Business & Personal Finance Articles

Stabilizing Your Portfolio Using Whole Life Insurance

August 28, 2023

If you have an investment portfolio, chances are you’ve heard of a 60/40 split. 60% equities with 40% bonds and you’ll be safe. However, do you realize that the 60/40 split recently had the worst year ever because of the inverse relationship between interest rates and bond prices?

With the rising interest rates in the market, prior to last year, bond investments had a run like no other. For 40 years, bond interest rates came down, which means the prices went up. It didn’t matter. When you got in on the bond train, you made money. Those days are over. The reason this happened is because interest rates, again, steadily came down. That’s probably not going to happen for a long time.

We all know that interest rates are on the rise. They’ve been on the rise for a while. And they’re going to continue to go up until inflation gets under control. With a small interest rate increase last year, the 60/40 portfolio split had its worst year ever. That’s not even taking into account the rise in interest rates since January 1st of this year.

Now, the point of the 60/40 split in the portfolio is to have some riskier investments and bonds to balance it out with some more stability. However, what happened last year was we had volatility in the riskier investments, as well as volatility due to the interest rate rises in the bond market.

So this bears the question, if bonds aren’t stable anymore, and we’re adding them to the portfolio for stability, what do we use to replace the bonds to add stability and keep our money safe?

Most investment managers talk about diversified portfolios, but how do we diversify our portfolio in a way that introduces stability to our portfolio? One way may be with a specially designed whole life insurance policy designed for cash accumulation and you may be wondering, what does whole life insurance have to do with investments?

Whole life insurance is a terrible “investment.” And that, in fact, is true because typical investments inherently have risk. But with a whole life insurance policy, it’s actuarially designed to get better and better, year over year. The fact of the matter is that whole life insurance is uniquely positioned to take advantage of increasing interest rates -which will work out in your favor.

You see when interest rates rise, the insurance company doesn’t have to sell the bond. They’re going to hold the bond to maturity. They can utilize the bonds that are maturing to reinvest into higher interest-rate bonds, or they can utilize those bonds to pay expenses. So it’s an old money, new money type phenomenon.

But the point is, because the insurance company has that option, they don’t have to sell the bonds before maturity, and therefore, realize a loss. In essence, what you’re doing is you’re giving the interest rate risk to the insurance company (instead of taking on the risk yourself -as in typical stock investments) which is uniquely positioned to accept that risk because they don’t have to sell the bonds.

Here’s the long and the short of it.

In rising interest rate environments, the insurance company is able to take on that bond interest rate risk and come out better on the other side. You’re able to transfer that risk to the insurance company.

But what happens in low-interest rate environments?

Well, whole life insurance policies designed for cash accumulation are a great way to warehouse your wealth due to their many benefits. We have tax-deferred growth within the policy. We have an actuarially designed policy that’s guaranteed to get better and better every year. We have dividends that, once they’re credited, can never go away. We also have tax-free access to the policy cash values via the policy loan provisions. And then at the death of the insured, we have the opportunity to recapture all of the costs associated with the death benefit costs, as well as any loan interest that you paid throughout your life. You have the opportunity to recapture that and keep it within your family at the insured’s death.

You give the insurance company the interest rate risk. You give the insurance company the portfolio risk, And you give the insurance company the opportunity cost risk. They’re accepting all the risk because they’re uniquely positioned to accept that. And it adds stability to your portfolio, plus, you get a death benefit.

If you’d like to learn more about this positioning, schedule your FREE strategy session with us.

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

Cracking the Code to Properly Save for College

August 24, 2023

Have you ever wondered how people afford sending their children to college? Sometimes the first child is manageable, the second is tight. And by the third or fourth child, it’s downright impossible. Today, we’re going to talk about how to set yourself up financially to send your children to college and afford that college tuition.

The cost of college education has been rising at a rate that is significantly higher than the rate of inflation. Basically, that means that what it’s going to cost you to send your children to college is growing much faster than the income that you’re earning. But here’s the deal. If your income grows fast, that factors against you when you’re filling out the FAFSA, the Free Application for Federal Student Aid.

We call inflation the stealth tax because we don’t see it on our tax returns, but it affects each and every single one of us. When it comes to the cost of college, not every family is going to pay the same amount of tuition for the exact same school. You see, it’s calculated based on four factors: parent’s income, parent’s assets, children’s income and children’s assets. So when it comes time to send your children to college, you want to make sure you keep those numbers looking as low as possible.

