- IUL is like a five-story apartment building.
In this educational episode, I'm going to talk
about how to fund IUL to generate tax-free income.
Get ready.
I'm going to use the metaphor
of a five-story apartment building
and you're gonna be blown away.
(upbeat music)
So I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist now
for nearly five decades, helping thousands
of people optimize their assets, minimize taxes,
prepare for a comfortable retirement
so they will not outlive their money.
Many times when they come to learn
and I tell them that they can have 50% more
in retirement income than they're going to get out
of their IRAs of 401(k)s, they go, "I'm all in."
And then I show them actually 100% more or 200
or 300 or four times the income and they're blown away.
So they come to learn
about max-funded index universal life insurance policies.
These are my favorite vehicle
and they have been since 1997 when indexing first came out.
But even before that, in 1980 when EF Hutton,
who was not an insurance company,
they were a brokerage firm, came out with the idea
of hey let's use
the multi-trillion dollar insurance industry.
They're the backbone of America.
They're some of the best money managers in the world
and let's set up a permanent life insurance policy.
But instead of trying to get the death benefit that we want
for the least premium, let's flip it.
Let's take the least amount of insurance
that the IRS will let us get away with
and let's put in the most premium
or money that the IRS will allow as fast as they allow.
And so this all evolved through tax citations in the 1980s.
These are acronyms called TEFRA, DEFRA and TAMRA.
TEFRA is the Tax Equity Fiscal Responsibility Act of 1982.
DEFRA is the Deficit Reduction Act of 1984.
Those two tax citations dictate the minimum amount
of insurance required based upon the person's age, gender
and health to be allowed to put in money
and have it accumulate tax-free
under section 72E of the Internal Revenue Code,
and then be able to turn on tax-free income even
before the age of 59 and a half under section 7702.
And then at the end of the day, when you pass away,
anything left in the policy blossoms
and transfers income tax-free
under section 101A in the form of a death benefit.
Now, nothing else does that in the Internal Revenue Code.
I've challenged many CPAs
and tax attorneys to show me anything else that does that
and I've yet to have anybody show me.
And so this has been one of my favorite vehicles.
Back in 1974 when I started,
I was a big buy term, invest the difference proponent.
This is like buy term, invest the difference
on steroids 'cause it's tax-free.
So what happened during the 1980s is first of all,
TEFRA and DEFRA were passed,
and it basically said you have to determine
how much insurance you can get away with
based upon your age, gender, and health.
But if you're unhealthy,
you can squeeze down the death benefit
because it gave parity, meaning equality.
So it didn't matter
if you're a 22-year-old athletic marathon running female
or if you're a 60 year old or even a a 78 year old.
A friend of our family
who had three blocked arteries back then,
adult onset diabetes, a prostate cancer episode,
six sisters all predeceased him
and three brothers predeceasing.
He got rated what is called a Table D
but we were able to squeeze down his death benefit
to accommodate his 500,000
and we were able to get away
with a death benefit of 800 and some odd thousand
because his objective was internal rate of return.
He was able to earn 11% and net 10%
after the cost of insurance,
just like a 22-year-old athletic marathon running female.
But maybe that female who's in good health
and young, to be able to put in 500,000,
requires a death benefit of five or six million.
But see, the cost of insurance is the same.
It's the amount of insurance required goes down
as you get older and even the more unhealthy you are.
And by the way, if you're totally uninsurable,
you can use a surrogate,
you can put the insurance on your spouse, your kids,
your grandkids 'cause it's the owner of the insurance policy
that gets all the tax-free accumulation and growth.
Usually the insured is the owner
but it doesn't have to be, okay?
And so this is where there was this massive exodus
of money leaving the banks and the brokerage firms,
the credit unions in the 1980s
over to these max-funded insurance policies
because they were safer, they paid higher interest,
they were tax-free, they blossomed
and transferred tax-free when you died.
No other vehicle did that.
Banks, credit unions, IRAs, 401(k), they don't do that.
And so a massive exodus
of money was leaving the institutions and to these.
And so they lobbied Congress by 1988
and June 21st is the exact date to pass a part
of legislation in the Technical
and Miscellaneous Revenue Act, spelling the acronym TAMRA
to slow the flow.
They didn't wanna kill these because this is where banks
and credit unions put 30 to 40%
of their tier one assets for liquidity and safety.
See, banks borrow your money, so to speak, and pay you 1%
on every million bucks that people deposit into banks.
The banks pay you 1%, that's 10,000 and they turn around
and take 30 to 40% of their tier one assets
and put it into insurance companies,
increase the safety by usually five or six notches.
Most of these insurance companies are rated AAA.
A lot of these banks are only rated BBB.
The difference between BBB and AAA
is like six notches higher in safety.
They're increasing the safety and the rate of return.
Most of these banks who put money
into insurance companies are fine with 5%
because how much more is 5% than 1%?
Don't say four, it's five times.
