- Buyer beware.
Make sure your IUL is designed to make you the most money.
In this educational episode,
I'm going to address the questions
what is the downside of IUL?
What can go wrong with an IUL?
Get ready, I hope you will learn quite a bit
from what I'm gonna share with you.
(bright upbeat music)
So I'm Doug Andrew, and I've been doing this.
What's this?
Helping people maximize their assets, optimize them
and minimize taxes and prepare for a comfortable retirement
so they will not outlive their money.
And I've been doing it for just about five decades.
My favorite financial vehicle to accomplish these goals
and to make retirees immune
from the negative impact of taxes, inflation
and market volatility is a properly structured
max funded indexed universal life IUL.
And if it's structured properly and funded correctly
it is deemed what I call a LASER fund.
LASER is an acronym that I have used for years that stands
for liquid asset safely earning returns.
So let me share with you how you can tell
if the advisor is proficient
or let's talk about what can go wrong.
You know, many times when I teach educational events
I will hear people say, I've always thought that insurance
in general was a poor investment.
And then they're shocked when I say, "Actually we agree."
Why do we agree?
Because it's not an investment, it's a tax-free vehicle.
If you understand TEFRA, DEFRA and TAMRA tax citations
if you keep it
from being deemed an investment which is taxed
in a separate part of the code,
then it cannot be called an investment.
So it's not an investment, it's an insurance contract
and it adheres to tax laws so that you can accumulate access
and transfer your money tax free.
But unfortunately,
most insurance is not structured correctly
and funded properly to accomplish the best results
for living benefits.
Most people have come to me in my career
not wanting death benefit per se,
that is one desire, but it seems to be secondary.
Their primary purpose is they want a financial instrument
where they can accumulate their money
on a tax favored basis and then be able
to turn on tax free income during retirement.
And at the end of the day, when they die
then it blossoms and transfers income tax free
in the form of a death benefit.
And the best way to do that is
with a max funded indexed universal life insurance contract.
I'm gonna gift to you a copy
of my most recent best selling book that talks about this
at the end of this episode.
So stay with me.
So what can go wrong?
Well, let's briefly share.
If it's not not structured correctly
under these tax citations known as TEFRA and DEFRA,
many agents put too much insurance on there
therefore it cannot perform as well.
Because my goal is to have my clients
earn an average rate of return
sort of like I have by using diversification
and various index accounts and by rebalancing
on an annual basis at a minimum.
And that's how you're able to tweak the rate of return.
And I've averaged 11.17%
on my indexed universal life since 1997.
Now, retract it back to day one, I have netted 10.07.
So that means the actual cost
of the insurance is only about one percentage point
and I'm netting 10% cash on cash.
That means, you know,
if I have a million dollars accumulated at retirement
I can take out a hundred grand a year
without depleting principal at a 10% payout
for as long as I live.
And that's totally tax free.
You can't believe how many agents do not understand
how to structure it properly.
And so what I call the spigot
on the bucket is bigger than it needs to be.
And even if they did rebalance and diversify you
and you accomplished an 11% rate of return
you might only net 5, 6 or 7%
because they put too much insurance on the contract.
Unfortunately, a lot
of agents don't know how to rebalance and diversify.
And so the average return might only be 8 or 9%,
which isn't bad, eight or nine is tax free.
But if you're gonna earn nine, you wanna net eight
you don't wanna earn nine and net four, okay?
And so that's number one.
Number two, yeah, if it's not funded correctly.
So if you design an insurance contract to accommodate
you know, 20,000 a year, 500 a month,
100,000 a year, make sure that you do that.
But if life changes and you have to adjust it,
make sure you adjust it or else it's not gonna perform
as originally illustrated, okay?
If it's not designed in accordance
with IRS guidelines to be tax free.
And so in order to be able to access money tax free
down the road, we want to adhere
to TEFRA, DEFRA and TAMRA tax citations.
And this TAMRA
is the Technical Miscellaneous Revenue Act of 1988.
But also you wanna make sure
you can accumulate money tax free
under section 72e of the Internal Revenue Code.
But when you go to access money or turn on income later
you want it to be tax free.
You have to adhere to 7702 of the Internal Revenue Code
and at the end of the day, when you die
it will blossom, increase in value
and transfer tax-free under section 101a.
So if a policy is not designed
in accordance with these guidelines,
you're not gonna have a good experience.
You're gonna miss out on some
of the money that you could have made
if you use the wrong product.
