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What's The Difference Between Whole Life and IUL — Transcript

by Doug Andrew - 3 Dimensional Wealth · 3,782 words · 525 segments · language en · Watch on YouTube

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0:00what's the difference between whole life
0:04insurance and ilul indexed universal
0:08life uh I've been asked that question
0:10thousands of times this episode will
0:14explain um why I prefer ilul over whole
0:19life uh if your objective is living
0:22benefits you want to accumulate your
0:25money at the best net internal rate of
0:27return taxfree and then turn on on a
0:30taxfree income with the highest net
0:33spendable tax-free income and all the
0:36way to age 120 without depleting your
0:39your nest egg or your cash value I'll
0:42prove in this episode that a property
0:44structured Max funded iul uh will far
0:47outperform whole life because iul or
0:50universal life was designed primarily
0:53for that purpose living benefits
0:55compared to Whole Life which was
0:58primarily designed for death benefit
1:01with guarantees to make sure the death
1:02benefit stays in force okay I'm going to
1:05prove to you in this episode uh if you
1:07do it right uh it is a superior vehicle
1:10for that purpose so get ready so I'm
1:13Doug Andrew I've been a financial
1:15strategist and a retirement planning
1:16specialist now for five decades helping
1:19thousands of Americans optimize their
1:21assets minimize taxes Empower what I
1:23call their authentic or true well uh if
1:25you've watched very many episodes on
1:27this channel my favorite Financial
1:28vehicle without question for living
1:31benefits taxfree accumulation of your
1:33money tax-free income is a properly
1:37structured maxf funded indexed universal
1:40life and uh if that's your objective
1:43you're going to understand here why
1:46whole life uh in my opinion doesn't hold
1:49a candle whole life was not designed
1:52primarily for living benefits can you
1:54use it for living benefits yeah uh but
1:57if if your main objective is living
1:59benefits uh index universal life is a
2:02far better choice and you'll see why uh
2:05even though you could use whole life for
2:07you know taxfree access to money and and
2:09tax-free income you won't generate as
2:13much and I'll explain why in this
2:15episode so let's first of all uh talk
2:19about the concept of living benefits
2:23now most people in my career have come
2:26to me because they they want to put
2:28their money they want to reposition
2:30their serious cash into the best
2:33financial instrument or
2:35instruments uh that will do what okay
2:39it's for living benefits they want to
2:41not outlive their money in retirement
2:43okay or maybe College funding or
2:45business working capital or the banking
2:47concept or whatever okay so usually
2:51people are intrigued because life
2:54insurance uh helps eliminate the three
2:57big dangers that cause most most
3:00retirees to outlive their money taxes
3:03inflation and Market volatility okay and
3:05so if your property structure uh or Max
3:09Fund life insurance in order to
3:11eliminate those dangers you're seizing
3:14three opportunities okay you're
3:16converting to tax-free Vehicles because
3:19permanent life insurance the money that
3:21grows inside of those is tax-free and at
3:23the end of the day when you die the
3:24death benefit is taxfree okay nothing
3:27else in the Internal Revenue code allows
3:28you to accumulate your money taxfree
3:30access that money taxfree and when you
3:32die it blossoms it increases in value
3:34and transfers income tax free uh when
3:37you understand indexing uh you can link
3:40your returns to the things that sort of
3:43inflate okay I don't like inflation any
3:44more than anybody but doesn't hurt me so
3:46I I come along for the right I can
3:48outpace inflation by uh diversifying and
3:51rebalancing and then by using indexing I
3:54participate when the market goes up but
3:57I don't lose when the market goes down
3:59uh the reason why uh life insurance
4:02property designed and structured is my
4:03favorite vehicle and if it is it it
4:05qualifies to be deemed a laser fund is
4:08uh liquidity that's the number one rule
4:11of a prudent investment you want to have
4:13access to your money when you need it
4:14okay without 10% penalties triggering
4:17tax and what have you you want to have
4:19safety of principle not only of the
