How can an insurance company earning 5% let's say on their investments afford to pay you
8% on your IUL policy and then allow you to take out 10% a year 10 payouts
without depleting your principal. So, by the end of this video episode, you will understand
how it's possible for a company or for you to generate tax-free income annual payouts let's
say during retirement of $100,000 a year out of a million dollar nest
egg cash value in an IUL policy as long as you live even if you live to be a hundred and twenty.
So, I'm Doug Andrew and I've been teaching educational seminars.
I've had my own radio show. I've written 12 books so far in my career
and I've been helping people optimize assets and minimize taxes now for north of 48 years.
If you've watched very many of my educational videos or read any of my books. I'm very passionate
about asset optimization and tax minimization and empowering what I call your authentic wealth. When
people talk about their money that's just one of a three-legged stool one of three dimensions.
But it's the financial dimension and so this particular episode is addressing a question that
I usually pose to my audiences at the beginning of a four-hour seminar or a six-hour retire by
design event or even a two-day clarity retreat and I have done this thousands of times. Because
I'm teaching them about one of my favorite vehicles max funded IUL index universal life and
why it's one of my favorite instruments for all kinds of financial goals. I call it the financial
swiss army knife, the dream solution. Whether you're saving money for retirement, college funding,
for your kids and grandkids, or working capital for your business, or real estate management.
Maybe an emergency fund. Maybe estate planning. Maybe your school teacher retiring. You want to
maximize the amount of pension benefits that you leave behind if you happen to die or whatever.
It could be a general tax reduction strategic rollouts of the IRAs and 401ks whatever.
When you structure an IUL policy it is the dream solution, why? Because when you do it
correctly and you fund it properly it allows you to accumulate your money totally tax-free
then you can access your money totally tax-free anytime without triggering tax if you do it the
smart way and at the end of the day when you finally die. Whether you die in an accident
tomorrow or you die when you're 120 years old whatever you leave behind blossoms. It increases
in value and transfers income-tax-free. Now, nothing else that I'm aware of does that in the internal
revenue code. Watch the episodes that explain that if you don't understand it's section 72E 7702
and 101A. That allows you to accumulate access and transfer money tax-free in a max funded insurance
policy. Now, I use indexed universal life because that allows me to participate when the market
goes up and not lose when the market goes down. Now, you also have to comply with three tax citations
they're called TEFRA, DEFRA, and TAMRA and if you adhere to those tax citations
you are allowed to accumulate the money tax-free but most importantly, you can access your money the
smart way and generate tax-free income. So, let's come back to this question that I would pose to my
audiences at the beginning of a six-hour retire by design event. They're coming to learn how to
prepare to retire and maybe get their money out of those IRAs and 401ks and maybe sell some of their
real estate and they don't know where to put the money and they don't want to be a landlord anymore
whatever. They're wanting to optimize their assets reposition, underperforming non-performing assets,
convert to tax-free, always outpace inflation, and be immune from market volatility. That's why people
set up IUL policies which is very smart and so at the beginning, I'll usually pose the question. Very
few people will actually ask this question even though there's been a handful. I'll say, by the end
of this event you will understand how an insurance company earning let's say four or five percent
on their investments, that's called their general account portfolio. If that's what the insurance
company is earning you will understand how they can afford to pay you let's say
eight percent or even higher some gears even though they're only earning five. They go, really?
Yes, because a lot of advisors don't understand this but one step further you'll also understand
how they can afford to give you a 10% payout. Let's say you have a million dollars in your IUL policy.
They will be able to give you $100,000 a year in income tax-free
that's a 10% payout without depleting your principal of a million even if you're
only earning or being credited 8% and people go, "What? how can they afford to give you 10%
in a payout of 100,000 if you're only earning 8%, 80,000 and I go
you'll know the answer at the end of this event. So, I'm gonna cut to the chase and give you a
sneak preview, okay. Simply put an insurance company they manage billions and some even
trillions of dollars. One company I have my money and manages three and a half trillion. That's as
much money as the IRS collects in income taxes in an entire year one insurance company. So, they take
these billions or trillions of dollars and they invested in very conservative liquid investments.
