Simplify Your Legacy with Expert Insights from Adam Zuckerman

Episode Summary

In this episode, Adam Zuckerman shares his insights on the importance of estate planning and the tools necessary to make the process easier. He discusses his journey towards creating solutions that help individuals manage their estate and end-of-life tasks efficiently. The conversation delves into the significance of preparing for asset protection, collaborating with financial advisors, and working with estate attorneys and religious organizations to ensure a smooth transition of wealth.

Guest Info

Buried In Work Website

Key Takeaways

  1. Start Early with Estate Planning:
    • Proactive Planning: Adam Zuckerman stresses the importance of initiating estate planning early in life, even as young as 18 or 19 years old. This early start ensures that your assets and final wishes are well-documented, avoiding complications later on.
    • Building a Strong Foundation: By starting early, individuals can build a comprehensive estate plan that evolves over time as their financial situation and family dynamics change. This approach allows for adjustments and refinements, leading to a more robust and resilient plan.
  2. Innovative Tools and Resources for Estate Planning:
    • Buried in Work: Adam’s company, Buried in Work, provides a suite of tools designed to simplify estate planning. These tools are geared towards streamlining the process of organizing important documents, managing digital assets, and preparing for end-of-life tasks.
    • Technology Integration: The use of technology in estate planning is a significant innovation that Adam emphasizes. These digital solutions help users keep track of their assets, legal documents, and other critical information in a centralized and easily accessible manner.
  3. Collaboration with Financial and Legal Professionals:
    • Expert Guidance: Estate planning is a complex process that often requires the expertise of financial advisors, estate attorneys, and tax professionals. Adam underscores the importance of collaborating with these professionals to ensure all aspects of the plan are legally sound and financially optimized.
    • Holistic Approach: By working with a team of experts, individuals can address not only the financial and legal aspects of estate planning but also the emotional and ethical considerations, such as how to handle family disputes and ensure that beneficiaries are well taken care of.
  4. Personalized Estate Planning Solutions:
    • Tailored Plans: Adam advocates for personalized estate planning solutions that cater to the unique needs of each individual. This includes considering family dynamics, the specific types of assets involved, and personal values and preferences.
    • Adaptability: Estate plans should be adaptable to changes in life circumstances, such as marriage, divorce, the birth of children, or significant changes in financial status. A flexible plan can be adjusted to reflect these life events, ensuring that it remains relevant and effective.
  5. End-of-Life Planning Beyond Finances:
    • Comprehensive Preparation: Estate planning is not just about distributing assets; it also involves preparing for end-of-life decisions. Adam discusses the importance of addressing issues like healthcare directives, living wills, and funeral arrangements.
    • Emotional Considerations: The emotional aspect of estate planning is often overlooked, but Adam highlights the importance of preparing your loved ones for the transition. This includes having open conversations with family members about your wishes and ensuring that they understand the rationale behind your decisions.
  6. Legacy and Wealth Transfer:
    • Preserving Wealth Across Generations: One of the key goals of estate planning is to ensure that wealth is preserved and transferred efficiently to the next generation. Adam discusses strategies for minimizing taxes and protecting assets from potential risks.
    • Creating a Lasting Impact: Beyond financial wealth, Adam encourages individuals to consider the legacy they want to leave behind. This could include charitable contributions, establishing trusts for future generations, or creating a family foundation.
  7. Personal Experience as a Catalyst for Innovation:
    • Adam’s Journey: Adam shares how his personal experiences, including challenges faced during his own family’s estate planning process, inspired him to create solutions that address the common pain points people encounter. His journey highlights the importance of empathy and understanding in developing effective estate planning tools.
    • Practical Solutions: The products and services offered by Buried in Work are grounded in real-world experiences, making them practical and user-friendly. Adam’s goal is to demystify estate planning and make it accessible to everyone, regardless of their background or financial situation.

Transcript

Olivia: “Hello and welcome to the Control Your Cash podcast. I’m your host, Olivia Kirk.”

Tim: “And I’m your co-host, Tim Yurick. Today we have with us Adam Zuckerman. Adam, thank you so much for joining us today.”

Adam: “Yeah, it’s great to be here. I think I like ‘otter’ better. That should be a new nickname.”

Olivia: “Hey, you got it, at least for the next hour. All right, let me tell you guys a little bit about Adam. As an entrepreneur, attorney, and MBA, Adam is a subject matter expert focused on the impact and implementation of future-facing technologies and the fourth industrial revolution, often at the intersection of enterprise growth and startups. With a diverse background in many industry verticals, including energy, finance, nonprofits, startups, and Fortune 500 companies, he serves as an advisor to several organizations, keynotes events around the world, and has been hired to present on the future of marketing and technology to leading global agencies. He’s also an Eisenhower fellow, adjunct professor at the University of Maryland, and has been a guest analyst on the topic of business and technology on CNBC nearly two dozen times. So again, thank you so much, Adam, for being with us. We’re excited for a great show.”

Adam: “It is great to be here. That is a bio that I haven’t heard for a very long time, but it’s a blast from the past. Glad to be here, and we’ll talk about what we’re working on today too.”

Tim: “Yeah, awesome. So, Adam, I appeared on your podcast several weeks ago, and it occurred to me that you and I have a lot of synergies in the business that we do. So I was very, very interested in the estate planning concepts that you have experienced and you have sort of perfected in my eyes. So if you could give us a sort of a background on your journey as to how you got to that point and, more importantly, some of the collateral and the products that you have designed and implemented.”

Adam: “Yeah, I’d be happy to. It’s an unexpected journey that’s taken me to where I am today. So the current role is founder of a company called ‘Buried in Work’ that helps people simplify their estate planning and end-of-life tasks, all the way from when someone’s 18, 19 years old to past when someone passes away, whenever that might be in their estate transition. I was very fortunate to be in a situation based on all the skills and roles and opportunities that I had leading up to where I am today—that’s a little bit of what Olivia mentioned in the bio—to position me to build this company. And the funny thing is that I didn’t expect to make this company at all.

My father was at my house doing a bit of woodworking in the basement, and he walked up the stairs and said, ‘I’m tired.’ When he says, ‘I’m tired,’ it’s a little bit different than if Olivia or you, Tim, or I say it. When we say it, we want to take a nap; when he says it, it is an indication that he has to go to the doctor. The reason why is six and a half years prior, he was diagnosed with leukemia. I donated bone marrow to him a long time ago. He went to the doctor, and they checked him into the hospital on a Thursday, and 12 days later, he passed away far too quickly.

So, I hopped in and helped my mom transition everything on the estate. As with many people, it was a complicated and confusing situation. I took very diligent notes of everything I did. When I met with my mom’s financial planner and showed her what I had put together, she said it was the most comprehensive transition she had ever seen in her life. On one hand, I had that little devil on my shoulder saying, ‘Ah, she just doesn’t want you to move your mom’s money,’ and on the other shoulder, the angel saying, ‘Well, you’re pretty organized; maybe there’s something to this.’

