Olivia Kirk

Is It Possible to Take Out Life Insurance on Your Partner, Parent, or Business Partner?

You may or may not realize that you’re able to insure not only your own life, but also the lives of others, under certain conditions. And that’s exactly what we’re going to talk about today—how to buy a policy on someone else’s life.

Now, in most cases, when you purchase a life insurance policy, you’re both the owner and the insured. This means your own life is covered, so the death benefit will be paid out when you pass away. As the owner, you control everything: you pay the premiums, can change the beneficiary, and access benefits like the cash value. But sometimes, it might make sense to purchase a policy on someone else’s life, especially if you’re uninsurable or would suffer a financial loss if that person dies. In that case, you’d be the owner of the policy and have access to those benefits, including the cash value.

Think of it this way: maybe you want a life insurance policy but aren’t insurable yourself. That’s where the insurance industry provides the option to purchase a policy on anyone with whom you have an insurable interest. So, what is an insurable interest? Basically, it means you would suffer some financial loss if that person passes away.

Let’s talk about who might qualify as someone with an insurable interest. This could include your spouse, your child, a co-signer on a loan where you’d be responsible for paying the loan if they die, a parent you rely on financially, or even a business partner. There are other options as well, like a key person in your company or a partner in a real estate venture. We’ve even worked with people who co-own assets like an airplane together. In that case, if something were to happen to one partner, the other partner would want to ensure the deceased partner’s share of the asset was taken care of, so they purchase insurance on each other.

Even if you have a roommate who helps with expenses, their passing could create a financial loss for you. But regardless of the situation, when you want to purchase life insurance on someone else’s life, the agent will need to explain to the insurance company what the financial loss would be if that person dies. Once this is established, the underwriting process is quite similar to a standard policy. The majority of underwriting will be based on the insured person’s life, as the insurance company is assessing their risk. So, the insured person would need to complete the application, possibly undergo a physical if required, release medical records to the insurer, and sign the necessary delivery documents. But from there, it’s straightforward—the policy then lies entirely in the owner’s hands.

Here’s a key point to remember: the insurable interest only has to exist at the time of application. For example, if two business partners apply for insurance on each other, and later down the road they sell the business, they can still keep those policies because the insurable interest was verified only at the time of application. This is a big contrast with property insurance, where the insurable interest must exist throughout the policy.

At the time of delivery, the insured signs off on the policy, giving the owner complete control. The owner will have that control throughout the insured’s life and, ultimately, the death benefit will be paid to the owner or to a beneficiary designated by the owner.

This approach can also be a solution if you’re uninsurable and want to implement the infinite banking concept. Simply find someone with whom you have an insurable interest, purchase a policy on them, and you’ll control the cash value. Then you can borrow against it and take advantage of all the benefits that infinite banking provides.

It’s interesting to note that when people are considering buying policies on others, they often think about insuring the youngest person possible to gain the longest growth period. However, if you’re looking for liquidity in the near term, you might want to think about insuring someone closer to your own age, or even older, if budget allows. When that person eventually passes, you’ll receive a guaranteed sum of money, along with access to the cash value in the meantime.

If you’d like to learn more about this strategy and how it could work in your life, visit our website at tier1capital.com to schedule a free strategy session or download our free business owners guide. We’d be happy to discuss your unique situation and help you make the most of it.

Remember, it’s not about how much money you make—it’s about how much you keep that truly matters.

The Key to Financial Control: Why Cash Flow Matters More Than Rate of Return

In America, we tend to view our financial lives in terms of “money in, money out.” You go to work, earn money, and then use that income to pay bills. It’s a cycle most people are familiar with. However, when we’re taught about finances, the focus is often on the rate of return—how much interest can be earned on savings or investments. But here’s the problem: if your cash flow is inefficient, there won’t be anything left to save.

That’s what we’re discussing today—the difference between cash flow and rate of return, and why optimizing your cash flow might be the most important financial move you can make. At Tier 1 Capital, we’ve dedicated ourselves to helping people regain control of their money, and our approach focuses on cash flow, not just rate of return.

Here’s the simple truth: you can’t spend rate of return. Cash flow, on the other hand, is the lifeblood of both your family and your business. When you focus on cash flow—and more importantly, maintaining control over it—you gain clarity and confidence in your financial decisions. Rate of return is unpredictable and often involves locking up your money, making it inaccessible when you need it most. But when you focus on cash flow, suddenly, a world of possibilities opens up.

One of the biggest areas where we help families and businesses is by analyzing their current cash flow. Many people have inefficiencies in their financial systems—money leaks, so to speak. These are like holes in a bucket where cash slips through your hands each month without you even realizing it. Our goal is to plug those leaks, even if it’s just a small amount at a time, so your money stays in your control.

Think of it this way: when you plug the holes, less money leaks out. Now, that money remains with you, building up over time and becoming available for future purchases or investments. The key is to make that money work for you, not for financial institutions, advisors, or large corporations.

We all know the importance of saving, right? No matter how much you’re saving—whether it’s 5%, 10%, or 20%—there’s always a sense that you should be saving more. And that’s even harder today with rising inflation and interest rates. So how do you maintain a manageable cash flow while still saving for the future? By identifying inefficiencies in your current system and redirecting that money to a place where you have liquidity, use, and control over it.

Once you start building up a pool of cash, you gain options. You won’t need to rely on high-interest credit cards (which can have rates of 30% or more!) or take out loans with unfavorable terms. You’ll have something in your back pocket—a financial safety net that you’ve built and can leverage when needed.

At Tier 1 Capital, we recommend placing that money into specially designed life insurance policies, structured for cash accumulation. Why? Because not only does your money continue to grow with compound interest, but you can also borrow against the policy at much lower rates—currently around 5.5% to 6%. Compare that to today’s mortgage rates, which are often over 7%, or even home equity lines of credit that can go up to 9.5%.

The real advantage of these policies? They offer flexible, unstructured loan repayments. When you take a policy loan, there’s no strict repayment schedule. Yes, you should pay back the interest annually, but beyond that, you get to decide how and when you repay the loan. If you’re used to paying a fixed amount to a credit card company each month, you can now direct those payments toward your policy loan—and if you have extra cash flow, you can repay it faster. The faster you pay it back, the quicker you can borrow against it again.

This structure allows you to stay in control of your cash flow on multiple levels, making your money work for you in the most efficient way possible.

If you’re interested in learning more about how this process can work for you, your family, or your business, visit our website at tier1capital.com, where we offer a free web course on cash flow management.

Remember, it’s not about how much money you make—it’s about how much you keep. And that’s what truly matters.

Life Insurance Dividends vs. Investment Dividends: What’s the Smarter Choice for Growing Your Wealth?

When you’re talking about whole life insurance with a mutually owned life insurance company, it’s natural that you’ll talk about dividends, and you may be wondering, what exactly is a dividend and how do life insurance dividends differ from investment dividends? And that’s exactly what we’re going to cover today.

Now, there are some key distinctions between life insurance dividends and investment dividends. What exactly are they? So an investment dividend is literally a distribution of profits from the company to its shareholders, and those dividends are taxable. Those distributions are taxable. Now, a dividend in life insurance is literally a return of overpaid premium, and as such is not taxable. So that is a key huge distinction, right? And that’s why we always talk about paying taxes, income tax on the premiums. You never want to take a deduction for your life insurance premium, even if you’re using it for business purposes, because that would mess everything up in the sense that if you take the deduction on the premium payments, then your death benefit, that big pool of money that’s going to go to the beneficiary, will end up being taxable. So it’s important to make sure that all your ducks are in a line all along the way to make sure you’re getting the most bang for your buck when it comes to the benefits of life insurance.

