intro — IUL Mystery’s Mythes & facts explained!

“Everyone wants to be the alpha but not everyone can handle being the alpha.”

 

 

 

 

There’s a lot of mystery surrounding IUL’s – Indexed Universal Life Insurance products, as a result there’s an abundance of hype and misrepresentations.

 

Typically, the information you see advertised for an indexed universal life insurance policy is either one extreme or the other.

 

 

You have individuals who tout an IUL policy as the best thing since sliced bread nothing outperforms it…. It’s better than any stock bond or mutual fund or any other investment you could have.  We also have the extreme opposite with advisors who are generally securities only advisors who equally don’t understand how these products work and as a result their messaging is to run hide and never touch and IUL.

Newsflash both camps are very wrong!

 

I was listening to a financial guru trying to explain why they don’t like an IUL. This statement was made…. Why would you want an insurance policy that invests in an index and invest in mutual funds.

This comment was made by a very smart quote-UN-quote financial guru with a huge radio and TV following.

 

I must assume they’ve never actually looked at an IUL contract because in bold letters it clearly states in the contract and on the brochures and in the product illustrations… that an IUL does not invest in the market.

 

 

 

 

 

 

An IUL doesn’t directly participate in the market, you are not buying any bonds, shares of stocks or shares of an index.

This is a screenshot taken directly from an insurance companies’ brochure!

I’m just going to assume these advisors really don’t know how it actually works I’m not going to go so far as to say they are purposely misleading you, but I am scratching my head as to why such smart people don’t understand one of the basic functions of an IUL which is how the interest is credited. Especially if you’re on TV talking about it.

I also heard this same guru say when you get older you will not be able to afford your IUL. When this was mentioned, I was honestly trying to make sure I completely understood which product he was talking about. I said to myself, maybe he’s talking about a different product that I’m not aware of, so I began to listen with even more focus.

This statement clearly demonstrated to me this person was so far out in left field I don’t even know how they’re allowed to spew out this information that is so miserably wrong. First of all, the design of an IUL is technically not for the death benefit however that is a byproduct of the policy the whole purpose of an IUL is to be able to maximum income tax free withdrawals during retirement.

Yes, it is a life insurance policy and it does provide a death benefit to your beneficiaries however 99% of advisors and agents who sell these products it’s for the tax free income It can provide you during retirement.

I covered this in more detail later in this report.

 

Every time I hear an advisor talking about how expensive a life insurance policy will become later on in life it’s clear they don’t understand how insurance works and clearly, they skipped the class on insurance 101.

Oftentimes these people will also say that you lose your cash value when you die again, they missed the class on insurance 101.

 

With regards to how a cash value policy works a permanent policy let’s look at a female age 30 who purchase $1,000,000 policy with a monthly premium of $250 per month. Hypothetically speaking let’s say in 30 years the policy will have a cash value of $600,000.

 

Now I want to be clear that as you get older the per $1000 cost of insurance does increase but this doesn’t increase your premium because the overall cost of insurance goes down overtime not up.

Now I know this sounds like I just said two different things and this is where insurance 101 comes into play, the class these financial gurus skipped out on.

 

With this particular $1,000,000 policy, when it was purchased the $250 premium was required to pay for the $1 million of life insurance.

$250 was used to purchase a $1 million policy and after 30 years the cash value is $600,000. This means that in year 30 you are no longer paying for $1 million in coverage you are only paying for $400,000 of coverage. The insurance company’s net at risk is only $400,000.

If you were to die in this scenario your beneficiaries would receive $1,000,000.

 $600,000 of it is your cash value the other 400,000 is the insurance that you’re paying for.

 

You started off spending $250 per month for $1,000,000 of coverage you continue to pay that same $250 per month over 30 years and in 30 years you have $600,000 of cash value, with each payment you make you are paying down on the insurance companies net at risk cost.

 

A different way to look at it is this: when you started paying $250 per month for this $1 million of coverage let’s just say $200 of those premiums was going towards paying for the cost of insurance.

However, by the time we reach year 30 only $50 of those premiums is going towards paying for the cost of insurance and the other $200 is going into the interest earning accounts.

Folks this is basic insurance 101 and it’s clear to me the majority of advisers have no clue as to how this works.

 

After 30 years of owning a $1,000,000 policy, you are no longer paying for the entire amount of insurance in the later years as you get older, you are only paying for the amount of insurance minus the cash value growth, which is a combination of your premiums and interest earned.

 

When statements like these are made its very misleading simply because the individuals making the statement don’t understand how the life insurance policy works.

 As you get older the life insurance policy becomes cheaper, you are no longer paying for the same amount of coverage as you were when you started the plan!

 

If you have a $1,000,000 life insurance policy with $600,000 of cash value and you die the insurance company is only responsible for $400,000.

 

 

 

 With $600,000 of cash value you are no longer paying for $1 million of coverage you’re only paying for $400,000 the rest of your money is going towards the cash value and your beneficiaries will receive the 600,000 in cash value along with the $400,000 the insurance company is at risk for.

It’s almost like paying off a mortgage. If you have a $500,000 mortgage what a fixed 5% rate your P&I payment would be $2684.11. With the very first payment you make $2083.33 goes to the interest while only $600.78 goes to the principal. In year 25 only $601.31 goes towards the interest while the majority is now going towards the principle.

In year 25 your P & I payment is still the same as it was when you first took out the loan it’s just now more of your money is going towards principal instead interest.

 

This same mathematical process works with a cash value permanent life insurance policy.

 

 

 

 

 

 

 

 

 

 

An IUL Will Outperform The Stock Market?

*Ahhhh, NO IT WILL NOT*

 

 

 

 An IUL or Whole Life Insurance plan will not outperform the stock market!  

 

Life Insurance products, when structured properly can be an awesome tool to grow tax-free retirement income, but it’s not a replacement for stock market growth!  

The cash value building policy plan of choice for my clients is an IUL indexed universal life insurance product. 

There are those who use a whole life insurance policy however because of the loan mechanisms and the potential for higher gains in an IUL along with the over loan protection rider IULs end up being the product of choice for Max Funding a Life Insurance policy for maximum retirement income. That is why my recommendation is for an IUL as a supplement to an overall investment portfolio. 

A properly structured IUL will not outperform a growth stock portfolio, however it can and will outperform the bond portion of the portfolio. 

 

When looking at a 60/40 split 60% stock 40% bonds, generally I’ll use a properly structured IUL policy to replace the Bond portion of the portfolio. I view a properly structured whole life insurance policy as a good replacement for Bank CDs and money markets. However, because of the flexibility of the IULs, typically I just stick with using an IUL as my bond market and bank CD / money market replacement. 

Any advisor or insurance agent suggesting that an IUL is the only investment tool you should be using or that you should use an IUL or whole life policy to replace the stock portion of your portfolio probably has an agenda and don’t truly understand the way the math works out. 

 

An IUL historically has performed between the 5 3/4% to 7%, net of fees.. with the majority of the plans coming in at around 6.5% net of fees. 