Now, there are probably 70
or 80 companies that offer indexed universal life.
There's probably 2 or 300 products.
I'm sort of picky, there's only, you know,
a dozen or so companies that I put my serious cash into.
But basically, most companies have pretty good design.
Maybe you could average 2% higher rates
of return with some companies or products.
And so you wanna use a good product.
And I like the companies
and products that whenever they update their products
they give the same benefits
to the older policies that have been enforced, okay?
So if you use the wrong product
it may not perform as well as it could
if you use the wrong company
because maybe what your goals are would be better suited
with an indexed universal life
that's offered by another carrier.
Or maybe you're picky about
the safety ratings of the companies.
And we usually like to use companies that are rated
in the top, you know, 10 percentile
by looking at vital signs
and so forth and all of their ratings.
So the wrong product, the wrong company.
But here's the biggie.
If the advisor is not proficient.
This has been the biggest reason
and in the 50 years I've been a financial strategist
it's the saddest day when people come
to me and they say, you know, Doug, I heard you
I attended one of your events.
I heard what you said on the radio.
I watched a video.
And I said, okay, that's what I want.
And I realized, well, golly, I've got a nephew
with an insurance license, I've got a brother-in-law
with an insurance license, they'll probably help me do this.
Ugh.
That's usually a huge mistake.
They'll come and they'll hear me
on the radio and I'll say something like, well,
if you had a half a million dollars in your IUL policy seven
and a half years ago, it should now exceed 1 million.
You should have doubled your money by now.
Pretty slam dunk.
That's 9.6.
If you got a good advisor,
they would've been tweaking it, rebalancing it.
Maybe you would've doubled it in within five or six years.
And these people, they come to me and they say
I had a half a million and I heard you on the radio.
I don't have a million today.
In fact, I don't even hardly have 500,000.
It's going down, what's wrong?
And I take about 30 seconds
and look at it and go, who set this up?
And they go, our nephew, he had an insurance license
he said he could do it or my brother-in-law.
And I said, wow, that was an expensive relationship.
So let's talk about that one because when you set up
an IUL correctly, I call it the dream solution.
It's like a financial Swiss army knife.
And yes, you wanna set up this dream solution for all kinds
of financial goals and there's a death benefit there
which is, you know, always nice.
It gives you peace to know that if you happen to pass away
that whatever's in the account is going to generate
you know, blossom and transfer income tax free.
It's one heck of a rate of return
but I don't recommend dying to get your money, okay?
Most people use it for retirement planning
because it knocks the socks off of IRAs and 401ks.
But maybe you're setting up an IUL for the use
of a college savings plan because this is far better
than a 5 29 college savings plan, which does not have
near the flexibility.
If you are a business owner,
we have many business owners that set up IUL policies
as working capital accounts
and they actually use the banking concept
where they borrow all using their cash value as collateral
for their business and they can borrow at 5%
and they keep earning 10, 15, 20, 25%
or more on the money and their policy
that's collateralizing the loan from the insurance company.
It's incredible.
Same thing with real estate management.
If you're smart,
you wouldn't be sending extra principal payments
against the mortgage to get out of debt.
You'd put it into an IUL
that's earning 9% compounding tax free.
And the net cost
of a 4 1/2% deductible mortgage is only three.
You're making 300%.
You're making three times as much
as the mortgage is costing you.
You'll get out of debt two and a half years faster.
An emergency fund, this is where banks
and credit unions put 30 to 40%
of their tier one assets for liquidity and safety.
So if you need an emergency fund in this day and age
you don't need some institution with a drive up window
down the street when you can access money if needs be
with an electronic funds transfer or phone call
just bypass the middle man, 'cause this is where banks
and credit unions put a lot of your money,
in insurance companies.
Lump sum capital transfer.
This is where you get settlements
or you come into a lump sum,
all kinds of capital that sometimes comes into our lap.
Windfalls, estate planning, pension maximization
if you're a school teacher or police officer, a firefighter,
don't take the survivor benefits.
Take the no survivor benefit and take the differential
between the no survivor benefit maybe 5,000 a month
and the survivor benefit, which is maybe 4,000 a month.
Take that thousand a month and put it into an IUL,
you'll be way better off than being forced
into buying the most expensive life insurance policy
you'll ever buy from the state
where you retired as a school teacher.
And also tax reduction to do strategic rollouts
out of IRAs of 401ks, get the taxes over and done with
sooner than later, reposition it
into an IUL and have tax-free income forever after.
