Using this strategy people earned 49.77% instead of 14.65%. In this episode, I'm going to address
how to earn safer returns for long-term financial goals using a five-year strategy. Get ready, you're
going to be blown away with some opportunities that you probably didn't know existed before.
So my name's Doug Andrew and I've helped many many thousands of people prepare for a comfortable
retirement, save money for long-term goals. This is money that they don't want to jeopardize. They
want to make sure they earn predictable rates of return and they don't want to be clobbered with
the negative impact of taxes inflation and market volatility. So, I direct them to put their money
in a diversified portfolio off times of maximum funded indexed universal life insurance contracts.
Where they can earn between seven to ten percent average rates of return. But many years they can
earn higher than that when I say that people go, "What? I've never seen an insurance policy do that."
Well, it doesn't mean it doesn't exist. I would say this a laser fund and I call it
the laser fund because it's an acronym that I've used for years. It stands for liquid
asset safely earning returns. Now, a laser fund is built on an iul index universal life chassis.
So it is an indexed universal life but not all indexed universal life policies would qualify
to be classified as a laser fund. In fact, unfortunately, most would not qualify
because they're not structured correctly or funded properly. When they are they can perform far
more superior than IRAs and 401ks invested in the market. You don't have the market volatility
they're tax-free and as far as I'm concerned you show me any ira or 401k that outperforms what a
maximum funded laser fund can do in the long term and I would be shocked. I've seen these for decades
and this is where people are able to accumulate a bigger nest egg faster safer and every million
dollars that they accumulate inside a portfolio of laser funds can generate predictably seventy
thousand eighty thousand a hundred thousand dollars a year that's a ten percent payout.
If they live to be 120 from age 65 to age 120 a hundred grand a year of tax-free income for as
long as they live without depleting principle. You show me a portfolio of IRAs or 401k is invested in
the market that can do that because the average market return for retirees is unfortunately only
about three and a half percent. In this episode, I'm going to talk about a little-known strategy
that sometimes people don't think about and this is using indexed universal life where your money
accumulates tax-free. In a nutshell, when you use indexing you are not putting your money at risk
in the market. There's other episodes on this very channel that talk about indexing. In a nutshell if
you don't understand it you're accumulating your money for the purpose of living benefits not death
benefits in an insurance policy. You're doing what ef Hutton who was the brainchild behind
the emergence of universal life. Designed it for in the first place for living benefits
not the death benefit. It has a death benefit what you're actually doing is taking the least amount
of insurance that the IRS will let you get away with and you're putting in the most money the most
premium that the IRS allows as fast as it allows you to and it turns into this tax-free cash cow. So
that if you set aside you know ten thousand a year a hundred thousand a year we've had many clients
who put in five hundred thousand dollars and that five hundred thousand without adding any new money
to it doubled to a million in seven to ten years because they were earning average returns between
seven point two to ten percent. Use rule of 72 math you can figure that out your money's gonna double
about every seven to ten years. So a half a million doubles to a million. A million then doubles to
two million. Two million doubles to four million. Four million doubles to eight million. We actually
have clients who started out with five hundred thousand dollars thirty years ago that now have
eight million dollars in their portfolio of indexed universal life policies laser funds
and that eight million is generating between six hundred thousand to eight hundred thousand a year
of growth or tax-free income without depleting principle. Now, when you have your money in those
insurance policies you can link your returns to an index. Linking means you are not authorizing
the insurance company to take any of your million. Let's use a million-dollar example. Let's say you
have a million bucks you are not authorizing them to put your million at risk in the market. You're
linking your return to an index let's use the s&p 500 which is a common one. So they simply take the
interest they're earning each year okay on that million and they're buying upside options in the
index that you chose that they offered. So that if the s&p went up ten percent they'll pay you 10% or
up to a cap. Sometimes the caps are 10 and a half sometimes they're 12 sometimes there is no cap
and this is why many people from March of 2020 to March of 2021 locked in gains of 61.33% on a
one-year point to point. Those opportunities come not all the time but the average return is great
because you're able to participate when the market goes up because the insurance company is using the
interest on your money to buy upside options. But if the market tanks the options expire worthless
you didn't lose the million you started with. Your principal is protected
but every year you make money like in 2017 we had many clients who locked in gains of 16%, 25%. So on a
million, they locked in 160,000 or 250,000. So then in 2018 they started out with a million 250,000.
Which means if the market would have crashed 40 percent at the end of 2018 they would have
still had their 1,250,000. You lock in your gains every year and you reset that's why I love
indexing. On this very channel there's all kinds of different ways or strategies to use indexing
here's a few. The most common strategy is what is called the one-year point-to-point and I
have a video explaining that and that's where you measure the difference in the s&p from one year
let's say the 15th of a given month July 15th to July 15th of the next year. If the s&p went
up 10% they pay you 10% or they pay you whatever it went up by if it went up 30% but the caps 19%
they cap you out at 19%. That's a one year point to point with the cap. There's also a one year point
to point with no cap and then they minus maybe five percent that's called a threshold or spread
that's explained in another episode. Sometimes people use a two-year point-to-point strategy
which I've explained in other episodes and that's where you wait two years and the caps are usually
higher like 19 percent or there is no cap and they may have a 10 threshold or spread. So that if
the market went up 30 percent over two years they subtract 10 and you actually get credited at 20%
gain over 24 months. In this episode, this will help you understand a five-year strategy.
