IUL is far superior to whole life in my opinion. In this
episode, I'm going to address the question "Is whole life insurance
a good investment for retirement?" Well, get ready to understand that the
financial services industry will not allow insurance to be regarded
as an investment. Whole life is better than most IRAs
and 401Ks out there. but it's only a good way to go. It wasn't
designed for retirement income. IUL was designed to give you the highest
amount of net spendable retirement income totally tax-free.
So, get ready to learn.
So, first of all and let's talk about the features
of whole life insurance. I have a little ditty that maybe
you've heard me say on other YouTube videos that goes good, better, best;
never let it rest. Never let it rest till good gets better and better gets best.
Now, I think whole life insurance can be a
good way to go provided that your primary objective
is death benefit. You're insuring yourself in case you
were to pass away with an untimely death or what have you. And you want to make
sure you have this death benefit. Whole life insurance was usually
designed to have some guarantees in there
that are not free. You have to pay for it. And so it's more expensive
to make sure that that life insurance is in force your whole
life. That's why it's called that. If you live to be
75, 95, 120. And so, it's going to be more expensive.
So, whole life was primarily designed for death benefit.
Now, you can access cash value out of there on a tax favored basis because
money inside of life insurance has been this sacred
cow for over a hundred years in the internal revenue
code. In section 72E, money inside of an insurance policy growing with interest
or dividends or whatever will grow tax-free. If you need to access
money while you're alive, you can access money up to your basis
tax free if you withdraw it. Or you can borrow and the insurance
company charges you an interest rate to borrow your money.
But your money still earns usually an interest rate equal to
or greater than what they're charging you to borrow the money. So,
a lot of times whole life is used for what is called the bank on yourself or
infinite banking concept where you're borrowing and paying yourself back
interest. Or you're borrowing money at let's say
4% and they keep crediting you 6%.
So, it's okay. But whole life was never really designed
to give you the best net spendable tax-free income. It can give you
income. But if you ask most whole life insurance agents to
illustrate the type of income that you can pull out of a whole life policy
and never run out of money till age 120, they have a hard time doing it.
And if you're lucky on every million bucks that you accumulate in the policy,
you'd be lucky to be able to get 30 or 40 thousand dollars
a year of income. Maybe 50,000. If you had a super performing whole life policy,
maybe 60,000 out of a million. But the problem is the insurance company
have to be earning 8 and they're not doing that. Most
whole life companies are not crediting that much in dividends. But that's
about as high as they got. If you did earn 8, you'd only be
netting 6. I love indexed universal life
because the last 25 years, I've earned 11.17 and I've netted 10.07. I earn 11
and net 10. In a whole life policy at best, you
might earn 8 to net 6. And it would take you till age 95 before
you finally got within that 2 percentage point spread earning
8 to net 6. I can earn 11 and net 10
within 10 or 15 years with an indexed universal life
because the insurance costs get less as you get
older. Did you hear that? So, stay with me. I'm going to tell you why with
a property structured indexed universal life, the insurance can become
cheaper as you get older. I would say that the biggest difference between
whole life insurance and why it's not the best instrument if
you're trying to accumulate money tax free for retirement but IUL, index
universal life is because of flexibility. You know, if
you get to know me, I have this beatitude. Blessed are the flexible for they shall
not be bent out of shape. And so, I like universal life because
it's far more flexible. Whole life requires that you must
pay a set premium in order to make sure that it doesn't lapse. So, with index
universal life, I can structure it to accommodate let's
say 100 thousand, 300 thousand. Do I have to put
that much in? No. I could put in 10 thousand. If I put in
100,000, I could probably coast for 10 years without adding a
dime. You can't do that with whole life
insurance. So, I have all kinds of flexibility.
But if I could put in 300,000 and I only put in 30,000,
I can put in the the additional 270,000 anytime in the future because I'm
grandfathered with a lot more room with indexed universal life. So, I like
the flexibility that universal life offers. Now, when we
talk about the differences here, whole life
insurance can usually generate a rate of return
unless you buy variable whole life because there's
fixed and there's variable in universal life. There's index. Well
whole life insurance, if you put it out to the market then you
can lose money and have to cough up a whole bunch of premiums to make sure it
doesn't lapse because the cash values were depleted if the
market dropped 40%. I've never owned a variable product. A
variable annuity, I've never owned a variable
whole life or a variable universal life. I like
indexed universal life. Indexing allows me to make money when the market goes up
and not lose when the market goes down. But the neatest thing about universal
life is when EF Hutton who was not an insurance
company, they were a brokerage firm came out with the idea.
