- How to become totally self insured in 20 years or less.
In this video episode, I'm going to explain
why a Max-Funded tax advantage
Indexed Universal Life Insurance policy
is the superior way to buy term and invest the difference.
You are gonna get some huge epiphanies.
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So I'm Doug Andrew, I've been a financial strategist,
and retirement planning specialist now
for North of 48 years, helping many many Americans
optimize their assets and minimize taxes.
If you've watched very many of these episodes
on my Three Dimensional Wealth channel,
you will quickly realize
that one of my favorite financial vehicles
is a Max-Funded Indexed Universal Life Insurance policy
that allows a person to accumulate their money
totally income tax free,
then be able to access that money income tax free,
anytime, not just waiting until retirement,
or after age 59 1/2.
Many business owners use these
for working capital for their business,
but at the end of the day when you finally pass away,
Max-Funded Index Universal Life still blossoms,
increases in value in transfers income tax free.
There is nothing else that does that
in the internal revenue code that I'm aware of,
and I have taught many many CPAs and tax attorneys
advanced continuing education about these.
They are found in the internal revenue code
section 72E, 7702 and 101A,
and they sit there with their mouths open
and I've never had a single CPA or tax attorney,
show me anywhere else in the internal revenue code
an instrument that does that.
So when you structure an IUL policy correctly
and fund it properly, it qualifies to be called
what I call a LASER fund.
LASER is an acronym that I use that stands for
Liquid Asset Safely Earning Returns.
I want you to stay with me to the end of this episode.
I wanna gift you a copy of my 11th book
called "The Laser Fund."
It's a 300 page book that I will gift you absolutely free.
So stay with me.
So let's talk about why this is a superior way
to buy term insurance and invest the difference.
Let's go back to 1974 when I first started.
Back in 1974, I'm an old geezer.
I got my series one securities license
and also my insurance license as a means to sell insurance
and invest people's money into mutual funds,
buy term and invest the difference,
to get myself through a college and law school.
And I fell in love with doing this,
and so I talked to many estate planning attorneys
and they said golly, if we had to do it over again,
we'd do what you're doing Doug.
And so I loved it so much, I stayed with it,
and I've never regretted it.
So in 1974, I was one of the country's biggest proponents
of buy term insurance and invest the difference.
Because I did a lot of studies
of how this would knock the socks off of
a whole life policy if you did invest the difference.
The biggest problem,
is that a lot of people would buy term insurance
and then spend the difference.
They would not invest the difference.
And so a whole life insurance agents would say,
well at least whole life forces you to invest the difference
even though the rate of return was only
two and a half, three, three and a half percent off times,
but it was tax free.
But I knew that I could probably do better
if I invested the difference into mutual funds
especially if they could earn more like 9, 10, 11, or 12%
even after tax, I outperformed the whole life.
So I went out and frankly from 1974 until 1980,
I ended up being responsible
for over 3000 clients in 13 Western states.
And then what happened in 1980, a defining moment.
This is when EF Hutton, who was not an insurance company,
they were a brokerage firm,
and they said wait a minute, we're trying to average 12%
which sometimes is hard to do with money invested
in a volatile stock market.
But even if we could average 12% EF Hutton said hey,
let's say that we accumulate a million dollars
in the stock market for somebody,
and if we could average 12% during retirement
which we are nervous about
because sometimes the market may drop 20, 30, 40%.
People want predictable income
and Wall Street was never designed
to actually sell your mutual fund shares.
When you ask Wall Street when's the best time
to sell our shares or our stocks, they will say never.
And so EF Hutton said, golly for retirees,
we need to have something more safe and predictable.
What about the multi-trillion dollar insurance industry?
It is not only the backbone of America
but the backbone of the world.
They're some of the best money managers in the world,
and so they came up with the idea
of using a Max-Funded Insurance policy
where you take the least amount of life insurance,
that the IRS will let you get away with,
and you put in the most money
or the most premium the IRS allows.
It was like the reverse of what most people would do.
When you buy term and invest the difference,
you want the amount of life insurance that you want
for the cheapest premium.
They sort of flipped that on its end
and they said hey, let's take the least amount of insurance
we can get away with and put in the most premium,
and this thing will turn into a cash cow.
Let's take a hundred percent of the money,
and take the least amount of insurance.
Well, I saw this immediately and realized wow,
this is buy term invest the difference
under a tax free umbrella.
And back then interest rates were high.
I never got credited less than 11 and three quarters percent
from 1980 to 1990,
I got credited as high as 50 and a half percent.
Let's just take it down to 11.
But I had many many clients back in 1980, 81, 82.
In fact, those 3000 clients I got out of the stock market
were never happier,
'cause they didn't lose money again due to market downturns.
And so they would put in let's say $500,000.
Now you could put in 50,000, 10,000, 5 million,
but let's use 500,000 as an example.
I had clients put in $500,000 into a universal life policy,
in 1980 they were earning let's round it down to 11,
11 and they were netting 10.
Yep at the cost of insurance was only 1% of the 11%,
one of those percentage points.
They were netting cash on cash on their half a million 10%.
And so they were pulling out 50,000 a year.
Many of them wanted income immediately and was tax free.
They put in 500,000, they were pulling out
50,000 a year of tax free income.
In fact they've been doing it many of them ever since.
So that was the magic behind
taking the least amount of life insurance.
If you were a 60 year old and you wanted to put in 500,000,
the amount of insurance now is about double that,
about a million.
And as you put in the $500,000,
and now you have to spread it out over five years,
but once you have that $500,000 in there,
the net amount at risk is half what it originally was.