4:21institution insurance companies are very
4:23they're probably the safest institutions
4:24in the country but safety of your
4:26principle whatever I set aside I don't
4:28want to lose and any year that I make
4:30money I want that gain to become newly
4:33protected uh principal I don't want to
4:34lose in future years money I made in
4:37previous years a lot of products can't
4:39do that and then to earn a predictable
4:41rate of return that historically has
4:43outpaced inflation it doesn't have to be
4:45Pie in the Sky rates of return even
4:47though some years our clients get
4:49credited 25% 61% 158% and more uh the
4:54average return uh is usually in that 7
4:57to 10% range net C on cash um and even
5:01higher and I'll I'll prove that to you
5:03okay so with that in mind um if we look
5:07at the benefits of permanent life
5:09insurance whe whether it's whole life
5:10insurance or uh universal life uh when
5:14EF Hutton who was the brainchild behind
5:16the emergence of universal life back in
5:181980 and then the emergence of index
5:21universal life in
5:221997 they realized in three sections of
5:25the Internal Revenue code that now for
5:28over a century have been sort of uh
5:30sacred tax-free you know Cash Cow
5:33accumulation access uh Vehicles okay
5:37briefly section 101a of the Internal
5:39Revenue code uh talks about that any
5:42anytime you own life insurance permanent
5:44life insurance or any life insurance
5:47when you die that death benefit is
5:48income taxfree to The Heirs okay uh now
5:52while you're alive the money that
5:55accumulates inside your permanent life
5:57insurance policy the growth interest
5:59dividends or whatever is taxfree under
6:01section 72e of the code because the
6:04government doesn't want to hurt people
6:06are trying to take ownership uh whether
6:08they live a long time and want to take
6:09tax-free income or whether they die uh
6:12prematurely and leave behind widows and
6:13orphans uh if they're trying to take
6:16pressure off of the government to take
6:18care of these people or take care of uh
6:20people in retirement uh they don't want
6:22to shoot themselves on the foot so they
6:24said let let's give them taxfree
6:26accumulation section 7702 of the code
6:29says how or what rules you have to abide
6:32by to be able to access money tax-free
6:34out of permanent life insurance okay so
6:38uh those three sections of the code EF
6:40Hutton said golly life insurance is is
6:44incredible but instead of whole life uh
6:48which was primarily designed for death
6:50benefit EF Hutton back in 1980 said well
6:53why don't we design Insurance primarily
6:56for living benefits and uh we can
6:58actually get with less life insurance
7:01than the iris requires under whole life
7:04and we can get more money in faster so
7:07therefore the costs are going to be less
7:09the biggest problem whole life agents
7:11make is is they're trying to compare
7:13apples to oranges uh uh when they think
7:17they're comparing Apples to Apples
7:19because they're always looking at the
7:20death benefit we're not talking about
7:22the death benefit most people uh that
7:25have come to me didn't really want or
7:26need more life insurance death benefit
7:29what did they want they wanted a vehicle
7:31where they could put money and
7:33accumulate it tax-free and get the
7:34highest amount of tax-free income uh
7:37during their life it's called life
7:39insurance most whole life agents are
7:42using it for for death Insurance okay so
7:46they came out with uh universal life in
7:481980 which basically meant that uh when
7:51a person came and if they wanted to
7:53reposition you know 10,000 a year a
7:56100,000 a year 500,000 and one fell
7:59swoop back in 1980 we just calculated
8:02the minimum amount of insurance required
8:05uh you could buy a ton of life insurance
8:07for $500,000 that's not the objective
8:09you wanted the least amount of insurance
8:12that you could get away with okay and so
8:14U these tax citations in 1982 the tax
8:18Equity fiscal responsibility act and
8:20then the IRS didn't know what they were
8:22doing when they went to Congress so they
8:23had to redefine it two years later this
8:25was 1982 1984 is deer that's a a deficit
8:29reduction act simply put uh the te defra
8:33tax citations or Corridor dictate under
8:36section 101a of the code how much life
8:39insurance has to be uh in the policy
