Warren Buffett has two rules for investing. Rule number one, don't lose money. Rule number two,
don't forget rule number one. In this episode, I'm going to address the question why does a
max funded IUL have more predictable returns than money invested in the stock market. So, by
the end of this video, you will understand why an IUL policy has a guaranteed floor.
You won't lose due to market volatility but participate in upside potential. Get ready.
I'm Doug Andrew and I began in the financial services industry clear back in 1974.
So, nearly five decades now and from 1974 until 1980 for 6 years
I helped people sort of buy term and invest the difference. Because at that time I was a
big proponent of that because I think you could outperform what was usually whole life insurance
that only maybe had 2, 3, 4, percent rates of return and I was trying to achieve
more like 12 rates of return for my clients in a portfolio of mutual funds. So, what ended up
happening during that period and I ended up with over 3,000 clients that I was responsible for
in 13 western states. They were never happier than when I got them out of the stock market in 1980.
What happened in 1980? EF Hutton who was not an insurance company they were a brokerage firm
realized that even if you could earn let's say 12% which most people don't because they buy and sell
at the wrong times. You're not netting 12%. Even if you put it into a tax deferred IRA 401k
because most people are going to pay back about a third of that in taxes either sooner on a Roth
or later on a traditional IRA or 401k. Probably around a third will go out the window in taxes
between federal and state income tax. So, you're not netting 12 you're netting maybe 8 percent
and then a lot of these asset managers charge one percent asset management fees. So, if you're
earning 12% you're only netting seven or seventy thousand on a million-dollar nest egg if you're
not wanting to deplete principle to buy gas and groceries prescriptions and golf grain fees, okay.
Back then EF Hutton said, "What are we thinking? Let's look at the multi-trillion dollar
insurance industry, the backbone of America and the backbone of the world." So, what they meant was these
are some of the best money managers in the world and if you have money that accumulates inside of
a life insurance policy it's like a sacred cow in the internal revenue code. Section 72E, 7702, 101a
have been around in one form or another for over 108 years. But up until then the rates of return
were fairly poor that's why we had bi-term invest the difference. They said, "Why don't we
buy term and invest the difference under a tax-free umbrella and let's get a rate of return
that is within one percent of the gross rate of return by taking the least amount of insurance
the IRS will let us get away with and put in the most money the IRS allows as fast as
they allow". Now, I have other episodes on this very channel that talk about this. So, I would
recommend that you subscribe it's free and I post a new educational video almost on a daily basis.
But let's just cut to the chase. If you take the least amount of insurance that the IRS will let
you get away with and you put in the most money the IRS allows under three tax citations they're
called TEFRA, DEFRA, and TAMRA. They're explained on other episodes on this channel. This turns into an
instrument that accumulates your money where I've averaged 9.6% rates of return and so I'm actually
earning more like 10.6 and netting 9.6. But I don't care if you earn eight net seven or earn a 12 net
11 or earn 16 a net five. We've had many people that in the year 2021 for example that earned
61.33 and netted within one percentage point of that 60% and people said, "Really? I've never
heard of this", well, it doesn't mean it doesn't exist. What I have recommended for years because
from 1980 to 1990 based upon the insurance company's general account portfolio yield on their
aaa and doubly bonds and mortgages on shopping malls and skyscrapers and if they do invest
in stocks, it's a very low percentage and very conservative ones. But I earned between 11 and
three quarters and 15 and a half percent never less than that from 1980 to 1990. Now, in the
late 90s interest rates started to come down and that's when indexed universal life was introduced
and I thought wow now this is great because now I can participate when the stock market so to speak
goes up but not lose when it goes down without my money at risk in the market. So, I won't lose Warren
Buffett's number one rule. So, what is indexing and how does it work? When indexed universal life came
out in 1997 I immediately not only had my clients in universal life but I began to have them opt-in
for the index universal life. Now, indexing is a strategy I'm not talking about index mutual funds.
So, I'm going to explain it on this chart how it works because in 1998 I was credited 21.98%
on my index universal life policy tax-free because this is tax-free. So, what ended up
happening is we had what is called the great recession. Basically, the turn of the
century around the year 2000 ending actually 12 years later in 2012. It's the worst 12-year
period since the great depression. So, let's just look at that 12-year period on a graph
and this actually starts in November of 1999, okay. So, what ended up happening in the market and we're
going to use the S&P 500 standard and poor's and we saw it go like this. Now, in most 10 12-year periods
you'll maybe have three loss years compared to seven gain years in a decade. That decade 2000
2010 there were five lost years. But I'm going to go two more years to 2012 to illustrate my point.
So, we had people let's say you know they spent their entire lifetime accumulating
a million dollars so we'll use that you can extrapolate from the million bucks
and so they saw that without adding any money they saw that million-dollar nest egg in their
IRAs and 401k is invested in the market. Go down by 35-40 a million dollars went down to
600,000 dollars for many about to retire people they felt like they had lost their future.