You know, and that brings up a good point. The premium is the small contributions you make to get the huge death benefit. So if the premium is deductible, the death benefit is taxable. You don’t want that. So by paying the premium with after-tax dollars, that allows for the tax advantages of the large amount, the death benefit. But let’s get back to dividends. Why are dividends important? Well, real simply, dividends in life insurance enhance your cash value growth. Now again, the dividends are a refund of overpaid premiums. But think of it this way, that refund is technically a profit. And understand that if you buy a policy with a mutual insurance company, you are the owner of the company as it relates to your policy.

And think about it this way: with the whole life insurance policy, there are actuaries that design and engineer these policies, right? And we all know that engineers overestimate, and that’s why we have the dividends built in, right? So when you see an illustration, you’ll see those guaranteed numbers—the worst-case scenario. As in, if there were no dividends paid to that policy ever, this is what you would have—the worst case, correct? And then there’s another illustration in there, and that’s usually based on the current dividend rate. What would happen if we earned the 2024 dividends or 2025 dividends every single year perpetually going forward? How would the policy perform?

And I think another thing we need to touch on here is it makes the most sense to have those dividends reinvested into the policy using paid purchasing, paid-up additions, right? So with that, the dividends go and purchase a small chunk of death benefit that’s not going to have any more ongoing premiums. And so you’re able to earn interest on those dividends that you’ve earned, and it increases your dividends going forward, right? So think of it—you’re earning interest on your dividends and dividends on your dividends. And this thing just continues to snowball and really build long-term value. And that’s the key. Remember we said you’re the owner of the company as it relates to your policy. Well, those profits are smaller in the beginning, in the early years, and much larger in the later years. So the longer you have the policy, the more dividends you’ll receive, the greater those dividends will be, and the greater the compounding.

And that makes perfect sense when you think about the design of a life insurance policy, right? Because when you purchase a whole life insurance policy, the insurance company is making you two promises. The first is to pay that death benefit out if and when the insured dies anywhere along the way, and the second is to have a cash value equal to that death benefit at the age of maturity, which is typically age 121. But that’s really key. They’re actually designed to increase in cash value on an exponential basis, on a guaranteed basis, even over time as that policy matures. So if you add dividends on top of that, it makes it go even faster and faster and makes this machine as efficient as possible, especially as that policy ages.

Exactly. But now let’s talk about one key feature of dividends, and it’s real simple: they are not guaranteed. Dividends are not guaranteed. So keep this in mind. That’s why when you get your illustration, there’s two columns: there’s the guaranteed numbers with no dividends, and then the current numbers, which include dividends at the current rate the insurance company is paying out. Dividends. Now two things need to be addressed. Number one, the guarantees are the worst-case scenario. And number two, the numbers you see on the non-guaranteed with dividends is guaranteed to not be that number. It’s funny. So you get these two illustrations, and you know you have the worst-case scenario, you have the current-case scenario. Neither of them are going to be true. They’re just meant to give you an idea of what those cash values could look like over time. But another key we need to remember here is that the only dividends that aren’t guaranteed are the ones that haven’t been credited yet. Once your policy earns a dividend, there’s no risk of losing that dividend, that cash value, that death benefit associated with those paid-up additions. There’s no risk associated with it from the market, even if, you know, the insurance company never pays another dividend again. The dividends that you’ve already earned are yours, and you get to keep those.

So understand a few things here. Number one, dividends are not guaranteed. But if you’re buying a policy with a mutual insurance company, most mutual insurance companies have been around for over 150 years or so, paid dividends for over 125 consecutive years—that’s through world wars, depressions, gas shortages, you name it. So those dividends, again, aren’t guaranteed, but the probability is the company will pay something. It may not be what they’re projecting, but they will pay something. And the other thing is that as the owner of the policy, you get to choose how your dividend is allocated. You can use it to reduce premiums, you can use it to be paid in cash, you can use it to purchase paid-up additions or paid-up life insurance. So there’s a lot of different ways you can allocate your dividend, and that’s your contractual right.

Now, when we talk about whole life insurance designed for cash value accumulation, dividends are a key feature. Thanks so much for watching our video, and remember, it’s not how much money you make, it’s how much money you keep that really matters. We’ll see you in the next one.

Life Insurance Dividends vs. Investment Dividends: What’s the Smarter Choice for Growing Your Wealth?

When discussing whole life insurance with a mutually owned life insurance company, dividends naturally come into the conversation. You might wonder, what exactly is a dividend and how do life insurance dividends differ from investment dividends? That’s exactly what we are going to cover today.

There are some key distinctions between life insurance dividends and investment dividends. An investment dividend is a distribution of profits from a company to its shareholders, and these dividends are taxable. However, life insurance dividends are a return of overpaid premiums and are not taxable. This is a crucial distinction.

One reason we always talk about paying income tax on the premiums is that you never want to take a deduction for your life insurance premium, even if it is for business purposes. Doing so could lead to your death benefit—the large sum of money that goes to the beneficiary—becoming taxable. It’s vital to ensure that everything is aligned properly to get the most out of life insurance.

The premiums you pay are small contributions towards the huge death benefit. If the premiums are deductible, the death benefit becomes taxable, and you don’t want that. By paying premiums with after-tax dollars, you maintain the tax advantages of the death benefit. Dividends, on the other hand, are used to enhance your policy’s cash value growth. Although dividends are technically a refund of overpaid premiums, they can be seen as profits because if you have a policy with a mutual insurance company, you essentially become an owner of the company.

With whole life insurance, policies are designed by actuaries, who typically overestimate the amount needed, which is why dividends are built into the policy. When you see an illustration, you’ll notice two sets of numbers—the guaranteed figures representing the worst-case scenario (if no dividends were ever paid) and another set based on the current dividend rate, showing how the policy could perform if dividends are paid consistently over time.

Reinvesting dividends into the policy by purchasing paid-up additions is a smart strategy. This allows you to earn interest on the dividends, which in turn increases future dividends. Over time, this compounding effect builds long-term value, with dividends being smaller in the early years and much larger in the later years.

Life insurance companies make two promises with a whole life policy. First, to pay out the death benefit when the insured dies, and second, to have the cash value equal to the death benefit by the policy’s maturity, which is usually age 121. As the policy matures, the cash value grows exponentially. If you add dividends into the mix, this process accelerates, making the policy more efficient over time.

One key thing to remember is that dividends are not guaranteed. When you get your policy illustration, the figures showing the dividends are based on the current rate, which is subject to change. However, once a dividend is earned, it’s yours—there is no risk of losing that dividend or the associated cash value, even if no future dividends are paid.

Although dividends aren’t guaranteed, many mutual insurance companies have been paying dividends for over 125 consecutive years, even through significant events like world wars, depressions, and economic downturns. While the dividend projections may not always be met, companies generally do pay something.

As the owner of the policy, you have the contractual right to choose how your dividends are allocated. You can use them to reduce premiums, take them as cash, or purchase paid-up additions.

If you’d like to learn more about how to apply this process to your business, family, or personal finances, visit our website at tier1capital.com. We’d love to speak with you in a free strategy session.

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

Essential Social Security Strategies: Key Decisions You Can’t Afford to Ignore for Maximizing Retirement Benefits

Episode Summary

In this episode of Control Your Cash, hosts Olivia Kirk and Tim Yurek are joined by Bill Rainaldi, a Senior Financial Consultant at Security Mutual Life Insurance Company of New York and an expert in Social Security planning. Bill dives deep into the complexities of Social Security, including spousal benefits, optimal claiming ages, and common mistakes people make when deciding when to start their benefits. He also explores how life insurance can play a pivotal role in long-term financial planning, especially for families with children and retirees. Throughout the conversation, the hosts and Bill emphasize the importance of consulting with knowledgeable financial professionals to navigate these decisions and avoid costly errors. Whether you’re nearing retirement or looking for ways to maximize your Social Security and insurance benefits, this episode offers essential insights.