She encouraged me to put it online, give the resources away, and share my learnings with others. I talked to a few friends and showed a few adults my mom’s age what I had done. The overwhelming response was, ‘Adam, you absolutely need to give this to other people.’ So, I built a website, and within a week, we had over 10,000 visits. The feedback was, ‘The information you put online is great; here’s my story, here’s what I learned; how can you help me with this?’ That last question turned into what became ‘Buried in Work,’ where we are creating resources that help people before they need it and after they need it. It’s effectively sharing information, giving the gift of organization.

Now, we’ve got products like checklists, guides, and the most comprehensive estate organization system available right now, called the Estate Preparation Package. It’s designed so that if you get hit by a bus, your family will have all the information they need to deal with your incapacitation or passing away—they won’t have to search for it. We can talk about that in a bit. We’ve also got card games now to help you capture those memories from loved ones, like the ‘Nothing Left Unsaid’ card game, which helps you quickly get through questions like, ‘Do you have a will? Do you have a trust? Who helped you with it? Where are they located? How do you feel about palliative care?’

We started off helping individuals, but now we’re working with businesses, service providers, attorneys, CPAs, synagogues, temples, churches, hospice companies, and nursing homes. The interest in what we’re doing is quite frankly wonderful. That’s a quick overview of where we are.”

Tim: “You know, they say that Innovation is the mother of necessity, right? So I think it’s incredible that you were sort of backed into this position, and you basically became the executor of your dad’s estate. All of a sudden, I think your background as an attorney probably helped you with the organizational skills for sure. But that being said, there are a lot of attorneys out there who aren’t really organized as well, so it was obviously a combination of a lot of things. But at the end of the day, one of the things that attracted me to your company is the fact that this is an all-encompassing process that really doesn’t seem that difficult to implement.”

Adam: “That’s right. On average, it takes 570 hours to administer an estate in the United States, and the reason isn’t that the process is extremely difficult—it can be challenging if you’ve never gone through it before—but rather, the people going through it for the first time are in a time of grief, stress, and they’re on a scavenger hunt to find information. What we found is that if you organize everything in an estate, in a status, in a place that’s easy for your loved ones to find—your heirs, your spouse, your executor, your administrator—the effort will be the same in terms of the process, but they’ll have the tools to go through it much faster.

By doing so, we’ve expanded the definition of estate planning—not just having a will or a trust or giving directions on what to do with your assets or belongings when you pass away, but really positioning your entire family to have the tools and resources they need. What I mean by that is, if you have pets, what’s going to happen to them if something happens to you? Who’s going to water your plants? What bank accounts do you have, where are they located, how do you access them, how are your bills paid? On average, women outlive their male spouses by 5.8 years in the United States, and there are many millions of people about to find themselves in a situation where they’re not familiar with paying the bills. We have a solution that provides peace of mind by giving them the information they need—knowing where accounts are, how to pay bills, and what needs to be done.”

Tim: “You know, that is so important. In our business, when we help families ensure the breadwinner or businesses ensure key people, there’s going to be a windfall of money coming into that estate, family, or business. A lot of times, the people left behind may not be familiar with handling money or paying bills, let alone managing a large amount of money. And it comes at a time when the key person, who the survivor relied upon to make large decisions, is no longer there. Now, at the time you need to make these big, important decisions, the key person you’ve always relied upon is gone. This puts the survivor, whether it’s a spouse or a child, in a very overwhelming and confusing situation.”

Adam: “Tim, you’re right. It’s funny, my dad always said to my mom, ‘Don’t worry, Adam will take care of it.’ And in a way, he was right, and he also knew my sisters would help out because they’re involved in some capacity. But in his mind, if you asked him, ‘Where is the receipt for when you replaced the roof 20 years ago?’ he’d go to the office, second drawer down, six files back, and he’d know exactly where it was. But him knowing that is very different from someone saying, ‘Oh, Adam knows the files are in the office.’ So, whereas you might think, ‘Oh, I’m totally organized,’ or ‘Oh, my child knows the key to my safe,’ it doesn’t mean they actually know where things are or have the information in a way they can process. What’s important is to step back from your perspective and, using design thinking, put yourself in the shoes of the people who’ll be impacted to see how they would react if something happened. That’s when things get surprising.”

Olivia: “That makes a lot of sense, Adam. It’s funny because, as a young adult, you start thinking about these things—your parents, the things you’ll have to deal with. And it’s funny because so many families don’t talk about this stuff. Those conversations aren’t being had about money, it’s still not talked about at the dinner table. Are you seeing that a lot in your position, or are these people who come to you more from the older generation or the younger generation when planning?”

Adam: “It’s a pretty even split and changes depending on the week. What’s been phenomenal is that we found when the older generation comes to us, they’re not just looking out for themselves but also thinking, ‘Hey, I’ve got children that I want to position better.’ So they’ll buy an estate preparation package and they’ll also get one for their child or for their children. And then we also have people coming to us saying, ‘Hey, here’s a life event—I just got married, I just had a child, I just got a new job, and I want to make sure that things are in order.’ And then when they see it, they go, ‘Oh wait a minute, I actually need to get this for my parents too.’ So then they buy multiple packages, sometimes they only buy one, sometimes they don’t buy anything and they use our self-serve resources on the website as well.

But the neat thing is that the people coming to us often are doing so because someone they know—whether it’s them directly or a family member or a friend—has gone through this process and they saw how hard it is, and they’re looking for solutions. This is not something that you typically wake up on your own and go, ‘You know what, today is the day I’m going to spend going through my bills or gathering my information and writing down my family genealogy and gathering the information so all my tax returns are in the same place.’ Something happens, and with the way the demographics are going in the country right now—10,000 Americans turning 65 every day—this ‘something’ is going to happen to more and more people at a faster and faster rate.”

Tim: “Absolutely. So, are you seeing that so much of our bills and life are now online, and when people don’t do this preparation, I imagine it’d be very difficult to know where everything is because all you would have is your parents’ phone, you know, if they’re tech-savvy enough to have all the apps and everything set up on bill pay. I know my neighbor passed away recently, and his sons were looking through his bills, and they were like, ‘Why is he being charged $125 a month for this?’ It turned out to be their mother’s cell phone bill from when she died like 10 years ago, and he’s been paying this bill for so long. So you just don’t know what’s out there if you don’t have it written down somewhere.”

Adam: “Yeah, that’s so true. The joke used to be—and I say joke in quotes—between attorneys, if you wanted to know what bills somebody had after they passed away, just check their mail because within three months, you’re going to get a letter of delinquency. But that was a joke from two decades ago. Things are very different now, where you know, ‘Go paperless, it saves the environment, it helps the companies.’ Well, that also means there isn’t as much of a paper trail. And you’re a little bit younger than I am—maybe you’ve seen the movie Zoolander, the joke of ‘The files are in the computer.’ Well, if the files are on the computer, it doesn’t mean I know how to find them. It’s the same thing with the office, only even worse. And that’s exactly right—people now also have to worry about something called their ‘digital legacy.’ That’s your email and online accounts and passwords. Who has access to it? What happens to your files when you pass away? If you have Facebook, is it memorialized? Who can log in? What do you want to have happen to your photos? Should they be deleted? Should somebody get them?