This is called their general account portfolio and so they'll put a lot of it into triple-A and
double A bonds because they can sell those bonds and they're very liquid. They might loan money
on skyscrapers and shopping malls but they only loan 50 percent loan to value. They don't loan
80 percent of the value of the skyscraper like banks do. Because if they ever have to foreclose
they want to come out and make sure they get their money back and so, they only loan 50-60%
loan to value. So, if they ever have to foreclose on a shopping center they come out smelling like
a rose. This is why many banks and credit unions will take your money that you put in their bank
and they'll take 30 to 40 percent of their tier one assets for liquidity and safety and they'll
put it into insurance companies and they increase the safety by maybe five or six notches higher.
Triple-A instead of triple B which is what a lot of banks are rated and they increase the rate of
return from where the bank pays you 1% they turn around and make 4% by putting
it into an insurance company. How much more is four than one? Don't say it's 3%
more no, it's four times, it's 400 percent. On every million they only have to pay a 10,000 in interest
to their depositors at the bank. They turn around and make 40,000 four times 400%
more than they're paying you. If you don't understand this you can bypass the middleman.
So, that's called the general account portfolio. So, the insurance company
let's say back in 1980 to 1990 on their general account portfolio mortgage rates were like 18-21%.
CDS that banks were paying 10. On my policies I never earned less than 11% and three quarters.
I earned as high as 15 and a half and that was their general account portfolio rate. But in the 1990s,
interest rate started coming down and so index universal life was introduced in 1997 so you could
still outpace inflation. So, if you've watched some episodes what you're doing when you link
to an index. Any year that you feel bullish about America, you tell the insurance company
oh you're earning 4%. If you think we're headed for a recession you can just
settle for the 4%. Now, they may take one of those percentage points for their profits
and only give you 3% which is still 3x what banks are paying. That's called
the general account portfolio rate, the fixed rate. anytime you want to link to an index you say,
why don't you take that 4% interest on my million in this example that'd be 40,000.
Now, I'm using a million-dollar example, you can extrapolate. It doesn't
matter if you have 10,000, 100,000, 10 million in your policy.
So, in this example on a million you're saying, "You don't need to pay me that 4%.
You can take that 4% interest on my million 40,000 and do whatever you need to do with
it to have the wherewithal to pay me whatever the index does". So, they buy upside options in the
index or indices that I chose. There's episodes that explain this and so if it's the S&P 500
or the Dow Jones of the Russell 2000 I can diversify they buy upside options.Tthen if the s
p goes up eight they can pay me 8% or 80,000. If it goes up twelve they pay me
120,000 on my million. They may have to cap me but the floor is
if the market crashes I don't lose one dime of my million. It's still safe in the insurance company.
I simply didn't earn anything but I didn't lose. So, that's indexing. So, zero becomes your
hero during the down years when other people might lose 30 or 40 percent. So far so good?
So, based on averages based on actual historical performance an insurance company earning four when
you link to an index if you did it year in and year out and you didn't even switch back and forth
you would probably earn 7 to 8 percent. So, right there an insurance company can afford to
pay you 8% even though they're only earning 4% on their general account
portfolio. Because you're saying you don't have tokeep the 4% that you're earning for me
you can use that to buy upside options. They go, you mean we only have to pay you if the market goes up?
We don't owe you a dime if the market goes down? We can just buy options and they expire worthless?
Yeah, why would you do that? Because 70% of the time the market will be up.
When indexed universal life came out my average rate of return went from about 8%
up to 9.6% and even 10.07, 11.17 percent by doing that but let's just be
conservative. The insurance companies earning 4 but they can afford to pay you 8
because you're allowing them to take that interest that four percent and by upside options and that
gives them the wherewithal to pay you 8 even though they're only earning 4 because
you let them buy upside options and the years the market crashes the options expire
worthless but you will average probably 2 or 3 percent higher interest by doing that.
