Infinite Banking With IUL Versus Whole Life — Transcript

Full transcript

1. 0:00IUL dwarfs whole life.
2. 0:04In this episode, I'm going to address the topic: Infinite Banking With IUL Versus Whole
3. 0:13Life Insurance.
4. 0:14Get ready because you're going to understand somethings that most whole life agents do
5. 0:19not understand.
6. 0:26So, my name is Doug Andrew and I've helped many, many thousands of people save for their
7. 0:39brighter future, for retirement, business owners, real estate investors by understanding
8. 0:47the merits of max-funded life insurance.
9. 0:50Now, why do people overfund or maximum fund a life insurance policy?
10. 0:57I'm going to explain why and give you the basic difference between whole life and universal
11. 1:04life and why a properly structured maximum-funded indexed universal life will knock the socks
12. 1:11off of a whole life insurance policy for the infinite banking concept.
13. 1:16So, in a nutshell, for years, they were 2 types of life insurance.
14. 1:23Term insurance & whole life insurance.
15. 1:26Term insurance is where you're simply paying for the pure cost, the mortality cost if you
16. 1:32happen to pass away.
17. 1:34And so, you pay a premium based upon your age and your health and so forth based upon
18. 1:40the mortality table.
19. 1:43Term insurance does not accumulate cash, generally speaking.
20. 1:47And so, if you win, you have to die.
21. 1:50But see, when you pass away, it pays out a death benefit.
22. 1:53So, it's a nice way and inexpensive way to insure yourself.
23. 1:58But term insurance gets more expensive through the years as you get older.
24. 2:03So, whole life insurance came around because people wanted to have insurance protection
25. 2:09for their whole life.
26. 2:10But they didn't want to have to keep paying higher, higher, higher premiums every year
27. 2:14that they got older because when you're 60, 70, 80 years old, you may not be able to afford
28. 2:20those high premiums.
29. 2:22So, whole life insurance basically said, "Well, if you pay a higher premium in the early years,
30. 2:29you're going to be way overpaying in the early years but that will build up equity in your
31. 2:34policy."
32. 2:35It's called cash value and that will cover you for your whole life because you over pay
33. 2:40the early years which allows you to underpay the later years because you have cash that's
34. 2:47earning interest inside that whole life policy that allows you to pay a level premium your
35. 2:53whole life and you have enough cash build-up that the interest on that and that cash value
36. 3:00will make up the difference in your later years.
37. 3:03That's called whole life.
38. 3:05And so, whole life has guarantees life insurance since ever since the 1980s was built on a
39. 3:11chasey based upon a 4% guaranteed fixed interest rate.
40. 3:17Well, whole life has merits because it's structured to be able to give those guarantees.
41. 3:23But in a low-interest environment like we have been in recently where a lot of banks
42. 3:30and so forth and Fed rates and the US treasuries are under 1%.
43. 3:35How are insurance companies going to continue to be able to cover you for your whole life
44. 3:42based upon 4% when they're not able to earn 4% maybe?
45. 3:47This is putting insurance companies into a bind.
46. 3:50And so that's why in the WE hours of the very end of the year 2020, congress passed this
47. 3:58part of that big stimulus legislation changes to section 7702 of the internal revenue code.
48. 4:06I have other episodes I'm going to be releasing that explain this.
49. 4:10But that is going to take the guarantee down to 2%.
50. 4:13So, the guarantees inside of whole life are not going mean that much anymore.
51. 4:19Whole life insurance is going to have to perform based upon dividends and interests.
52. 4:25I can prove to you that indexed universal life will knock the socks off of whole life
53. 4:30as far as rates of return.
54. 4:32And that's because of the historical average rates of return.
55. 4:36But also if you're using life insurance for what is called infinite banking to become
56. 4:42your own banker.
57. 4:44Indexed universal life will dwarf what whole life insurance can do.
58. 4:48So, let me explain why and how.
59. 4:51Now, if what I've said so far is intriguing you, subscribe to this 3-Dimensional Wealth
60. 4:57Channel.
61. 4:58It's free.
62. 4:59And I post an in-depth answer to questions almost daily.
63. 5:02And as this topic relates to several others, you will gain insights into how to maximum
64. 5:08fund and insurance policy, universal life versus whole life.
65. 5:12There's a lot of people out there that tout that whole life is better.
66. 5:16And they usually quote the guarantees.
67. 5:18That's all changing.
68. 5:19So, as this evolves especially now, you're going to want to tune in and see how you can
69. 5:26benefit yourself and why indexed universal life I think is by far the best product if
70. 5:32you want accumulate tax-free capital.
71. 5:36If all you want is death benefit, whole life is a pretty good product.
72. 5:39But universal life, can still do well.
73. 5:42But with universal life, your self insuring in the policies that I structure, most people
74. 5:48are self-insured within 10 to 15 years.
75. 5:51Meaning, the cash inside the insurance policy is within 5% of the death benefit within 15
76. 5:58years.
