All right infinite banking concept today we're going to go over a question that comes up all
the time dividends - am I really earning 6%? or am I really earning whatever that the advertised
dividend rate is from the insurance company? So one thing if you watch any of your videos you've
seen this several times or hit on heavily the four major mutual companies to put it
simply, have always paid the highest returns and policyholders when you look at these companies
compared to everyone else actual returns not just illustrations not just projections actual returns
these guys have always out delivered everyone else so we heavily, heavily recommend these to
everyone but for today's topic or if you take a company like MassMutual they have a dividend
rate at 6.4% does that mean that you're actually earning 6.4 % on your money the answer is
NO, right whatever you take the dividend rate we've got the broke gross and you've got your
net returns so we've given it same thing with the guaranteed rate which is a company's floor
that is a gross rate put this in caps that is credited after the company's insurance expenses
and mortality charges so again it's a gross interest rate that is credited to a policyholder
after expenses. Don't you love our fancy board especially when it works. So how we can illustrate
that right so if we pull up some spreadsheets what we're gonna look at here is actually a MassMutual
policy this thing is properly designed in the sense that it is maxed out right so we've got
a 40 year old male 50k you're going in this would be consistent if it's 5k a year which
is 500 thousand a year how we know that it's maxed out he's of the contribution % $5,000 is
going towards the insurance premium the insurance expense everything else were plowing into cash
there's a small term rider but that thing is cheap on this account so we've maxed out the
ratios maxed out the design what we want to look at here is this example assumes MassMutual 2019
dividend interest rate 6.4 % right so we're gonna scroll back up here 6.4 % that's the
gross dividend rate we've got a couple things here we've got a break-even point between years four
and five highlighted in yellow some things overall return this assumes the average return on the life
insurance account meaning the first four years we have a negative return why this is showing
negative or in the red is because we paid in two hundred thousand dollars over four years and we
have less than two hundred thousand dollars yeah we have a death back of it right which is great
but we don't care about the death benefit we're looking at this as a pure cash account that's
important to be aware of the banking concept of borrowing is great but purely returns again we
have less at the year for mark the most pain in now from that point forward you see those average
returns creep up and we can scroll down here they continue to climb up what's pulling them up
is when we pay money into a policy right we know of this 50,000 the premium piece you've got 5k
going towards the insurance expense here's 1 & 2 0 through seg of that shows up in cash we can
see that here on the annual return section we can also run an illustration with all insurance
expense or all premium going in we'll see the same thing so here's 1 and 2 negative return
from that point forward you see those returns get stronger and stronger why that is is our premium
is now coming back to cash for us we're also earning dividends we've got the guaranteed rate
we're picking up the pace this is what we want now you're gonna see it's maxed out and right about
five and a quarter percent and this is assuming that a 6.4% dividend is credited
to the account forever the dividends going to change over time going back to our work of art
whatever a company's dividend rate is right if it's 6.4% you can always expect
the net returns is going to be consistent with the four major mutual companies to fall anywhere from
1-2% below that dividend rate one and a half is a good average depends on
our age when we start all that good stuff but 6.4%
we saw what a net earning of five and a quarter and was the max good to be aware of what we're
looking at what we're actually earning on a policy hope this helps more to come in the near future