- With IUL, you can earn 100%
to 500% more than the cost of borrowing
rather than withdrawing your money out of that policy.
In this educational episode,
I'm going to dispel the myth
that when using what is called the banking concept,
that whole life insurance is superior.
No, you need to understand this.
It's crucial.
(ambient music)
So I'm Doug Andrew,
and I've been helping thousands of clients now
for nearly five decades optimize their assets,
minimize taxes, empower their authentic wealth,
helping many, many people prepare
for a comfortable retirement
so they will not outlive their money.
The biggest dangers that cause most retirees
to outlive their money are taxes,
inflation and market volatility.
That's why my favorite financial vehicle is a max funded
indexed universal life insurance contract.
Now, I have a lot of critics out there
that simply don't know what they don't know.
They poo poo something.
And of course one of my favorite quotes is anonymous.
"The worst form of ignorance is when you poo poo something,"
you reject something
that you know very little or nothing about.
So a lot of times insurance agents ,
whole life agents say, oh, that index universal life,
that's just an insurance policy where they're investing
your cash value into an index mutual fund.
No, no, it isn't.
Your money is not in an index mutual fund
or else you would've lost 40% twice in the great recession.
Our clients didn't lose a dime
when the market dropped 40% twice in that decade.
We use indexing that's a strategy.
Or they may say, oh,
that index universal life is so expensive,
it's gonna crash and burn.
It's gonna implode
because it gets more and more expensive as you get older.
I go, no, the cash value in a structure correctly
will grow to equal and exceed the death benefit.
You'll be self-insured within 12 to 20 years.
The insurance costs you nothing.
You don't need any guarantees like whole life offers
when your death benefit, you're self-insured now,
because the only thing a guarantee does
in whole life is guarantee
that the death benefit won't lapse.
Well, if your cash value in the 12th year equals
or exceeds the original death benefit
in index universal life like it is with most of my clients,
why do you need a guarantee that the death benefit
will not lapse when you are self-insured?
Your cash value is the death benefit now.
The cost of the insurance is virtually zippo, okay?
You can watch some of my episodes on this,
but when we're talking about the banking concept,
a lot of times whole life agents say,
oh, whole life is superior to index universal life.
And I just go, here we go again.
They don't know what they don't know.
So what is the banking concept?
Many times there are people like Nelson Nash, who I know,
and he calls it infinite banking.
Pamela Yellen, she came out with a term bank on yourself.
That's their view of it.
But this banking concept has been around for decades,
and I was teaching this clear back in the 1970s and 1980s
is simply how money works.
So let's simplify it right now.
What does a bank do
or a credit union or even an insurance company?
They borrow OPM, other people's money.
So during the decade from 2000 to 2010,
interest rates came down and it was a heyday for banks
because they were only paying 1% interest.
And so it's because the Federal Reserve
interest rates were low.
So the banks were having a heyday.
Why? Because banks would only pay you 1% interest.
But there's only four things you can do with your money.
You can spend it, you can lend it,
you can own with it, or you can give it away.
When you put your money in a banker credit union
or even an insurance company, it's in a lended position.
Are they just a benevolent institution paying you interest?
No, they're borrowing or paying you interest
so they can make more interest.
See, sometimes people equip,
there's two kinds of people in the world,
those that pay interest and those that earn interest,
and I go, oh, bless your heart.
You don't understand how money works.
There's a third kind of person,
the mega wealthy people that learn
when it's wise to pay low interest,
turn around and make higher interest.
So let me give you an example.
Banks, they pay 1%.
So on every million dollars of OPM, other people's money,
they pay 1% a year on.
They're only paying out 10,000 bucks
to borrow the public's money.
They turned around and they disclosed
in 2008 when the country nearly collapsed
and the federal government asked the five major banks
in America to disclose where they had their tier one assets
for liquidity and safety.
This is money that banks
and credit unions have to have on hand,
liquid and safe in case there's a collapse
or a run on the bank.
Guess where they had it?
In insurance companies,
in what is called sometimes BOLI, bank-owned life insurance.
They own life insurance on other people.
They do it for the living benefits.
So banks are paying you 1%,
they turn around and they don't even link to an index maybe
and they earn 5%.
How much more is five than one?
Don't say four, it's 500%.
It's five times.
They are borrowing money
and paying 10,000 and they're making 50,000.
So they're netting 400% or 40,000. Let me put it this way.
Would you hire an employee
for 10,000 that made you an extra 50,000?
That's called a 500% return on employment cost.
Would you buy a widget machine for 10 grand
that made you an extra 50 grand?
That's called a 500% return on equipment cost.
Okay, so far so good.
So that's what banks were doing.
During that same time period when interest rates were low,
I was borrowing money, let's say to purchase real estate,
and I was borrowing money at 3%.
So I can borrow a million bucks to acquire a piece
of property and so I borrow and pay 3% interest.
That's 30 grand a year.
I write off that $30,000 of interest on my tax returns.
So it's not costing me 30,000
because I write off 30 grand in a 33% tax bracket.
I actually save one third, 33% of that 30,000, 10 grand.
So I get 10,000 back in a refund
or 10,000 in a lower tax bill.
And so the net cost of a 3% tax deductible interest
on a mortgage, let's say, is 2%.
So the net cost of borrowing OPM for me was two.
I was earning on my index universal life, 11 netting 10.