They had to put off retirement seven years because when you lose 40% you have to have a
67% gain to make up for a 40% loss. People go, "Huh?", if a million goes down to 600,000
600,000 has to grow by 67% 400,000 to get back to break
even. So, this is what happened during that time period. This is the break-even line okay and so
I have a 100,000 on the screen I don't care if it's that or a million. If you lose at
35-40 percent it took four years to come back to break even. Now, my clients who had indexed
universal life they did not lose a dime when that happened. They may not have made very much but
they stayed up here and the minute the market turned around they started making money up here.
I'm going to show you the difference. People said, "Okay, we can finally retire in the year
2007", what happened in 2008? As Warren Buffett put it he said when the tide went out it revealed
who was swimming naked. What he meant by that is people weren't protected from that market
volatility. People lost 40% on average again, some lost 50%. For the second time in a decade
none of our clients lost who had indexed universal life, they were cheering go... because they
weren't losing anything. If they had just started they were still up here instead of having to lose
the money and then as soon as the market turned around which it did in 2009 many of our clients
locked in gains of 16% tax-free the first 90 days of 2009 after not losing a dime due to that market
crash of 2008. People say, "What? How did they do that?", with indexing and then the market it took
until 2012 to where you know 100,000 was worth 104,680 bucks. That didn't even keep up with inflation.
People who use indexed universal life their money whether it was a hundred thousand or a million was
double or triple that at the end of the 12-year period. Does this arouse curiosity? Do you want
to understand why and how. So, the message is this, when the market goes down you don't want to lose
you may not make very much but as Will Rogers once said people get more concerned about the return of
their money instead of the return on their money when the market goes down and then when it comes
back up again you want to participate without your money at risk in the market and people go,
"How can you do that?". Well, let me show you. This is that same 12-year period superimposed here
and I'm going to put on top of this what indexing would have done. But when you look at it that was
only about one third of one percent compounded annual rate of return if your money was in the
market in that 12-year period. That's pretty pathetic. But see, with indexing maybe you didn't
earn as much when the market went up because there might have been a cap it's called a cap
but people got credited zero one, two, two-point three-four percent but they didn't lose and then
as soon as the market turned around they started making money. Maybe not quite as much but look at
this because they didn't lose they had 130 percent increase whereas money in the market only had a
4.68% increase, huge difference. So, how does that equate? If we go back to 1975 the year after
I started and I had a series one securities license. If I had money in the market 500,000
in the S&P it shows here in the red. I would have gone up and down like you know heartburn up
down and so forth. But I would have ended up with maybe 5.6 million. People said, "That's pretty good",
hold on you haven't seen the whole picture yet. With indexing, I would have had
eight million but that's not the whole story. Remember, Paul Harvey the rest of the story?
In the market, if you earned 5.6 million over that period of time from 1975 to the end of 2010 in
the market you would have had to pay tax on that. At least at the end of the day with the
tax-deferred IRA or 401k. You have to pay nearly 1.8 million in tax you're only netting 3.8 and you
have all this heartburn in the meantime. In index universal life you don't have any heartburn. You
don't lose when the market goes down. You can sleep at night and you end up with 8 million tax-free.
What would you rather have 8 million tax-free or 3.8 million? Hamburger A or hamburger B is that
simple. So, this is why I love index universal life and you don't have to use it just for retirement.
It's like the dream solution like a financial swiss army knife for death benefit, retirement
planning, for college savings, this beats a 529 plan, working capital for business, or real estate
management, emergency funds, lump-sum capital transfer, estate planning, pension maximization,
if you're a school teacher. If you don't know what that is you gotta search this channel. So, this is
the beauty behind max-funded IUL. You don't lose when the market goes down you make money when
it goes up and it's tax-free. So, how can you learn more? So, you can learn how many people in the year
2021 locked in gains on their index universal life of not just 10 or 11% but 25%, 61.33%, and even 153%.
Meaning, the next year if the market crashes they don't lose one dime of that that they made the
year before. If you want to learn more about this I want to gift you a free copy of my most recent
best-selling book. This is flying off of our warehouse shelves it's called the laser fund
it's actually two books in one. This one is for the left-brain thinker all the charts and graphs and
and explanations here. If you're more of a right-brain learner, you flip it over and
read this one. This is 12 chapters with 62 actual client stories and examples if
you learn more by stories. If you want to use the right brain and left brain you read both
okay. But this will teach you how to diversify and create the foundation for a tax-free retirement
and how to have you know 40 to 60% or more of your retirement income be protected from market
volatility and not even show up on your 1040 tax return. The IRS will know you're receiving it but
they'll know it's tax-free. So, go to laserfund.com to claim your free copy. You contribute a nominal
amount towards the shipping and handling. I'll cover the rest of that, I'll pay for the book.
Click on the link below and claim your free copy to understand this or you're going to lose.