Why? Because I would recommend you consider maybe 20% of your allocation be to a five-year strategy.
Didn't have to be we have many people who will put 40% of their money linked to a one year point to
point. Forty percent to a two year and maybe twenty percent to a five year strategy. Now, what does this
mean? You're diversifying so if you had a million dollars that would be four hundred thousand under
the one year point to point-to-point. 400,000 is linked to the two-year and maybe 200,000 is
linked to a five-year. Now, unlike the two-year where you're waiting two years because that's
maybe a downside. You have to wait two years to find out what you're going to be credited.
If you're impatient maybe this isn't for you. But if you patiently wait two years you're able to see
the gain and the insurance company because option costs are cheaper can have the caps be higher more
like 19% or no cap and then they have a threshold charge. On a five-year strategy often what they'll
do is you link let's say from 2016 to 2021. Now, you have to wait five years to see what your gain
is but the likelihood that the market is going to be up over a five-year period is pretty good
odds . But what if you happen to hit a downturn like March of 2020 when the market dropped about
30 percent in the Covid19 pandemic. See, if you would have had your money in a five-year strategy
and the end of the five years just happened to be when the market crashed even though it's
it spread out over five years your return would have been 14.65 percent over the five-year period.
You know that's okay you didn't lose money but on a five-year strategy many of the companies that we
use for clients all over America they take the last year of the five years and they average it.
So, it's called a five-year point-to-point okay and its point to last year
average is the actual technical term for this. So on a five-year strategy with the last year being
averaged they're going to take the average return each month for the last 12 months of
the five years so they're 60 months from the 49th month to the 60th month they're going to take and
average those returns to sort of smooth it out. What difference did it make in my example? If you
would have linked and you would have gone to the year 2020 or 2021 instead of having 14.65%
by averaging it out your return would have jumped to 49.77% huge difference, right? So, to be clear in
that particular example where I compared a 14.65 to actually a 49.77 that was going back
to March of 2015 and if you had had a five-year strategy and you ended in March of 2020. Oh, talk
about picking one of the worst little crashes in a five-year period you still would have had the
14.65% return I wanted to make that clear. But by using the last year average of the five years
instead of 14.65 you would have had a 49.77% crediting return. Even though the end of the
five years was in a horrible downturn does that make sense? So sometimes a five-year strategy
will help you out because of that last year averaging that sort of is a smoothing period.
So, that's why sometimes a lot of the advisors that I mentor and train that I point my students to.
They will recommend well maybe you want to put 20% percent of your allocation if you have a million
dollars maybe 200,000 in a five-year strategy with the last year being averaged out. Because sometimes
over five years your chance of a pretty good gain is worth assigning maybe 20% maybe even as high as
50 percent to that kind of a strategy. I'll give you an example of what that could have achieved on
an historical average basis. So, on a historical basis if you had 50 in a two-year indexed account
with a 19% cap and the other 50% in the five-year index okay that has no cap.
Your average crediting rate for this period this is I think a 20-year period would have been 14%
not bad. Depending upon the timing and what's going on in the market it may behoove you to diversify
into different indexing strategies. The key is in order to earn an average of 7, 9, 10, or more rate
of return. It's going to include some periods that are higher and lower and sometimes those periods
could be expanded to two-year point-to-point or five-year point-to-point especially if they
average the last 12 months of that five-year period. So, the key here is is to get educated
and make sure you meet with an iul specialist who understands all of these and can help match
you up with the right product, the right strategy, so that you can diversify properly and protect
your money and achieve the greatest potential possible. So, what's the downside? Well, if you
use a five-year strategy you're gonna have to wait five years to see what your gain is or your return.
If you're impatient you don't like to do that then maybe the five-year strategy isn't for you but the
one-year point to point may be the cat's meow for you. Whatever it is, I want to gift you a copy
of this textbook on indexed universal life it's called the laser fund how to diversify and create
the foundation for a tax-free retirement. Now, this retails for $20. Now, I will gift you a copy of this
book free. If you go to laserfund.com click on the link below I'll pay for the book. You contribute a
nominal amount towards the shipping and handling and there's options there to listen and learn and
watch and learn. Why am I passionate about this? This is 300 pages it contains all kinds of charts
and graphs and explanations. But also you flip it over and this has a hundred pages 12 chapters with
62 actual client stories of how the laser fund has helped them achieve all kinds of financial
goals not just retirement, emergency funds, college funding for the kids and grandkids, working capital
for your business, real estate management on and on and on. So I call it the financial swiss army knife.
I want to gift you a copy make sure and claim it go to laserfund.com and there's
also options there where you can learn from our educational webinars. But I'm passionate about
providing you with insights into opportunities that maybe you didn't even know existed before.