Key Takeaways

  • Understanding when and how to claim Social Security can significantly impact spousal benefits and long-term income security.
  • Life insurance isn’t just for young families; it’s also a critical asset in retirement planning, especially for estate protection and tax-free inheritance.
  • Social Security offices often provide limited information, so asking the right questions and consulting with a financial professional is essential.
  • Early financial planning with the right professional can help avoid common mistakes that may lead to lost benefits or higher taxes​.

About the Guest

William F. Rainaldi, CFP®
Author, Social Security Specialist, and Senior Financial Services Consultant at Security Mutual Life Insurance Company of New York. Host of the “SML Planning Minute” podcast, where he shares expert insights on financial planning and retirement strategies.

Transcript

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

Tim: And I’m Tim Yurek. And we have a special guest today, Bill Rinaldi, who is the Senior Financial Consultant for Security Mutual Life Insurance Company of New York. And Bill is a specialist in Social Security planning. Bill, welcome to the show.

Bill: Thank you, Tim. This is great to be here. You know, uh, you were a guest on my podcast at Security Mutual a few years ago, and it was one of the best perceived podcasts we’ve ever had, so I’m hoping to do the best I can to, to, to match that today. So, we’ll see.

Tim: <laugh> Awesome. Well, I know we have a lot of great information in store for us today. And, and thank you again, Bill, for, for joining us.

Olivia: So, Bill, um, let’s talk about Social Security because it seems to me that Social Security is probably one of the most misunderstood benefits, misunderstood pillars, if you will, of our retirement planning. So if you could talk to us about what are some of the biggest mistakes that people make as it relates to their Social Security claims or their strategies?

Bill: Well, first of all, Tim, I agree a hundred percent with what you said. Um, I have this economic theory, which is that any time you have a government program, uh, that stays around for a long time and becomes very popular, it’s inevitable that at some point it’s gonna get so complicated that nobody understands it. And unfortunately, that’s what’s happened with Social Security. Now, there are a lot of nooks and crannies, a lot of little special things you gotta know, and it is incredibly complicated, but at the same time, it affects everybody. Everybody has a Social Security benefit pretty much, and everybody wants to get the most outta Social Security. So the simple question people ask is, well, when should I claim my benefit? That’s the one thing that people want to know. Now, if you ask me, I think the biggest mistake people make is that they don’t seek professional help when it comes to figuring out what to do.

This is so tricky and so complicated, and there are so many things. For example, there might be children’s benefits. There’s almost always what’s called a survivor benefit in Social Security. Uh, there could be disability benefits that, that have an impact. There’s so much to know that it’s almost impossible for an ordinary person to know everything they need to know about when to claim. Um, the one biggest thing I think people miss is survivor benefits on Social Security. That’s huge. And when you understand that, you might be inclined to collect a little later than you otherwise would. So…

Tim: Yeah, absolutely. So, Bill, when it comes to Social Security, what, in your opinion, is the most important thing that, that someone needs to consider? Right. So there, there are so many moving parts when it comes to Social Security—you know, the benefits, the age, um, the spousal benefits. What, what needs to be focused on when you’re making that, that big decision?

Bill: Well, the age difference between the two spouses is really important. Uh, one of the other things that’s incredibly important is life expectancy. Um, so many people, for example, are inclined to collect their Social Security as early as possible. And usually it’s because they believe—or I shouldn’t say usually—most of the time, a lot of the time, it’s because they believe that it’s not gonna be there in the future. Uh, so, “I’m gonna get mine while I can” seems to be the general philosophy. Well, that’s fine. If you’ve got a life expectancy and you think, you know, you might not make it past age 70, then maybe you would wanna collect at age 62. However, the majority of people seem to be living longer now than they initially expected. And if you’re gonna live into your 80s or perhaps your 90s, you’re better off waiting as long as possible to start the actual collection process.

So that’s a huge one, Olivia. I would also add to that one thing that people miss, and I just mentioned this a few minutes ago about survivor benefits. Survivor benefits are one of the only simple things about Social Security. Okay? If, if you’re married and both spouses, let’s say, live past age 67, then survivor benefits are fairly, uh, easy to understand. But it’s the one thing that people don’t even consider when they’re trying to collect or trying to figure out when to collect. They collect based upon their own life expectancy, and they don’t consider their spouse. Now, let me give you a quick example of how survivor benefits work. Let’s say my benefit is $2,000 and my wife’s benefit is $1,000. Now, she’s three years younger than me, and she’s also female. You know, women tend to live longer than men by about two or three years.

So you factor all that in. But if I collect, that means that if I collected at my age 67, I would get $2,000 a month. If I waited until age 70, I would get an extra benefit because I would get 24% more money or $2,480 a month by waiting until age 70 to start. Uh, now I might think, “Well, I’m probably gonna live to, I don’t know, 75 or something like that. Why would I do that? That doesn’t make any sense ’cause I’ll never make up that difference.” But with a survivor benefit, my wife would take over my benefit because hers is lower. She would take over my benefit if something happens to me. So I might live to 75; she could live to 95. So when I make that claiming decision to start at age 67, it’s probably not gonna just affect me. It’s also going to affect her, and she’s gonna get stuck with that lower benefit if something happens to me. That’s probably the most basic concept I think people miss, Olivia, that, that they need to understand about Social Security.

Olivia: Yeah, that’s, that’s huge, and it’s a huge difference for so long. So I imagine that even comes into effect if, say, you know, you were to die before you started claiming. She would still be able to claim that higher spousal benefit going forward, right?

Bill: Uh, in most cases, yeah. If I were, let’s say I died at age 68 and I wasn’t collecting yet, I would be frozen at age 68. My benefit would be frozen at that point. That’s still gonna be higher than her $1,000. But, uh, you know, so, so yes, but, uh, it’s not gonna be the full age 70 benefit because I didn’t make it to that age.

Olivia: Okay. Yeah. And that’s still gonna be higher than, let’s say, if you started collecting at age 66 or 67, you know? Um, so that makes a, a huge difference. And I imagine that’s one of the biggest mistakes that people make when they’re, they’re processing these claims, um, and starting their Social Security benefits.

Bill: Oh, absolutely. And there are, there are plenty more, but that is, that is the one I see most commonly. So, yeah.

Tim: Bill, does it ever make sense? You know, so, you know, it seems that the, a prudent strategy might be to consider your life expectancy as well as the life expectancy of your spouse when making your claim. With that in mind, does it ever make sense in your opinion, uh, to claim, let’s say, at at age 62? Is there, is there an argument that one spouse or the other should claim at age 62?

Bill: Sure. Well, first of all, if you’re a single person, then you don’t have to deal with the other spouse, right? So under those circumstances, it’s strictly a, a play on your life expectancy. If you’re in bad health and you turn 62 and you’re not working—I’ll talk about that in a minute—but, and if you’re not working, uh, then yeah, you would probably want to collect as early as possible. Uh, now there is another situation for a married couple. Let’s say the, um, the unmarried, the, the, the, uh, the younger spouse is age 62, and, and that spouse has a much lower benefit than the older spouse who’s going to wait until age 70 because that becomes the survivor benefit. You follow? In, in those circumstances, if that older spouse is willing to wait and can afford to wait till age 70, then it doesn’t make that much of a difference when the younger spouse collects.

