How much money do you need to start an IUL policy? What's the minimum or maximum? By the
end of this video episode, you will understand how you can start an IUL policy with as little as $500
a month or you can design one to accommodate hundreds of thousands or even millions of dollars.
So, I'm Doug Andrew, I've been a financial strategist and retirement planning specialist
now for north of 48 years. My favorite financial instrument is a max funded indexed universal life
insurance policy. I have many episodes that will help you understand what that is, how they work,
what indexing is? But in this episode, I'm going to address the question, "Well, how much money
do I need to put into an IUL policy?". These are so flexible. Historically, when they were first
introduced in 1980 by EF Hutton who is credited with being the brain child behind the emergence of
universal life and then later 17 years later in 1997 the emergence of indexed universal life.
They designed it so it could be extremely flexible from one end of the spectrum over to the other end
of the spectrum. So, what do I mean by that? If your goal is to primarily accumulate money for
living benefits which frankly is the goal for most of my clients throughout my lifetime. Most
people did not come to me necessarily wanting or needing life insurance death benefit. Yeah,
that was a secondary objective and maybe the insurance they had wasn't structured correctly
to be able to perform the way they wanted to even for death benefit. But most people would
come to me because they wanted a safe repository in which to put money so they could accumulate it
on a tax-favored basis and if they could access the money tax-free even without having to wait
until they retired to do so they wanted to do it without triggering penalties or taxes. And then
at the end of the day, anything they left behind in that retirement nest egg so to speak would blossom
and transfer income tax-free to their heirs, to their spouse, their kids, or grandkids, in the
form of a tax-free death benefit. But the primary objective was for living benefits. What EF Hutton
realized that if you structured an insurance policy with the least amount of insurance
that the IRS would let you get away with and put in the most money that the IRS would allow as fast
as they allow. It can turn into this tax-free cash cow for living benefits. That if you sock away 500
bucks a month or a lump sum of 100,000 or 500,000 that money will grow
at rates of return averaging probably between 6 to 10 percent historically. I don't know what the
future will hold. But historically, I've actually averaged about 9.62% and so if you understand
rule of 72 math 9.6 average rates of returns will double your money about every seven and a
half years. So, if you put money into an IUL policy you're wanting to get good rates of return that
will double your money let's say every seven and a half years or in some of the worst periods
people have earned 7.23 percent. That was during the great recession 2000 to 2010.
A lot of our clients averaged 7.23 percent. Most 10-year periods you'll have seven up years in the
market compared to three down years. That decade there were five down years. So, a lot of our clients
did not earn anything five of those years but they didn't lose. The other five years they made money
and only two of those years did they cap out. But they averaged 7.23 percent your money will double
about every 10 years when you do that. So, when people say, "Well, golly, is this only for the wealthy?",
no, this is for anybody. You can be in your 20s, 30s, 40s. Most people that come to me when they finally
realize they have painted themselves into a tax corner so to speak. They have money trapped in
IRAs or 401ks. They're way too top-heavy in yet to be taxed IRAs and 401ks. So, they want me to
sort of get them out of that tax trap. So, in that case, I'm working with people that are older. Maybe
between 55 to 75 years old to get the money out of those IRAs and 401ks and get the taxes over and
done with sooner than later and then reposition it into a portfolio of IUL policies to be tax-free.
So, in many of my educational episodes, I will use examples of people sucking away 100,000
a year or 500,000 a year. Yeah, we have people putting in a million a year and more.
No, it's not what you begin with that counts it's what you end up with. But because a lot of savvy
people who understand money when they realize how safe these are and why they are tax-free.
