- An IUL can pay out double, triple,
even quadruple what IRAs and 401ks do,
especially when invested in the market.
I'm talking about IRAs and 401ks.
In this episode, I'm going to address the question,
how an IUL death benefit can be used
for tax-free retirement income.
(upbeat music)
So I'm Doug Andrew.
I've been a retirement planning specialist now
for just about five decades,
48 and a half years to be precise,
helping thousands of people optimize their assets,
minimize taxes,
and empower what I call their authentic wealth.
And in doing so, helping people prepare
for a comfortable retirement,
I like to eliminate the dangers of taxes, inflation,
and market volatility, which are the three big dangers
that cause most retirees to outlive their money.
Well, sometimes there's other unexpected events that happen.
So my favorite financial instrument or vehicle
to accumulate money tax-free,
allow you to take tax-free income
that will last as long as you do,
and be immune from market volatility and inflation,
is a max-funded Indexed Universal Life policy
structured correctly, and funded properly
if it meets the LASER test.
Now, LASER is an acronym that stands for liquidity,
safety, rate of return, and tax benefits, in that order.
And so in my most recent bestselling book,
we have four different measurements
for liquidity, safety, rate of return, and tax benefits,
where most people save their money,
it fails that LASER test.
On a scale of one to 10 on liquidity,
most people's investments only score three or four at best,
like an IRA of 401k.
If you touch it before age 59 and a half,
there's a 10% penalty and it triggers tax.
No, that doesn't pass the liquidity test.
Safety, if you have your money
in mutual funds or in the market, you can lose 40%
which many people have experienced many times
in the last 20 years, as of the recording of this episode.
It doesn't pass the safety of test.
Rate of return.
Do you know that most people who have their money
in the market are only averaging
about three and a half percent according to studies DALBAR.
And yet the advisor say,
"Oh no, hang in there, you'll earn 12."
Well, people aren't earning 12.
Even if you bought and held, they only earn maybe nine,
but they don't buy and hold.
When the market starts to go down,
they get nervous and they finally sell low.
And then they wait, wait, wait, and buy high.
So the average return of people who have their money
in the market is only three and a half percent.
That's pretty pathetic.
My average return on IUL has been 9.6% tax-free, okay?
So it's my favorite vehicle to be able to do this.
Now, when you watch other episodes,
you'll understand that what you're doing
is you're using a life insurance policy,
Indexed Universal Life, primarily for living benefits.
Meaning the death benefit is secondary.
You're trying to take the least amount of insurance
that the IRS will let you get away with, so to speak.
And you're trying to put in the most premium the IRS allows,
as fast as they allow under three tax laws
or citations called TEFRA, DEFRA and TAMRA.
You can search my channel to learn more about those.
So this allows you to accumulate money tax-free
under Section 72E of the Internal Revenue Code
which has been around in one form or another for 108 years.
You can access your money.
I don't care if you retire at age 35, 45,
you don't have to wait till you're 59 and a half,
and you can turn on tax-free income from age 60,
let's say, if you live to be 120, tax-free income,
that will last as long as you do.
And then when you ultimately die,
whatever's left behind blossoms,
increases in value and transfers tax-free.
I'm gonna be 70 here in a couple of months.
If I died in an accident tomorrow,
every million that I might have in a portfolio
of LASER funds would blossom to about two and a half million
and transfer tax-free to my wife, my kids,
my grandkids a church or charity, whoever,
within three weeks after I die.
There's not an IRA, 401k or a Roth that will do that.
And people always say, "Hmm, how much does that cost?"
Well, nothing's free.
It doesn't cost me anything, though.
It's being paid for with a minuscule portion of interest
that would otherwise go out the window in unnecessary tax.
I only have to earn 11% to net 10.
Most people have to earn 15% in an IRA or 401k
to net 10 after tax.
You subtract the fees, they have to earn 15 to net nine.
Oh my heavens, I can earn 11 and net 10.
And that is one percentage point that is not taxes.
That's the cost of the insurance that actually
makes my account double or triple when I die, okay?
So it's money that would otherwise go out the window
in unnecessary tax.
The point is this.
If you happen to die sooner than later...
I've had many clients, my own brother included,
that I set up IUL policies for living benefits
so that he could take tax-free income,
and he was killed in a one car rollover clear back in 1999.
Now I was able to take the death benefit
of several hundred thousand dollars and turn that
into tax-free income
for my sister-in-law, his sweet wife,
and their four children, that helped them continue
with their college education and living life
in dignity for the next 20 years
because of the death benefit.
So whenever I have a client where they experience death,
that money is tax-free.
Life insurance proceeds upon death are tax free.
They come to me and I say, "If I were you,"
I'm talking a lot of times to widows or widowers,
"I would recommend you keep it tax-free."
And they go, "How?"
"Because I would put it right back
into a max-funded Indexed Universal Life Insurance policy
on you or on your kids or grandkids, but you own it."