And if the younger spouse wants to collect at age 62 under those circumstances, that’s fine. The only thing you gotta watch out for is what’s called the earnings test. And the earnings test basically says that if you’re gonna collect your Social Security early, uh, you better not be working, earning a wage and making a lot of money because the, it’s gonna disqualify you from collecting any Social Security benefit. Uh, the earnings test amount in 2024 is, uh, $22,000 in change. And basically what happens is, if you make more, if you as an individual make more than that amount in wages—not interest income, not withdrawals from an IRA or anything like that—but if your wage income is more than $22,000 in change, your Social Security benefit, should you try to collect it, will be reduced $1 for every $2 over that limit. So let’s say you’re still working and you’re making $70,000 a year or something like that, um, you really don’t have a choice. You either have to give up your job or you can’t collect Social Security. Realistically speaking, those are your two choices if you wanna continue working and make that kind of money. So, other than that, yeah, there are, there are definitely some circumstances where it makes sense to collect at 62.

Tim: Now, Bill, let’s say you’re earning $40,000 and the threshold is $22,000. So in that scenario, you’re giving back $1 of benefit for every $2 over the threshold. So roughly it’s $9,000 that you would be giving up. And that’s in that example.

Bill: That’s, that’s correct. And if you have a small personal benefit, remember at that circumstance you’re starting at age 62. So remember I said you get more when you wait till age 70, you get less at 62. Right? So it’s quite possible that that $9,000 could significantly reduce and in some cases even eliminate that Social Security benefit entirely. So yeah, I mean, sometimes if you’re making $40,000, it’s just not worth applying for, uh, that Social Security benefit. And some, some people will, Tim, they’ll, they’ll work part-time or whatever just to get up to that $22,000 threshold and then not go above that threshold. So that happens as well.

Tim: Yeah, I, I’ve seen that quite a bit, but that is probably one of, in my estimation, Bill, just dealing with people on a daily basis and talking about their retirement planning, that is probably one of the most misunderstood aspects of Social Security. The fact that, hey, yeah, you know, I’m still working and I’m gonna, I’m gonna collect at 62 because I don’t think Social Security’s gonna be there and I wanna make sure I’m getting mine. And I understand that philosophy. But then when you explain to them that, hey, you’re not gonna be able to earn more than $22,000, well gee, I make $50,000. Well, now you have this giveback that you have to consider. And people don’t under—you know, they, they, up until that point, they were completely unfamiliar with it. And you know, I, I would explain it to them and then I would suggest that they call the Social Security Administration and just get verification on that. And sure enough, they do and they come back and say, “Okay, now what do I do?”

Bill: Well, yeah, you do have the option to withdraw within 12 months too. And I’ve seen people do that. Um, the problem with withdrawing is that you gotta give ’em back whatever you have already collected. So, but so, it, it, it’s really kind of a hassle to deal with with, uh, with all that. I’ve also seen situations, Tim, where people have, uh, just, you know, you fill out when you, when you apply for Social Security and let’s say you’re age 62, you fill out a form online and you tell ’em you’re not gonna make any money, and you know that’s not true, but you just figure out they’re gonna tell ’em that and that get, and, uh, they’ll never figure it out. Well, guess what, uh, they do talk to the IRS and they do find out what money you’re making. So, uh, that can get into an ugly situation where they’re gonna demand money back from you, uh, with what’s called a demand letter. So you don’t wanna deal with that. You wanna be honest with them and tell them the truth and make an honest decision about whether you should be collecting at 62 or not, or 63 or 64 or 65, you know?

Tim: Right. And, and you know, Bill, that makes sense. I mean, for us to be honest with the government, ’cause they’re always honest with us.

Bill: <laugh> Uhhuh. <affirmative> Sure. Well, understand, Tim, just to follow up on that, I just wanna make—just follow up on what I just said earlier too. The, this is the Social Security Administration. Okay. It is not the IRS. Okay. The Social Security Administration can’t garnish your wages. They can’t send an auditor to your house or anything like that. They don’t have those powers. However, it’s not like they don’t talk to each other, okay. And they don’t find out whatever they need to find out from each other. So just keep that in mind. I think the SSA is actually a little bit more efficiently run than a lot of other government agencies. So.

Tim: Yes, for sure. Um, so, Bill, talk to us about, um, the, you know, we talk about life expectancy planning when we’re making our decisions. Talk to us about where life insurance fits into the equation when making your Social Security claiming strategies.

Bill: Well, sure, there are probably about a, a dozen different situations that I can think of where life insurance can help with the decision. But I’ll give you just one example, uh, of where life insurance can make a huge difference. Go back to that example I gave you before where I’m collecting $2,000 and my wife is collecting $1,000 a month, let’s say. Um, we do the right thing. We, and I don’t collect early, so I’m getting that $2,000 for life. Uh, if something happens to me, the good news for my wife is that she gets a, a bump in her benefit, right? She was collecting $1,000, but now if something happens to me, she goes from $1,000 to $2,000 a month, right? That’s the good news. But there’s bad news too, isn’t there? The bad news is that collectively, the two of us were collecting $3,000 a month as a married couple in our household.

Now, something happens to me, it goes down to $2,000 a month. Uh, you know, what’s gonna happen with the household expenses? I mean, I mean, in my case, there’d be a lot less food in the house, all right? But <laugh>, but we might make it up because <laugh>, we might make it up because, uh, she’s gonna have to pay someone for maintenance on the house, the stuff that, you know, maybe I do around the house. What’s gonna happen with the real estate taxes? Are they gonna go down because I’m not there anymore? No, they’re gonna stay the same, right? Mortgage is gonna stay the same, right? None of that is gonna change, but there’s less income coming in to pay those expenses. And my experience with older people has always been that once you get past a certain age and you’ve been in your house for a while, you wanna stay there for as long as possible.

You’re not in any great hurry to go and, uh, move into assisted living or anything like that. So how do you solve this problem? You have less income and the same expenses. Well, a life insurance policy could create that pool of money. So you could write a, a, a life insurance policy on me, you know, and it wouldn’t have to be that much in terms of with the way life insurance is normally valued, you know, $300 or $400,000 and I would buy that at a younger age. But what if something happens to me? You have that extra money there and that can help, uh, offset those extra expenses, um, after I’m gone. That’s one basic idea.

Olivia: Yeah. And, and so not only to offset those expenses, but to replace the lost Social Security benefit.

Bill: Exactly. Yeah. Yeah. That, that, that’s exactly right. ‘Cause you have a pool of money now that you can draw from as needed. Uh, so, and uh, and it would just, it would just, uh, set my wife’s at ease knowing that, that that’s there, that she’s not gonna have to move out of the house because something happens to me.

Tim: Yeah, and that’s a good point, right? Because most people are under the mistaken idea that I won’t need life insurance after age 65. And the, the fact that there will be an income reduction at the first death because of the loss, Social Security, uh, benefits at the first death. Now, funding for that eventual loss is probably a prudent thing. And therefore keeping your life insurance benefits in effect post age 65 probably makes some sense.

Bill: You know, I, yeah, Tim, it’s interesting ’cause I, I’ve dealt—and I’m sure you’ve found this similar to in your situation—I’ve dealt with hundreds of people who have life insurance and get past a certain age. And I don’t remember ever any one person when they get to that point saying, yeah, I don’t want this life insurance anymore. Uh, ’cause first of all, they probably got it when it was a lot cheaper at a younger age than it is now. And, uh, for some reason, there’s always a use for that life insurance, even once you get past retirement age. So that’s been my experience anyway.

