- Term versus universal life insurance.
In this educational episode, I'm going to explain why
Indexed Universal Life,
structured correctly and funded properly
is like buying term and investing the difference
on steroids.
Get ready.
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So, I'm Doug Andrew.
I've been a financial strategist since 1974.
Also been viewed
primarily as a Retirement Planning Specialist,
helping people prepare for a comfortable retirement,
where they will not outlive their money.
Well, my favorite financial instrument, BarNone
is a max funded, indexed universal life insurance contract
that allows a person
to accumulate their money totally income tax-free.
And then when you need to access money
even before the age of 59 and a half,
you can do so without triggering tax or penalties.
But if you use it as an alternative to IRAs and 401(k)s,
it ends up knocking the socks off of most of those,
because you can access the money tax-free.
And at the end of the day, when you ultimately die,
anything left behind in the policy,
in the cash value blossoms and transfers income tax-free.
Now, nothing else does that
in the Internal Revenue Code that I'm aware of.
And I've asked many CPAs and tax attorneys that I teach
in advanced continuing education
to show me anything else in the Internal Revenue Code
that allows you to accumulate money tax-free,
access it tax-free, and when you die
it blossoms and transfers tax-free.
They've yet to come up with anything to show me to do that.
Now, that is provided under three sections of the code
72(e), 7702, and 101(a).
In this episode, I wanna sort of explain
why a property structured, max funded indexed universal life
is really nothing more than a buying term
and investing the difference under a tax-free umbrella.
It's like on steroids.
Now, when you purchase term insurance
what you're doing is you're paying for a death benefit.
And the philosophy behind this,
as explained by advisors out there like Dave Ramsey
and Suze Orman, they say,
"Well, if you buy insurance to protect you
"in the event of an untimely death,"
which you should protect yourself and say
in case accidental death or something happens,
is to make sure that those that you would leave behind,
your spouse, your children,
would not suffer an economic loss.
So if you're 30 years old and you are making let's say,
a hundred thousand dollars a year,
you can usually qualify for maybe 30 times your income.
So that'd be three million of life insurance.
And you can't just go apply
for millions and billions of dollars of insurance.
You have to have a reason and justification
for the amount of insurance you're applying for.
And so it's usually based upon a factor of your income.
So let's say you need three million of life insurance
at age 30.
Well, usually if you're shopping around for the cheapest
you would buy a term insurance policy
maybe annual renewable term or five year tenure, whatever,
and you're trying to pay the least premium
for that $3 million of life insurance
so that you can eventually get rid of
the three million of life insurance,
30 or 40 years down the road
when you end up accumulating three or four million of cash.
So you buy term and invest the difference
so you become self-insured.
Well, what a lot of agents
or advisors don't understand is universal life,
especially indexed universal life
is actually designed to do exactly that, to self-insure.
And they don't understand how to do this.
And so what you're doing
is you're taking the least amount of insurance,
the IRAs will let you get away with
and put in the most money the IRAs allows.
So many people that would come to me,
they wanted to reposition money
that was underperforming or non-performing.
Maybe it was money they had in IRAs or 401(k)s
invested in the market
and they didn't like the volatile market
where they were making money then losing money and so forth.
And so they wanted to get outta that volatile market.
Maybe it was non-performing or underperforming
because they had money in a banker credit union
earning a measly 1%.
Many times people would have
maybe a piece of real estate, a rental property
and it was like an albatross around their neck.
They couldn't stand fixing the toilets
and evicting the tenants and taking out the trash.
And so they just wanted to get rid of it.
So they wanted to sell this duplex or this rental home
and they didn't know what to do with the $200,000
and so people would come to me and they'd say,
"Doug, I want to sell this piece of property,
"and I need a place to put this 200,000.
"I have a hundred thousand sitting at a banker credit union,
"and it's ridiculous.
"I'm rowing upstream at the rate of one mile an hour
"1% interest and the current inflation's coming down
"at 3, 5, 10.
"I'm going backwards.
"I go, I understand
"and I'm sick and tired of my money in these IRAs of 401(k)s
"in the market where I make money and then I lose 40%."
And people saw that twice in the decade from 2000 to 2010.
They lost 40% twice in that decade.
We call it the lost decade.
And so they wanna reposition using strategic rollout.
This is where you're rolling money out
of those IRAs or 401(k)s, not over rolling them out
paying the tax and putting the net into
an IUL policy 'cause it's tax-free.
So based upon that example,
that would be 200,000 from a strategic rollout,
200,000 from the sale of a rental property,
another a hundred thousand
coming out of a banker credit union.
So that's a total of 500,000.
What I'm doing is I'm putting in $500,000
and I'm taking the least amount of insurance
I can get away with.
Now if I'm down in my 20s or early 30s,
the IRAs requires the amount of insurance
might be about 3 million bucks
to accommodate that 500,000.
Now if I'm 60, I only need a million dollars
of life insurance to accommodate 500,000.
So the objective is not to get as much insurance
you want the least amount of insurance you can get away with
and put in the most money 'cause you want that money
to accumulate tax free for living benefits.
Well, if you're young and you're 25 or 30
maybe the minimum amount under these TEFRA
and different tax citations
that dictate the amount of insurance you required
might be 3 million.