8:42attached to the account uh so you do not
8:45exceed the definition of
8:48taxfree accumulation of money and death
8:51benefit uh if you violate that then then
8:54you move from taxfree Life Insurance to
8:58taxable in investment uh section of the
9:01internal Reven of code and Investments
9:04are taxable sooner or later and they're
9:06usually subject to Market volatility I
9:08don't want an investment if that's how
9:11they Define investment I want taxfree
9:15growth of my money under Section 101a
9:18okay now so that's what they dictated
9:22and I'm going to come back and show you
9:23the power behind what this means uh then
9:25in 1988 there was a massive Exodus of
9:28money leaving the Banks the brokerage
9:30firms Credit Unions into these because
9:32they were safer they paid higher
9:34interest they were tax-free they
9:35blossomed when you died and uh so they
9:38couldn't compete and so they didn't want
9:40to kill them because this is where Banks
9:41and Credit Unions brokerage firms put 30
9:4440% of their t one assets for liquidity
9:46and safety in in Bly bank owned life
9:49insurance okay and so they didn't want
9:51to kill it they just wanted to slow the
9:52flow of money cuz people were just
9:55transferring a half a million dollars on
9:57one Fell Swoop and so they said just
9:59slow the flow so they passed under the
10:01technical and miscellaneous Revenue Act
10:03what is called Tamara if you violate
10:06Tamar uh inside of a whole life or
10:08inside of a universal life uh if you
10:11violate Tamar it becomes a Mech a
10:13modified endowment contract the money
10:15still grows uh tax deferred under
10:18Section 72e but if you start taking out
10:20money out of the policy under Section
10:227702 it's now taxable lifo last in first
10:27out uh most people came to me um not for
10:30the death benefit they want a tax-free
10:32income so to comply with 7702 you have
10:35to comply with Tam Tamra with whole life
10:40is also synonymous with seven pay if you
10:43wanted to put in $500,000 into a whole
10:47life policy uh you had to put it in in
10:50seven payments it took seven years uh
10:53technically the first day of the first
10:55year so after six years and one day into
10:58the seventh year you could get the
11:00500,000 into a whole life policy to
11:03avoid a Mech uh seven pay is is a
11:07misnomer with regard to Universal Life
11:09an index universal life uh for somebody
11:11over age 50 uh I could get the $500,000
11:15into the ilul policy in four years in
11:17one day if you're under age 50 in three
11:20years in one day and now uh since uh
11:23recent passage I can get by with even
11:25less insurance with um uh Universal life
11:29index universal life and I can get in
11:31the money maybe for a younger person in
11:34as little as two years in one day an
11:36older person 3 years in one day I can
11:38get most of the money in there if not
11:40all of it so uh Tamra uh under
11:447702 it I can actually get my money in
11:47Faster which means the money is going to
11:49start growing better and I can get away
11:52with less insurance under te def so let
11:54me show you what this means I've often
11:57compared a permanent life insurance
11:58policy to like a a bucket so uh with
12:01whether it's whole life or universal
12:03life if somebody comes to me and U they
12:06want to you know reposition 10,000 a
12:09year 500 a month 100,000 a year 500,000
12:14uh Tamara says that under uh universal
12:16life I can get it in there if you're you
12:19know overage 50 uh first day of the
12:21first year uh 4 years and one day into
12:24the fifth year I can get the money in
12:26there I've comp complied now and my
12:28money will grow tax-free I can take out
12:30tax-free income I can have the cost of
12:33the insurance which is the the spet on
12:35the bucket which is really not a cost it
12:37it's actually watering a nice little
12:38money tree at the end of the day that's
12:40going to blossom into a death benefit
12:42now I'm going to share something right
12:43now that most whole life agents don't
12:45understand you ready okay so let's use a
12:48scenario here many times I I'll say to a
12:51whole life agent let's take a a male age
12:5460 I want you to show me a whole life
12:58policy and I want you to structure it so
13:01it will accommodate a half a million
13:03bucks uh of this person's money into a
13:07whole life policy as fast as the IRS
13:10allows under te and defra with the least
