- Is universal life a good idea?
In this educational episode,
I'm going to explain
that in my opinion, nothing else
that I'm aware of in the Internal Revenue Code,
allows you to accumulate access and transfer your money
totally income tax-free.
I've challenged many CPAs and tax attorneys
to show me anything else in the code that does that
and I've yet to have any of them
come up with anything that comes close
to a max-funded universal life.
So get ready, I'm going to explain why.
(cheerful bright music)
So, I'm Doug Andrew.
I've been a financial strategist,
tax minimization specialist
for now nearly five decades.
And my favorite financial instrument
that allows my clients,
and I've helped thousands of people do this,
accumulate their money for long-term goals
totally tax-free, income tax-free,
and then be able to access that money income tax-free.
But at the end of the day,
when they finally die, when they pass away,
anything that is left behind in the account blossoms,
increases in value
and transfers income tax-free.
And that is a max-funded universal life
which was first introduced by E.F. Hutton back in 1980.
And interest rates were high back then.
And so from 1980 until 1990,
I never got credited less
than 11 and 3/4 percent
during that first decade
when universal life was introduced.
I got credited as high as 15 and 1/2 percent.
But then, interest rates
started to come down in the '90s
and they introduced indexed universal life in 1997.
And that is my preferred instrument
so that I can still, in a low interest environment,
earn rates of return
averaging 11 netting 10 on the average.
If you use indexed universal life,
you diversify and you rebalance regularly.
Now this is what a very savvy,
trained financial professional who's a specialist in IUL
can help you accomplish.
If you just sort of fell asleep like "Rip Van Winkle"
in the worst decade since the Great Depression, 2000,
and then woke up in 2010,
and you didn't diversify,
you did not rebalance,
and I'll explain those terms here in just a moment,
you would've earned 7.23%.
Now if you understand Rule of 72 math,
you divide 7.23
into the number 72.
It means your money would've doubled
in 10 years in that decade.
So if you had a million dollars in the year 2000,
in the year 2010, it would've been worth 2 million.
And that's what happened with many people.
That's just using indexed universal life.
That year or that decade rather,
there were five loss years and five gain years.
Most 10-year periods there are seven gain years
compared to three loss years.
Well, if you understand indexed universal life,
your money is not at risk in the market.
It's safely tucked in the insurance company.
So that million dollars sat in the insurance company.
And during that decade,
the general account portfolio rates were about 6%
on the average with most insurance companies.
And they needed about one of those percentage points
for their profit,
and so the net crediting rate was around 5%.
So you can just sit there
and leave your money earning 5% if you want,
but 5 into 72 means it would take 14.4 years
for your money to double.
Well, we were able to double our client's money
in 10 years by using indexing, see?
'Cause you're able to take the average return
to about 2 or 3% higher
than the general account portfolio rate.
Now if you do not understand indexing,
I would strongly recommend
you explore some other educational videos on this channel.
But in a nutshell, it just means
you're not telling the insurance company
to take your million dollars
and invest it out in an index mutual fund.
That's what some agents think, that's wrong.
What you're doing is you're telling the insurance company
take the interest on your million,
in this case 5%,
and that would be 50,000 of interest,
and do whatever they need to do
with that $50,000 of interest
they're earning on your million
to have the wherewithal to pay you,
whatever the index does that you chose.
Now, if we're using the S&P 500,
that means if the S&P went up,
and it went up 8%,
then that 50,000 of options allowed the insurance company
to pay you 80,000 of interest or 8% or 12.
The caps were usually 16%.
So there were some two years in that decade
where we capped out and we got credited $160,000
in one year on that million or 16%.
But when the market crashes or goes down,
the options expire worthless.
You don't lose your million
'cause your million is not in the market,
but the options expired worthless.
And so by falling asleep and waking up 10 years later,
that means five years, those options expired worthless.
You didn't make anything but you didn't lose.
The other five years, you made money
but only two of those years did you cap out.
But your average return, it would've been 7.23%.
Your million would've been worth 2 million
at the end of 10 years.
Do you know that people who had their money
in the S&P in the market,
that million dollars in 2000
went down to 600,000.
It wasn't back to a million again until 2012.
By then, many people with indexed universal life
had two and a half to even three times their money, how?
Well, you can tweak your rate of return by rebalancing.
So just simple rebalancing
is what we did with some of our clients.
In 2001 when the market went down
after the 9/11 terrorist attacks,
we didn't sit there and just settle for zero.
Zero is your hero when the market crashes
'cause you're not losing,
but you don't make anything.
You don't have to sit there at zero
for three consecutive years.
So in 2002 and 2003, we said, you know what?
The market's continuing to go down because of 9/11.
So just move back over and earn the 5%.
Same thing happened after 2007 crash and 2008.
We said just move over and move five.
So instead of having five years of zero,
we only had two years of zero.
The other three years, they earned 5%,
and people were able to average 11.17.
Well, I also teach on this channel how to diversify
and I teach sophisticated IUL agents
how to diversify
so that you could maybe have 40% of your money
in a one-year point-to-point.
40% in a two-year point-to-point
and maybe 20% in a five-year point-to-point, okay?
You diversify or you sometimes are able
to move money over to a one-year point-to-point with no cap.
Now if you don't know what I'm talking about,
search some other videos on this episode
because many of our clients
from March of 2020 to March of 2021,
because of COVID-19,
locked in gains of 61.33%
because we were able to rebalance.
So this is how I have been able to earn an average return
of 11.17 netting 10.07
since that means cash on cash, 10%,
your money doubles every 7.2 years
ever since indexed universal life came out.
But ever since 1980 until today,
I've averaged 9.62.
So if you round that down to 9.6
and divide that number into the Rule of 72,
your money will double every seven and a half years.
So what does that mean?
Well, yeah, we've had people
who maybe started out with $500,000.
They didn't add a dime but that 500,000
doubles every seven and a half years to a million.
A million doubles to two million
in another seven and a half.
Two million doubles to four million
in another seven and a half.
And four million doubles to eight million
at the end of the 30th year.
30 years, a half a million doubled, okay?
And it is now worth eight million.
We have clients with eight million tax-free,
generating 600 to 800,000 a year of tax-free income.
This is incredible.
So is universal life a good idea?
Yep but indexed universal life is even the best idea.
If this is intriguing you,
you need to understand
how it must be structured correctly and funded properly.
So I wanna gift you a copy
of my most recent bestselling book.
It's called "The LASER Fund"
which is actually two books in one.
If you're a left brain learner,
you learn by the charts and the graphs and the numbers,
you read this side which is about 200 pages, 14 chapters.
If you learn more by stories and examples, you flip it over,
and this is about a hundred pages,
12 chapters with 62 actual client stories
of how a property structured IUL contract
can be used as a superior cash accumulation tool
for living benefits
for retirement, college funding,
working capital for business,
real estate management, emergency funds,
you name it, okay?
It's like the dream solution.
If you wanna use both your right brain and left brain,
then read all 300 pages.
But instead of paying $20 on Amazon,
I wanna gift you a copy
so you can claim your free copy
by going to LASERfund, LASERfund.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.
I'll pay for the book and fire out a hard copy to you.
And while you are in there,
if you like to listen and learn or watch and learn,
there's options there for those mediums.
But check out our regular educational webinars that we do.
There's no charge.
And you can even schedule an appointment
with an IUL specialist that I oversee.
So you can see how one of these could be structured
correctly in your particular set of circumstances.
But this is about you and your brighter future.
Explore why it may be a good idea for you.
(lively upbeat music)