What computers and phones do you have? Because if somebody’s not paying for the service on the cell phone, all those two-factor authentication text messages that we get, guess what—they’re going to be locked out of accounts if they could get in. And then you have to worry about, well, even if they can get in, should they be getting in? Because they may not be legally supposed to. A lot of people think, ‘Oh, I have a power of attorney, I can get into all these accounts after someone passes away.’ The reality is the power of attorney privileges cease immediately when the person dies. You have to go through and get a letter of administration or a death certificate, and then you have to file with them. So we’re creating templates to help people go through all these processes. There are a lot of tips and tricks that if you haven’t gone through it, you’re not going to know—not because you’re an idiot, but because you’ve never gone through it before. And that’s what we’re trying to do is just make things easier for people to simplify the process.”

Olivia: “Yeah, that makes a lot of sense. Is it different from state to state? Do you work with all of the states, or are you mainly in the Maryland area?”

Adam: “I love that question. We have a lot of customers in the Maryland area because that’s where we started, but our resources are countrywide. If you want to find out the requirements for a will in Arkansas, come to the website, and we have that. We won’t provide legal services, so while I am an attorney, we’re not offering legal advice, but we are providing the information and tools people need to navigate these processes.”

Adam: “As an attorney, I’m not providing legal services, and the team isn’t providing legal services. What I mean by that is we’re not drafting wills, we’re not drafting trust documentation for you. What we are doing is helping you get your information in order and then giving you a link to a service directory on our website where you can find attorneys in your area, tax professionals, funeral homes, cemeteries, hospice companies, long-term care hospitals in your area, and then they’ll be able to serve you better.

What people have told us is that after they’ve bought our estate preparation package, they actually saved money on their legal bills because the attorneys had all the information they needed. And while they’re billing hourly, they’re able to work even faster, so it pays for itself in a unique way.”

Tim: “Yeah, that’s absolutely true because, you know, the attorneys at least have an idea of where to go for the information, but it takes time to learn the stuff, right? It takes time to know—in our industry, it takes time to learn what questions to ask to get the right answer, and I’m sure it’s the same way in your industry and as the executor of the estate and as an attorney. So, yeah, it’s definitely a learning curve, and it takes time to learn things. So having it all in one place, I would imagine, makes for fewer mistakes along the way.”

Adam: “Service providers are very happy. There are a few tax professionals that we’re working with, and one is looking at a four-figure order—he’s getting estate preparation packages for all of his clients. The reason why is it’s an appreciation token; it gives you a reason to check in with them on an annual basis, it gives them a talking point to tell their friends, ‘Look what just happened,’ so it’s deal flow. There’s just a lot of stuff that is working out really well.”

Olivia: “So, Adam, you mentioned a card game. I’m curious as to how that developed and if you can give us a sort of story as to how it’s been successful.”

Adam: “Okay. We were sitting in the hospital with my father, and we were just joking. We knew that things were kind of on that downward spiral toward the end, but he was very competent and had all his faculties, give or take, up until just a day or two before he passed. We started saying, ‘Dad, tell us one more story about this. What do you think about that? What’s your favorite food that you ate? Tell me the story about how you met Mom. What’s your legacy that you want to leave? If there’s one more thing that you could have done, what would you have done?’ Because the reality is, when somebody passes away, unless you have a recording of them, unless you had a conversation with them, their stories are gone, and that’s unfortunate.

So what we did is we took 126 questions across six categories and put them into a card game. It’s called ‘One More Story.’ You can get it on our website; it will be on Amazon probably by the time this goes up. It’s actually in Johns Hopkins Hospital right now in the gift stores, which is kind of neat, and in other places too. It just allows you to have these stories and conversations.

What is interesting is how people are using these cards. I originally thought they would be designed and delivered in a way that you could use them when people are getting older. So, they’re poker-style cards, a much thicker box, really easy to open, the finish on them is tactile design so it doesn’t slip out of your hands—you know, we’ve all seen those bad playing cards, but these are high quality. They’re printed in the United States, and their GSM 300, if that means anything to anybody, so the weight is hefty.

But people are buying them, and we’ve gotten emails saying, ‘Oh, after going through the game, I left them on my kitchen table. My teenage daughter and her friend, I came home, and they were going through the questions,’ and it led to conversations. We’ve had people reach out and say that they’ve taken them on dates, which I thought was crazy, but when you think about it, it’s like, ‘Yeah, they’re really good get-to-know-you cards, why not?’ We were written up in a ‘Best Father’s Day Road Trip’ guide, which is pretty neat.

And then on the other side of the equation, the ‘Nothing Left Unsaid’ one—it’s a little bit more of a heavier topic. It has questions like, ‘Do you have a will? Do you have a trust? Where are they?’ It goes through a lot of the questions that you really want to have answered if you can, without having to write everything down. But that’s the ‘Okay, really quick, let’s get this done,’ and lawyers and CPAs—they’re buying them and giving them to their clients as well. They’re leaving it in their office in the waiting room so when people see them, it gives them the idea of, ‘Wait a minute, I didn’t think about having a guardianship designation in my will. That’s what this definition is; I should talk to my attorney about that.’ So it pre-educates them and helps with an upsell from the business side—a lot of use cases, some of which were unexpected, some of which are working out better than we thought.”

Olivia: “That’s amazing. So Adam, you were talking earlier about working with, you know, businesses, CPAs, synagogues, and everything like that. In what capacity are you working with them?”

Adam: “That’s a good question. So it depends on the company themselves. We have a bunch of different offerings, and we custom tailor them. If you’re an association or religious organization, we have fundraisers where you can take our products, and we have a commission structure that goes back to you. We have custom-branded white-label options, so ‘powered by Buried in Work,’ where we have 1,700 articles on the website, 30-plus guides and checklists. We’ll sit down and go through and say, ‘Alright, which of these are good for your community?’ and then we come up with a package where that can live on their website, or they can send people to us, and we’ll host a page for them where they have an instant, effectively, custom-branded resource bank for their communities or clients in a matter of weeks.

That’s great for hospice companies that want to focus on doing what they need to do, but they don’t necessarily want to say, ‘These are the instructions on how to transfer a car after somebody passes away in Pennsylvania.’ We have that information; we can put that together really quickly for them. Employee benefits—companies are offering our resources to their employees instead of just giving them a gym membership reimbursement, which is great, but this is something that gives them a lot of peace of mind. Sometimes it’s, ‘Okay, we just want to make the resources available,’ and other times it’s, ‘We’ll actually buy the estate preparation packages,’ or have you come in as a workshop.

End-of-life service providers—obviously estate sale providers—same thing, games, checklists, whatnot. Retirement, senior living communities, hospice, palliative care, pre-need insurance, therapists, death doulas—there are a lot of people interested right now. To give the exact answer of what we’re working with them on, it really is specific to the company we’re dealing with. As an example, earlier today there was a religious organization in Maryland that we’re talking about setting up a custom webpage for them that will host all the information for their congregants. For their members, the congregation, if something happened, their website would link to us. They’d have a special password, and they’d have everything they need to know about end-of-life planning in one spot.

So, long answer to a short question.”