My rule of thumb is this: when you are young you have time to recover from a stock market crash or a series of down years such as the 44% loss in 2002 the 44% to 54% loss in 2008 along with the 33% combined loss of 2021 and 2022, when you are young you have time to recover from these types of stock market losses therefore typically I recommend someone who is young to have an aggressive stock market portfolio plan while adding a safe money tool such as an IUL as a supplement to your overall plan.

After you enter what’s known as the Retirement Redzone the amount of risk you take should start to decrease and that’s when Safe Money Alternatives begin to take the Forefront of your portfolio. 

You don’t want to wake up the day you turn 60 to find out that the market dropped 44% and that you lost 35 to 40% of your money, you don’t have enough time to recover from those kinds of losses. If approaching retirement, at retirement or in retirement…. suffering a stock market loss of this magnitude could prevent you from staying retired or result in you running out of money during retirement. 

 

 Think of Safe Money products as a fill in the Gap kind of strategy, to provide you with tax-free income that will not disappear due to a market decline.  An IUL is well positioned to go along with any other retirement income you’ve established. 

 

To recap, an IUL is a good supplement to your overall Investment Portfolio, it’s an awesome replacement for the bond portion of your portfolio. An IUL or any cash value building policy is not meant to replace the stock portion of your portfolio. 

 

 

 

 

 

You Should Only Take Money From The Basis In The Form Of A Withdrawal First?

 

You Should Only Take Money From The Basis In The Form Of A Withdrawal First?

Not true, it should be taken as a loan.

 

 

Taking money out of a life insurance or annuity contract is almost like having an auto catch up provision in your portfolio in the sense that these products have unique features that allows you to take advantage of various IRS rules to increase your overall income withdrawals. 

 

When it comes to the longevity of your income it matters how you access your money. 

 

 

With regards to an IUL indexed universal life insurance policy you can remove all your money as a lump sum, but this option will trigger a taxable event. 

 

 

 

You can withdraw the money. Withdrawals are generally treated as coming out of your policy basis first, this is your premium dollars coming out prior to interest earnings. You can also remove money by way of policy loans. 

 

My preferred method of accessing the cash in an index universal life insurance policy is by way of policy loans. 

 

Obviously, you don’t want to pull all the money out of the policy triggering a taxable event unless you’re faced with a dire emergency. 

 

Clients are often advised to withdraw the basis first in an attempt to recover all premiums paid, basically creating a Return of Premium scenario. This method is flawed and I’m assuming the original design of a Max Funded IUL isn’t just to have a return of premium styled plan. 

 

 

 

 

 

 

 

 

 The purpose of a Max Funded IUL is to create as much tax-free retirement income as possible. When you pull from the policy basis first you are depleting your overall account value faster just like withdrawing money from your traditional market-based accounts when you start withdrawing money from your market-based accounts you deplete your money at a faster rate than you would if you were pulling out the same amount of money from an index universal life insurance policy in the form of policy loans. 

 

Withdrawing money from the policy basis directly lowers the overall account value however when you take money out in the form of a loan the money is paid out to you from a different account the loan money is not considered to be removed from the policy even though you’re being paid the money from the loan, therefore the entire account balance to include the loaned money is still earning crediting interest. 

 

Pulling money from the basis you will spend down on your money faster than spending down on the exact same amount money by way of a policy loan. 

 

 

 

 

For example: 

We have two buckets of money but with each bucket holding $1,000,000. For simple math let’s say each account is earning 10%. With each account we’ll spend or take out $100,000! 

 

 

So both accounts earned 10%, which left each account with $1,000,000. With the withdrawal account you remove $100,000. You now only have $900,000 that will be earning 10% 

 

With the loan account when you remove $100,000, because this money is a loan from the policy the entire account value will earn crediting interest.  

 

In this example the withdrawal account will earn 10% interest based on $900,000 while the loan account value will earn interest based on its entire account value of $1,000,000. 

 

The insurance company is loaning you the money from a separate account and then makes adjustments as necessary if the loaned money isn’t repaid, as a result, this allows you to spend down on monies inside of an IUL by way of a loan a lot slower than you would if you were simply withdrawing from the bases first and then switching to a loan. 

 

You could potentially cost yourself thousands of dollars potentially 200,000 plus over a 20-year retirement time frame and that is a 200K plus mistake you don’t want to make. 

 

 

Allow your money the best opportunity to continue working for you while providing you the maximum amount of income during retirement, always use income tax free policy loans. 

 

 

 

 

 

 

 

 

 

 

 

Loan Provision Options In A Whole Life Policy Doesn’t Compare to an IUls Loan Provisions.

 

 

 

The Indexed Universal Life (IUL) insurance policy is my preferred choice for growing tax-free income as compared to the Whole Life Insurance policy. However, for individuals who are extremely conservative, the Whole Life policy may be a more suitable option. 

 

Advocates of Whole Life policies emphasize the withdrawal differences between a traditional stock portfolio and a Whole Life policy. However, they fail to recognize the advantages of withdrawing money from an IUL policy, which provides greater flexibility as compared to a Whole Life policy. In essence, the loan features of a Whole Life policy are incomparable with those of an IUL policy. 

 

Every Whole Life insurance loan provision incurs an interest rate to withdraw money from the policy. In most cases, the charge to remove money from the policy is higher than the interest being credited to the loaned amount. Additionally, a Whole Life insurance policy does not offer different loan provisions to choose from. 

 

On the other hand, an IUL policy allows for withdrawing money from the policy, not only income tax-free but loan-free as well. This is a provision that a Whole Life insurance policy does not have. It is evident that an IUL policy provides the most spendable income, especially when compared to a Whole Life policy that charges a fee to remove money. 

 

With an IUL policy you have 4 different loan options.

• Option 1 is a fixed rate loan.
• Option 2 is a wash loan or zero percent loan.
• Option 3 is a participating fixed loan.
• Option 4 is a participating variable loan.  

  

Loan option 1 is like a whole life insurance policy loan. You are charged a fixed rate on the loaned money. In a whole life policy, you have a guaranteed interest rate of (let’s say 4%) the loan interest rate or charge is usually 7% fixed. The real interest charge in this example would be 3%. 7% charge minus the 4% guaranteed credit. Loan option one in an Index Universal Life Insurance Policy works the same way.   

  

Loan option 2 inside of an Index Universal Life Insurance Policy allows you to receive what’s referred to as a “Zero Percent Wash Loan.” Whole Life Insurance Policies don’t have a zero percent wash loan.  

The loan provision in an IUL switches from option 1 to option 2 after 10 years. With a zero percent loan or wash loan, the insurance company will charge the loaned money (let’s say 3%) while also crediting the loaned money the same amount… 3%. This results in a zero percent loan or wash loan.  A free no cost loan!

 

Loan option 3, a participating fixed loan gives you the option of earning interest on the loaned money.  Most of the time the fixed loan rate is 5%, with the opportunity of earning 6.5% or higher it could reach 10% or higher but I’m more comfortable counting on a 6.5% rate of return on my loaned money! Many advocates of “Whole Life Insurance along with the Bank On Yourself Concepts” often talk about paying themselves interest instead of paying interest to the banks. 