So, far so good? So, now you know the answer how can an insurance company earning 4 afford to pay you 8.
Now, before I give you the last little tidbit. If this is intriguing you, be sure and share
post a comment click like but stay with me here to the end, I'm going to blow you away. So, how can
the insurance company afford to allow you to take out 10 percent? So, you have a million dollars and
you're retiring and you want to retire and if you're earning 8%. Yeah, you could pull
out 80,000 a year without depleting your million. But most savvy people they pull out 10 percent
the smart way. If you watch other episodes the smart way to access money is with indexed loans.
So, instead of just you know taking out your 8% interest. You borrow money from your policy
and you can actually borrow let's say a 100,000 a year out of your policy
and even if the policy is only earning 8. If you borrow 100,000 the insurance
company may charge you 4% you don't have to write out a check for that they just
deduct it out of whatever the index is earning. So, if they charge you 4% but you're
earning 8, how much more is 8 than 4? Don't say 4 it's 400,000 more. So,
by borrowing money out 100,000 a year. You're not only able to earn 8% on a
million and then a million one hundred million two hundred because you keep earning interest
as it compounds. They're only charging you for that spread in that example is 4% spread.
If you only averaged a two-point spread between what they're charging you to borrow the equipment
of your interest and what they're crediting you that allows you to take out 10% a hundred
thousand a year without depleting principle. If you're going what I just explained and you can
learn by reading my book and meeting with an advisor and see an actual illustration
we have clients that for every million dollars in their IUL policies. They can turn on income let's
say of 100,000 a year a 10% payout is what it's called and year after year
their million dollars stays stable and even grows. We have one client that has 8 million they've been
pulling out 10 percent and the 8 million is growing even though they're pulling out 10%.
Because they've been pulling out money at 4% and they keep earning 8 and 12 and 16%. But I'm
just trying to be conservative. So, the answer to the question, how can an insurance company that's
only earning 4 or 5 percent afford to pay you 8? Because you're letting them take that
interest on your money and buy upside options and 70 percent of the time you're gonna make
more than that and so you will average out maybe earning seven or eight or nine percent or higher
even though they're only earning 4% on their general account portfolio and then if you
take it out the smart way you borrow at let's say an index rate of four and they keep crediting
you 6, 8, 10, 12, 15, even some years 61%. You can actually pull out 10% a
year and not deplete your million-dollar nest egg even though the insurance company is technically
maybe only averaging 8. In fact, if I say that to most advisors they go that's impossible.
No, it isn't. We can show you thousands of clients portfolios that they are getting 10%
payouts without depleting principle by understanding this. So, don't be left in the dust.
My admonition to you is twofold. Number one, watch episodes here to understand this more thoroughly
share them and if you have not claimed your copy of this bestselling book, the laser fund make sure
you do by going to laserfund.com. Click on the link below you contribute a nominal amount towards the
shipping and handling. I cover the rest of that and I pay for the book. There's options there to
listen and learn watch and learn. But when you're in there, there is a choice to be able to meet
with an IUL specialist over zoom or in person whatever you prefer
and you can see how these strategies apply to your particular set of circumstances. But I would ask
this favor. Before you do that and you read a study and you watch these episodes because
it's going to be valuable time to have the highest and best use of your time. Here's what I recommend,
take time to learn know the answers to some of the basics TEFRA, DEFRA, TAMRA. Why is it tax-free?
What's indexing and so forth. Then when you talk to an advisor, if they're qualified and I can
point you to the ones who understand this who have passed proficiency exams with 150 questions, okay.
The conversation will start up here with your numbers instead of starting out clear down here
with you asking questions like, so why is this tax-free? You ought to know the answer to
that and \I'm passionate about educating you. But if you get educated before you meet with an
IUL specialist now you'll see how it applies to your set of circumstances. We can talk about your
numbers right off the bat instead of two or three appointments down the road. Does that make sense?
So, here is to your brighter future. I want to see you on the other side of success.