This kind of loan is never due and payable
during your lifetime. In this episode, am going to explain reason number 2
out of 5 to borrow money instead of withdraw money from an IUL policy. By the end of this video,
you will understand what a phantom loan is and why it is never too unpayable during your lifetime.
So, I'm Doug Andrew and I've been a financial strategist and a retirement planning specialist
now for more than 48 years and so I'm very passionate about helping you understand how
to optimize your assets, minimize taxes, and when you hit retirement your golden years
how to not outlive your money like many Americans do because they follow the herd.
They have their money in tax-deferred IRAs and 401ks in the market. I have a lot of episodes
on this channel that talks about how to to do a strategic conversion and have your
income be 40, 50, 60, even 100% tax-free. I actually have clients that have 8 million accumulated
from starting out with just $500,000 it doubled every seven and
a half years now it's worth 8 million and it generates 800,000 a year of tax-free income.
You can do the same thing and this is far better and they are actually borrowing
on their money rather than withdrawing it and people go, "What? Why would you borrow? Are they going
to charge you interest?", well, let's take one step at a time as we go forward. At the end of this episode,
you're going to understand what a phantom loan is and why it's not doing payable during your
lifetime and then you'll want to watch the other episodes in this five-episode series.
There's three ways to access money out of an insurance policy and I'm talking about a max
funded insurance policy. my favorite is indexed universal life that's where I've averaged 9.62%
rates of return tax-free ever since 1997, okay. Now, you can do this too. There's some years you
know we've earned 25%, 61.33% even 153%, like the year 2021. Let's just be conservative here 9.6%.
That will double your money every seven and a half years. So, there's uh three ways to access
money as it grows. If you started out like a lot of our clients did putting in 500 a month
and after 30 years they've got a million bucks or they started out with a lump sum of 500,000
in a double to a million in seven and a half years a million doubles to 2 million and
another 7 and a half years 2 million doubles to 4 million in another 7 and a half years
and it doubles again to 8 million and we're in the 30th year. So, we have people with 8 million
that started out with 500,000 and it's generating a 10 payout tax-free. When you access money
at retirement, we don't have to wait till retirement. You don't even have to wait till you're
59 and a half that's the beauty of these. But let's just say you want to start accessing money.
Now, there is the sad way and I don't recommend this one but it's one heck of a return. What's the
sad way to access money out of an insurance policy is by dying. Now, again, none of us are getting out
of here alive. I mean, out of this life right and so I've had many clients who have passed away sooner
than they anticipated. These are called untimely deaths and money inside of an insurance policy
whether you have 5,000 in there, a hundred thousand in there. If the death benefit is
2 million or 5 million when you die it instantly pays out 5 million, 2 million the death benefit
tax-free. Nothing else that I'm aware of does that. So, the money blossoms it goes from maybe 100,000
of cash value and pays out a million or 10 million or whatever in an insurance policy. That's the sad
way. Now, most people don't come to me primarily thinking about I need to protect myself in case
I die even though they like that benefit. They want to use it for living tax-free income. If you
use it as a living benefit you want to make sure it is not the dumb way. So, we have the sad way the
dumb way and then you have the smart way. The dumb way is by withdrawing the money when you go to
retire and people go, "Well, isn't that smart?". No... Hear me out. Let's say you have a million dollars
accumulated in an indexed universal life policy and you're able to get a 10% payout like many of
our clients do that would be a hundred grand a year. Now, let's say you started out with 500,000
and you opened it when you were you know 55 or 60 years old and so it took seven and a half
years before your 500,000 double to a million okay. Now, that 500,000 is your basis. Your basis
is the total amount of premiums you paid into the policy. You can access or recover that basis
without paying tax. Most investments are taxed LIFO. If you put 500,000 into an annuity
which is a savings account with an insurance company it grows tax-deferred
but when you annuitize it or you take money out of an annuity. If you take out just the
interest that you're earning because you don't want to deplete your principle it's 100% taxable
because it's taxed LIFO, last in first out. The last money you're earning is the interest which
is the first money coming out. It's all taxable. Whereas insurance is taxed FIFO, first in first out.