 

 If you don’t have a loan provision which gives you the ability to earn a positive interest rate on your loan, an interest rate higher than what you are being charged to use the money, well, it’s impossible for you to pay yourself interest. It’s correct you are not paying interest to the bank; however, you are paying interest to the insurance company. Lol 

 

A whole life policy doesn’t offer you a participating loan of any kind and whole life insurance policies don’t even offer you a zero percent wash loan.

 As such, the claim of paying yourself interest instead of the banks is absolutely false. 

 

An IUL with a participating fixed loan is the only product that can make such a claim!  

 

The 4^th loan option is the participating variable loan. An option I don’t recommend. With the participating fixed loan (the 3rd option) only the crediting interest rate varies. With the participating variable loan both the crediting interest rate and the fee interest rate will fluctuate. This option requires a much higher risk tolerance, a risk I’m not willing to take. 

 

With an IUL, many companies give you the option of switching loan options each year. A few companies will only allow you to switch loan options 3 times over the term of a loan with even fewer companies not allowing you to switch at all. I typically recommend using IUL companies that allow you to switch at the end of each year. If the market is booming you can switch to the Participating Fixed Loan option, if the market is headed towards some down years, simply switch to the zero percent wash loan.  

 

 

 

Hopefully you now understand why loaned money from an IUL policy has a much better longevity outcome than a whole life insurance policy. It’s easy math! If you have $1,000,000 in a whole life insurance policy and $1,000,000 in an Index Universal Life insurance policy. The money in the account with no loan fees will last longer than the account with a 3% fee! 

 

If you take a loan of $100,000 each year for 10 years at 3% that’s a fee of $3,000 each year for 10 years a total of $30,000 (With this example I’m not accounting for the simple interest calculation which would make the ongoing fee higher). With the IUL account you don’t have to pay this $30,000 fee!

 

Over time you’ll draw down money faster with a whole life insurance policy verse an IUL policy as a result of having free loans! 

 

In conclusion, between a properly structured Whole Life insurance policy and a properly structured IUL policy, my preferred method is to opt for an IUL policy with much more potential gain and much more favorable loan options.  

 

 

How the loan fees are charged in an IUL

 Either in advance or in arrears.

 

 

I only recommend indexed universal life insurance policies that charge the interest in the arrears. Without this feature you will not have a true no cost zero percent wash loan, if the interest is not charged in the arrears, you will still pay a small admin fee to pull out the money. 

 

When you remove money from an IUL in the form of a loan, the insurance company will charge the loan account interest in advance or on the back end. 

 

The scenario is this (assuming you qualify for the zero percent wash loan): you will be charged 3% for the loan, however the insurance company will credit you 3% on the same loaned money which makes this a 0% wash loan.

 

The 3% credit will wash away the 3% charge, however if the interest is charged in advance, you will pay an additional 40 basis point administration fee. 

 

I get it… 40 basis points is only 4/10 of a percent not even a half percent, but it’s still a charge you don’t have to pay if structured properly.  

The goal of a Max Funded IUL is to squeeze out as many of the fees as possible, which allows you to receive better results. Most agents and advisors who sell cash value building policies are not aware of this minor glitch, and you are now empowered with information that 99% of the financial sector who offers these products simply don’t know or understand. 

 

Not sure if the plan you have charges you in advance or in arrears, more than likely you’re not aware of it because your agent or advisor doesn’t know about it. When going over the pros and cons of the different IULs, the loan features are high on my checklist.   

The loan feature will literally determine how long your money will last during retirement, so it’s important to get this step right! 

 

 

 

 

 

 

 

 

Compare the expenses of removing money from an IUL during the first 10 to 20 years with removing money from a traditional stock portfolio prior to age 59 and a half.

 

 

Removing money from an IUL – Index Universal Life Insurance Policy, whole life insurance policy or any cash value building policy during the first 10 years can be quite expensive. 

 

HOW SOON WILL YOU NEED TO ACCESS YOUR MONEY.

 

This question should be answered before recommending an IUL or any cash value life insurance policy. Building tax-free income inside of an IUL or whole life insurance policy should be viewed as a long-term commitment.   

 A growth period of 20 years or longer is typically recommended, obviously there are exceptions to this rule.

 

Life insurance policies are front loaded with a huge chunk of the fees paid during the first 10 years. The way you access your money also plays into the overall cost of the plan. The primary way to access monies inside of a life insurance policy is by way of a loan.

 When you receive loaned money from an IUL policy after year 10, the insurance company gives you a preferred loan (zero percent wash loan), loan option 2.  

 

The loan provision in an IUL switches from option 1 to option 2 after 10 years. With a zero percent loan or wash loan, the insurance company will charge the loaned money (let’s say 3%) while also crediting the loaned money the same amount… 3%. This results in a zero percent loan or wash loan.  

 

With a huge chunk of fees dropping off by year 10 along with surrender charges vanishing to include receiving a preferred loan or zero percent wash loan, it makes absolute since to wait at least 10 years before accessing money inside of an IUL policy.  

 

 

My strategy for any kind of investing is for long-term purposes the same truth is valid if you have money in a 401k or any other kind of traditional investment accounts the only difference is you might have to wait 10-20-30 or 40 years if you don’t want to incur an extra penalty for removing the money prior to age 59 ½. 

 

 

 

 If you start investing in a 401k account at the age of 20 and 35 years later, you decide you want to remove money from your account you’ll be penalized not only with the income tax that you’re going to pay you’ll also be assessed an additional 10% penalty because you’re not 59 and a half yet. 

 

In fact, this penalty exists to help discourage you from using this pool of money without it being a dire emergency, to help encourage continued retirement savings for your “Uncle Sam”… I’m sorry, I meant to say…. to help encourage your continued retirement savings.  

 

In both a cash value building policy and traditional investment accounts you will be penalized and pay high fees for accessing your money early. 

 

 

I include this article because I heard a financial Guru say that one of the reasons why you don’t want to purchase a cash value building policy is because if you access the money after you’ve had it for 4 or 5 years it’s going to be very expensive to do so.

 

 

 

I was waiting for this financial Guru to also say the same when accessing money in a traditional investment account but they failed to mention that part, that’s why I decided to do this article because it does not matter if you access the money from a cash value building policy or a traditional investment account both accounts are going to charge you a boatload of money, technically when you access money from a cash value building policy during the first 10 years you will pay fees however you will not pay income taxes, but when you access money from a typical investment account not only will you incur a 10% penalty fee but you will also pay income taxes and if you were receiving an employer match from an account such as a 401k and you were not vested you will also lose your employer matching money as well.

 

 If you move money from a traditional investment account early, it’s going to cost you a boatload of money, and if you move money from a cash value life insurance policy, it’s going to cost you a boatload of money.  

 

When considering max funding an IUL – Index Universal Life Insurance Policy, a long-term commitment will help ensure income-tax free cash value growth later down the road in retirement.   