They're making 50,000.
They're only paying you 10,000.
They're making five times or 500%.
Would you hire an employee
for 10 grand that made you an extra 50 grand?
Yeah, I'll do that all day long.
And so this is called TAMRA
and this is where they slowed the flow.
Instead of being allowed to put in a one fell swoop,
let's use an example of 500,000 bucks.
They only would allow you to put
in about 20% a year if you were over the age of 50
and you wanted to do this
for tax-free income and retirement.
So if you put in a lump sum of 500,000,
it still grew tax-deferred.
But if you wanted to start accessing income,
it was now taxable like an IRA or 401(k).
If you wanted tax-free income,
you had to comply with TAMRA.
So you could only put in about 100,000 a year
would be the fastest.
The first year, the second year,
the third year, the fourth year.
You put in 100,000 the first day of the first year,
the first day of the second year, first day of third year.
And finally, after four years and one day,
the first day of the fifth year,
you could put in the last 100,000
and now you have max funded it with a total amount 500,000.
And when you turn on income anywhere down the road,
it's tax-free by complying with TAMRA.
So I have compared this metaphorically
to owning an apartment building.
See, if you were to build a five-story building
and the IRS said, "Hey, I'll tell you what.
If you just fill up the first floor the first year, okay?
So if you only rent out the first floor,
you only fill up the first floor the first year
and then the first day of the second year,
you can rent out the second floor and then the third floor
and then the fourth floor.
The first day of the fifth year, in four years and one day,
you can rent out the entire building.
And if you do that,
then all of the rental income on that property
the rest of your life will be totally tax-free."
Now, if you did the math, you'd be shocked.
That would be the smartest thing in the world to do
is to spread out the filling up of that building.
Well, that's like filling up an IUL policy.
I compare it to a bucket.
You're filling up the bucket.
If it's a $500,000 bucket,
you are putting in just $100,000 a year.
If it's a $100,000 bucket,
you're putting in 20,000 a year
but you're not putting in any more money
than the IRS allows under that TAMRA tax citation.
And then it turns into this tax-free cash cow
to where every million that you've accumulated tax-free
can generate 10% payouts,
$100,000 a year of tax-free income
without depleting principle when you structure it correctly.
So the purpose of this channel is to help you understand
how to accumulate, access and transfer your money tax-free
the smart way.
And it also is to help you find the right advisors
to understand how to structure these properly.
So if you want to learn how to design an IUL policy,
like a bucket so that it's in compliance
with TEFRA, DEFRA and TAMRA guidelines,
and to be able to have the cost of the insurance,
the spigot on the bucket, be the smallest amount
so that you can earn 11 and net 10 and comply with TAMRA
by filling up the bucket no faster, that apartment building
so that all of the income, if you put in 500,000,
if it doubles to a million or you wait
and the million doubles to 2 million and 2 million doubles
to 4 million and 4 million doubles to 8 million.
Yeah, we've had many clients who have done that.
They started out with 500,000
and they now have 8 million tax-free
in compliance with TEFRA, DEFRA and TAMRA.
Now they can pull out 800,000 a year of tax-free income.
If you wanna learn how to do this, I want to gift you a copy
of this book called "The LASER Fund."
Now, this has been flying off of our warehouse shelves.
You can buy it on Amazon
for 20 bucks but I'll gift you a copy for free.
But it's actually two books in one.
This side is about 200 pages with all the charts
and graphs and explanations comprising 14 chapters.
If you learn more by right brain, by stories,
you flip it over and read this one.
This is about 100 pages, 12 chapters
with 62 actual client stories
of how a properly structured IUL
would be deemed a LASER fund,
liquid assets safely earning returns
spells the acronym LASER
and it can be used not only for retirement but all kinds
of financial goals, college funding.
It knocks the socks off of a 529 college savings plan,
business working capital,
real estate management, emergency fund, you name it.
It's the dream solution.
And so this is how you can claim your free copy
and I would recommend you read both of these
if you have both a right brain and left brain.
Simply go to laserfund, laserfund.com
or click on the link below.
You contribute a nominal amount
towards the shipping and handling,
have some skin in the game,
and I will will cover the rest of that cost.
I'll pay for the book.
I'll fire out a hard copy to you.
While you're in there claiming your free copy,
if you like to listen and learn or watch and learn,
check out different audio and video versions.
Also check out the free educational webinars
that we teach on a regular basis.
You can also schedule an appointment
with an IUL specialist to see some illustrations
of how a LASER fund can be structured
for you and your particular set of circumstances
so that it's designed correctly,
so that you can earn 11 and net 10.
Whereas most agents, they don't know how to do it.
You'd be lucky to earn 11, you might only earn seven
or eight and you'll only net four or five
'cause they didn't know what they were doing
when they structured it.
Don't make that mistake.
Claim your free copy and I'll see you
on the brighter side of your financial future.
(lively music)