Tim: “Yeah, because it does impact everyone, right? At the end of the day, most of us are going to deal with this unless, well, you have really good siblings. The former Chief Deputy Technology Officer at NASA was talking to me about one of the products, and I think his quote is one of the best we’ve had, and we actually put half of it on our box. The second half was, ‘Leave your heirs the gift of organization,’ which I think is brilliant. But the front half of the quote, which not a lot of people know, was effectively—and I’m going to paraphrase it—’Whether or not you settle somebody’s estate, somebody is going to settle yours.’ And that’s the truth of it. We all have an estate plan; the estate plan just might be dictated by the state’s laws or regulations if you don’t have something in place and you’re not taking matters into your own hands. So if you don’t want someone to advocate on your behalf without them necessarily knowing what your wishes are, it’s best to get organized and take control of the situation yourself, and he’s 100% correct.”

Olivia: “Wow, that is so profound too because it is spot-on. I mean, somebody’s going to settle my estate, somebody’s going to settle your estate, somebody’s going to settle Olivia’s estate—hopefully not for a long time—”

Tim: “Exactly.”

Olivia: “—but giving that person the gift of organization will make that job so much easier. And again, we see it a lot where people are so unprepared for the inevitability that is now right at their doorstep. And it is, as I said, overwhelming, confusing, and a lot of times, it’s maddening. They’re like, ‘Why didn’t he or she do this? Why didn’t they take care of these issues?’ And a lot of people just think, ‘Oh, I’ll get to it later. I’ve got plenty of time,’ or, ‘Oh, I just don’t need to deal with it.'”

Adam: “…because it’s someone else’s problem, but it’s unfortunate that the reality is that every single week I get phone calls from people going, ‘They weren’t prepared, they didn’t know, they didn’t wake up, they fell, they slipped—what do I do?’ And it’s heartbreaking to see. Fortunately, we are making the process a little bit easier for people who are willing to spend a little bit of time getting their affairs in order.”

Olivia: “Yeah, and I love that it sounds like you have options for pre-planning and for people who didn’t necessarily plan—checklists for both to get them through that tough time—which is a really good thing because, you know, you don’t necessarily have control over whether that person does the planning, right? You could nag your parents forever, and they don’t necessarily have to take those actions. But having that guidance afterward, I’m sure, is a big relief because there’s so much unknown.”

Adam: “Yeah, and like, we have analytics on the site. Right now, we have 12 active users on the site—I’ve got the dashboard up in front of me—so they’re in Nevada, Oklahoma, Texas, Mississippi, Alabama, South Carolina, North Carolina, Illinois, Montana, Washington, Maine, a few other places. So there’s actually more than 12 people; there’s a little bit of a delay. And we can see the pages that people are hitting. Right now, most people are on the ‘Find Unclaimed Property’ page—we have links to every single unclaimed property database in the country, both state and federal. But the second most-visited page right now is the checklist of ‘What to Do After Somebody Dies.’ It gives you 56 steps: ‘Do this, do this, do this.’ You can tell that those groups of people are likely in very different stages of the journey.

What I want to see is that the number of people utilizing the website shifts to the preparation pages as opposed to the after pages. But the reality is, right now, most people are looking—when you look at the metrics across the board—at pages that are, ‘Oh shoot, something just happened.’ And that’s a challenging thing to see for a lot of reasons.”

Olivia: “Yeah, but like you said earlier, you know, it starts with a trigger. There’s always a trigger to these thoughts in your head like, ‘Oh, I need to take steps.’ So hopefully, after they go through this checklist, they’re able to shift focus on, ‘Oh my gosh, I don’t want to do this to the next generation—let me get my stuff in order and be proactive going forward.’ So I’m sure some of the people are going to end up there, at least, right?”

Adam: “And that’s the hope. I’m sure that’s the hope.”

Tim: “Yeah, so Adam, just out of curiosity, do you have any estate planning attorneys who are subscribers to your website or your services? Because I think they would—on the surface, you could look at it and say, ‘Well, that almost looks like replacing them,’ but I see there’s tremendous synergy there.”

Adam: “Absolutely. We have numerous estate planning attorneys who are content contributors on the website. We are in discussions with several right now about taking our content and white-labeling it. What we do is make their jobs easier because attorneys don’t want to spend time educating their clients on what a will is—the attorneys want to do the legal work and actually get paid to do the work that matters. So this is something that they’re viewing as the ultimate intake document, where we’re helping them do their job better. And that’s one of the reasons why we’re not actually creating wills and drafting wills—because as it stands right now, I don’t want to take that work away from other people; I want to help them do their job better and get people personalized service in the jurisdiction that they live in.”

Tim: “Yeah, and like you mentioned earlier, it helps everything become more efficient from a cost perspective and from a workflow perspective, right? Because attorney work isn’t necessarily quick, but if they know exactly what they’re doing, it could certainly make it faster. And that efficiency—you could hypothetically charge more for it, right? Because it’s a better service.”

Adam: “Exactly, exactly.”

Olivia Kirk: “Yeah. So Adam, how could our listeners find you or locate you or get information from your website? Phone numbers, whatever you want to share.”

Adam: “Very easy—just come to the website, it’s buriedinwork.com, so B-U-R-I-E-D-I-N-W-O-R-K dot com. You can email me personally if you want—[email protected]. There’s a contact form if you’ve got questions, and me or somebody from the team will get back to you. Real people read the emails, it’s amazing.”

Tim: “I heard you’re very organized.”

Adam: “Sometimes. Sometimes.”

Olivia: “Awesome. Well, it was great speaking with you. This was so informative, and you know the work you’re doing is certainly going to make an impact for generations to come.”

Adam: “Thank you, I appreciate it.”

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It Takes Less Than You Might Think

When we think of what it means to be or start becoming financially free, we often imagine luxurious cars, lavish holidays, and an endless flow of cold, hard cash. However, financial freedom looks different depending on who you ask.

For some, it means having the security to enjoy their hobbies and passions without sacrificing their quality of life. For others, freedom simply means learning how to control your finances before they control you through impulsive spending and crushing debt.

The one common fact about financial freedom, no matter who you ask, is that it’s possible to unlock it – and the infinite banking concept is the key.

First Things First…

You Need to Understand It’s Not About What You Buy or Don’t Buy

When you think of saving, you might think of the things that you buy. Instead, you should be thinking of how you’re paying for the things that you buy. In most cases, you’re either paying or losing interest.

Take financing a business for example. When you finance a business, you’ll incur interest that’s paid to the financial institution or lender you’re working with. When you pay in cash, you’ll never see the money that you don’t earn. You’ll essentially keep the interest.

With that in mind, it’s important to understand that the secret to how to control your finances is to control your cash flow. You need to find the most effective, efficient way to earn compound interest on a regular, continuous basis, without halting the purchases that you want or need to make.

Now that you have a basic overview of what you need to know about interest and payments, let’s talk about how banks make money.

How Do Banks Make Money?

They Do It by Using Yours

Becoming financially free means thinking like a bank. No, not loaning out money and hoping you’ll get paid back. We mean keeping your money flowing every single day. To understand the infinite banking concept, you need to understand how a bank makes money in the first place.

The very first step to making money as a bank is starting your bank. This is done by applying for a charter and finding people who want to start depositing money. A new bank might charge higher interest than their competitors at first. Then, this new bank needs to find people who need money.