Tim: Yeah, that’s, that’s a great point because people in their 50s and 60s are not looking to get rid of life insurance. They are actually looking to purchase more because they see now—they see the value and the need is probably more pressing, let’s say, you know, their, their runway is much shorter than it was when they were in their 30s and 40s.

Olivia: Yeah, absolutely. And I, I think about like the term policies on, on young couples, um, being put in place, you know, for the benefit of the kids, right? So if one of the, one of the parents dies, they’re gonna need money to raise the kids. Um, and really it’s, it’s true. You do need money to raise the kids, but there’s also the, the longer term planning that also often isn’t considered. Um, and I feel like a lot of times, you know, we have that class of people who, who don’t want to get rid of the life insurance at, at a certain age right after they get older. But then there’s the other ones who are, are looking at their investments being paid for by the life insurance. And I feel like they, they don’t necessarily see the benefit that is life insurance, right? Being able to pay pennies to get those dollars tax free when they die is, is a huge benefit, um, that often is overlooked in this industry, unfortunately, you know, by other advisors.

Bill: Yeah. You know, it’s funny, I, I think of my friend Marty Smith who always likes to say to people, uh, “Well, you know, if you have enough life insurance, then you don’t have to worry about spending down their inheritance and you want to go on a trip around the world. Go ahead.” <laugh> So it certainly has its advantages.

Tim: So, Bill, let’s talk about the, uh, let, let’s call it the, you know, the eight-hundred-pound gorilla in the room, which is, will Social Security be around? What, what’s your take on that? What’s your opinion? Because that’s, you know, everybody’s, everybody talks about that.

Bill: Yeah. How many hours do you have, Tim, to talk about it?

Tim: <laugh> Uh, listen, I, I I, I, I’ve, uh, I’ve looked at this in a good deal of detail and, uh, I just don’t believe that it’s ever—first of all, if you look at the projection, people say it’s gonna disappear or it’s gonna go bankrupt. That’s not quite true. What they say is, if nothing changes between now and the year 2035, benefits will be reduced by about 20%. That’s what they say. It’s never, it is never gonna go to zero because people are always gonna be working and they’re gonna always be collecting Social Security withholding from people’s paychecks. Um, so the, the real question is what’s going to happen between now and 2035? And I, I don’t know, but I I would absolutely be stunned if there’s ever gonna be any reduction in people’s Social Security benefits. I mean, I, I just think there would be rioting in the streets if that ever happened.

Um, so they’re gonna have to fix it somehow. And if you look at what, uh, the two main, uh, the main nominees are to how, on how to fix it, it’s either A, raise full retirement age, or B, increase the withholding taxes in some way. That might mean increasing the percentage or increasing the number of people who actually pay it, increasing the income limit or something like that. Um, so I, I, as I said, I’d be shocked if something, if, if they didn’t come up with a solution like that, one of those two things. Now it’s not gonna happen tomorrow. Okay. And I don’t think anything’s gonna happen for the next three or four years because people forget this, this happened once before, back in the early 80s, in 1983, the Social Security Trust Fund got down almost to zero, and they were within a year of, of bankrupting that trust fund. Uh, and what they did was a combination of things, you know, they raised full retirement age and they increased the withholding tax. Now that was supposed to last 75 years. And, uh, <laugh> it looks like we’re gonna be a little short on that, so they’re gonna have to do something. But, uh, I would be, I would be, uh, really surprised if, if they didn’t do anything to fix this at, at some point.

Tim: Well, I, I think that’s a great point, Bill, and thanks for addressing that. ‘Cause a lot of people don’t want to touch that question. Uh, so I, I appreciate you going out on the limb and answering that question, but I, I think another thing that they’ll probably do is they’ll just print more money to pay for the benefits and, you know, further kicking the can down the road, so to speak.

Bill: Well, yeah, I mean, technically, Tim, in order to do that right now, they, they legally can’t do it, which means they just have to change the law and then they could do it. So, you know, <laugh> eventually, eventually they, they, they certainly could do that. A, another possibility, and I was thinking about this too—you remember about, I don’t know how long ago, it was maybe 15, 20 years ago—they got in a situation, the government did, where they decided there were too many military bases in this country, and they had to close some of these bases, and they tried to—Congress tried to work it out themselves, and that became impossible because every congressman who had a base in their district would not allow a closure. So what they ended up doing was appointing this blue ribbon commission to do the dirty work, and that commission decided which bases were going to close, uh, without offending the members of Congress. You know, something like that could conceivably happen in the future, I think, with Social Security as well. So, we’ll see. I don’t know. It, it, it’s just a guess, but something, something’s gotta happen. I think so.

Tim: Yeah, for sure. Bill, is there any other questions you think we should be asking?

Bill: Uh, no, I, I think we, we’ve got a good idea. I mean, the only other thing I would say is understand, uh, one of the reasons that you need professional help when you decide when to collect Social Security is that Social Security’s not gonna tell you about certain things. For example, you might have a child under the age of 18. Social Security is not gonna tell you that, hey, you can collect a, a benefit for this child. Or you have an adult child who’s disabled—hey, you can collect a benefit for this child. So there are so many other extra benefits that you might not be aware of that you really do need to get, get a pro, uh, to help you with this, this sort of thing. So it’s not as easy as it first seems.

Olivia: Yeah, it’s funny. I have some friends who work in the Social Security field, like at, at the offices and they’re in the call center, and when they go through the training, they just learn how to search for the questions on the website and then read the webpage to the people. So if you don’t know the right questions to ask, you’re not going to get the right answers, because half the time they don’t even know the follow-up questions that you should be asking, and they’re not going to give out that information because they’re just going and searching and reading you what they have off the page these days.

Bill: Oh, yeah. And in fact, the, uh, their manual, their, their training manual, Social Security Administration’s training manual is online. It’s thousands of pages long, and it, it’s very difficult. I, I don’t lie, I have to look at it sometimes. I don’t like using it because it, it, it, it ends up confusing a lot of situations. But, uh, uh, yeah, that, that’s exactly right. It, you, you do need to know to have someone who knows the ins and outs of the system either way.

Tim: Now, Bill, I know in the past you have helped me and hundreds of other agents with helping their clients make the best decisions for them, and I think it’s important to understand, like, what special software or programs do you have to help our clients make the best decisions possible for them?

Bill: Well, we use a program called SS Analyzer, uh, and, uh, I, I’ve, I know you’ve seen that, Tim, and you know what it, what it looks like. It, um, it addresses all the issues or, uh, every issue that, that pretty much anybody would, would come across when it comes to Social Security, like the children, like I talked before, um, there’s another issue for state and local government employees where their Social Security benefit might get reduced if they’re getting a pension from that state or, or government agency or a local government agency. Uh, it also addresses that. Uh, but as I said at the beginning, the, the basic question everybody wants to get an answer to is, when should I collect? And that seems to, uh, and this, this program does a great job of, uh, addressing when you should collect, when you should start, and, uh, uh, I’m happy to share that with you, Tim, and other people. So.

Tim: Yeah, absolutely. And, um, it is important to have financial professionals because as so many things in this financial world go, you don’t know what you need to know until, until it’s too late in a lot of cases. So taking those steps, um, preemptively, um, consulting with a professional who, you know, has more knowledge and also has more resources of knowledge, right? Because not everyone knows all the answers, but they should know where to get the answers and be able to communicate that to you in, in a clear and concise way.

Bill: Yeah, and Olivia, I would add something to that, which is, if you make a mistake, it’s gonna cost you money every month for the rest of your life, so you gotta get it right.

Olivia: Yeah, absolutely.

Tim: Yeah. And you definitely don’t wanna leave any money on the table, and that, I think, is ultimately what everybody is trying to accomplish, not wanting to leave any more, any money on the table from our government benefit.

