- Put your money safely tucked in a house of bricks.
In this educational episode,
I'm going to address how to protect your money
from market downturns or market crashes.
Get ready.
You're gonna understand why money has to have a home
and where the best house for your serious cash should be.
(upbeat music)
So I'm Doug Andrew and I've been a financial strategist
and retirement planning specialist
now for nearly five decades,
helping thousands of people optimize assets
and minimize taxes and get ready for long-term goals,
such as retirement
so that they will not outlive their money.
Well, one of the concepts that I love to teach
is how to protect your serious cash.
The money that your socket away for long-term goals
like retirement from market downturns
whether it's the stock market or the real estate market.
And I remember years ago when I was preparing
to release my third book, which became a New York Times
and Wall Street Journal number one bestseller
the second week it was released in 2007.
We were so grateful for the receptivity of that book.
It was a million dollar advance from my publisher,
Time Warner.
And I remember as I was working on the book
I happened to be down in San Francisco working on it.
And as I was retiring that night
I was sort of thinking, "Golly, I've gotta come up
with a metaphor to explain indexing
and why IUL, index universal life
allows you to accumulate access and transfer money tax free,
but it's immune from market downturns.
You may not make much when the market goes down,
but you don't lose.
And so I went to sleep, but this was in my mind
and all of a sudden I had this dream.
And I dreamt about the story of the three little pigs.
And you've heard that story.
The three little pigs and one builds his house out of straw
and the other one builds his house outta sticks,
and the other one builds his house outta bricks.
And of course, the little pigs that built their houses
out of straw and sticks,
their houses get blown down by who?
The big bad wolf.
So I'm gonna use this metaphor,
and they all move over to the house of bricks
once they learn their lesson the hard way.
So I'm having this dream and I'm going, "Oh my heavens,
IUL is like a house of bricks."
And when you have your money in the real estate market
that's like the house of sticks
and money in the stock market is like the house of straw.
I don't know how I dreamed this, but I was dreaming this.
And so I woke up and I realized if I don't write this down,
I will forget it.
'Cause sometimes I would have dreams
and I'm thinking, I'll remember this.
And the next morning I could not remember the dream
for the life of me.
So I actually reached over and grabbed my cell phone
and pushed record and I recorded my dream.
Otherwise I would not be able to go back to sleep.
'Cause I try to remember not to forget.
And so I got up in the morning
I went back over to my computer.
All of a sudden I go, wait a minute.
I had a dream last night.
I recorded it.
Sure enough, I pulled out my smartphone
and I played the dream that I dictated.
And it was this metaphor.
And so that was the beginning.
And ever since then I have used this example
to explain this concept.
So money has to have a home.
Now a lot of Americans will choose one, two, or three
of these places to put their money.
So we have some people
who will put their money into real estate.
Others will put it into the stock market.
In fact, 91% of Americans choose to put money
into tax deferred IRAs or 401k invested in the stock market
because most asset managers they're trained to say,
"Oh, the market, if it crashes
the market always comes back.
Just hang in there."
Well, this is like putting your money in a house of straw
because the big bad wolf, now, who's the big bad wolf?
Some people say the IRS, no.
I can see why they would think that.
But the big bad wolf would be recessions,
crashes, pandemics, earthquakes, hurricanes.
Things that happen out there that we have no control over
that cause a domino effect.
And the stock market reacts, Wall Street does.
And the stock market drops 5, 10, 15, 20, 30%
and then panic ensues and people lose 40%, like twice,
in the decade from 2000 to 2010.
2001 to 2003 due to the 9/11 terrorist attacks,
most people lost 40%.
It took four years until 2007 to get back what they lost.
In 2008 they lost 40% again due to that mortgage meltdown.
That was the big bad wolf, the mortgage meltdown.
So this is gonna keep happening folks.
Money has to have a home and your home for your cash
should not be in the house of straw in the stock market
during your golden years.
Wall Street was not designed to create predictable income.
Now, some people think that real estate is the cat's meow
until the real estate market crashes.
It doesn't happen as fast maybe as the stock market.
But in 2008, 2009, a lot of people who owned real estate,
they saw the value of their homes,
their apartment complexes,
their commercial real estate drop in value
when supply became greater than the demand, 30, 40%.
My home went down in value about 35% in one single year.
Now, I didn't lose a dime because my money,
my equity is not in my home.
I keep all of my cash safely tucked
over here in a house of bricks.
And so the point I like to make
with this metaphor is I want to participate
when the stock market is doing well,
but I don't want my money actually trapped
in that house of straw.
People say, "Well, how can you participate
when the market goes up without your money in the market?"
It's called indexing.
My money is safely tucked over here in a house of bricks
in a max-funded indexed insurance contract.
When you look at these, money market, CDs, annuities,
they're okay.
They pass the safety test,
but they don't pass the rate of return test.
Meaning you don't earn a rate of return
equal to or greater than the inflation rate at the time
or the cost of funds.
And so the only one that really passed the liquidity safety
and rate of return test were flying colors
and it's totally tax free
is a maximum-funded insurance contract.
And so if it's structured correctly and funded properly
it is what I call a LASER Fund.
And I'll give you a copy of this book
at the end of this episode if you stay with me.
So a max-funded indexed universal life insurance contract
is where I put my serious cash
safely tucked in a house of bricks
because the multi-trillion dollar insurance industry
is not only the backbone of America,
but the backbone of the world.