 

 

Sweep Function Of An IUL

 

 

An easy way to test if your advisor or insurance agent knows how to properly structure an index universal life insurance policy is to ask them a simple question and it’s this: 

 

What is the sweep feature of the plan you’re recommending?

 

This is one of those technical features most insurance agents and advisors are clueless on. 95% of agents and advisors don’t know what a true 0% wash loan is by ensuring the interest is credited in the arrears instead of in advance. Most Agents don’t know what the sweep function of an IUL is and how it impacts your overall performance. 

 

I had a conversation with an insurance agent who’s been selling life insurance for over 30 years, specifically recommending index universal life insurance policies for the last 14 years and they don’t know what a sweep function.  Scary! 

 

 

 

When you make your premium payment each month, your money goes into what’s considered a nominal account and the money sits in this account until it is swept into the performance or index-based account. 

 

There are many companies who allow your monies to sit in the nominal account for up to 6 months before it’s actually swept into the performance crediting accounts. 

 

 

The IUL products I recommend sweep your money daily and at the very least monthly.

 

 

Mini crediting cycles are done on a monthly cycle so at least having the money swept monthly can still yield much more favorable results rather than having your money swept every 6 months. You experience a much favorable outcome the sooner your money is working for you.   

 

You can have two accounts with the same sums of money with the same crediting strategies with the same interest credited to the accounts, but one can outperform the other if the money is not swept at least monthly into the performance crediting accounts and over time this could cost you thousands of dollars. 

 

Premium payments swept into the performance crediting accounts at the minimum of monthly, is a crucial part with ensuring your LUL is properly structured. 

 

The sweep function is a part of my checklist I provide for every potential client when it comes time for them to select which IUL plan to select.

 

All my clients understand what the sweep function is before they purchase the policy. If you’ve already purchased a Max funded IUL and this is the first time you’ve heard of the sweep term, you need to give my office a call and we will review your plan to make sure it’s structured properly, odds are if you don’t know about the “SWEEP” your product is probably not structured correctly. 

 

 

 

 

 

 

 

 

Be leery of companies offering bonuses on the loans and bonus crediting options which seldom work out.

 

 

 Be leery of companies offering bonuses on the loans and bonus crediting options which seldom work out.

 

There are several companies who create products that look really good on paper but in reality, because of the basic design of the product, more than likely the results you see on paper will not come to pass.

 

I hate to call this trickery, but I guess it is what it is. These companies will add bonus crediting interest rates to the indexing as well as to the loan account creating an over-inflated hypothetical scenario however after a close review of these types of policies you will notice these crediting strategies are not guaranteed and that’s why I do not like the use of bonus anything when it comes to illustrating in an IUL.

 

Typically, these same companies usually use an index that doesn’t have a true historical, they will use an index with a back tested historical, in other words they’ll make it up.

 

One such index is called the

“Fidelity Multifactor yield index 5% ER”

 

When you search for this index on Fidelity’s website or do a simple google search, you’ll see this Index wasn’t created until the end of 2019.

 

Google search result: ***** Fidelity Multifactor Yield Index 5% ER Index inception was 12/11/19. Allocations shown prior to that date are hypothetical and are based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected allocation decisions. *****

 

 After a quick search you’ll notice this index was created 12-11-19. However, when you look at a proposal showing or using this index, you’ll notice that they will give a 20-year historical on a product that hasn’t been around for 20 years. Very easy to make up a backdated history when you already have all the information as to how the market performed over the last 20 years.

 

I recommend using index strategies with a 20-year track record, 15 at the minimum. The issue of using untested indexing has become such a problem for some IUL companies that the reputable IUL companies complained to Congress and as a result congress passed AG49-B.

Congress had previously passed AG-49 & AG49-A. AG-49—got rid of 2%+ loan arbitrages (which was needed). AG49-A—got rid of illustrating non-guaranteed bonuses/multipliers (which was needed).

 

 AG49-B—gets rid of all bonuses and multipliers on crediting strategies and puts in restrictions on how high the illustrated rate can be. Companies will be forced to stop over inflating Volatility Control Indexes (VCIs).

 

More IUL’s will simply rely on the S&P 500 caps.

I was never a fan of companies using these crediting & illustrating methods and I’ve never sold any of their products. Sometimes simple is better! Even with the new rule I’ve noticed a few companies trying to become very creative with skirting around the rule.

 

I personally like using a blended index option relying heavily on the good ole simple S&P 500 Cap Index.

If you would like a second opinion on your cash value building plan, please feel free to reach out to my office and we’ll make sure your plan isn’t overloaded with excessive fees, overloaded with commissions, nor overloaded with hypothetical fluff illustrations.

 

 

 

Bank on yourself infinite banking your personal bank these are all awesome sounding strategies however I’m not the

Biggest fan of them.

 

 

The idea behind these Concepts is to use a whole life insurance product that has a guaranteed interest rate. Overfunded the policy for five six seven years and then you withdraw money to make large purchases for cars and things of that nature and then you quickly pay the loan back and keep repeating this process for every large purchase you want to make. 

 

The idea is that instead of paying the interest to the bank…you are paying yourself interest, that’s why they call it Bank on yourself. 

 

The only problem with this or shall I say one of the problems with this is that you’re not paying yourself interest when you pay it back, you’re paying the interest to the insurance company. 

 

 

 

The typical scenario is earning a guaranteed 4% return on your whole life insurance policy.  When you loan the money out you will then be charged a 7% interest rate and 7 – 4 is 3.  How can you be paying yourself back interest if you are paying 3% interest to the insurance company, the only way you would truly be paying yourself back interest is if your account is being credited a 4% guarantee while the interest to loaned money is only 3%.

 

You are not banking on yourself with this strategy, you are simply banking with the insurance company instead of the bank. 

 

There is only one product that would realistically allow you to earn interest on the loan money by using the participating fixed loan feature of an IUL.

 

 

To be fair an IUL also has a participating variable loan but feature which could produce the same results or better, than a “participating fixed loan” however this loan feature involves way more risk than what most people would like to take when it comes to loaning money from your policy. I recommend the zero percent wash loan or the participating fixed loan because the interest rate you are charged with both loans is guaranteed.

 

If you like the idea of earning interest on the loaned money with minimal risk a participating Loan with a fixed interest charge would be the way to go.

 

 The loan functionality of a whole life insurance policy is one of the reasons why I’m not a big fan of the infinite banking, “Bank on yourself strategies”.

 

 The next reason why I’m not a fan is this:  If you’ve check out any of my other articles, I talk about how life insurance policies are front loaded meaning most of the fees will be assessed during the first 10 to 15 years of the life of the policy.  

 

Infinite Banking or “Bank On Yourself” requires you to overfund the policy over five to seven years and then take money out to purchase an item such as a new car or use it to fund college expenses….. and then try to quickly pay it back.  

 

With the scenarios you are removing money from an account that is front loaded and removing money during the time when the fees are the highest.

