, you have more stable
rates of return. And if you use indexing, you will not lose when the market goes down and crashes
if your money's in the market, yeah, you're exposed to that market volatility and risk.
You're able to accumulate your money tax-free under section 72(e) of the internal revenue code.
You access your money income tax-free under section 7702 and under section 101(A) when you
ultimately die, it blossoms and transfers income tax-free. When EF Hutton realized that, they said,
"Life insurance can be used for life not just for death." This was the big ah-ha. When I saw it in
1980, I said, "This is the answer. This is like buying term and investing the difference under
a tax-free umbrella." It's not an investment. It's way better than one of those. So, how do
you design a max-funded, indexed universal life insurance policy to perform as a miracle financial
vehicle? Well, I wish I could answer that in this episode. But this is why I've written many
books and I want you to claim your free copy of my most recent best-selling book called
The Laser Fund. I call it that because LASER means liquid assets safely earning returns.
Basically, what you're doing is you're determining the amount of money that you want to reposition
to increase the liquidity, safety, and earn predictable rates of return
and have it be tax-free. So, when I sit down with people, I'm usually looking at non-performing or
underperforming assets. Maybe money in banks or credit unions earning a measly 1% or less. Hello.
Why don't you increase the safety by maybe 5 or 6 notches higher by repositioning that money into
an insurance contract? Not only increasing the safety but the rate of return. Banks and
credit unions are only paying a measly you know half of a percent. Why don't you earn
5, 6, 7, 8, 9, 10 percent by putting it into the insurance contract. Because this is where banks
are taking your money and earning higher rates of return. And so, non-performing or underperforming
assets might be those kinds of accounts. Or maybe you have money in the market and you are tired of
the volatility and you want to get rid of that. You want to use indexing so that you make money
when the market goes up and not lose when it goes down. And so, you may want to reposition
those kinds of funds. Maybe you have real estate that you're tired of being a landlord. You want
to sell it and you're wondering what do I do with the net proceeds on that. I have episodes
that talk about this exact topic. And so, when I set up a max-funded indexed universal life,
it is designed to be able to accommodate money from non-performing or underperforming assets
whether it's money in institutions, in the market, in real estate. And so, as you design that, the
key is you're trying to take the least amount of insurance the IRS will let you get away with under
tax citations Tefra and Defra. And then put in the money as fast as the IRS allows under the Tamra
tax citation. If this is intriguing you, you ought to learn. So, how does Tefra, Defra, and Tamra...
Why is insurance not deemed an investment? Why is it way better than an investment? Why is
it tax-free? And why is it not subject to market volatility? Because those are the features of most
investments. So, in answering the question, okay? Is life insurance really a bad investment? Well,
it's not an investment. In my opinion, it's way better than that. And hopefully, you're realizing.
If you want to learn more, claim your free copy of my most recent 300-page, best-selling book The
Laser Fund. Here's how you can do that. So, how can you learn more? If this has a piqued interest,
I would love to gift you a free copy of my most recent best-selling, 300-page book The Laser Fund
which is actually 2 books in 1. This book here is about 200 pages comprised of 14 chapters with
all kinds of charts and graphs and explanations of how to diversify and create the foundation
for a tax-free retirement. Now, if you learn more right brain with stories and examples, you flip
the book over and read this one. This is about 100 pages, 12 chapters with 62 chicken soup for the
financial soul stories like the one I just told you. If you like to use your whole brain, I would
recommend you read both books. But it's 300 pages. This has been flying off of our warehouse shelves.
I'll tell you what. I will pay for the book. You go to laserfund, LASERfund.com, it's on the screen
here. And claim your free copy. You contribute a nominal amount towards the shipping and handling.
I'll cover the rest of that cost and I will send out a book to you. There's also options
there for you to listen and learn and watch and learn. But here's to your brighter future.