77. 5:59So, the cost of the insurance is next to nothing.
78. 6:01In other words, if you put in a half a million dollars in the amount of insurance required
79. 6:07for it to be tax-free for a 60-year old was 1,250,000, that 500,000 has grown to a million
80. 6:14within 7 to 10 years.
81. 6:16And in another 7 to 10 years, it's going to grow to 2 million.
82. 6:19Well, that's more than the insurance.
83. 6:21So, the insurance stays ahead of it by 5 percentage points.
84. 6:25Indexed universal life is by far the cheapest insurance policy when it's structured properly
85. 6:30you will ever, ever see.
86. 6:33Because it gets cheaper as you get older.
87. 6:35You don't need guarantees because the cash equals the death benefit or almost equals
88. 6:42it based upon the Tefra, Defra tax citations which I explain in other episodes.
89. 6:47Now, let me explain why people would even consider using an insurance policy as their
90. 6:55own bank.
91. 6:56Life insurance for over 100 years is a sacred cow.
92. 7:01In the internal revenue code under section 72E, 7702, and 101A, it explains that money
93. 7:10inside of a permanent life insurance policy...
94. 7:13And by the way, indexed universal didn't come out until 1997.
95. 7:18Universal life came out in 1980.
96. 7:19Who came up with it?
97. 7:21It wasn't an insurance company.
98. 7:23It was a brokerage firm, EF Hutton.
99. 7:25This is where I immediately recognize this is like buy term and invest the difference
100. 7:30under a tax-free umbrella.
101. 7:32It's like on steroids.
102. 7:34Well, it's true when you use universal life for the infinite banking concept.
103. 7:39It's like infinite banking on steroids.
104. 7:41So, Tefra, Defra, and Tamra are tax citations.
105. 7:45Sections 72E, 7702, and 101A say that when you put money into an insurance policy and
106. 7:52you take the least amount of insurance the IRS will let you get away with, it accumulates
107. 7:56your money tax-free, you can access that money tax-free and when you die, it blossoms, it
108. 8:02increases in value and transfers income tax-free.
109. 8:05Nothing else does that that I'm aware of in the internal revenue code..
110. 8:10This is where I have earned rates of return of 6%, 8%, 10%.
111. 8:14I'm talking about net.
112. 8:16Net internal rate of return, cash on cash.
113. 8:19Now, since it's sort of a sacred cow, whole life insurance ofttimes has been touted for
114. 8:24infinite banking because when you build up this cash value and the guarantees were based
115. 8:30upon 4%.
116. 8:31You know, you can borrow money out of your whole life policy.
117. 8:35And they'll charge you a nominal interest rate.
118. 8:37And then they'll keep crediting you a little bit higher interest rate.
119. 8:40So, if you borrowed at 2, you might be guaranteed 4.
120. 8:43So, you're being guaranteed twice as much as they're charging you which is good.
121. 8:49But folks, all they've been able to say is "Well, universal life doesn't have the guarantees
122. 8:55whole life has."
123. 8:56Well, looks like the guarantees are going to go down to 2%.
124. 9:00So, that's not such a big deal anymore.
125. 9:02And it never has been with universal life.
126. 9:05Because the cost of insurance, I don't need the guarantee anymore because my cash grows
127. 9:11to equal the death benefit.
128. 9:13And the death benefit then stays ahead by 5 percentage points.
129. 9:16If I have 2 million of cash value, the death benefit is going to be 2.1 million.
130. 9:21If I ended up with 4 million of insurance then the death benefit is going to be 4.2
131. 9:26million.
132. 9:27Most of the money is my money.
133. 9:28So, the cost of insurance goes down as you get older.
134. 9:31Now, I explain this in other episodes.
135. 9:34But let me share with you why banking concept is so dynamic with indexed universal life
136. 9:41compared to whole life.
137. 9:43With indexed universal life insurance, I have 2 ways that I can borrow money.
138. 9:48One is called zero cost or zero wash loan.
139. 9:52So, let's say I have a million dollars of cash value.
140. 9:54It doesn't matter if it's 100,000; 1,000,000 or 10,000,000.
141. 9:58People use their insurance for the banking concept to buy real estate, to use for working
142. 10:04capital for business and so forth.
143. 10:06If you don't understand this concept, watch other episodes where I explain how to become
144. 10:10your own banker.
145. 10:11So, let's say I have a million dollars of cash value.
146. 10:14If it was a whole life policy, I could borrow that and they will credit me a little bit
147. 10:19higher interest rate.
148. 10:20And I'm paying myself interest as I put money back into the policy and so forth.
149. 10:24Folks, that's okay.
150. 10:26Yeah.
151. 10:27If you borrow at 2 and you earn 4, 4% is 100% more than 2%.
152. 10:31I get it.
153. 10:32But those guarantees are going down.