 

 

 

 

 My primary use for cash value building life insurance policies more specifically an IUL – index universal life insurance policy is to use it as a supplement to your retirement income allowing the policy 20 years or more to grow which is the same thing you would do with a typical stock-based investment.  

 

You don’t dump a bunch of money into a stock based investment with the idea of taking the money out in two or five years and therefore incurring a bunch of fees and penalties such as the 10% penalty you would receive for removing money prior to age 59 and a half.

 

Investing in a 401k/ IRA – Mutual Funds etc etc… is usually a long-term strategy. Investing extra dollars in an indexed universal life insurance policy or any cash value building policy should also be a long-term commitment.

 

If you are always pulling money out of the policy in short intervals, theoretically you are reducing your overall achievable gains. The higher the balance the more interest earning potential you’ll have.  I recommend not touching these funds for at least 20 to 25 years. If longer GREAT!

 

 

 

 

The next thing I would like to point out is this: If you have a guaranteed interest rate of 4% and a loan rate of 7%, this leaves a 3% charge to the money you are loaning out.  If you have good to great credit you can simply go to a credit union and secure a rate under 3%….. so this begs the question as to why you would pull money out of your life insurance policy to pay 3% interest rate, when you can get a lower interest rate from your bank or auto loan company?

 

The client who can afford to dump hundreds or thousands of dollars per month into a cash value building life insurance policy more than likely has good to great credit and can obtain zero percent financing at just about any dealership.  

 

 

Don’t get me wrong, I like making money while using other people’s money. That’s what the banks do and that’s why they’re filthy rich, at least the majority of them.. 

I like using other people’s money to make money when there is positive Arbitrage. 

 

It’s certainly not a positive cash flow scenario when you are being charged to use money when you could pick the option of not being charged to use the same money. 

 

The same goes for using this concept to get out of debt, if you have that kind of positive cash flow to dump that kind of money into a cash value building policy, you could just simply use that money to pay those debts off or more than likely you could get another loan with an interest rate lower than a whole life insurance policy will charge you.

 

The Bank On Yourself Concept sounds good, it looks good but does it really taste good, is it going to be one of those dishes that looks and smells good but leaves a bad taste in your mouth after you actually eat it.

 

I’m a huge proponent of using cash value life insurance policies more specifically index universal life insurance policies as a way to grow tax free income for retirement while avoiding the risk of losing your money due to stock market decline, implementing this strategy for the long-term 20 years at the minimum however, I am not a fan of Dipping into the cash values when the cost to do so is at its highest. 

 

Also, I’m not a fan of using my money to purchase an item while being charged a higher interest rate than what I would normally be charged if I used someone else’s money to do so that flat out doesn’t make sense to me. 

 

 

The other scary part to this concept is many agents and advisors are jumping on this bandwagon and none of them understand any of the concepts I’ve went over in this report.

 

They don’t understand how to properly structure a cash value life insurance policy, they don’t understand the different crediting strategies, most don’t understand the sweep strategies, they don’t understand the loan functionality strategies and they don’t understand how an increasing death benefit can actually lower the cost of insurance over time in a properly structured plan.

 

If you have a bank on yourself whole life insurance policy, an infinite banking whole life insurance policy a be your own Banker whole life insurance policy, please feel free to reach out to my office for a second look.

 

 

 

 

 

 

 

 

 

Money In An IUL Is Protected From A Market Decline!

 

 

Another attractive feature of an indexed universal life insurance policy is the point-to-point annual reset. The annual point-to-point in essence allows you to lock in the current year’s gain while preventing your account value from going backwards regardless of how the market performs.

 

If you’ve ever been on a roller coaster, then you will understand how the annual point to point works in a life insurance product. As you are ascending the roller coaster tracks there’s a very loud clicking noise, this mechanical clicking noise is the coaster locking you into place preventing you from going backwards. If there was ever a malfunction with the coaster you would be automatically locked into place with the very last click…. you can only go forward.

 

The annual point to point with an index universal life insurance policy works the same way, each year your account has a gain, there’s a clicking noise automatically locking your gains into place preventing your account values from going backwards. This autopilot functionality Works 24 hours a day even while you’re sleeping.

 An index universal life insurance policy doesn’t directly invest in the market. The interest is credited to the account by the insurance company linked to the gains of an index without directly investing in the market….  This allows you to enjoy the upward movement of the account without ever have having to worry about a decrease.

When the market is doing good you will see an increase in your account.  If the market drops by 44% like it did in 2002 and again in 2008 or like it dropped 33% between 21 and 2022….. You simply will not be credited with any gains; your credit will be zero. 

You will not lose 44% or 33% or even 1%, you will lose nothing if the market goes south, doesn’t matter if it’s down for 3 years or more you will not lose any money due to market decline.  When the market rebounds you’ll again start to receive a portion of the gains.  

The annual point to point is your best friend when the market is down, it’s a security blanket against financial loss.

The cap feature of an IUL is technically what pays the cost of having this type of protection. There isn’t a product on the market that will allow you unlimited gains while at the same time offering you unlimited downside protection.

There isn’t a product where you can earn unlimited interest without ever worrying about losing your money. So basically, you just have to make a decision on what you’re more comfortable with. A if you like the idea of having unlimited gains and you’re not worried about losing any money when the market goes South, or you feel like you have time on your side because you’re in your 20s or 30s so that if the market does go South, you have more years to rebound.

If this sounds like your profile, then investing all your money in aggressive stocks might be your path however if you don’t have time to recover from a market loss or you’re worried about losing money when the stock market goes down then maybe putting some of your money into an account that can protect you against a market loss might be the path you want to take. There is no one-size-fits-all scenario, it’s really up to your own individual circumstances and what you’re trying to accomplish with your retirement income. However, rest assured the monies inside of an IL will be protected against a downturn in the market.

If you were to ask individuals who lost 44% of their account value in 2002 or 2009 or 33% between 2021 and 2022, I’m sure if they had to do it all over again they would have had a ton of their money in a market stop loss account such as an IUL!

 

Should you put all your money in an IUL or cash value life insurance policy?

Absolutely not!

 

Many financial advisors recommend a 60/40 split 60% stock with a 40% bond blend!

 

A life insurance policy isn’t designed to replace stocks, it doesn’t matter if it’s a whole life insurance policy a guaranteed universal life insurance policy or an IUL index universal life insurance policy. A life insurance policy isn’t designed to take the place of a stock portfolio. The best designed life insurance policy will not outperform and aggressive stock portfolio. However, a properly designed life insurance policy can and will outperform the bond portion of the portfolio.

 

The bond portion of a stock portfolio is typically a stockbroker’s safe money tool. Bonds are safer than stocks but they’re still subject to market volatility, just ask Silicon Valley bank along with a few other banks that bottomed out in 2023.

One surprising fact you may not be aware of is this: Our nation’s richest institutions the banks are the largest purchasers of cash value life insurance. Collectively 3100 banks are sitting on over $200 billion of liquid cash value by way of cash value life insurance policies.