They want to hunker down and play it safe and so they're repositioning assets underperforming or
non-performing assets or they want to get their money out of the volatile market. They want to get
their money out of banks and credit unions paying them one percent and earn more like nine percent
okay and so they're trying to optimize assets. It could be lump sums coming out of IRAs and 401ks
in what we call a strategic rollout not a rollover, a rollout. See, a rollover is like going from the
frying pan into the fire so to speak. You're taking money in your 401ks and rolling them over to IRAs
and making the mistake of deferring till you're 72 years old and then taking RMDs or required minimum
distributions. That's the worst advice I've ever heard for most people in that situation and if you
don't understand why be sure and study my books and watch other episodes on this channel. Now,
if they came to us maybe they're wanting to reposition 200,000 or
500,000. We've had people reposition a million, two million, four million dollars,
out of their IRAs and 401ks over a five-year period and so yeah they have a lot of lump sums. It could
be 500 grand a year, a million a year, and we had a couple do that and now they have 8 million-plus
that's earning 10 payouts and many years they've been earning more than that. But they can take 8
million bucks and pull out 800,000 a year without depleting principle and you'll understand why as
you watch other episodes here. So, yes, you will hear examples of people who have lump sums and
that intimidates some people. Well, I don't have any lump sums of money. Well, that's okay. Well, can you
start just sucking away a monthly amount? Yes, you could set up an IUL policy to suck away 500 bucks
a month, okay, a thousand a month. You could put in you know 8,300 a month. That's a hundred thousand a
year you can do whatever you want. But see, when you meet with an IUL professional they'll determine
what assets that are underperforming. They're not earning good rates of return. You want to increase
the liquidity safety and rate of return and the tax benefits. What assets do you have that you want
to reposition and then if you want to still suck away money monthly into this rather than a 401k.
Yeah, then they accommodate the amount of monthly deposits on top of any lump sums. But what if you
don't have a lump sum? No problem. You can then just set it up to accommodate periodic input unless you
think there's going to be a lump sum from maybe a settlement or an inheritance or you're going to
sell a rental property in a few years. So you can structure your IUL policy to accommodate lump sums
down the road which would be wise for many people. Because if you wait till you have the money in
hand you may not be able to qualify. Whereas you could start getting the TEFRA, DEFRA, TAMRA
tax citations to your advantage by opening one today that will accommodate a lump sum in three or
four or five years. Does that make sense? But let's say you just have monthly. You could set up an IUL
policy to set aside 500 bucks a month, that's 6,000 a year and you do that and they calculate the
minimum amount of insurance required to be able to put in 6,000 a year and they calculate that based
upon the first 11 years if you think you're going to put in at least that much the first
11 years. So, that would be a grand total of $66,000 and that is called your bucket size. So, you can do
monthly amounts no matter what it is. You can have monthly amounts and make room for lump sums.
You can reposition assets. In fact, my wife and I when we had our six children when they were just
tiny sometimes just after they were born we took out universal life policies at 25 bucks a month
and then we made them bigger to put in 50 and then 100 bucks and then 250 bucks a month. So, the
point is this, you can set them up to accommodate whatever amount you want to put in on a periodic
basis monthly, quarterly, annually, and or lump sums or a combination of both. But that is what's
beautiful about an IUL policy it is so flexible. Again on the spectrum, you could structure it to
accommodate just a minimum amount if you want you maximize what you leave behind when you die.
We have many people that put in money and they don't ever intend to take out money while they're alive.
They're trying to maximize what is left behind when they die. So, for example, my kid's own policies
on me. Basically, so that when I eventually die I said, "Hey, take out a million-dollar policy on
me and put in six or seven hundred dollars a month", now they could put in way more than
that but when I die they get a million bucks tax-free. That's better than them putting that
six or seven or eight hundred dollars a month into a 401k. Hello, I have owned IUL policies
on my mother-in-law, my father-in-law, on my dad. I couldn't on my mother she had heart disease.
But see, you structure it to accommodate the money that you want either as a living benefit
to access money on a policy on you or if you want to maximize what you leave behind when you die
or if you own one on somebody else when they die. Because you calculate the rate of return you can
minimum fund it, you can maximum fund it, or you can do something in between. But in my opinion,
it's probably one of the best financial strategies to accumulate your money tax-free and then be able
to access the money tax-free if you need it and then when you die it blossoms and transfers income
tax-free. I know of nothing else in the internal revenue code that does that. So, when you meet with
an IUL professional which I would recommend you do and as you learn these things be sure and share or
post a comment. But make sure you meet with an IUL professional that understands how to structure it
correctly and fund it properly. They will show you illustrations based upon your numbers. But make
sure that you come prepared with some knowledge by watching this episode and others and also that you
refer to this book. This is sort of your textbook 300 pages it's called the laser fund
which is what I call a max funded IUL policy when it's structured correctly and funded properly.
If you do not have your free copy you can go to laserfund.com click on the link below okay
and you contribute a nominal amount towards the shipping and handling. I'll cover the rest of that
and I'll fire out a hard copy to you and there's options there if you would rather listen and learn
or watch and learn. But this is about your brighter future. We'll see you on the other side of success.