See, when you had a million dollar death benefit
and you first started,
every time you put in money a hundred thousand a year
for the first five years,
the amount risk to the insurance company became less
because your cash the premiums you're paying in
the cash value,
now qualifies as part of that million dollars.
So when you have 500,000 in there,
within four years and one day technically,
then the net amount of risk is half of the million,
only 500,000. The insurance company is only charging you
for the net amount at risk.
That half a million many times would double
in seven and a half years,
'cause they were averaging 9.6% like I've averaged
for 42 years.
Your money doubles every seven and a half years.
So 500,000 doubles to a million,
by the 12 and a half year into the policy,
12 and a half years.
And now your cash value equals the original death benefit.
So technically you self-insured.
You were able to accomplish that in this example
in 12 and a half years.
So you're really not having to pay
for any in life insurance,
but Teflon Differ says
if you wanted to continue to grow tax free,
the life insurance death benefit
has to stay five percentage points ahead of it.
So if you died in 12 and a half years,
the million dollar life insurance policy
will pay out 1,050,000.
If the million doubles to 2 million
in another seven and a half years,
the death benefit would be 2.1 million.
But the insurance company's only charging you
for the remaining hundred thousand.
This is how the cost of the insurance goes down
as you get older and I have an episode that explains that.
What I'm talking about here is
when we hear proponents like I used to be,
and today you have the Susie Ormans and the Dave Ramseys,
that still talk about buy term invest the difference.
Well that's what IUL is and they don't even realize it.
Indexed Universal Life
is simply buy term invest the difference tax free.
That's is what EF Hutton really came up with.
I saw that immediately.
I'm shocked how many advisors do not understand,
that Maximum-Funded Indexed Universal Life,
is like buy term invest the difference on steroids.
So it simply means this.
I put in the money the premiums,
and they begin to grow tax free
at 9.6% average rate of return,
Your money doubles every seven and a half years.
We've had clients that put in 500,000
or when they got 500,000 in there,
it doubled to a million in seven and a half years.
A million double to 2 million
in another seven and a half years.
So it's worth 2 million in the 15th year,
from when it was 500.
In another seven and a half years it's worth 4 million,
in another seven and a half years.
So in the 30th year, it's now worth 8 million bucks.
We have people that started their insurance policies
35 years ago with 500,000 and it's worth 8 million now.
And they're able to generate 600,000 to 800,000 a year
of tax free income and an eight to a 10% payout
without depleting principle, totally tax free.
We have one couple that's the only income they have.
They don't even need that much.
They say Doug we only need 300,000 of income
'cause we don't even pay any taxes on that.
The IRS knows they're receiving it,
but so the other half a million they're earning an interest
just stays in the policy and keeps growing
to hedge against inflation.
That's the kind of retirement a lot of people want.
But the point is this, they were buying term insurance
because there's term insurance, or a term component,
in whole life, in universal life.
That's basically term insurance in there.
And if you buy term and invest the difference
under a tax free umbrella, that's incredible.
That's all EF Hutton came up with.
Let's buy term and invest the difference,
but let's do it tax free.
And when you do it correctly,
it's like buy term invest the difference on steroids.
So many times I will see advisors
like Dave Ramsey that'll say,
if you buy term and invest the difference,
you can take out a 20 year or a 30 year term,
and then you can sort of be self-insured.
Yeah you'll save enough money
investing the difference in 30 years,
where you can get rid of your life insurance.
Yeah it's interesting how many 60 year olds and 70 year olds
are buying more life insurance than ever at that age
because hello, it protects their money,
it's tax free and so forth.
The average person who takes out
Indexed Universal Life is between ages 55 and age 75.
Did you know that?
Why? It's because they're using it for living benefits.
But if you were to go back and use that idea,
buy term invest the difference,
and in 30 years you'll have the money
to give up the life insurance
and the survivors you leave behind if you happen to die,
will not have that many more years
where they will need income,
so you can get rid of the life insurance.
Well I could become self-insured,
and I don't have to take 30 years with IUL.
I've had many people who have had their cash value
equal or exceed their death benefit
within 12 and a half years, within 15 years,
within 17 and a half years.
By the 20th year, their cash value is far in excess
of the original death benefit.
The insurance is costing 1/20
well it did 20 years earlier,
they have actually accomplished the goal
of giving up or being self-insured 10 years faster
than buy term invest the difference proponents project.
If you wanna learn more about how to do this
there's an entire chapter that talks about it
in this book called "The Laser Fund."
Now, if you go to Amazon, you can pay 20 bucks for this book
but I wanna gift you a copy.
Absolutely free it's 300 pages of information,
but it's actually two books in one.
You can claim your free copy
by simply going to laserfund, L-A-S-E-Rfund.com,
or click on the link below.
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.
This side is about 200 pages,
with all the charts and graphs and explanations.
If you learn more right brain by stories,
you flip it over and read this one.
This is about a hundred pages, 12 chapters,
with 62 actual client stories.
And so I want you to learn,
whether you're left brain or right brain,
and you can do that by going to the website, laserfund.com.
But while you're in there,
there's options there to listen and learn, watch and learn.
You can check out some of the online educational webinars
we do on a regular basis,
and you can even set up an appointment
to talk to an IUL specialist
at no cost or obligation to you,
to see how a LASER fund can be
a buy term invest the difference under a tax free strategy,
far smarter than doing it the way
buy term invest the difference proponents talk about.
This is about you and saving money,
and optimizing your assets and minimizing taxes,
and redirecting otherwise payable tax to causes you support
including paying for your life insurance by redirecting,
a nominal amount of the interest you're earning
for that insurance.
Watch other educational episodes on this channel
to gain further insights.
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