 

Don’t believe me, just Google BOLI which stands for bank owned life insurance. Banks are required to report how much life insurance they own in fact many banks report their cash value life insurance policies as part of their secure investments on their tier one reporting forms and this is all public information. A certain percentage of A banks tier one holdings must be considered safe and banks use cash value life insurance as their safe money alternative.

Cash value life insurance must work if the banks have access to $200 billion of cash value! OK!

But like I said don’t take my word for this Google bank owned life insurance it will shock you how much cash value life insurance banks own.

 

No contribution limits no age limits on withdrawals no RMDs

 

A few awesome benefits of an index universal life insurance product is this:

 

There are no contribution limits so you can contribute as much money as you want up to the original design of the policy and it will always be taxed advantaged.  

 

No age limits you just have to qualify medically and there are no distribution limits, remove as little or as much as you like “No RMDs!” These attributes make it very attractive for high Network earners, individuals who’ve already maxed out other sources.

 

 Individuals who are not high net worth earners can take advantage of these benefits as well however I do have personal qualifications I place on my clients when it comes to recommending an IUL – index universal life insurance product for Max funded tax-free retirement income purposes.

 

 

 

Investing should be looked at as a long-term commitment. Investing in an indexed universal life insurance product is no different, it should be looked at as a long-term goal not short-term.

 

The goal of using an IUL for retirement purposes is not to worry about what the monthly premium is if you are not able to afford a regular monthly premium, you’re certainly not going to properly Max Fund an IUL.

 

 

If you are living paycheck to paycheck Max funding and IUL should not be on your radar now. If you don’t already have at least 5 to 6 months of living expenses saved up sitting in your savings account, you might not be a good candidate for Max funding and IUL.

 

 

At the moment, you might not be a good candidate to Max Fund an IUL if your total expenses exceed 50% of your total take-home pay. I will say that most people have the ability through sacrifice to wipe out $200 – $300 worth of needless spending, but again do you have the discipline to make that sacrifice.

 

 

The ideal candidate should have at least $12,000 to $18,000 per year they can commit to for at least 7 to 10 years. 

 

 

If you don’t have 12,000 or $18,000 at the minimum, you can commit every year, but you are a highly disciplined individual we can create a mini plan based upon an annual commitment of $5,000 and yes this $5000 can be broken down into monthly contributions.

 

 I don’t want to put clients in a position of potentially losing money as a result of not being able to follow through with their commitment for this type of plan.

 

 95% of all cash value building policies to include whole life insurance along with index universal life insurance 95% of policies designed for any kind of Max accumulation strategy will lapse within the first 19 months when money allocated to these accounts equal less than $5,000 a year.

 

 

You don’t have to be a high-net-worth earner in order to take advantage of an indexed universal life Max funding strategy. However, you should have financial stability in your household with an already existing rainy day emergency fund. 

 

Another key component I look at is this: are you taking advantage of your employer 401K match, it’s free money why not? I would only contribute to your employers match and not a dime more!

 

 

 There’s no shortage of advisors and agents willing to take less than normal minimum standards to create a plan like this for you. I came across a client who said they were Max funding a policy and they were only paying $75 per month.

 

I asked a client was it just for death benefit or were you trying to grow income to supplement your retirement.

 

The response was according to the agent they should be able to have a nice supplemental income to their retirement plan in 5 to 6 years. These clients were in their very late 50s and based upon their current financial profile certainly not ideal clients for a max-funded strategy.

 

If you think contributing $75 per month into any kind of plan for six and a half years is going to yield you a nice supplement to your retirement income, (well let me just leave it at that)

 

 

 

 

 

An IUL, for the right client can be an awesome tool to grow income tax free retirement income there’s:

• No age requirements.
• No minimum distributions -RMDs.
• No contribution limits.
• If structured properly no fees to access your money.
• Protected against stock market loss.
• Protected against creditors and litigation.

 

 

 

 

 

 

 

 

 

 

 

 

 

The Fees Are Too High For An IUL To Be An Adequate Cash Building Tool!

 

 

In this article I want to go over a comment made about “fees inside of an IUL Index Universal Life Insurance policy or any cash value building policy to include whole life insurance, are too high so therefore it’s not a good source for building income. 

 

 Hopefully this article will be an eye-opening moment for you as we dive into the fees of an IUL or cash value building policy. 

 

When I hear it an anti IUL or anti whole life Guru talk about the fees being high the first question I ask and the first question you should ask is this:  

 

The fees are high compared to what?

 

This is the first question that you should ask, the second question is this: Are the fees high during the life of the policy compared to the life of a managed market investment account?  

 

For the record, I already know when the “Gurus” are talking about the fees being high in an IUL, they’re only looking at the first few years of a life insurance policy. They are assuming you have no idea life insurance policies are front loaded while overlooking an essential part of the argument in that most of the fees paid on a brokerage account is paid on the back end.  

 

 They fail to mention many of the fees drop off after a certain amount of time…  maybe they just don’t know and if they don’t know that brings into question their Guru status. They fail to mention that although the per unit cost of insurance increases as you get older, the overall cost of insurance decreases drastically. The fees over the life of a properly structured IUL can be as low as 1% or less.  

 

Either these gurus don’t understand how these policies work or they are purposely misleading you to keep you paying their investment and money management fees. 

 

Typically, an example given to prove the fees are high in an IUL policy is done using a contract that is not structured properly using a high death benefit.  

 

 The goal of using an IUL or any cash value building policy for maximum cash accumulation is not to see how large of a death benefit you can purchase for a given amount of dollars, it’s the exact opposite. The goal is to purchase the least amount of death benefit while contributing the maximum amount allowed under IRS regulations. 

 

 For example, I reviewed a poorly structured policy with a $1 million death benefit and the premium was $2,000 per month.  After reviewing the client’s age and health conditions, although the plan is being overfunded, it was still structured improperly. 

 

 A Max Funded IUL must resemble a spigot, squeezing out every drop of Life Insurance you can. With this approach it lowers the fees per dollar spent as a result of lowering the overall death benefit.  

 

If a policy isn’t structured properly, you will not be able to change or correct the issues later so it’s imperative that you’re dealing with an agent or advisor who knows how to properly structure these plans. 

 

I created a new plan using the same $2,000 monthly payment, dropping the death benefit to $421,000 while eliminating more than half of the fees associated with the original plan. 

Using the least amount of death benefit is the first step in properly structuring an IUL for maximum cash value accumulation, get this part wrong and the plan will not produce the results as advertised by your agent or advisor. 

 

As a side note I offer an IUL and whole life insurance rescue plan. I will review your plan free of charge giving you the Peace of Mind of knowing your plan is set up correctly. 

 

 Now let’s look at some hypothetical numbers. 

 This example calls for $100,000 Max Funded into a properly structured IUL policy. 

 

The fees for this policy over the first 30 years would equal $86,549. 

 

I will admit $87,000 is a lot of money to pay in fees but the real question is this:  if the fees are considered high, what are we comparing the $87,000 in fees with? 

 

To avoid this policy turning into a Mec-modified endowment contract the $100,000 was dumped into this policy over a 7-year period. Next, we’re going to look at what you might pay in a managed brokerage account assuming the same $100,000 over a 30-year window. 