Starting The Flow and Keeping It Going Forever

Using Depositors and Borrowers in A Perfect Balance

Once they’ve identified a network of depositors and borrowers, the real work begins. They offer sky-high interest rates on savings accounts to tempt you and others like you to start saving your money with them. However, they won’t be losing out by offering you these “high” interest rates. Once they have your money, they’ll start lending it to qualified borrowers.

These borrowers will then be responsible for paying their money back at an interest rate much higher than what you’re getting, which means that Mr. Bank can pay you your interest and pocket the difference. Easy, right?

As you can see, when you’re a bank, “your” money never stays in one place for very long. It’s lent out and stays flowing so that it can grow forever.

How To Apply the Infinite Banking Concept in Your Own Life

Without Spending Years Learning How to Do It

It might seem strange to compare making money as a bank to becoming financially free as a parent, working professional, and/or recent graduate. While you won’t be able to lend out billions of dollars and reap the reward of high interest repayments, you can apply the principle of keeping your money flowing with the right life insurance, savings vehicles, and processes. By owning this banking process, you’ll be able to learn not only how to control your finances, but also how to use them to keep your wealth growing your entire life.

What Does Tier 1 Capital Do?

We Help People Just Like You

Tier 1 Capital provides our valued clients with the permanent life insurance they need to accumulate cash indefinitely. We connect you to a savings vehicle or pool of cash that you own and control.

We provide our clients with a range of financial strategies that cut down the risk and ramp up the accessibility of their money while keeping them in complete control. Our mission is to empower our clients with the strategies and insight they need to take conscious action regarding their finances and their overall financial future. We are committed to keeping you informed, educated, and up-to-date with the best financial practices and services in the industry.

We have worked with families and small business owners of all walks of life, and now, we want to work with you. Reach out to our team now here at Tier 1 Capital  and book a free strategy call today if you’d like to learn more. We’ll walk you through everything you need to know as part of a complimentary strategy session with one of our certified and professional team members.

 

Money Management Tips: Regain Control Of Your Cash Flow

If you have been following our blog post, you know that we are constantly talking about the importance of you being in control of your money or regaining control of your money. So why is it so difficult to accomplish despite it being a very simple concept? Today, we are going to talk about the unintended consequences that result from following traditional or conventional wisdom when it comes to your finances and how to regain control of your money by just knowing these things.

Now there are three main institutions that are trying to gain control of our cash flow on a monthly basis: the banks, Wall Street and the government. It is like a game to them in the sense that they set the rules. These rules are:
1. Gain control of as much of our money as possible.
2. Get that money on a systematic basis, meaning they want their hands in our checkbook every single month.
3. Hold on to or control that money for as long as possible.

We are going to take a look at how Wall Street gets us to act in their best interest. By following the rules that benefit them. Firstly, they want to take control of our money. So how do they do that? They will tell you that the only chance you have to beat inflation is to be in equities. They tell you that you have to be in it to win it. They tell you to employ strategies like dollar cost averaging. That’s how they get us to do things on a systematic basis. Also, they tell you that the higher the risk, the higher the reward. So these are things that they tell us to get us, to play the game by their rules so that they could win. Secondly, when the market is down, they tell you that you can’t sell now because you are going to be locked in losses. But when the market is up and you say, “Hey, I wanna sell because I think we made a pretty good profit”. They will say, “Geez, I don’t want you to miss out on this profit”. Plus if you sell now, you have to pay taxes on the gains. So if you don’t sell low, because they don’t want you to lock in losses and you don’t sell high because they don’t want you to pay taxes or miss out on a run, then, when do you sell? Well for Wall Street’s benefit, they never want you to sell.

You see, their job is to get you in the market and keep you in the market at all costs because that is what benefits them, but it doesn’t necessarily benefit you.

 

Now, how do the banks get us to do what’s in their best interest? Let’s take a look at the rules again. Rule number one is they want to get our money. So when it comes to a mortgage, we want to put a downpayment as high as possible. Because with a lower loan or a lower mortgage, you will pay less interest. Rule number two, they want to get our money on a systematic basis. So they will entice us with lower interest rates on shorter term mortgages. For example, a 15 year mortgage will have a lower interest rate than a 30 year mortgage. Rule number three,  they want to keep our money for as long as possible. So with the 15 year mortgage, we’re giving up more of our monthly cash flow to the bank. Even though we’re paying them less interest, we’re still losing control of that monthly cash flow. With the home equity, they tell us that it’s our home equity as if we have control of it and that we are more secure when our house is paid off. But in reality, we don’t have access to that money unless they give us permission to access that home equity. So who’s really benefiting from a shorter mortgage, us or the banks? The answer is clear. The banks are following the three rules and they are in control of our money by positioning it as if we are in control and that it is in our best interest.

Finally, the government gets us to play the game by enticing us to invest in retirement plans for our future. They give us a tax deduction on a small amount of money today so that money can grow on a deferred basis and then they have the potential to tax us at a much higher rate in the future.Think about it, you are putting money away today for a small tax deduction, but in the future, the government determines how much of that money you get to keep. Even if you earn a decent rate of return over many years, you don’t know how much of that money is actually going to be available to you to fund your retirement lifestyle. The government gets us to play the game, but they are also consulting with Wall Street and the banks to create the rules. Who else benefits when we participate in retirement plans? Wall Street, because they get to hang onto our money until 59 and a half, or we pay a penalty and tax. Secondly, the bank’s benefits because if we’re maxing out our retirement account contributions, that means our money is tied up. When the time comes that we have to pay for our children’s college education or buy a car or go on vacation, we don’t have access to our money as it is tied up in retirement accounts or home equity. Therefore we have to borrow more money and who benefits when we borrow more money? Obviously it’s the banks.

Now that  we have  looked at how the government, Wall Street and the banks get us to follow their rules so that they can win and can be in control of our money, what’s the alternative that is not following their conventional financial advice?

The alternative is to save in a place where you have full access and control of your money. A place where your money could grow on a continuous compound interest scale and never be interrupted even after you spend the money. We accomplish this by saving in a specially designed whole life insurance policy, where we get to control our money, where we have full liquidity use and control and access to our cash value for whatever we want, whenever we want. So that we will not be forced to go to the banks to borrow and give up control of our monthly cash flow.

If you’re interested in learning more, book your free strategy session today  to know exactly how we can accomplish this. Remember it’s not how much money you make. It’s how much money you keep that really matters.

College Planning: How To Save Thousands On Tuition

We have a team that specializes in the college application process. They will help you with everything from filling out the free application for federal student aid – FAFSA, to helping your child write essays for their college application. Also, they will help you negotiate for a better deal after you have received your initial offer on financial aid. All of these things are to help your student get into their dream school, a school that is a good fit for them. Not just that, it also helps parents not to overpay for their children’s college education.

This service includes a detailed report that assesses each of the schools that your child is interested in attending. This could even give suggestions for more school options that would be a good fit based on your child’s area of interest.

The report is everything you need to know about sending your child to school/college. It even conducts a financial analysis that breaks down the EFC for each of the schools and goes as far as breaking down the minimum EFC your family could expect for each school.