Bill: Well, especially when you look at how much money you put in in the first place, right?

Olivia: Yeah, exactly. That’s a great point, Bill. Well, Bill, it’s only a matter of time before this podcast goes viral and, and certainly this episode. And, uh, I want to thank you for joining us today. We really enjoyed your company, and hopefully you had a good time as well.

Bill: Well, I always enjoyed talking to both of you, as you know. So this has, this has been great. And, uh, I hope people get some benefit out of what we’re talking about today. That’s the main thing.

Outro: Are you a business owner, tired of feeling like your finances are out of control? Do you wish you could minimize risk and maximize returns without sacrificing the growth of your business? Then Tier One Capital is the solution for you. Tier One Capital is a company that specializes in helping business owners take control of their finances and achieve financial success. Their mission is to empower their clients and enable them to make informed financial decisions that benefit their business. At Tier One Capital, they understand that financial institutions and the government can hinder your business’s growth, which is why they strive to identify areas where you may be unknowingly and unnecessarily giving up control. They provide expert guidance to help you reduce tax burdens, increase returns, and build wealth in a tax-efficient manner. So if you are looking to take your business’s finances to the next level, visit TierOneCapital.com today and start your journey to financial success.

Mastering Cash Flow Management: How Small Business Owners Can Regain Control and Increase Profits

When you own your own business, it’s common to want to expand that business as quickly as possible. Business owners often reinvest their profits into inventory or expanding the business in any way possible because hypothetically, the more money they put in, the more they can get out. It contributes to financial freedom. Today, we’re discussing how to make that cash flow as efficient as possible because, ultimately, every purchase we make is financed.

Keep this in mind: cash flow is the lifeblood of any business. According to our research, 61% of small business owners around the world struggle with chronic or cyclical cash flow issues. What we’ve found is that most of these cash flow issues are self-inflicted. It’s how business owners manage their money that holds them back.

Here’s the key: we finance everything we buy, whether it’s inventory, equipment, or even employees. We’re either going to borrow money and pay interest, or we’ll pay cash and give up interest that we could have earned.

Most people try to avoid paying interest because they see it as a loss. However, they often overlook the interest they’re giving up by paying cash. This causes a mistake when business owners pay cash for things they could otherwise finance. The same goes for paying off debt too quickly—this practice sacrifices cash flow and control at every turn.

What happens when business owners give away their cash flow by paying off debt or paying cash for things is they eventually find themselves needing to borrow money down the road. Why? Because they gave away their profits and now have no capital reserve to access when necessary.

This leads to what we call the “debt cycle.” Chronic and cyclical cash flow issues arise when businesses give away control of their cash flow, leaving them without a financial safety net when problems arise.

A cash flow issue is simply a symptom, not the root problem. Most people approach it by either reducing expenses or increasing revenue, but both come with costs. For example, reducing marketing expenses can lead to a dip in revenue. However, cash flow issues really stem from not understanding the bigger financing picture.

If businesses manage financing more efficiently, they gain better control over their cash flow. That’s the goal: more control over your cash flow and assets.

In our practice, we examine every financial decision through the lens of control. Does this decision give you more control over your cash flow and assets, or less? The goal is to have as much control as possible because control leads to freedom and opportunity.

When you have options, you can choose to borrow from yourself, from the bank, or pay cash. But it’s critical to make these decisions in the most efficient way possible—where you are in the greatest control of cash flow and assets.

Conventional financing methods send the velocity of your money away from you, your business, and your family. The money flows outward, and you lose control of it. However, with our process, we start taking back control of some of that money’s velocity, keeping it in an entity you own and control. This allows you to leverage and reuse that money in the future.

You’re still making the same purchases and investments in your business, but now you control the process, ensuring that some of the cash flow returns to you. As a result, the next time an opportunity arises, you have a pool of money to draw from, ensuring that your cash flow is constantly circulating back to you.

The key is that you’re still making purchases, but now the money flow comes back to you, putting you in complete control. It’s a huge difference.

If you’d like to learn more about how to apply this process to your business, family, or personal finances, visit our website at tier1capital.com or download our free business owners guide. We’d love to speak with you in a free strategy session.

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

How Whole Life Insurance Builds Wealth, Grows Tax-Free, and Creates a Financial Legacy

When people think about life insurance, they often focus on the death benefit. But whole life insurance, especially designed for cash value accumulation, offers much more. It helps build wealth in the present, grows for the future, and ultimately creates a lasting legacy. One powerful tool in this process is dividends.

Dividends are a portion of the profits that mutually owned life insurance companies return to policyholders. If you own a policy with a mutual insurance company, you are essentially part-owner. The company’s profits come back to you as dividends, which are a return of overpaid premiums and are not taxable. If you reinvest these dividends into paid-up life insurance, your cash value compounds, growing even more over time.

Whole life insurance policies come with two guarantees: a death benefit and cash value that matches the death benefit by the policy’s maturity (usually at age 100 or 121). Insurance companies have to stash away more cash each year, so your policy naturally becomes more efficient, accumulating cash over time. You have access to this growing cash while still alive, a portion of the death benefit that you can use.

For policyholders with a mutual insurance company, dividends are an added advantage. These profits, combined with guaranteed growth, boost your policy’s efficiency. As long as the money stays in the policy, it grows tax-free, and you can access it via policy loans without interrupting the policy’s growth.

Insurance companies generate profits in three areas: mortality savings (fewer policyholders dying than expected), expense savings (overestimating operating costs), and interest earnings (earning more on investments than estimated). All these factors contribute to the dividend pool. Focusing solely on the dividend interest rate can be misleading—it’s just one part of the equation.

Reinvesting dividends creates perfect compounding. Your dividends generate more dividends, fueling continuous growth. You can access the growing cash value for retirement income, investments, or other needs, all while maintaining the policy’s growth. Additionally, your death benefit increases, allowing you to leave a larger legacy for your family, charity, or business, all tax-free.

Whole life insurance is a flexible, powerful tool for building wealth and securing your future. It grows a pool of cash you can use and leaves a tax-free legacy for your loved ones. If you’d like to explore how this can work for you, feel free to schedule a free strategy session at Tier 1 Capital. We’d be happy to help you take control of your financial future.

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

The Circle of Wealth: How To Reclaim Your Finances Without Taking Risks

Episode Summary

In this episode, hosts Olivia Kirk and Tim Yurek dive into the intricacies of personal financial control, focusing on how individuals can make their money work more efficiently without increasing risk. They explore the concept of a “Circle of Wealth,” breaking it into three parts: accumulated money, lifestyle money, and transferred money—emphasizing how most people unknowingly lose wealth through inefficiencies such as interest on debt, taxes, and fees. Tim and Olivia stress that true financial freedom comes not from taking on more risk for higher returns, but from eliminating wealth transfers and putting individuals in full control of their cash flow. The episode also offers actionable insights on how to reduce expenses without sacrificing lifestyle, drawing an analogy to improving one’s “golf swing” instead of buying better “golf clubs” to illustrate their unique financial approach.

Key Takeaways

  1. Focus on reducing wealth transfers like taxes, interest on debt, and inefficiencies to help grow your circle of wealth without added risk.
  2. Increasing your rate of return is not always the most effective way to build wealth, especially if it involves taking on more risk.
  3. Increasing savings without reducing lifestyle is possible by focusing on reducing expenses rather than chasing higher investment returns. 
  4. Mastering the process of how you use financial products is more important than the products themselves to help achieve financial success.