 

The Famous Financial gurus recommended advisors charge an average fee of 1.5%, so we’re going to look at $100,000 with a 1.5% fee charged over 30 years. In the first year with the managed brokerage account, 1.5% charged on a lump sum of $100,000 equals $1,500. 

 

Using my example of spreading $100,000 over 7 years in the properly structured IUL the first-year fees equal around $11,859 

 

If you only look at the first year of both accounts hands down the fees in the managed brokerage account are considerably less. The fees in the first 3 years of this IUL will top $25,000+. But keep in mind, I mentioned earlier that life insurance policies are front loaded to pay for the cost of insurance. 

 The fees in the first year is much higher in the life insurance policy as compared to the brokerage account, however if you died prematurely your beneficiaries would receive a $302,725.00 income tax free death benefit or if you developed a chronic Illness, you would receive a tax-free lump sum payout of $250,000.

 Also, the death benefit by age 75 would increase to $674,465. These benefits are active the very same day the coverage is started….. with the brokerage account after the first year and assuming a 10% growth you would 108,350 before taxes. 

 

Someone might be thinking that a 10% gain on $100,000 is actually $110,000; you are correct however in a managed brokerage account the fee is charged on the front end not the back end which means the 1.5% fee is charged before you even invest the money in the market, this leaves you with $98,500 to be invested in the market and 10% of 98,500 is $108,350. 

 

Now for the numbers. 

 

If you invested $100,000 in a managed brokerage account with a 1.5% fee over 30 years assuming a10% return.  

 

 

The ending value (net with fees) is $1,155,825.16. 

 

Ending Value (Gross) $1,744,940.23 

 

 The fees would total $589,115.07!  

 

 

 

I know someone right now is thinking, “But I only pay 1.25%. 

 

At 1.25% the numbers are: 

 

• The ending value (net with fees) is $1,238,448.55. 
• Ending Value (Gross) $1,744,940.23 
• The fees would total is $506,491.68. 

 

 

There’s another person saying they only pay 1% 

 

• At 1% the numbers are: 
• The ending value (net with fees) is $1,326,767.85. 
• Ending Value (Gross) $1,744,940.23 
• Cost of fees $418,172.38 

 

When these Financial gurus are bragging about how the fees are so high in an IUL and the first thing they say is if you invest $100,000 with us, we’re only going to charge you 1.5%, they fail to mention the 1.5% will be compounding over 30 years for a total of almost $600,000. 

 

Now I think it would be silly for me to ask which sum of money you would rather pay almost $600,000 over 30 years or almost $90,000 over 30 years?

 

When an investment advisor / financial advisor /money manager/ Entertainer, says the fees in an IUL or cash value life insurance policy are really high…you should follow that statement with: (the fees are high compared to what) 

 

 Even if we only use the 1% money management fee, you’re still paying $419,000 over a 30-year period.  The answer is yes when asked if the fees in an IUL policy are high but the real question to ask is…. compared to what? 

 

 

In closing I want to look at potential Commissions an insurance agent might earn for selling a policy with premiums of $100,000 spread over 7 years. 

 

I wasn’t going to include this section but at the last minute I decided why not let’s go ahead and talk about it. 

 One of the reasons why according to various financial gurus that an insurance agent is trying to sell you a whole life insurance policy or an IUL policy is because they’re going to make big fat commissions by doing so. 

 

 

 

 

And of course, you might have already guessed it, just like they misguide you on the fees of an IUL compared to what the money managed accounts they recommend charge over the life of the two different accounts… these same gurus certainly misguide you on the money an insurance agent will make for selling a Max funded policy versus the money they will earn for managing your money.  

 

Hint, I’ve already displayed what they’re going to earn over 30 years but let’s look at it again and do a comparison. 

 

Let’s first look at what an insurance agent might potentially earn and to do so I ran an illustration showing $100,000 placed into an IUL over 7 years the same example I’ve used in this article. 

 

Illustration Name:	test
Face Amount:	$302,725.00
Minimum Premium:	$1,919.28
Target Premium:	$3,747.74
7-Pay Premium:	$18,403.39
Modal Premium:	$14,285.71
Mode:	Annual

 

 

 

With a Max funded IUL policy insurance agents and advisors will earn $99.5% of their money off of the Target Premium and half percent of their money will come from the excess premiums paid. 

 

Let’s just assume the agent or advisor is on a 100% contract level. 

 

The commission for excess premiums is more than likely 1%. However, in this example I’m going to use 3% as the excess premium commissions earned. 

 

This means as you can see in this example the agent would earn $3,747.74 upfront which is 100% of the first-year premium. 

Along with 3% of the excess premium which equals 316.16 for a total of $4,063.91. 

 

 

The typical payout for future income for this policy is typically 3% of the target monthly premium plus an additional half percent of the excess monthly premium. 

 

 

The monthly premium for this plan for 7 years is $312.31 the commission for this monthly Target Premium would be $9.36 monthly for as long as the premiums are paid and in this example the premiums will be paid for 7 years if you were to divide out the annual excess premiums by 12 months that would make the monthly premium $878.16 a half percent of that number is $43.90 for a grand total of $53.27 monthly for 6 years  $3,835.30. 

 

Add the additional 6-year payout to the first-year commissions for a total of $7,899.21. 

 

 

I’m sorry for asking you another silly question, however I feel the need to do so. Would you rather earn $7,899.21 over a 30-year period or would you rather receive as a payout of 589,115.07 over 30 years and at the minimum $418,172.38. 

 

 Who knew that a 1% fee charge could generate so much money in commissions or fees. 

 

The moral of this story is when you hear someone talking about the high fees that are charged in an IUL or whole life insurance policy the next question you should ask is compared to what?

 

When you hear a financial advisor talking about the fat commissions that an insurance agent or advisor is going to earn as a result of selling you a whole life or index universal life policy the next question you should ask is, compared to what? 

 

 I would like to compare the commissions using the same 100k deposit spread over 7 years only instead of using a Max funded strategy we’ll simply use a target premium. 

 

The max funded example I used above is the correct path towards a properly structured IUL, the following example is what you want to avoid if the goal is for maximum cash value.  

 

In my previous example $100,000 spread over 7 years purchased only $302,775 of life insurance coverage. If the goal was to purchase as much life insurance as possible $100,000 spread over 7 years at the target premium would provide you with $1,663,132 of life insurance death benefit.  

 

 

The first goal of properly structuring a Max funded IUL is to eliminate as much life insurance as possible while contributing the maximum amount of cash into the policy.  

 

In my max funded example I was able to get rid of $1,360,407. In my example instead of paying the cost of insurance on 1.6 million dollars I’m now only paying the cost of insurance on $300k.  

 

You certainly don’t have to be a math genius to figure out, this one simple adjustment will save you thousands of dollars over the life of the policy along with allowing more of your money to work on your behalf.  