This is where banks and credit unions put 30 to 40%
of their tier one assets for liquidity and safety.
You look at the Great Depression
and when the stock market crashed and real estate,
some real estate dropped 80% in the Great Depression.
The multi-trillion dollar insurance industry
came through with flying colors.
They came through crediting two and a half,
three and a half percent.
Not one single legal reserve insurance company
went under in the Great Depression.
Banks closed.
40% never opened their doors again.
But the stock market, horrible.
And same thing with real estate,
some real estate dropped 80%.
Well what about 2008?
In 2008, 400 banks went under.
900 more were on the brink of going under on the watch list.
And that's when the federal government
asked the five major banks in America
to disclose where they had their tier one assets
for liquidity and safety.
Guess where they had 30 to 40% of their tier one assets?
It wasn't in the stock market.
It wasn't in real estate.
It was in insurance companies.
And banks were paying 1% interest
on the average to depositors
and they were earning 5% tax free and insurance contracts.
Now how much more is five than one.
That it's not four, its five times.
They pay 10,000 in interest on every million they borrow
of OPM, other people's money,
and they earn over insurance companies 50,000
on every million.
50,000 is 500% more than 10,000.
And so they increase the safety
by usually six notches higher.
Most of these insurance companies are rated triple A.
A lot of banks are only rated triple B.
So you don't achieve liquidity, safety and predictable rates
of return tax free when you have your money
in the stock market.
So what I do is I keep my money safely tucked over here.
Now by using indexing
the insurance company credits me if I link to an index.
So if you don't understand indexing,
search different educational videos on this channel.
But that's where if I have a million dollars of money
over here in my index universal life
anytime I feel bearish about America,
I can just settle for the general account portfolio,
maybe 4 or 5%.
They'll pay me 40 or 50,000 that year is tax free.
But any year that I feel bearish about America
that I think the stock market's gonna do well
I don't wanna chance it.
So what I do is I tell the insurance company
keep my million dollars safe over here
in the house of bricks, but take the interest on my million
the 40 or 50,000, 4 or 5%.
And that funds an options budget.
And in the index that they offer that I choose,
let's say the S&P 500, meaning if the S&P,
if the stock market goes up,
the 50,000 of options allows the insurance company
to credit me 12% or 16% tax free.
I get to earn 120,000, 160,000 tax free,
maybe up to a cap.
But the trade off is, if I guess wrong
and the big bad wolf blows down the stock market,
I don't lose.
I still have the million.
I relinquished the interest on my million,
but my million is still safely tucked
over here in a house of bricks.
But I get to participate when the market goes up,
but not lose when the market goes down
when the big bad wolf blows the stock market down.
Does that make sense?
What about real estate?
I keep all of my real estate equity.
I've never paid a down payment
for any piece of real estate I've acquired.
I've satisfied down payments.
I don't send extra principle payments against the mortgage.
I usually refinance my real estate holdings
every three or four, five years.
And I keep all of my money over here safely tucked
in a house of bricks where it's liquid, safe,
earning predictable rates of return
at average returns of let's say 9% tax free.
Whereas I borrow money on real estate
at four and half percent tax deductible.
In a 33% bracket, that's only costing me 3%.
I'm making nine, it costs me three.
I'm making 90,000 on every million on my real estate
and I'm only paying 30,000.
That's three times or 300% more.
I'm my own banker.
But see, when the real estate market goes down,
I don't lose.
When my house went down in value in 2008 to 2009,
I didn't lose anything.
My money was safely tucked over here
and I was earning at least double the net cost
of the mortgage.
I was in control because my money wasn't in the property.
It would've taken four or five years
for my house to come back up to what it was worth in 2007.
I didn't lose a dime because my money is safely tucked
in a house of bricks.
That is a max-funded index universal life.
So I get to participate when the real estate market goes up.
I get to participate when the stock market goes up.
But when those two go down,
when the big bad wolf blows them down,
I can sleep at night when the wind blows
because my money is not in the stock market
or the real estate market directly.
Does that make sense?
So if you wanna learn more
about how to safely accumulate access
and transfer money tax free by utilizing one of these,
I want you to read and study this book.
It's called The LASER Fund.
It retails for 20 bucks on Amazon.
I'll pay for the book.
So first of all, let me explain.
It's two books in one.
This side is about 200 pages, 14 chapters,
with all the charts and graphs
and explanations of how to accumulate access
and transfer money tax free in this house of bricks.
But if you learn more by stories and examples
you can flip it over to this side
and this is for the right brain learner.
This is containing 62 stories
of how a max-funded IUL helps you achieve
all kinds of financial goals.
It's the dream solution.
Not only just for retirement, but for all kinds of goals.
College funding, working capital for your business,
or your real estate management, whatever you're doing.
Here's how you claim your free copy.
You simply go to laser fund, L-A-S-E-R fund.com
or click on the link below.
You contribute a nominal amount
towards the shipping and handling.
Have a little bit of skin in the game.
I'll cover the rest of that cost
and I will pay for the book.
I'll fire out a hard copy of this 300-page book to you.
And while you're in there claiming your free copy
check out if you wanna listen and learn or watch and learn.
There's also educational webinars that are free.
We teach on a weekly basis.
You can even schedule an appointment
with an IUL specialist to see some illustrations
on how a property structured LASER Fund
can help you safely tuck your money in a house of bricks,
so your immune from the big bad wolf
when it blows down the stock market
or the real estate market.
(upbeat music)