Are you getting it?
I'm earning 10% compound interest tax free.
The net cost is simple interest at two.
Just the very first year,
I am paying two and earning 10.
On that million dollars, I'm earning a 100 grand.
It only cost me 20 grand to borrow the million.
So I borrowed a million
and I was able to earn a 100 grand
but it only cost me 20 grand.
I netted 80,000.
I'm making 500%.
The banks were making 500%.
We both understand how money works.
It was a heyday.
Now, to be honest with you, most of my lifetime,
five decades on real estate, for example,
I've borrowed at an average rate
of maybe four and a half percent, some years as high as six.
But if I borrow a 6% tax deductible,
it's a net cost of four.
Would you hire an employee
for 40,000 that made you an extra 80 or a 100,000?
When I borrow at four point a half percent tax deductible
in a 33% bracket, it's a net cost of three.
Would you hire an employee for 30,000
on a million that made you an extra 100,000?
That is at least a 300% return on employment cost.
Are you getting it?
That is the banking concept.
So whole life insurance is okay.
Generally speaking, they tell you accumulate cash value
when you go to buy a car
or use working capital for business,
you can borrow out of your whole life policy
and maybe you might pay three or 4% interest.
But on the whole life policy,
generally speaking, you're only earning maybe two
or three points higher than that.
So that's fine.
You're hiring an employee for 30 or 40,000
and that employee is making you 60 or 70,000.
Yeah, that's still okay.
But index universal life, my heavens.
I had a client in 2017,
he needed to borrow a million dollars out
of his index universal life policy to tie up
a piece of real estate within earnest money.
It was a multimillion dollar apartment complex.
And he called me and said, Doug, email me the form.
It's one page.
He puts his name and his policy number on the form
and says, do you wanna withdraw a million out of your IUL,
or do you wanna borrow?
What do you think he checks?
Borrow.
Well, do you wanna borrow at a zero cost loan?
That means he borrows at at maybe 4% and they credit him 4%
on the million dollars of cash value
that's collateralizing the loan
from the insurance company.
His cash value still stays in the policy,
but he chose index loans that year,
which is what I normally do.
So that's 1% higher.
Why would you pay 1% higher?
Because they charged him 5% that year,
50 grand on a million dollar loan.
Now he doesn't have to write out a check for 50,000.
It's like a phantom loan.
It's just accruing there on a statement.
But now his entire cash value,
including the million that's collateral,
is earning the index rate.
Guess what he earned that year on that million
that was collateralizing the loan
that is being charged five?
He earned 25, it capped out at 25%.
He was credited 250,000 on that million.
You subtract the 50,000 loan,
he netted 20% or 200 grand on his million
while he was using the million to make 3 million
in his real estate.
Hello, that's working capital for business.
I've had clients in 2020 to 2021 that borrowed money
at 5% out of their IUL
and they got credited 61.33% because they linked that year
to a one year point to point with no cap.
After COVID-19 made the market go down 30%, they linked.
One year later they were credited 61.33%.
How would you like to borrow money at five and earn 61?
You show me a whole life policy
that even comes close to that.
So that's why it's a myth
when you hear that whole life insurance is superior
when you're using the banking concept,
you better think again
because IUL when structured properly, funded correctly,
dwarfs whole life insurance
if you're implementing the banking concept.
So if you wanna learn more about this,
we even have a video series that talks about this.
But if you wanna learn about index universal life,
I would recommend you study my 11th bestselling book.
It's been flying off of our warehouse shelves.
It's actually two books in one.
This side is about 14 chapters, 200 pages,
and it gives all the charts
and graphs and explanations of how IUL works.
That's for the left brain learner.
If you're a right brain learner,
you flip it over and read this one.
Now I said about 14 chapters, it's exactly 14,
I mean, about 200 pages.
This one is about a 100 pages,
12 chapters with 62 actual client stories.
If you wanna use both your right brain and left brain,
I would recommend reading both of these books.
You can go to Amazon and purchase it for 20 bucks.
And if you do, thank you,
but I'll gift you one for free.
If you wanna claim your free copy of this,
go to LASERFund.com or click on the link below.
You'll contribute a nominal amount
towards the shipping and handling.
I require some skin in the game.
If you buy it on Amazon,
you're gonna have to pay for shipping and handling.
But I'll pay for the book.
So that'll save you the 20 bucks.
I'll fire out a hard copy to you via priority mail.
But when you're in there claiming your free copy,
if you like to listen and learn or watch and learn,
check out the audio and video formats.
Also, if you want to attend an educational webinar,
we teach them on a regular basis.
They're free. There's no charge.
You can even schedule an appointment to talk
to an IUL specialist virtually
and do it on Zoom or whatever.
They will not charge you for their time.
There's no cost or obligation.
And they'll actually be able to create some illustrations to
show you how a properly structured, max funded IUL works.
And if you wanna see how the banking concepts works
with these various index loans,
they'll illustrate that
and then compare it to a whole life policy.
And ask a whole life agent, okay,
you show me this whole life policy
generating the best income.
Starting at age 60 or 65 out to age 120,
what's the best income?
And show it using the banking concept
and we'll compare that to an indexed universal life.
The whole life policy will not even hold a candle to it
and I would like to prove that to you.
So that's a challenge.
Check it out, set an appointment,
and get some illustrations created for you.
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