IUL has 4 more benefits than a Roth. In this episode, we are going to address
the question in depth "What is the difference between a max-funded IUL
--indexed universal life insurance policy and a Roth account?"
So, my name is Doug Andrew.
I've been a financial strategist retirement planning specialist for more
than 45 years. And by far, my favorite vehicle out of 4 that most retirees
use for retirement income is what I call the Laser Fund which is a max-funded
indexed universal life insurance contract. Because as far as I'm concerned,
it knocks the socks off of an IRA or 401K especially invested in the market.
They cannot predict income for you. I like to have predictable income streams
for my clients in retirement that are totally tax-free. Nothing else than a
maxed-funded IUL can do this if it's structured properly and funded correctly.
Okay? So, in this episode, I'm going to share with you the difference between
that and a Roth because I am asked this question all the time. "Well, is this
better than a Roth? What's the difference between a Roth and the IUL?" Well, let's go
back and talk about what a Roth is. Most Americans (I feel) have been duped into
putting their money for retirement into traditional IRAs and 401Ks. And they did
it under the premise that they were going to be in a lower tax bracket when
they retired. And that has not been true. Or axiomatic for more than 25 years. It
took the financial services industry until just a few years ago to finally
admit. Well, that's probably not the smartest way to say because people
aren't in lower brackets. If you're in a lower bracket when you retire, it
probably means you didn't say very much. But see still 91% of Americans seem to
be duped into putting pre-tax dollars into IRAs or 401Ks
thinking that it will grow to the most. Well, you don't choose investments based
upon which ones grow to the most. You choose them based upon which ones
generate the most, net spendable at the time in life you're going to need the money
the most. To buy gas and groceries after tax, after fees. That's how you
choose the proper investments. And so, when people started getting smart and
they realize that it's far better to fund your savings with after-tax dollars,
pay tax on the contribution money, pay tax on the seed money like if you were a
farmer and you bought your seed in the springtime, "Hey, you can either not pay
tax on the price of the seed. But later in life when you harvest your crops, now
you will pay tax. Well, that is a traditional IRA or 401K. and it sounded
good if you thought you were going to be in a lower bracket. If you're not and if you
agree congress will likely keep raising taxes, no it's better to pay tax on the
seed money and enjoy the harvest without tax. So, that's when the Roth came out. And
it actually wasn't for your benefit. It was for the government. hey were hard up
for money. In 1997, they needed to come up with some tax revenue. And so, Senator
Harry Roth said, "Hey, people are getting smart." They're realizing it's better to
pay tax on the seed money and enjoy the harvest without tax. And so, the Roth
actually created a windfall of tax revenue for the government. Because
people who were smart, they said, "Oh, let me convert they paid tax all of a sudden
on all that money. And then they accumulated a tax free from that point
forward and later they can take it out tax-free." No, it's not always guaranteed
their governments like Australia that when they got hard up for money, they
actually determined. "Well, if you have more than 100,000 or whatever
and their equivalent of a Roth, we think you've saved too much money. We need the
money more than you do. We're going to tax your Roth." Now, our government has
actually looked at that so I don't really trust that the Roth will always
be tax-free even though they've sort of kept it that way so far. But the reason
why I don't own a Roth or an IRA or 401K is because there's too many strings
attached. Let me share with you the strings attached, the limits to a Roth
compared to an IUL which has the 2 benefits of a Roth and 4 additional
benefits that Roth's don't have. I don't think they will ever have. Now, for
several years, I have taught advanced continuing education to CPAs --certified
public accountants, tax attorneys, financial advisers and they sort of sit
there with their mouths open when I teach them about max-funded IUL. And why
it is a superior vehicle and why it knocks the socks off of a Roth. Because
many of them have been recommending Roth's or traditional IRA or 401Ks to
their clients. When they hear me say, "I've never owned an IRA or 401K. Never will.
I've never owned a Roth. Never will." They go, "Well, why?" Why would I own a Roth when
I can have the 2 benefits of a Roth and 4 additional benefits. So, what are
they see a Roth allows you to fund it with after-tax dollars like I've said.
And your money accumulates tax-free. So, that's benefit number 1. And when you
access your money, it's tax-free. Those are the 2 benefits of a Roth. A max
funded IUL which I call the Laser Fund has had those provisions for over a
100 years. Long before Roth's ever came out in 1997.
So, under Section 72(E), 7702, 101A of the Internal Revenue Code, a max-funded IUL
which IUL didn't come out till 1997, indexed universal life started in 1980.