 

 

99.9999% of the time when a critic is illustrating why using an IUL or cash value policy isn’t a good idea, typically they are using an example that matches the use a target premium designed plan or they’ll present an example of a slightly overfunded policy and not a correctly structed max funded policy. 

 

 Let’s look at the commission difference between the max funded policy and the target premium example:  

 

$14,285.71 Is the annual premium for 7 years to equal 100k. I’ll use the same commission percentage as above.  

The first-year commissions on this plan assuming a 100% first year contract is $14,285.71 Assuming the same 3% monthly premium payout, add an additional $2,571.42 for a total 7-year payout of: $16,857.14. 

Compare earning $16,857.14 vs only earning $7,899.21. An agent or advisor selling a max funded policy with a target premium will earn more than double using the same premium dollars.  

 

When using a Max funded IUL strategy, it’s imperative the policy is structured properly from day one.  Once the policy is active and you realize it wasn’t set up correctly, you could always call the insurance company and have them reduce the life insurance death benefit amount, however doing so will not reduce the overall fees.

 

The only option you really have is to create a new plan with an Advisor who understands how to correctly structure a policy for Max Funded Purposes.  

 

 

 

 

 

Using An IUL To Solve The

Long-Term Care Dilemma

 

 

 

As of 2023 49 million Americans are retired and only 7.5 million has some kind of long-term care plan in place.

With only 14% of retired Americans possessing some kind of long-term care coverage along with 10,000 people turning age 65 everyday, we could be in for a long-term care crisis.

 

A recent poll discovered many retirees are worried about Long Term Care Medical Cost wiping out their retirement nest egg. The median retirement income for married couples over 65 was about $72,800 in 2020.

 

 It’s important to understand the financial impact a few years of long-term care can have.

 

According to AARP.

Nursing Home Care: The average cost of a year’s care in a private Medicare-certified long-term nursing home room is $107,000.

Home Care: The average in-home care costs $50,918 a year for 40 hours of help per week.⁴

Assisted Living Care: A year in a 1-bedroom assisted living care facility averages $57,000 per year.

 

^{With the median retirement income for married couples at $73,000 it could be financially devasting just to pay for the least expense type of care, which is “Home Care” at an average of $51,000 each year.  The average long-term care need as of today (2023) is around 3 to 5 years.}

^{For home care that’s an average of $153,000 – $255,000. For nursing home care, it could be dramatically more, $321,000 to $535,000.}

 

Typical Long Term Care Insurance simply doesn’t fit the needs of most retirees. Most financial gurus advise their clients not to purchase LTC until age 60 or 65 but ask yourself this question.

 

How many 60-65-year-olds “ARE NOT TAKING SOME KIND OF PRESCRIPTION DRUG” as a result of a preexisting condition?

 

The facts are clear, many Americans aged 60 and older have a preexisting condition. As a result, it makes obtaining coverage at a reasonable price very difficult,

I’m assuming that’s part of the reason why only 7.5 million retirees have LTC while 41.5 million retirees go without coverage.

 

The next issue is this…. After considering several premium rate increases from age 65 to age 85 paying around $70,000 over this 20-year span, if you were to die without ever needing to use the LTC policy your beneficiaries would receive nothing. There’s no return of premiums, there’s no built-in death benefit to the beneficiaries. The money is simply gone!

 

GOOD NEWS!

 

Fortunately, there is a better way. With a Long-Term Care Strategy Plan, we can double or triple your long-term care coverage, while protecting your retirement nest egg.

 

 If after 20 -25 years you decide you no longer need the coverage and assuming you didn’t use any of the benefits, simply request a 100% return of all your money. If you die without needing the coverage, rest assured your beneficiaries will receive an inheritance.

 

 

 

Money inside of a life insurance policy is

free from creditors and litigation.

 

 

 

 

 

Cash value life insurance policies provide asset protection against creditor claims. When a creditor obtains a judgment or a debtor files bankruptcy, the debtor’s assets can be seized and liquidated to satisfy debts. However, each state has exemption laws that identify specific asset categories that are immune or partially immune from attachment. The cash value and death benefits of life insurance policies are exempt in whole or in part in almost every state.

 

Exemption laws vary by state, with some states offering complete exemptions for life insurance, and others capping exemption amounts. Most states have one or more conditions for taking advantage of life insurance asset protection, such as requiring the beneficiary to be a third party. Exclusions to exemptions exist, such as when life insurance is purchased to defraud creditors or when the claim asserted against the policyowner is a domestic support obligation.

 

In bankruptcy cases, exempt assets like cash value life insurance are held outside of the bankruptcy estate and therefore not subject to attachment. The exemptions applicable to bankruptcy are usually the same as creditor exemptions, with federal exemptions allowing for an exemption of up to $15,000 for whole life and universal life cash value.

 

Most states exempt life insurance policy proceeds, with some requiring that proceeds be payable to a third-party beneficiary. Additional protections against creditors of both the insured and beneficiary can be gained through an irrevocable life insurance trust (ILIT).

 

There are substantial differences in the life insurance exemptions available throughout the fifty states, with Florida offering one of the most generous exemption schemes. New Hampshire and Washington do not provide some cash-value exemption for an insured policyowner but permit filers to apply federal exemption rules.

 

 

 

 

 

 

 

__________________________
North Carolina Rules:
NC
EXCEMPTION AMOUNT (CASH VALUE)
Unlimited

EXEMPTION CONDITIONS

Complete exemption if beneficiary is insured’s spouse and/or children. N.C. Gen. Stat. §58-58-95.

EXEMPTION SAME FOR BK & CREDITORS

Yes.

EXEMPTION OF DEATH BENEFITS
Lawful beneficiaries have right to proceeds as against creditors of policyowner / insured unless beneficiary is insured or insured’s estate. N.C. Gen. Stat. §§58-58-95, 58-58-115.

 

Use cash value life insurance to shield your money from creditors and litigation!

 

Gambrell Financial
Mel Gambrell

https://gambrellfinancial.com

info@gambrellfinancial.com

http://www.melgambrell.com/
(919) 228-9783

(919) 519-2721

Copyright © [2023]. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without prior written permission from the author. This publication aims to provide accurate and authoritative information regarding the subject matter discussed. It is important to note that the author is not providing legal, accounting, or other professional advice through this publication. If you require such advice, it is recommended that you consult a qualified professional in the respective field. The information contained in this publication is intended for general use, but it is crucial to understand that individual circumstances may vary significantly. Therefore, it is advisable to rely on this information only when it is accompanied by personalized and professional tax and/or financial advice. Prior to taking any actions based on the information presented in this report, it is essential to consider your specific situation, including your health and legacy goals. Please be aware that the information provided, as well as any opinions expressed, should not be construed as an offer to purchase any insurance or securities products and services. Furthermore, it should not be relied upon as tax or legal advice for the purpose of avoiding any individual Federal or State tax penalties. Mel Gambrell, his employees, or representatives are not authorized to offer tax or legal advice. Individuals are strongly advised to seek guidance from their own tax and legal counsel, as well as their own financial and/or insurance professionals.

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IUL MYSTERY’S MYTHS & FACTS EXPLAINED