The first money you put in in this example let's say it's $500,000 is your basis. So, if you pull out
100 grand a year it'll take five years before you have equaled or recovered your basis. That's
tax-free. But if you kept withdrawing money that would be dumb because now you're going to start
having to pay tax because now you're into a gain. That's dumb. The IRS says don't do the dumb thing.
Take it out the smart way. Change the nomenclature. Call it a loan. Wait a minute, why would you borrow
your money? Now, before I answer that question. If this is intriguing you, share this with somebody
who ought to watch this episode click like or post a comment. But most importantly please subscribe
to this three-dimensional wealth channel. It's free click on subscribe and click the little bell then
you'll be notified every time I post a new video which I do almost on a daily basis. This is about
you and your brighter future and stay with me to the end, I want to gift you a copy of my most
recent 300 page bestselling book that's flying off the warehouse shelves and you'll understand this
even better. So, why would the IRS say just change the nomenclature and call it a loan borrow your
money. Well, this is reason number two and I want you to watch the others in this series of five.
So, I'm going to keep it simple right now, let me give you the milk first. When you borrow money loan
proceeds are not subject to tax. When you borrow money to buy a car or to buy a house or whatever
you don't have to pay tax on borrowed funds. That's been clear in the internal revenue code
for over a century. Loan proceeds are not deemed earned passive or portfolio income
the IRS does say this. If it's going to be deemed a loan it has to pass the scrutiny of a loan. Which
means the institution loaning you the money has to charge you a minimum statutory interest rate.
So, let's say that's two percent that changes through the years and so you have a million
dollars in your insurance policy and instead of withdrawing the hundred thousand a year now you're
going to borrow the equivalent of that interest that you're earning. So, far so good? So, now you're
borrowing a hundred thousand and the insurance company is using that money as collateral you're
not withdrawing it and so now your accumulation balance is going to a million and it's going to be
worth a million one if you're earning ten percent and then a million two and then this phantom loan
and why I say it's phantom is because it's not doing payable during your lifetime. So, now you pull out a
hundred thousand next year another hundred that's two hundred thousand. So, you have a two hundred
thousand dollar loan balance, you have a million two hundred thousand cash because that's growing.
A million two hundred thousand minus two hundred thousand loan balance equals the same million
that you would have had had you pulled it out the dumb way and paid tax on that hundred thousand
the last two years. Is this making sense? So, the IRS says, "You don't have to do that". I mean,
if you do it the dumb way they'll go ahead and tax you but you don't have to do that.
So, you'll see at the end of this series you could retire at age 65 and at age 85
you've been living off of a hundred thousand a year of tax-free income
for 20 years that's 2 million. That 2 million loan is not doing payable during your lifetime.
You can pay it back if you want. I'll show you why you may want to do that
sometimes under certain scenarios. But how is that loan paid off? It's paid off with all this cash
that is compounding and that blossoms when you die into a tax-free death benefit. So, the loan
is paid off it's washed away and you don't have any more loan balance when you die for your heirs.
It's already subtracted out but that loan is a phantom loan. It's on the books because the IRS
requires it so it's a true loan. So, far so good? Well, these loans are washed away at death.
If this is intriguing you, let me show you how you can learn more about all five reasons why
you want to borrow money out of an insurance policy instead of withdrawing. So, claim your
free copy of this book. This has been flying off of our warehouse shelves I don't want you to miss out.
It's called The Laser Fund. Laser is an acronym stands for liquid asset safely earning returns
a max funded indexed universal life passes the liquidity safety rate of return tests and tax
benefits with flying colors. These are the five crucial key elements of a prudent investment.
This will teach you how to diversify and create the foundation for a tax-free retirement and do
it the smart way. You simply go to laserfund.com click on the link below and you contribute a
nominal amount towards the shipping and handling. I'll cover the rest of that cost but I'll pay for
the book. I'll fire out a hard copy to you there's options there to listen and learn
watch and learn. There's even an 18-hour master class that my two sons and I who are co-authors
on this book we teach. There's also information there on virtual webinars we do on a regular
basis and maybe we even come and do live events in your city. So, check it out but I want you to
claim your copy of this book. It's actually two books this one's for the left brain this one's
for the right brain. This has the stories, this has all the charts and graphs. So, claim your free copy
now this is the beginning of your brighter future to have tax-free income the smart way.