And you're immune from the dangers of taxes,
inflation and market volatility.
So this is why when we teach the merits of IUL
there's like 38 benefits.
This is called a mind map.
And so max funded tax advantage insurance
if it's structured correctly and funded properly,
it is incredibly liquid.
It passes the liquidity test, the safety test
with flying colors rate of return
because your average net rate of return can be 10% tax free.
You'd have to be earning 15 or 16%
in a tax deferred IRA or 401K
to net 10 after paying taxes on an IRA.
The death benefit, legal advantages, oh my heavens
these are next to impossible to penetrate
in courts of law in the sue happy society we have become.
And then of course the tax benefits.
You're able to accumulate access
and transfer money totally tax free.
So in my most recent bestselling book
these have been flying off of our warehouse shelves.
I have in here 14 chapters
on the left brain side, the right brain side, you flip over
and that has 62 actual stories and that's 12 chapters.
But in the left brain side we have
in one of the later chapters what can go wrong
and how to prevent it.
And on page 211 is where I am at in the book, okay?
And this is the book I'm gonna gift you at the end
of this episode, but it's called the LASER ready test.
And if you're partnering with an IUL agent, it's critical
that they're proficient, they know what they're doing.
Knowing that,
I put in here 14 questions that you can ask an IUL agent.
And if they don't know the answers
to these questions off the cuff, that's a red flag.
If they say, oh, golly, I don't know,
I'll have to find that out.
Or if they
if you can tell they're faking it, that's a red flag.
And I would be careful
and I can point you to somebody who I already know
is proficient that has passed a proficiency exam.
But to just give you an idea, you know,
the questions are what's TEFRA, DEFRA and TAMRA?
I mean if they go, oh, I don't know, I've heard about those.
I don't know.
Oh, that's a red flag right off the top, okay?
Explain to me Internal Revenue Code
section 72e, 7702 and 101a.
Every IUL specialist should know those sections
of the code.
What's the guideline?
Single premium.
If they don't understand that term, that's a red flag.
That's the amount, the total amount you can put
into the policy during the life of the policy.
What factors will the insurance company consider
when gauging the size of my policy?
If they don't know answers
to questions like this, what size policy,
how much death benefit would a 60 year old need
if they were going to put in $500,000
in a guideline single premium?
Now if they don't know pretty much off the top
of their head that it's about double that a million,
that's a red flag.
That tells you they don't do this very much, okay?
And how can an insurance company earning 4 or 5%
on their general account portfolio afford to credit you
7, 8, 9, 10, 11% on an index?
If they can't explain how indexing works,
that's a red flag, okay?
How can policy owners earn an extra 1
or 2% higher rate of return
when they're turning on income in retirement?
If they don't know how
to explain something like a spread or an index loan,
golly, if you're doing this for retirement
you may wanna reconsider the advisor, okay?
Over the life of an IUL policy
if it earned a gross return of 11%,
retracted back to day one,
what should it have really netted me?
And it should be within 1% if it's structured correctly.
If you're credited 11, you should be netting 10.
If you're credited nine, you should be netting eight.
If they don't know that
or they can't figure out how to do that, that's a red flag.
You might want to ask how many insurance companies
do you represent?
'Cause if they're just a captive agent, mmm,
they can only sell that company's products.
Or how many max funded insurance contracts have you sold?
How about this one?
How many of these do you own?
See, I own several, but if they don't walk their talk,
I would be careful.
So you wanna make sure that the professional
is in it and they believe in it, they walk their talk.
And so I invite you to claim your free copy of this book
and you can go to page 211 to 212 and read those.
But here's how you can claim your free copy
'cause if you go to Amazon
they're 20 bucks and you'll pay another $10
or so for shipping and handling, if you do, thank you.
But if you simply go to laser fund.com,
L A S E R fund.com or click on the link below,
and you contribute a nominal amount towards the shipping
and handling, I require a little bit of skin in the game.
I'll cover the rest of that and I'll pay for the book.
I'll fire out a hard copy to you via priority mail.
While you're in there claiming your book,
if you also like to listen and learn or watch and learn
there's audio and video formats.
Check out some
of the educational webinars we teach on a regular basis.
They're free.
You can even schedule an appointment
with an IUL professional who is proficient that I oversee.
There's no cost charge obligation and you can see
how a properly structured IUL should be structured
in your particular set of circumstances.
So I hope you've enjoyed this and I hope it helps
saving making any mistakes when you're looking
to have an IUL structured correctly.
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