Transcript

Tim: When it comes to finances, no one wakes up in the morning and says, “Man, how can I mess up my financial situation today?” On the contrary, we’re all doing what we think is best for our specific situation, given our specific resources. But the truth of the matter is that a lot of times, conventional wisdom—whether that be from the media, your family members, or mentors—a lot of the advice that we hear is actually giving away control of our money and giving away control of our cash flow.

What we do is help our clients, and help you, to become more in control of your cash flow and to make the most of your resources by making your money as efficient as possible. The reason we do this is simple: whoever controls your money controls your life. So here’s a 30,000-foot view of how our process can help you to make your money more efficient. It all starts with this circle right here, your circle of wealth.

Olivia: That’s right. One thing we all have in common is we all have a circle of wealth. Some are larger than others, and others are larger than ours, but we all have one simple thing in common: we want that circle to grow. Now, there are many ways that you can grow your circle of wealth, but what we have found is that every dollar that’s in or going through your circle of wealth is broken up into three areas: there’s accumulated money, that’s the money you have saved and invested, then there’s lifestyle money, that’s the house you live in, the car you drive, the things you do, the vacations you go on, and it’s the schools your children go to because that’s a lifestyle choice for Mom and Dad.

Tim: And the third type of money is transferred money. Do you know what transferred money is? Well, it’s money that we’re giving up control of unknowingly and unnecessarily. It’s things like interest on debt, it’s things like taxes, it’s things like fees and planning inefficiencies. And the key here is that we focus on the transferred monies. Why? Because we feel that is the best way to help our clients make their money more efficient—focus on not losing money rather than taking risks to get a higher rate of return.

So what we’d like to do is sort of show you what differentiates our process from the rest of the financial services industry, and it’s real simple. Do you know that in 2023, according to the Bureau of Labor and Statistics, there were over 272,000 financial advisors in America? And I would be willing to bet that less than a thousand focus on wealth transfers. The rest of them focus on moving the money that you have, because that’s the grease that makes the wheels operate in the financial services industry—moving money.

Olivia: The conversation basically goes, “Hey, you have X amount of money earning 5%, we can show you how to get 7%. Now, you have to take some risk to get there, and you may lose, but at least you’ll get a higher rate of return, hopefully over time.” And then you’ve got to buy into whether or not that’s a strategy you want to implement, but see, there’s no guarantee that you’re going to make more money.

Tim: The second way the financial services industry could help you is to discuss how you could live on less, how you can reduce your lifestyle in order to save more money. Now, that’s a conversation that I don’t want to have with my wife, and I’m sure a lot of people don’t want to have that conversation with their spouse or themselves, especially these days. As you know, the cost of everything is going up between inflation, interest rates, and let’s face it, the salaries that people are earning can’t necessarily keep up with the spending and that lifestyle inflation that came back in the COVID times. So it makes it challenging, and maybe more challenging than ever, to make your money more efficient on your own.

And that’s why we’re here, educating people as to ways to make that money last, make sure it’s accessible to serve you and your family, and help you accomplish your goals all along the way.

Olivia: So how we do that is to focus on these wealth transfers. And basically, our process has four steps. The first step is to identify exactly where you’re giving away control of your money, and when we show you that logically, it will all make sense. The second step is the hardest step in the process—you’ve got to stop doing what you’ve been doing for 10, 15, 20, even 30 years, and it’s a hard habit to break.

Tim: The third step is to show you where to put your money so that you’re in complete liquidity, use, and control of your money. We call it the L.U.C. Factor—putting money in a place where you, and only you, could access it. And then the final step is really where the magic happens, where you borrow money from yourself to fund your lifestyle and pay interest back to an entity that you own and control. And if you take a look at that, basically your money never leaves your control. And that’s the lens through which we look at things to make sure that you’re in control of your money at all times.

Olivia: Now, when we focus on these wealth transfers, again, it’s things like interest on debt, it’s things like planning inefficiencies, it’s things like taxes. But you see, if you paid a dollar in taxes this year that you didn’t have to pay, you don’t only lose that dollar—you lose something more valuable: you lose opportunity cost. You lose what that dollar could have earned for you, and you lose it for the rest of your life.

Tim: So we focus on opportunity costs because every move we make financially eliminates choices that we could have made had we not made that choice. Exactly. And we always say we’ll never see the interest we don’t earn on our money. You know, so a lot of people pay cash and they do it in order to avoid paying interest to outside entities. But what happens is we get a hole in the bucket, if you will, because we lose the opportunity cost, and that’s the unseen.

So we quickly identify where you’re giving up control of your money in six key areas: mortgages, how you’re paying for your real estate, taxes, how you’re funding your retirement, protection areas, insurances, college funding, how you’re paying for your children’s college, and then how you’re making major cash capital purchases. Because what we’ve found is it’s not what you buy—it’s how you pay for it that is going to make the difference in your financial life.

Olivia: So what we try to do is put you in control of your own money. Right now, a lot of the time, you know, depending on your situation, it may be the mortgage companies, the banks, the credit companies, the government, or those major capital purchases like cars and paying for education—all of these entities seek to gain control of your money and your cash flow. And that’s where the rub comes in.

Tim: So by putting yourself in control, you really regain control of your entire life because now you control all of that cash flow. And I would argue that most of life’s frustrations come from not having access to money when you really want or need something. Now, it might sound overwhelming, it might sound impossible, but the fact of the matter is it’s very simple. Do you remember when you first learned how to play this game, tic-tac-toe? It’s a simple game with simple rules, and the conversation went something like this: the person who showed you how to play basically said, “Hey, here’s a new game, it’s called tic-tac-toe. You’re X, I’m O. You have to get three in a row.”

Olivia: And because that person taught you the rules to play, but not the rules to win, you lost and you lost and you lost until you figured out how to prevent your opponent from getting three in a row, and then nobody won. So then you went and showed somebody else, and you taught them the rules to play, but you didn’t teach them the rules to win. Our process teaches you the rules to win the financial game.

Tim: And it’s funny because, you know, those financial institutions are the ones who are advertising, who are luring us in with all of those offers and giving us the information to make our financial decisions. So it makes sense that they’re winning right now, right? And you know they’re winning because a lot of times you’ll feel stuck, frustrated, unable to do the things that you want to do even though you earn a great income. And that’s how you know it’s not how much money you make, it’s how much money you’re keeping at the end of the day that’s really going to make an impact on what you’re able to achieve in this life and the impact that you’re able to have.

Olivia: And you see, conventional wisdom teaches us that we need to focus on getting a higher rate of return on our savings and investments. But here’s the problem—those products that we own are just that: products. Nobody’s showing us how to utilize those products to make our financial life better. And that’s the problem. If we only focus on getting a higher rate of return, and we completely ignore opportunity cost, taxes, and interest on debt, our total circle of wealth can grow, but these problems are going to grow as well.

Tim: So the best analogy that we make to differentiate our process from others is the fact that other advisors are focusing on getting a higher rate of return and selling you the best product—we’ll call them the golf clubs. Our approach is to focus on how you’re using those products—we’ll call that the golf swing. And if you wanted to get better in golf, there are two approaches: you can go out and buy the best clubs, and by virtue of that, you’ll be the best golfer, or you can figure out a way to improve your golf swing. And that’s what we do. We take you down to the practice range, find out how you’re using your money, and then make adjustments to make your money more efficient.

Tim: Here’s a great example of how we help our clients make their money more efficient. We’re going to use an example of a family earning $102,000 per year and they’re saving $6,000 per year, and they’re getting 6% on their savings. Now, it would be a fair estimate to say that up to this point in their lives before they met us, 100% of their financial planning focus was on getting a higher rate of return on this amount of money every year.