And so I've had many people
that got a million dollar death benefit,
and they were able to take that million dollars
and put it back into an insurance policy.
And that million dollars generates 80
to a hundred thousand a year of tax-free income
the rest of their life without depleting the million.
Unfortunately, a lot of people come out of the woodwork
and say, "Oh, take half of that million
and pay off your $500,000 mortgage."
Why?
Because not only did you just, sort of, kill one
of your tax deductions, but you wouldn't believe
how many widows, two or three years later say,
"Oh, why would I go borrow on the house?"
And they don't have any credit history.
If they would've just kept the mortgage going
by taking some of the interest on that million,
in an IUL policy, making the mortgage payment,
they establish credit without having
to reprove their credit worthy
by qualifying for a new loan.
There's all kinds of reasons why you wanna preserve
that money tax free.
So that's why any proceeds from life insurance
ought to be totally preserved tax-free
to generate tax free income, or just grow tax-free.
So far, so good.
So let me just say this.
There's five parties to a life insurance policy or contract.
Okay, there's the insured,
that's the one that has the insurance on them.
There's the owner of the insurance policy,
which is usually the insured, but doesn't have to be.
What?
Yeah, see, I own IUL policies on my wife, on my kids.
My kids own them on me.
I've owned them on my mother-in-law, father-in-law, my dad.
I couldn't own them on my mother 'cause she was uninsurable.
I own policies on them, why?
Do the math, my kids own them on me
if I have insurance capacity, why?
Because they can take out a million dollar
life insurance policy on me.
Look at what it does, not what it is.
They can put in 600 bucks a month, a thousand a month.
And anytime I die, 'cause I'm not immortal,
they will get a million bucks tax-free when I die.
That will generate a hundred thousand a year
of tax-free income.
You show me any IRA or 401k
that they could put in 800 or a thousand dollars a month,
and end up with a million bucks.
It would take 30, 35 years to grow to that net after tax.
If I die anytime they get a million bucks tax-free.
This is far superior to my kids putting that money
in an IRA or 401k.
They own life insurance on me.
The owner gets all the tax-free benefits.
That's why banks and credit unions own BOLI,
bank-owned life insurance.
They own insurance policies
on their stockholders, on their board members
because the owner gets all the tax-free benefits, okay?
So we have the insured, we have the owner,
we have the premium payer,
that's the person who's putting the money in.
That's usually the owner, but it doesn't have to be.
It could be a family trust, whatever, okay?
You have the beneficiary, that's the one
who gets the tax-free proceeds if you die, okay?
You have to suffer an economic loss
to be named a beneficiary.
You have to have a reason and justification
to be a beneficiary at the time the policy is issued,
but you can change the beneficiary after it's issued
to a church or a charity if you want.
You can donate your life to be insured
to a church or charity, the Red Cross, the Boy Scouts, okay?
Now the last party is the insurance company, the insurer.
So when you really think about what I just said,
you can own policies on other people.
I own them on my spouse, my kids, my kids own them on me.
I own them on my in-laws, my mom, my dad,
because of what it does.
It's the owner of the contract.
And so I've had many clients...
I just had a client here a few weeks ago
and the grandson, he was named as the beneficiary
of his grandmother's policy.
He took that lump sum of several hundred thousand dollars
and immediately wanted to know what to do with it.
I said, put it back into a policy on you, which he did.
And that is going to grow tax-free
and create tax-free income far better than an IRA or 401k.
That's what I'm talking about.
You can use this for tax-free retirement income
and every million dollars that you have
can generate 80, 90, a hundred thousand a year
of tax free income for as long as you live.
That is why I own them on other people,
and my family members own them on me.
Look at what it does, not what it is.
Sometimes people do not understand.
Wow, wait a minute.
This grows tax-free.
I can turn on tax-free income,
and when the person dies, it blossoms and transfers.
Yeah, check it out.
Nothing else in the Internal Revenue Code does that,
that I'm aware of.
So this is why I wrote the book, The LASER Fund,
my 11th book, How to Diversify and Create the Foundation
for Taxed-Free Retirement.
If you wanna learn how to do this correctly,
and even use this for death benefit,
I want to gift you a copy of this book.
It retails for 20 bucks.
I'm not trying to sell you a book, I'll gift it to you.
To claim your free copy, go to the laserfund.com,
just 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 will pay for the book.
I'll fire out a hard copy to you
and then there's options there.
If you would rather listen and learn or watch and learn,
there's even a 19 hour masterclass.
There's also webinars.
I can also point you to an advisor
that will help you implement one of these correctly.
But this is about you and your brighter future.
This has all kinds of charts and graphs and explanations.
You flip it over and there's 62 actual client stories
of how to use the LASER fund for all kinds of goals,
not just retirement.
This knocks the socks off of IRAs and 401ks,
but 529 college plans, your business,
your real estate management.
You can use it like a financial Swiss army knife.
It has several different functions.
It's the dream solution, and I want you to learn why
and how for your brighter future.
(upbeat music)