So many of my clients would go,
"Well, Doug, I want to put in this $500,000.
"What's the at least amount of insurance?"
And I'd say, "Well, it's 3 million bucks."
So they get the $3 million of insurance.
But what the real objective is
is to have their money grow, to become self-insured.
Well, if they put in $500,000,
that 500,000 if it's structured correctly
and funded properly, that 500,000,
if it's earning like I've earned on my IUL,
I've averaged 11.17,
since 1997, I've averaged 9.62% since 1980.
Your money will double every seven and a half years at 9.6.
So if you put in 500,000,
it's gonna double to a million in seven and a half years.
Well, then it's gonna go to 2 million and then to 4 million
then 8 million at the end of 30 years.
At the end of 30 years, you have 8 million.
Whoa, you accomplished your goal.
Well, you did it actually faster.
I ended up with 3 million of cash.
Usually, 500,000 would double to a million
in seven and a half years.
A million doubles to 2 million in another seven and a half.
That's 15 years.
By the time I got to 22.5 years, I was up to 4 million.
My cash exceeded the original 3 million death benefit.
I am self-insured.
So see now the insurance company's not charging me anymore
for the insurance because I have 4 million of cash.
The cash value grew to exceed the original death benefit.
And so that's the magic behind being self-insured.
It's like buying term
and investing the difference on steroids
because if you were a 60 year old and you put in 500,000
that 500,000 can double to a million
in seven and a half or 10 years.
And now your cash value equals the original death benefit.
In 10 years, you are self-insured.
See, a lot of agents say,
"Well no, you use increasing death benefit,"
that means the insurance company's gonna keep charging you
for the original million dollars of insurance.
No, I want to use this for living benefits.
I want to become self-insured as soon as possible.
So most of the time when I do this for people
the cash value equals or exceeds the death benefit
within 12 years, within 22 years.
And so now they are self-insured, whereas most advisors
the Dave Ramsey's and the Suze Orman's,
your money inside of that portfolio
is taking 30 or 40 years to equal that.
And then that's not what you're gonna net
you pull it out and you're gonna have to pay tax
on a third of it.
So why would you do that?
Money inside of an insurance policy is tax free.
I can be self-insured and have the cash value
equal and exceed the death benefit
in about half the time
as buy term invest the difference proponents
and it's totally tax free.
So why wouldn't you do that?
This is why it's like buy term invest the difference
on steroids.
Now, my critics out there, they go,
"Oh I've never seen an insurance policy that that does this.
"You're saying that this gets cheaper as you get older?"
And I go, "Yep!"
Well, I've never seen an insurance policy
that gets cheaper as you get older
then you haven't seen one structured like I'm talking about.
Because when you actually have the cash value
qualify as part of the death benefit,
and you take the least amount of insurance
based upon your age and your gender and your health,
the cash value will grow to equal
or exceed the death benefit, usually within 12 to 20 years.
And now the insurance is free.
I mean, if you die, it transfers tax free
but you're not paying for the insurance anymore.
The insurance is actually now growing with your cash value.
And there's a lot of agents
that do not understand that concept.
The insurance gets cheaper as you get older.
If I put in 500,000 and the minimum insurance is a million
the net amount at risk is only the remaining 500,000 now.
When that 500,000 doubles to a million
there is no net amount at risk.
The insurance company's not gonna charge me anymore
for a million dollars of insurance
because my cash is now equal to the insurance.
Does that make sense?
But now the a million can double to 2 million faster,
totally tax free and then to 4 million.
If this is intriguing you,
you need to learn how to do this correctly.
So if you wanna by term invest the difference tax free
and do it on steroids, I would recommend you learn
about how to structure one of these correctly.
If it is what I call a LASER fund.
LASER is an acronym that I've used for years
that stands for liquid assets safely earning returns.
A laser fund is a property structured max funded IUL.
So you could study this book
it's 300 pages and purchase it on Amazon for 20 bucks.
And if you do, thank you, but you don't have to do that.
I'll gift you one free.
Now it's actually two books in one.
This side is about 200 pages,
14 chapters with all the charts and graphs and explanations.
If you're a left brain learner,
if you're more of a right brain learner,
you learn by stories, you flip it over
and read this one a hundred pages, 12 chapters,
62 actual client's stories
of how match funded IUL can be used for retirement,
college funding, working capital for your business,
emergency funds, on and on on.
It's the dream solution for many financial goals.
If you wanna use your whole brain, left brain
and right brain, read the whole book,
but simply go to LASERFund.com
and you contribute a nominal amount
towards the shipping and handling.
I'll cover the rest of that cost and I'll pay for the book.
I'll fire out a hard copy to you while you're in there.
Check out if you like to listen and learn
or watch and learn.
There's audio and video versions.
There's even an 18 hour masterclass on this.
You'll really be educated.
But if you want to
check out some of our educational webinars
we do on a regular basis, there's no charge.
Check those out when you're in there
claiming your free copy.
Also, you could even schedule an appointment
with an IUL specialist that I oversee and mentor
so that they could create an illustration
of a property structured IUL for you
at no charge or obligation.
So this is not about me
this is about you and your brighter future.
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