13:13amount of death benefit now basically
13:17I'm going to round the numbers here with
13:19ilul if somebody comes to me at age 60
13:22and they're in decent Health okay uh
13:24they can get that $500,000 in there and
13:26the minimum amount of insurance is only
13:28about a million bucks
13:30I can get way more life insurance than
13:32that for a half a million that's not my
13:34objective I can get away with a with a
13:36million of life insurance stay with me
13:38I'm going to show you how significant
13:39this is if this was whole life most
13:43whole life agents will go well um let me
13:46use the same death benefit and they want
13:48to compare they think that's Apples to
13:50Apples no no the objective is living
13:52benefits so I want the whole life agent
13:55to take 500,000 and show the least
13:57amount of insurance they would have to
13:59have under her whole life and it's going
14:00to be a million 2 a million 3 a million
14:02four it's going to be way more life
14:04insurance it's going to be way more
14:06expense save the sping on the buck it's
14:08going to be
14:09higher hello so you're not comparing
14:12death benefit you're comparing how fast
14:15can I get that money in under that and
14:18what's the least amount of insurance I
14:20can get away with you get away with less
14:21insurance with I okay now under
14:25Tamara I'll be able to get in for that M
14:28AG 6
14:29I'll probably now be able to get in
14:31maybe
14:33125,000 uh the first day of the first
14:36year uh it'll another 125,000 the first
14:39day of the second year one year and one
14:42day I have I have half my money in there
14:44a quarter of a million in
14:46there on the third year two years and
14:49one day into it I've got you know a
14:52another 125,000 in there and uh so in in
14:57three years in one day or a little bit
15:00in the fourth year I've got my half
15:02million in there whole life it's going
15:05to take me seven payments or six years
15:08in one day to get that half million in
15:10there so hello if I get away with less
15:15cost less insurance with il and I get my
15:17money in a lot faster which one's going
15:20to outperform if everything else was
15:23equal now in actuality I actually earn a
15:26higher rate of return by divers and
15:29rebalancing with il than whole life but
15:32if the rates of return were the same
15:34I'll knock the socks off of whole
15:35life now here's what most whole life
15:38agents don't understand they think okay
15:42uh that universal life ilul is going to
15:44crash and burned the cost of insurance
15:46going to get uh so expensive at the end
15:48of the day they tout whole life well it
15:50has guarantees uh the death benefit is
15:53guaranteed your whole life if you'll pay
15:55these
15:56premiums uh no why why do I why do I
15:59need to worry about guarantees of death
16:02benefit okay they say Well it it it has
16:06to still be a a life insurance death
16:08benefit at the end of the day index
16:10universal life has no lapse guarantee
16:13writers that just come along for the
16:15right at no cost that this policy the
16:17death benefit will not lapse if you live
16:20to be
16:21120 but if you structure it the way I'm
16:24talking see this this money that's going
16:28into here I put in my money in
16:30compliance with Tamara okay now in four
16:33years in one day let's say I have my
16:35500,000 into the iul whole life is still
16:38taking a few more years to get it in
16:40there this 500,000 I don't care about
16:43the death benefit as I put in 500 Grand
16:47it actually qualifies as part of the
16:49original death benefit because I'm
16:50taking the level death benefit uh so if
16:54I die the insurance company's going to
16:56still pay out a million but a half a
16:58million of that was my own money hello
17:01so in four years in one day half of the
17:04million if I die is just my own money so
17:08how much are is the insurance company
17:10charging me in four years only for the
17:13net amount of risk that the remaining
17:15500,000 they don't keep charging me for
17:18a million of insurance CU they're not on
17:20the hook for that they're only on the
17:21hook for the difference between my cash
17:23and the original death benefit I've
17:25earned at least
17:2699.62% average rates of return is 1980
17:309.6 divided in the rule of 72 means your
17:32money is going to double every 7 and 1/2
17:34years that means in 11 and a half years