This report can help you save thousands of dollars per year. It can be a great resource to answer any lingering questions you may have regarding the college process. Keep in mind that not everybody pays the same price to attend the same school and that everything you have done up to this point to become successful financially might not be beneficial for financial aid purposes.

If you’re ready to send your child to their dream school without breaking the bank and without overpaying for tuition, schedule your free strategy session today! Remember – it’s not how much money you make. It’s how much money you keep that really matters.

What to pay first? Insurance Policy Loan Interest, Premiums or Paid Up Additions Rider

Last week, we got a call from a client who got an unexpected $25,000 tax bill. Coincidentally, at this came at the same time as his premium bill, loan interest bill and loan principal bill. He called us and he said, “Guys, do I really need to pay all of this stuff for the policy?”
If you are in a similar position where you have limited cash flow and are wondering what order and priority you have to pay first, stick around to the end of this blog post because  we are going over all of the details.

When you get a premium bill and your cash flow is limited, keep in mind that you should always pay the base premium first. When our client called, we showed him that his premium was about a little over $20,000 per year but his policy was over 16 years old. So his cash value increase was going to be over $32,000 from this 16th year to the 17th year. Once he did the math, he realized that he should definitely pay the base premium because for every dollar he put in the premium, he will get a cash value increase of $1.50.

So it makes sense to pay the base premium. And that’s the number one priority, pay the base premium. Especially as your policy matures. It will may seem to be more challenging to realize, but the more you pay into the policy at that time, the higher rate of return you’re going to get within your policy. So always pay the base policy first.

After you pay the base premium, the next thing you should look at paying is the paid up additions rider, if your policy has one. Especially in the first five years. By paying the paid up additions rider in the first five years, it will give you access to more cash sooner so that you can start using your policy to pay for the things of life. The reason why you want to pay the paid up additions in those first five years is because it takes a little bit of time for the policy to mature on its own. After those first five years are up, you may consider closing out the rider or opening the window so you could put money in at a later date.

The third priority to pay is the policy loan interest. The reason why this is third is because, if you don’t pay the loan interest, the loan interest balance will be added to the loan balance and it will may constrict the amount of cash value that is available in the future to access via the policy loan provision.

The fourth area to be paid should be the actual loan balance. By paying the loan balance and as your loan balance gets paid down, your cash equity increases. That puts you in a position where you will have more access to more money later on to accomplish your goals. With the loan balance, every dollar you put in is accessible via the loan provision. A lot of times, this is tricky for our clients to wrap their heads around with this idea because we are trained that debt is bad. But that’s not necessarily the case with policy debt. We are not taking money from the policy. We are putting a lien against the policy. So your cash value will continue to grow and earn dividends as if there is no loan against it. But by paying it down, if you have the cash flow to do so, you will have more access to cash as you pay back your loan. Also, there is less loan interest built for your next policy loan anniversary.

So let’s summarize the order of priority for paying policies. First base policy premium, second paid up additions rider, third loan interest, and fourth loan principle.

If you have more questions or would like to talk to us, feel free to schedule your free strategy session today! – and remember it’s not how much money you make, It’s how much money you keep that really matters.

Is Whole Life Insurance Too Good To Be True? The Truth About The Infinite Banking Concept

If you’ve been reading our blog posts for a while, you will know that we often talk about using specially designed whole life insurance policies to help our clients accomplish their goals. Sometimes, people come to us and say, “Hey guys! This seems like it’s too good to be true. What’s the catch and why aren’t more people doing this?”. If you’re interested in having those questions answered, stick around to the end of this blog post.

People come to us because they are generally frustrated that they’re making a good income and they are doing everything by the book according to the so-called financial experts. They are maximizing their retirement accounts. They are paying down their mortgage and they are saving for their two children for college. But they just don’t seem to be getting ahead. They feel frustrated because they don’t have access to money when there’s a financial or medical emergency, or they don’t have access to money when there’s an opportunity that they’d like to take advantage of. Because of that frustration, they seek assistance from financial advisers who could help them.

We met with a client who was a surgeon. He and his wife were very frustrated because they wanted to take their children to Disneyland. It was only going to cost $13,000. They make $800,000 a year and they were frustrated because they didn’t have access to their money. Why? It’s because they were maxing out their retirement accounts. They were saving money for their children’s college education. They were paying down their mortgage. So they didn’t have access to any of the money that they made.

Clearly it’s not the income that was holding the family back. It was how they were using their money. That’s why we always preach, “It’s not how much money you make. It’s how much money you keep that really matters”. One of the first things we do when we meet with clients is take a look at their personal economic model. We look for inefficiencies. Places where they are giving up control of their money unknowingly and unnecessarily. Unknowingly, meaning they’re not aware that they’re giving up control of that money. Unnecessarily in a sense that, they could actually change it. Although not necessarily that they could change it as quick as a snap of a finger. That’s one of the first things we look at and that’s really why we focus on regaining control of your money  so that you could get rid of those frustrations and you could accomplish what you want with your good income.

Regaining control of your money means putting you in a position where you could access your money when you need it. When we talk about plugging those leaky holes in your financial bucket, it’s literally identifying the five major areas where you are giving up control of your money. Those areas are taxes, how you fund your retirement, how you pay for your children’s college, how you pay for your real estate mortgages and how you make major capital purchases. We do a deep dive as to how you’re using your money in these five areas to show you exactly where you’re giving up control of your money.

Where am I giving up control of my cash flow?

It all becomes so simple. Whoever controls your cash flow controls your life. We find it very important to identify the exact places where our clients are giving up control of that cash. So they could regain control of their financial life. Keep this in mind, anywhere you place your money, besides under your mattress, is a financial tool. They are all financial products. But the products we use to help our clients accomplish their goals are specially designed whole life insurance policies, specifically designed to accumulate as much cash value as possible and as quickly as possible.

The reason why we do this is to help our clients accomplish short term, intermediate, and long-term financial goals;
Short Term Goals –  maybe it’s paying off debt or planning to go on a vacation.
Intermediate Goals – could look like saving for a wedding or a down payment on a house or sending your kids to college.
Long Term Goals –  would be planning for a retirement, supplementing your retirement, or using the cash value on a tax favored basis to supplement your retirement income, as well as leaving a legacy for your family.

When we’re recommending a financial product to our clients, we have a few things in mind.

Number one, they need to have access to that money, complete liquidity to use and control so that they can use it for whatever they need, whenever they need it, no questions asked.

Second, we want them to be safe. Safe from market losses and their money protected from Wall Street and creditors, if they are subject to a lawsuit or bankruptcy. Finally, safety from the government so that if the government increases or changes taxes, their money is protected.

The next thing we want is continuous compounding so that they could access their money, but still earn interest. As if their money is in two places at once. And think of this. What’s the rate of return? Getting $1 to do two jobs.

Finally, we want a reasonable rate of return. Let’s say somewhere around three to four percent.

If we can get all of those things with one product, then that really helps us to accomplish our client’s goal of having access to their money, but more importantly, making their money more efficient.