Tim: So, if they’re putting away $6,000 and earning 6%, they’re earning $360 per year of interest on their annual savings. And if they increase their rate of return by 50%, they now earn $540. And here’s the question: is that really moving the needle for them? They just increased their rate of return by 50%, and it didn’t necessarily move the needle for them financially.

Olivia: Well, they increased their rate of return, but they also increased the risk that they were taking in order to get that rate of return.

Tim: Exactly. So it comes down to, was it worth it for less than $200? So the question becomes, how can we increase the amount of savings or the amount of interest earned on your savings without taking on additional risk? And our approach is to focus on the $96,000 of expenses. And we’re not talking about, you know, stop going out for dinner three nights a week and only go out two nights a week, and you’ll save $100 a week. No, we’re talking about, how can we reduce your expenses without reducing your lifestyle? I want to repeat that: how can we reduce your expenses without reducing your lifestyle?

Olivia: That’s where we focus on the wealth transfers, because the wealth transfers are already baked into your cash flow cake. So here’s the benefit of reducing your expenses without reducing your lifestyle: if we reduce your expenses by 1%, that’s $960, and that is the equivalent of earning 16% on your $6,000 of savings. That’s how you move the needle.

Tim: Now, here’s the thing: we’ve all been told that the higher the risk, the higher the what?

Olivia: The higher the return.

Tim: That’s right, the return. Well, have we ever taken risk and not gotten a return?

Olivia: Unfortunately, yes.

Tim: But here’s the deal—how much risk do you have to take to stop an expense?

Olivia: Zero.

Tim: All you have to do is stop doing it. What does it cost to stop an expense? It doesn’t cost anything. So that’s how you win this financial game, and this is how we help our clients make their money more efficient: reducing their expenses without reducing their lifestyle.

Olivia: You see, we can prove that this works because 16% of $6,000 is $960. So that’s what makes us different, and that’s how we help our clients.

Tim: Now, if you had a bucket that had holes in it—things like debt, opportunity costs, taxes, interest—and you had a faucet trying to fill up that bucket, how long would it take to fill up your bucket?

Olivia: Well, it would never be full because all of the money would continue to leak out.

Tim: Exactly. So when it comes to filling up your leaky bucket, there are two methods: number one, turn up the water pressure, and you know, eventually maybe it’ll overflow. It’ll continue to leak, but as long as you keep that water flowing, you’ll be fine. But the second method is to plug the holes in your leaky bucket, and then that bucket is going to fill up even if you only have a trickle.

Olivia: And here’s the point: conventional wisdom tells us that we should save more into that leaky bucket. It doesn’t make sense. Why try to increase the flow? You should never increase the flow unless and until you plug the holes.

Tim: So our first step will be to see if we can find areas where you may be more efficient without the need to reduce your current lifestyle.

Olivia: Now here’s the question: on a scale of 1 to 10, how does what we do meet with what you’re looking for from an advisor?

Tim: If you’d like to learn more about how we put this solution to work for our clients, we’d be happy to take a look at your situation. Visit our website today at Tier1Capital.com and schedule your free strategy session. We look forward to speaking with you soon.

Why Whole Life Insurance is Essential for Wealth Building, Tax-Free Retirement and Legacy Preservation

When we think about financial assets, we often categorize them into three types: current assets, accumulation assets for the future, and legacy assets for passing on wealth. However, whole life insurance, specifically designed for cash value accumulation, can function as all three—current, accumulation, and legacy—simultaneously.

As a current asset, the cash value of your whole life insurance policy can be accessed at any time. You can borrow against it to pay off debt, invest in opportunities, grow your business, or handle immediate needs. This makes it a flexible financial tool that allows you to address today’s issues while keeping your long-term goals in mind. Unlike a traditional savings account, where you may lose out on interest when you withdraw funds, whole life insurance allows your money to continue earning uninterrupted compound interest while you borrow against it. Plus, it offers additional benefits like protection through a guaranteed death benefit.

As an accumulation asset, whole life insurance also serves as a long-term strategy for building wealth. Over time, your monthly or annual premiums accumulate in value, and the dividends and interest earned inside the policy grow your cash value. This provides a reliable way to supplement your retirement income on a tax-favored basis. You can withdraw the amount you’ve paid in premiums tax-free and borrow against the accumulated interest without triggering taxes. This setup helps avoid common tax liabilities that erode retirement income, such as federal and state income tax, Social Security offset taxes, and increased Medicare premiums.

Finally, whole life insurance acts as a legacy asset. When you pass away, the death benefit provides a significant sum to your beneficiaries—whether it be family, a business, or a charitable organization. This explosion of value far exceeds the amount paid in premiums and helps recapture the interest paid over the years through policy loans. In essence, whole life insurance allows you to make your money work in three different ways: as a current asset, a deferred asset for future use, and a legacy asset for your loved ones.

Incorporating whole life insurance into your financial strategy offers unmatched efficiency and control. If you’d like to learn more about how to use this strategy for your unique situation, visit our website at tier1capital.com and schedule a free strategy session.

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

Mastering Financial Freedom: Overcome Inflation, Debt, and Cash Flow Challenges

In today’s financial climate, many people feel the pinch as inflation reaches unprecedented levels, while salaries fail to keep up. It’s becoming increasingly difficult to manage your finances, especially after experiencing a period of “lifestyle inflation“—where spending habits increased during a time of economic boom, only to be met with the harsh reality of rising costs. This post aims to offer some relief and guidance on how to regain control of your finances amidst these challenges.

Inflation has surged by 18.6% over the past three years, while savings have plummeted by 37%. This stark contrast highlights the financial strain many are experiencing. The double whammy of dealing with both rising living costs and credit card debt, combined with contributions to retirement accounts, has left many feeling trapped. This scenario creates what we call a “double death”—a situation where your money is locked away in retirement accounts, making it inaccessible when you need it most, and at the same time, high-interest credit card debt eats into your cash flow.

Credit card debt in America is at an all-time high. The cost of living is forcing many to rely on credit just to get by, leading to a vicious cycle of debt that seems impossible to escape. Credit card interest rates can range from 20% to 35%, which means a significant portion of your payments goes toward interest rather than reducing the principal balance. This system is designed to keep you in debt, obligating your future income for purchases made today at a steep cost.

What we propose is a shift in mindset—regaining control of your cash flow and, ultimately, your life. Being heavily in debt means you’re not in control, and this financial stress can affect every aspect of your life, including your sleep. Studies show that a significant percentage of small business owners worldwide lose sleep over cash flow concerns, underscoring the pervasive nature of this issue.

Many cash flow problems are self-inflicted, often resulting from how we use our money. The combination of credit debt and retirement contributions is a prime example. Instead of the simplistic approach of redirecting all available cash flow to pay off credit card debt, which leaves you with no access to money and forces you back into borrowing, we suggest building a pool of cash that you own and control. This approach provides a safety net, allowing you to pay off debt while still having funds available for emergencies.

Building this financial safety net is key to navigating life’s unexpected expenses. By having access to capital, you gain the freedom to choose whether to tap into it, reducing your reliance on credit and giving you more control over your financial future. The strategies we often use may seem admirable—saving for retirement and getting out of debt—but when done simultaneously, they can leave you feeling just as pinched as before. By adjusting your approach, you can transition from feeling financially stuck to gaining more control almost overnight.

Ultimately, it’s about shifting your perspective to ask, “Am I putting myself in more control of my money or less?” This is the lens through which we help our clients view their cash flow, guiding them toward greater financial freedom. If you’re interested in learning more about how we implement this process for our clients, visit our website at tier1capital.com, where we offer a free web course that delves deeper into these strategies.

Remember, it’s not about how much money you make—it’s about how much you keep that truly matters.