154. 10:35With indexed universal life, I've always been able to borrow at 2 and they credit me 2.
155. 10:40And people say, "Well, that's a wash."
156. 10:42Well, that's not the way I usually borrow.
157. 10:45I can do that.
158. 10:47I opt for the indexed or participating loan.
159. 10:51This is where the insurance company goes, "Well, you can leave your money with us as
160. 10:55collateral.
161. 10:56And we'll keep crediting you whatever the index or indices you're linked to are earning."
162. 11:02So, many, many years I have earned 10%, 16, 25, even 55%.
163. 11:10Some years I don't earn that but the average has been 8, 9, 10 percent.
164. 11:15So, let's...
165. 11:16To keep it simple, say, 10.
166. 11:18If I'm earning 10%, wait a minute here.
167. 11:22I'm borrowing money.
168. 11:23Now, this is called an indexed or participating loan.
169. 11:26They're going to charge you a little bit higher interest.
170. 11:27So, they might charge me 4 or 5 percent.
171. 11:31Let's say 5.
172. 11:32So, they are charging me 5% to borrow on an indexed loan.
173. 11:36So, on that million dollars I borrow, they're going to charge 50,000.
174. 11:39Do I have to write out a check for that?
175. 11:42No.
176. 11:43It's really just sort of a phantom in the first place.
177. 11:45But they deduct the 50,000 from the 100,000 I earn that year.
178. 11:50Because if I earn 10% on my million that is still sitting in the policy that's being used
179. 11:55as collateral for the million dollars they loan me at 5%, I'm earning 100% more than
180. 12:00the cost of the funds.
181. 12:02So, I'm earning 50,000.
182. 12:04It's way better than a measly 2% maybe in a whole life policy.
183. 12:09But do you know that I have had many, many clients who for their business, for their
184. 12:15real estate management where they borrow money to build or to buy real estate properties,
185. 12:22they have borrowed that money at 5% and they have earned sometimes 16, 25 or even 55 percent
186. 12:29on indexed universal life.
187. 12:31In other words, you borrow a million, they charge a 50,000 as deducted automatically
188. 12:37from the 25% that people earned in 2017, for example.
189. 12:41They paid you 250,000 minus the 50,000.
190. 12:46You netted 20% or 200,000.
191. 12:49This is like infinite banking on steroids.
192. 12:53Indexed universal life will dwarf whole life as far as the spread...
193. 12:57What's the spread?
194. 12:59The difference between the net cost to borrow and the net amount you're earning on the compounding
195. 13:07inside the policy.
196. 13:09And the longer it goes...
197. 13:10If you keep earning 100% more than they're charging you, this one compounds and grows
198. 13:17tax-free.
199. 13:18Pretty soon, you're earning, let's say, 10% on twice as much money that you're paying
200. 13:25interest on.
201. 13:26But as it grows, you can keep borrowing more money.
202. 13:28This just keeps getting better and better and better as you go.
203. 13:30So, if you're intrigued with infinite banking, becoming your own banker, I can show you,
204. 13:36I can illustrate that a properly structured indexed universal life insurance policy will
205. 13:42actually perform far better from infinite banking than whole life.
206. 13:46And I have had many whole life agents when they finally listened and they finally saw
207. 13:50the illustrations, they went, "Oh, my heavens.
208. 13:54This knocks the socks off of whole life."
209. 13:56Yes it does.
210. 13:58if you watch episodes that say whole life is better and IUL is not, they don't know
211. 14:03what they don't know.
212. 14:05Make sure you don't make the mistake of doing something that's good when you could've done
213. 14:09something that was better or even best.
214. 14:12So, if this is intriguing you, subscribe to this channel.
215. 14:17But I want to gift you a copy of my most recent bestselling book called The LASER Fund.
216. 14:21The Laser Fund is a max-funded indexed universal life insurance contract.
217. 14:26And you will see in this book how this compares to most whole life insurance policies.
218. 14:31But frankly with this new legislation on section 7702, universal is even becoming better.
219. 14:38The guarantees inside of whole life just aren't that impressive anymore when it drops from
220. 14:434% down to 2%.
221. 14:45It looks like that's what's going to happen as insurance companies adapt to this.
222. 14:51So, LASER is an acronym that stands for Liquid Assets Safely Earning Returns.
223. 14:56You can learn in this book 2 ways.
224. 14:58Left brain, this side is all kinds of charts and graphs and explanations.
225. 15:03But if you learn by the stories, the examples of how the Laser Fund can be used for not
226. 15:08only retirement but college savings for you kids and grandkids, working capital for business
227. 15:14and becoming your own banker or your real estate management, you can read this stories
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230. 15:24So, simply go to Laserfund (LASERFUND.com).
231. 15:31Contribute a nominal amount towards the shipping and handling.
232. 15:33I'll cover the rest of that expense.
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234. 15:38There's also options there if you like to listen and learn or watch and learn.
235. 15:41But here is to your brighter future.