We believe that there is more opportunity in helping our clients avoid the losses than trying to pick the winners. Using this specially designed whole life insurance policies allows us to accomplish all of the things mentioned above and so much more. Because they are able to take advantage of opportunities when the stock market is down or when a business opportunity comes up. They are able to pay off their debts or buy a car. They’re able to use that money, however they want to use it without interrupting the compounding of interest. This is such a powerful tool.

Now that we’ve listed all of the benefits that you can get from owning cash value life insurance. Let’s talk about what it won’t do. It will not give you the highest rate of return in the shortest period of time. For a lot of people, that’s a deal killer. But that’s okay because you see, we’re worried about helping our clients who want to regain control of their money, who are sick of being frustrated from not having the cash to accomplish their short term intermediate and long term goals. The cash value life insurance gives them the opportunity to do those things we mentioned earlier.

We believe that there’s more opportunities in avoiding the losses and making your money more efficient and working for you consistently with no risk of loss than there is in picking the winners. That’s why we use this product so passionately.

Why aren’t more people doing this?

Well, it’s real simple. This is the way people used to save back in the seventies. But unfortunately the wall street model took over. IRA’s and 401k’s became popular or started in the seventies. The Wall Street model has pretty much taken over for the past 40 years. But prior to that, this is the way people used to save. But keep in mind, cash value life insurance has been around for over 200 years.

Ray Kroc used cash value life insurance to keep his business going when he was trying to figure out how to make money from McDonald’s. Sam Walton bought so much life insurance for many of his employees that he ended up paying a fine. Walt Disney borrowed against his life insurance when no bank would loan him money to start the theme park in Florida. Keep this in mind, banks are the largest purchasers of cash value life insurance. They take profits from their customers.They recommend the customer to put money in places where their money is tied up and then they take those profits. Put some of those profits in cash value life insurance.That’s very ironic.

So when the question is posed, “Why aren’t more people using this product?”. The answer is quite simple. Advisors today are not trained on how to use this product to its full potential. But for our company, we have been using this for several years with all of our clients, as well as personally. We use it to purchase cars, to invest in our business and send kids to college. All of the things that we’re talking about to our clients, we’ve done personally, and we’ve been doing it for several years. That’s the difference between us and most advisors. They are not trained on how to use this product and how to make it as efficient as possible for their clients.

If you are tired of feeling frustrated and stuck that your cash is pinched, or you feel like you’re doing everything right, but still can’t seem to get ahead and would like to learn about how you could put a whole life insurance policy, specifically designed for cash accumulation, to work for you and your family. Feel free to schedule a free strategy session or check out our web course where we go into great detail about how this process works. Remember, it’s not how much money you make, it’s how much money you keep that really matters.

Managing Cash Flow To Fund Your Kids College Education

Are you thinking about how you’re going to afford college tuition for your kids?
Whether your child was just born or is going to college this spring, the cost of college is a major expense for parents. If you’re looking for advice on how to pay the least amount for your child’s college education, we’re going to go over some simple shifts that you could make to ensure that you don’t overpay for your child’s college education in this blog post.

The cost of college is not the same for everyone. Not everyone who goes to the same school in the same year will pay the same amount for college. The cost of college is individual to each family, and it’s based on a few factors used in the financial aide calculation. That calculation includes parent’s income, parent’s assets, student’s income and student’s assets.

Notice what’s not included in that formula: DEBT. You can make $150,000 of income. And with taxes and expenses, you have spent $150,000. None of that matters as far as the formula is concerned.

Here’s an example of how we were able to help this family reduce their EFC and free up cash flow to assist their child in paying for college tuition.

First and foremost,  reducing the cost of college for your child can be as easy as rearranging your assets to make them “FAFSA Invisible” – meaning they go from residing in an asset that is included in the financial aide calculation to residing in an asset is not included on that financial aide form.
Secondly, our specialty is helping families find the cash flow to fund the cost of college. We look for inefficiencies in the family’s monthly cash flow to find and plug the holes in their “leaky bucket.”

We applied this process  to a family a few years ago – they had an income of $120,000 per year and a consumer debt bill that included several credit cards and personal lines of credit that totaled over $130,000. On top of the insurmountable amount of consumer debt (which consumed a large chunk of their monthly cash flow, as you can imagine), they also had a son who was about to attend college in one year. Since they had a good income of $120,000, they were on track to pay around $30,000 per year towards their son’s tuition.
Our process, worked to get them out of debt within 3 years and allowed them to fund their son’s tuition costs also.

In 2020, I got a call from the client and she said, “Olivia, you know, so many people are struggling financially. I feel guilty that I have this cash available”. And I said, “Well, you know, you did all that work. There’s no need for you to feel guilty. When you came to us, you were in such a tight cash flow position. And the shifts that you made put you in a secure financial position, even when the economy was at an all time low”.

 

So if you are in a position where you feel like your cash flow is pinched and you have a major expense of college coming up for your child, check out our free half hour webinar to learn more about this process and how it could help you. Or if you’re ready to get started, schedule your free strategy session today. So we could speak to your specific financial situation. Remember, it’s not how much money you make. It’s how much money you keep that really matters!

How to Protect Your Retirement Savings

When it comes to financial planning, we all have one end goal in mind. That’s retirement. If you’re concerned about whether or not you’re going to be able to reach your retirement goals, no matter your age, this is for you. In this blog post, we will talk about the roadblocks that could be holding you back from reaching your retirement goals.

For the past thirty seven years as a financial services professional, when people come to us with their yet to be taxed IRA or 401K statements, they are generally shocked when they find out how much they have to pay in taxes.

Why is that so? It is because that’s not what they were told throughout their whole working career. They were told that during retirement, they would be in a lower tax bracket, but that’s not the case. You may be wondering why?

It was as if they were traveling down this road towards retirement with one foot on the gas pedal and one foot on the brake. They were setting aside as much money as they possibly could into their IRA or 401k or 403B, that’s the foot on the gas pedal. At the same time they were paying down their mortgage while watching their kids grow up and leave home. They lose those deductions by the time they reach retirement. They just can’t defer income into the future and eventually they lose those deductions. That’s the other foot on the brake.

If you’re traveling down a road with one foot on the gas pedal and the other on the brakes, are you making any progress?

Aside from losing all of your deductions, there is this ever changing tax code that we have to consider. There’s this old saying in Washington, “If you’re not at the table in Washington, you’re on the menu”. When’s the last time you were at the table in Washington? As for me, I’ve never been there.

Our country has $29 trillion in debt. Clearly we have a problem. But every time they meet in Washington and pass a new bill, it seems like they just keep on increasing spending like a drunken sailor. Now let me ask you this. If you have a spending problem or a debt problem, does it make sense to increase spending? If they’re not going to address the issue, then there’s only two ways the government could respond to try to fix this problem.

* Legislatively. They will increase taxes. How will this affect your retirement?
* Administratively. They can print more money and when they do, it results in inflation. What does inflation do to the value of your savings in retirement?

We call inflation the stealth tax. It subtly eats away the buying power of  money. You don’t even realize it most of the time but this is what inflation is doing to our cash value. Right now in 2022, it is blatant what inflation is doing to our money. But we don’t realize that the value of the dollar is decreasing little by little over time. The moment we get to retirement, it’s also very blatant that the buying power of our dollar is ever decreasing due to inflation.