My heavens, even before that, life insurance has been a sacred cow. Allowing
people to accumulate their money tax-free, access their money tax-free
anytime. You don't have to wait till you're 59 ½ or 70 and a half
year I have to start taking it out on all these different rules. But when you
die, it blossoms in value and transfers income tax free. Nothing else in the code
does that. And so, A max-funded IUL has these 4 additional benefits on top of
tax-free access and accumulation. You can put in large amounts of money into a max
funded IUL. If I design it to accommodate up to
300,000 a year, I can throw in 300,000 if I have a banner year. You
can't do that with a Roth. If you put in a large lump sum it's usually from a
rollover from an IRA. You cannot put in more than a certain amount each year or
a certain percent of your income. Those are the strings attached.
Now, another neat thing about max-funded IUL, if I could put in 300,000 but it's
not a good year, I only put in 30,000 or nothing. The next year or 2 or 3 or
4 years later, I can make up for the years I didn't put in the maximum I
could have put in. If I could have put in 300 and I didn't or I only put in 30,000,
I can add another 270,000 on top of 300,000 for another year. I can make up
for that. You can't do that with a Roth. If you miss the opportunity, you lose
that opportunity to put in the annual amount once that year is passed. The next
benefit, number4: I can access money out of an IUL anytime. I can do it with
an electronic funds transfer or phone call for any reason. There's no IRS
penalties for doing that. You cannot access money in a Roth for
maybe 5 years or till you're 59 ½. You have all these restrictions. In
an IUL, I have people in their 30s who retire with a million, with 10 million
that generates a million a year of tax-free income on their 10 million
dollar nest egg and they're only in their 30's. You can't do that with an IRA
or 401K or a Roth. So, you can access the money. Next, you can use indexing. And I'm
going to explain the power behind indexing that Roth do not have. So, with
an IUL, it stands for indexed universal life, I can use indexing and
link my returns to what the market does any time I want.
Ride the market up again tax-free if we were to reposition money out of a
traditional IRA or 401K in to a laser fund. This is called a strategic rollout.
Not a rollover. Okay? Roll out. Then you can ride the market back up again. And
the time to do that sometimes during a crash where you want to get the
taxes on a traditional IRA or 401K over and done with at lower values and lower
tax rates. And then ride the market back up again tax-free because indexing not
only allows you to come along for the ride when the market goes up but when
the market crashes. Which it will. lt's not a matter of if, it's when. You will
not lose with your money in an indexed universal life due to market volatility.
If you have your Roth in the market, you are subject to loss. So, you want to use
indexing to ride the market back up again and do it totally tax-free, protect
yourself so if the market crashes (again, which it usually will) you're protected.
The last benefit that Roth's do not have. I'll explain it this way. If I have five
$500,000 in a Roth and if I die, sooner or later, you basically
leave behind $500,000. Now, your spouse can have that is
tax-free and so forth. But in my laser fund, a max-funded IUL, if I died with
500,000 in there every half a million at my current age, (68 at
the recording of this video) would blossom to about a million two hundred
fifty thousand. Every million would blossom to 2.5 million and
transfer income tax free. So, people say, "Huh, well what does that cost?" Wrong
question. What does it make you? That cost is the cost of the insurance that the
IRS says has to be there or it's not tax-free. It is the cost that's included
that if I earn 11, I net 10. So, they say insurance is coming along for the
ride. When I show people the net rate of
return of 10%, that's with the cost of the insurance already taken out.
That is net. And so, why would I ever own a Roth when it only has 2 benefits? You
accumulate your money tax-free, you can take it out tax-free. Heavens, I can have
those 2 benefits and 4 additional benefits. What are they? Well, I can put in
large sums, I can put in nothing. I can make up for years that I didn't
put in the maximum. I can access money at any time without any penalties for any
reason I want. I can use indexing and protect myself so when the market goes
down, I don't lose. And when I ultimately die, it blossoms in value and transfers
tax-free. So, why would you want a Roth when you can have all of those benefits?
If you want to learn how this works, this is why I wrote my 11th book called The
Laser Fund. If you go to laserfund.com, I will buy the book for you. I
will give you the book for free. You pay $5.95 shipping and handling.
And I'll send out this 3-hundred page book which actually has 14 chapters
of charts and graphs and explanations. This side has 12 chapters with 62 actual
clients stories. So, it's for the right brain the left brain person and you will
be empowered to see how this can benefit you. So the laserfund.com. I would love
for you to gain deep understanding on how you can diversify and create the
foundation for a tax-free retirement.