They said, "Hey, why don't we take the least amount of insurance the IRS will
let us get away with and put in the most premium
and self-insure?" So, if I wanted to drop in 500,000 let's say into
an indexed universal life policy, I may have to spread it out over 4 years in
one day to grandfather tax-free access for the
rest of my life. But when I put in $500,000,
age 60, let's say. The minimum death benefit is 1.2 million
approximately. Well, people say, "Golly, I could buy way
more life insurance than 1.2 million." Well, that's not your objective usually
with indexed universal life. You want to self-insure. You put in 500,000
at age 60, you have 1,200,000 of death benefit. Well, now the
insurance company is only at risk for the remaining 750,000
because 500,000 of that is your own money. You've self-insured for that. So,
they only charge you for the difference. In 10 years at 7.2%
which is the lowest average that I've earned in the worst
decade since the great depression, 500,000 doubles to a million in 10 years.
Well now, the insurance company is only charging you for 200,000
of the million too because a million of is your own .money
Do the math. Usually within 10, 12, 15 years, the death benefit
is less than your cash. And so, the death benefit now just keeps ahead
of your money. You've self-insured. And they're only charging you
for about a five percent difference. If it doubles from a million to 2 million,
the minimum death benefit under IRS rules would be 2.1 million. They're only
charging you for 100,000. That drains out less than than usually
one tenth of one percent of the interest I'm earning on my 2 million bucks.
So, the older I get, the cheaper it becomes. Right now,
I earned 11 like I've been earning, I would be netting
probably 10.9 whereas during the early years, if I earned 11, I only
netted 10.Oh, I only netted 10? Whole life takes until
you're 95 years old to maybe earn 8 and net 6. I would
rather earn 11 a net 10 because the cost of insurance
is really not a cost to me. It's paid for out of a minuscule portion of money that
most people would shell out in taxes if they save for retirement in
traditional IRAs and 401Ks. So, what are the greatest takeaways here?
Is whole life a good investment for retirement? Well it was never really
designed to be used to create predictable
retirement income that will last as long as you do.
It was designed more for death benefit. Indexed universal life was designed for
living benefits. And so, that's why a property structured indexed universal
life will allow you to grow your cash to a larger sum
quicker. When you get a million bucks instead of whole life only being able to
generate maybe 40, 50 or 60 thousand a year of income at best. A million
dollar nest egg in a universal life that's
indexed would generate between 80 to 100 thousand
a year of income. So, it's usually twice as much
income that can come out of an index universal life that will last
because you're self-insuring (the costs are very low)
If you live to be 120. I love the flexibility,
I love options and the ability to put in a lot of money at times. And not have to
put in anything. You don't have that flexibility with whole life insurance.
So, indexed universal life is my favorite. It was designed
for tax free retirement income. There are a lot of benefits that come
along when you understand how to use it for
maybe business, for working capital, for college funding.
It's not just for the death benefit. On that last
point when i ask a room full of people, "What are some uses for baking soda?" And
it's usually the women that will say, "Well, you can use it to soak in a tub. You
can take the odor out of the the food or in the refrigerator. It'll
take the pop out of a pot of beans." They give me all these uses for baking soda.
And then finally somebody goes, "Oh, it's good for baking."
The obvious, okay? See, life insurance is for life.
Not just death. But most insurance agents, most financial advisors only use it for
death and it's named life insurance. So, I like the living benefits. So, my
favorite vehicle is a max funded indexed universal life. I call
it the laser fund. In fact it's a title of my 11th
book, The Laser Fund. These have been flying off of our warehouse shelves.
I want to gift you a free copy of this book.
It's 300 pages. There are all kinds of charts graphs and explanations. You turn
the book over and this actually has 62 client stories that
will help you understand how the laser fund,
indexed universal life can be used for all kinds of financial goals.
So, all you have to do is go to laserfund, L-A-S-E-R, laserfund.com. I'll buy the
book for you. You just pay $5.95 shipping and handling.
I'll fire you out of hard copy. Or there's options there if you want a
digital version or audio version too. But I want you to
become empowered and know why this is the best alternative,
in my opinion. It knocks the socks off of whole life insurance for retirement goals.
goals
you