When people come to us with their yet to be taxed retirement plans astounded as to how much they have to pay in taxes, when we haven’t even addressed the inflation issue, what are our options? Many don’t realize that after you earn your income and you pay your tax, whether or not you pay tax again on that money, the rest of your life is optional. It’s voluntary. The key is knowing what your choices are up front.

Whether you are in Gen Z or a Baby Boomer, or in any generation in between, you have two options on how to save for your retirement.

Strategy A
Take a tax deduction on a small amount of your cash value today and anticipate that it grows into a bigger amount in the future knowing that the government could tax at any rate when necessary just to solve the inflation issue.

Strategy B
Pay tax at a small amount of your cash value today and put it in a place where the government could never touch it ever again. So when you get to retirement you can be in control of how much tax you actually pay.

Which strategy would benefit you and your family more? Strategy A or Strategy B?

It is our mission to help as many families as possible, make the best financial decisions that would benefit them. That’s why we present you with these strategies because we believe that it is more beneficial to pay a small amount of tax on the small amount of income, rather than deferring it into the unknown future.

If you are ready to learn how to utilize these strategies to work for you in your specific situations, schedule your free strategy session today

Remember it’s not how much money you make, it’s how much you keep that really matters.

Is Whole Life Insurance a Good Investment?: Internal Vs. External Rate of Return

You often hear that whole life insurance is a lousy investment and that’s kind of true in the sense that life insurance isn’t an investment. Investments inherently have risk and that’s not the case with the whole life insurance policy.

With the whole life insurance policy designed for cash accumulation, you could expect to earn anywhere between 3% and 5% over your lifetime – but understand that’s not how the policy starts off.

Starting a new life insurance policy is kind of like starting a business. If you were to start a business today, you wouldn’t expect to become profitable in the first year, the second year or even the third year – but usually from the fourth year, that business will become profitable and hopefully will continue to grow year over year. The same holds true with a whole life insurance policy designed for cash accumulation. In the first year, you might have access to 40% of what you pay in premium. In the second year, it might be 60% or 65%. In the third year, 90% or 95%. But from the fourth year on, you should be generating a profit year over year in that policy and it will only get better from that point forward because of the way the policy is designed.

Basically, for each dollar you pay in premium from the fourth year on, you could expect your cash value to increase by more than one dollar. As mentioned, life insurance isn’t an investment because there is no risk. Once that money is credited to your cash value, that value will never go down.

On a cumulative basis, we would expect the break-even point to be somewhere between year seven and year ten. For example, if you paid a hundred thousand dollars in premiums over 10 years, you would expect your cash value to be a hundred thousand dollars in those 10 years and maybe a little higher. After that, the cash value and the accumulation value will continue to grow year after year.

The key here is that the so-called financial experts will judge life insurance on those first 10 years and say it’s a lousy investment. But what they’re completely ignoring is the fact that you could still access that money through the loan option or the loan feature in the policy. Taking advantage of the loan provision can allow you to not only generate that internal rate of return, but to generate an external rate of return on your money. This can allow you to make all of your other savings and investments much more efficient. Keep this in mind: You have the internal rate of return – that isn’t going to be interrupted by accessing that cash using policy loans PLUS you’re able to put that money to work for you somewhere else and make an external rate of return on an actual investment. Once you make the money on your investment, you can cash out and repay your policy loan and realize your profit.

Can I use my policy in the early years – before the break-even point?

A lot of times people come to us with credit card debt and they’re paying a very high interest rate which is taking up a lot of their monthly cash flow. An example of how you could use your policy is to repay that credit card debt using a policy loan and then rebuild and replenish your cash values so that it is accessible again in the future. Basically, you could take a loan  against your life insurance cash, pay that credit card off and then redirect the payments from your credit card to repay the policy loan until the loan is paid off. Not only do we have a lower interest rate, we also have control over that payment amount every month. If you run into cash problems, you could back off on that payment. But if you are cash flush, you could pay that debt off faster and you’re actually building an asset for yourself.

Another way that you could access that money either in the early stages of your policy or the late stages is to borrow against your cash value to make an investment whether that’s into stocks and bonds, crypto currency, gold, silver or real estate.

 

The key is using the cash value in your life insurance policy to make your other money substantially more efficient.

 

Only in a whole life insurance policy, you can have access to the cash values without draining the tank. Basically you’re able to continuously earn compound interest and access that money to make an investment that will potentially earn you a higher rate of return. You have the policy earning the 3% to 5% over your lifetime at the same time you also have the ability to earn a higher rate of return on investments like stocks or real estate. Whether it’s to make an investment or to pay off debt, the bottom line is that you’re making your money more efficient. Your money is working in more than one place at once. That makes your money more efficient and ultimately puts you in a stronger financial position.

What about getting a margin loan or borrowing against the equity of my real estate?

It is possible to access money from other sources like a home equity loan or a margin loan on your investment portfolio. However, whole life insurance is the only financial tool that allows you to access money and know for sure that you’re going to have a greater account value at the end of the year than you did in the previous year  – when you take a loan against your life insurance cash value, the compounding of interest is never interrupted. Your policy continues to perform as if you had not accessed any money.

With a margin loan, the underlying investments might decline and you may have a margin call – once again putting further squeeze on your cash.

In real estate, the value of your real estate could appreciate or it could also depreciate, it depends on the market conditions. Also, with a real estate loan, you have a structured repayment versus with a policy loan where you can determine the payment terms in the sense that if you want to put $50 a month on the policy loan, you could do that. If you want to put $300 a month on the policy loan, you could do that. If you don’t want to put anything on the policy loan, you could do that as well. There’s no one telling you what the repayment schedule is.

Here’s another thing to consider. What if you just drain your savings to make the investment? What’s the difference there?

We had this situation with a client who started a policy. They had about $5,000 of cash in the policy. They coincidentally have a $3,500 credit card bill that’s due and they wanted to pay off the credit card. The husband wanted to borrow against the policy because he sort of understood the concept of leveraging life insurance and the power of using this method. The wife was a little hesitant and wanted to use money from their savings account instead of a policy loan. They had $20,000 in savings and she said, “Well, let’s just take $3,500 from the savings, drain down the tank. Then we could leave the money in the policy to use for our home improvements.” What they’re missing is the fact that before that transaction, they have access to $20,000 that they own and control. If they drain down the tank to the tune of $3,500, they don’t control $20,000. They only control $16,500 and they’re still earning the interest in the policy because they didn’t access the money. But if they don’t take the money out from the savings and they borrow against the policy, they will still control $20,000 and they will still earn interest on the $5,000 – even though they accessed $3,500 against the policy. That’s what we call opportunity cost. We don’t only consider the money that we’re using – we also consider what that money could have earned us had we invested that money.

Whether it’s to pay off debt or pay a lower interest rate against the policy versus credit cards or whether it’s to make an external investment by accessing the cash value in your life insurance. Life insurance could allow you to generate that external rate of return on investment opportunities and still guarantee that you’ll get the internal rate of return on your cash value that you have accumulated in the policy.

Remember, it’s not how much money you make, It’s how much money you keep that really matters.

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