17:37in this example my 500,000 is going to
17:41be equal to the
17:43million now my cash value has grown to
17:46equal the death benefit what's the cost
17:48of
17:50insurance why do I need guaranteed
17:54million dollar of life insurance when my
17:56death benefit is a million because my
17:59cash is a million you can't believe how
18:03many whole life agents get a deer in the
18:04head like look look when I say this okay
18:06they don't understand this and then um
18:10you know that million of cash value can
18:11generate 100,000 a year of taxfree
18:13income or if I don't need the money that
18:16million will double in another seven and
18:18a half years to 2 million now
18:20technically speaking under te and defra
18:22if I happen to die uh Temp and Def says
18:25that the insurance company um uh will
18:28pay out 5% more so if I had 2 million of
18:31cash and I died the insurance companies
18:33is going to pay out 2.1 million but
18:35they're only charging me for a 100,000
18:38of net death benefit the the cost of
18:41100,000 even though I'm 17 years older
18:44in this example the cost for 100,000 of
18:47insurance the sping on the bucket is so
18:49minuscule compared to the interest I'm
18:51earning that year and every year on the
18:542 million it's it's like the insurance
18:57is getting cheaper as I get older in the
19:0120th year if I earned 11 I'll probably
19:03in that year net
19:0610.95 but retroactive back to day one if
19:09I average 11 I'll net I'll Net 10 okay
19:13uh you'd be lucky with whole life to
19:15earn eight and net
19:175.9 by age
19:1995 I have seen numerous Whole Life
19:23policies and the net internal rate of
19:25return cash on cash uh rarely gets
19:28within 2% of the gross rate of return at
19:30takes age 95 to do that we achieve that
19:33by age 65 or or 70 and depending on if
19:37they just started at age 60 and the net
19:39internal rate of return is usually
19:41within 1% of the gross rate of return uh
19:43retroactive back to day one okay so uh
19:47this is what I would
19:49recommend if you want to compare uh
19:52whole life to iul this is how you ask an
19:57agent or the company
19:59uh to create a scenario determine the
20:02scenario to compare Max funded IL to Max
20:05funded whole life for the purpose of
20:07living benefits okay uh you're wanting
20:09to use tax-free income you got it so the
20:13example let's say you're I want to see a
20:15male a 60 repositioning $500,000 that's
20:19that's the money you're going to put in
20:21calculate the least death benefit with
20:24whole life under te and defer tax
20:27guidelines what's the least death
20:29benefit and I assure you it's going to
20:31be more than the death benefit required
20:34for
20:35ilul Max Fund that whole life as fast as
20:39Tammer allows to avoid a
20:41Mech uh they will not be able to put in
20:43as much money uh as fast as IL does okay
20:48pick an age if we did 60 age 70 or if
20:52you're starting at age 35 maybe age 65
20:55pick an age to illustrate the maximum
20:58tax free income to age
21:00120 without lapsing the policy okay you
21:05got it so show me starting age 70 uh how
21:09much I could pull out of that whole life
21:10policy taxfree without it running out
21:12without it lapsing to age 120 I
21:15guarantee you the income out of whole
21:18life will not even be close to the
21:20income you can generate out of a Max
21:23funded ilul and make sure they use
21:27actual historical rates of return based
21:29on diversification and rebalancing if
21:32you structure I properly you will
21:34diversify and rebalance annually if you
21:38work with a certified ilul professional
21:41and so that's how we are able to earn
21:43average returns of 11 and Net 10 by
21:45doing that um whole life you might be
21:48lucky to earn eight and net six okay so
21:53that's basically the difference uh so
21:55folks uh if you want to learn more
21:59uh of course you can go to laser
22:00fund.com and contribute a nominal amount
22:03towards the shipping and handling and
22:05I'll pay for this 300 Page book the
22:07laser fund and fire out a hard copy to
22:10you via priority mail I require a little
22:12bit of skin in the game uh and you will
22:15learn a ton so to learn more or take a
22:18deeper dive hear a different perspective
22:20uh click on this episode here uh to
22:24learn and understand more
22:28a
22:31[Music]

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