But the question becomes, how exactly do you do that? How do you set your family up in a position so that you’re paying the lowest legal amount you have to your to send your children to college so that you could get out ahead in the long run?

What you’re trying to do is maximize the amount of federal aid that you receive. And if you do that in so doing, you’re making your money more efficient. What we’re trying to do here is show you how to send your children to college with minimal impact on your ability to save for your future and with minimal impact on your current lifestyle.

But here’s the issue. Traditional methods of paying for college and saving for college are going to leave you pinched. Here’s a secret, 529 savings accounts count against you when it comes to federal aid application. So by doing the right thing and saving for your children to go to college because that’s a major capital expenditure, you’re actually decreasing the amount of aid that your family’s going to qualify for because you did the right thing to save for college.

If it seems like you’re damned if you do and damned if you don’t. I got news for you. That’s the way they set it up. You see, everything that served you well financially up until the point your children are applying for federal aid, will work against you going forward after the application for federal student aid.

No parent should have to choose between sending their child to their dream school and funding their own retirement. But unfortunately, that’s what it comes down to a lot of times in these college funding situations. Because you know what wasn’t factored into the FAFSA calculation? How much money parents are paying towards their own debt on a monthly basis. And clearly the amount of debt you have is going to impact not only your lifestyle, but your ability to pay for your child to go to college, especially if you plan on doing so without derailing your own retirement. There’s only so much cash flow to go around.

If you have a lot of debt payments, there’s only so much leftover at the end of the month. What happens is a lot of parents are forced to decrease their retirement savings at the time they’re sending their children to college so that they’re able to finance the cost of college tuition.

Here’s the solution.

You really should be looking at ways to make your money more efficient because the more efficient your money becomes, the better prepared you are to take on or tackle this increased expense of sending your child or children to college.

At Tier 1 Capital, we look at things through the lens of control. Are your financial decisions putting you in more control of your cash flow and assets or in less control of your assets? Whoever controls your cash flow controls your life.

No parent wants to stand in the way of their child pursuing their dreams but we see so many times where children have to make a decision between almost bankrupting their parents and pursuing their dreams.

So what are some practical steps you could walk away with and apply?

Number one is to look at where you’re giving up control of your money unknowingly and unnecessary. We call these wealth transfers. The five areas that we focus on are taxes, mortgages, how you’re funding your retirement, how you’re paying for your children’s college, and how you’re making major capital purchases. And let’s face it, isn’t college a major capital purchase?

Number two would be to build in flexibility to your plan. First, you find the inefficiencies, regain control of that cash flow, and then save in an area where you own and control. And the importance of that is the flexibility to send your children to college to pay for vacations, to pay for any expenses that come up, and then eventually also use that money to retire without the restrictions placed on accounts by the government for example.

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

The Inverse Relationship Risk between Bonds and Interest Rates

August 17, 2023

Everyone knows that interest rates are finally on the rise. But what you may not realize is what’s going on under the covers. What’s happening to the bond market as these interest rates rise? Do you realize that there’s an inverse relationship between interest rates and bond prices? Let’s take a deep dive on what this means for you.

Let’s start at the beginning. What the heck is an inverse relationship, and how is there one between interest rates and bond prices? Well, it’s real simple. When the interest rates rise, the value of the bond or the price of the bond goes down. And when interest rates go down, the value or the price of the bond goes up.

Now, in and of itself, it may not mean a whole heck of a lot to the average investor, because if you’re holding the bond to duration or till the end of the bond period, there’s no problem. If you bought a 4% bond and interest rates went up to 5%, you’ll still collect your 4% at maturity. The problem is when you’re either renewing rates or exchanging bonds, that’s where the problem comes into play.

There are three main risks with this inverse relationship. The first is interest rate risk. Interest rate risk really comes into play if you need to sell your bond before maturity. If you need to sell your bond before maturity and interest rates have risen, the value of your bond may have gone down and consequently you’ll receive less than you were supposed to receive. You will lose money.

Risk typically isn’t associated with bonds, as they are considered a safe investment. But as we see here with this inverse relationship and rising interest rates, it can leave you exposed. This could also be a little bit of an issue because bonds are relatively liquid. If it comes down to it and it’s between selling your actual investments, stocks, real estate or mutual funds, it may make more sense to sell your bond, because it’s the most liquid. But the point is this. You have to recognize the fact that bonds are not risk free.

The second issue that could arise between this inverse relationship of interest rates and bonds is opportunity cost. And basically what that means is you might have better opportunities with higher interest rates, meaning that savings accounts, CDs, annuities or newer bonds might have higher interest rates than the existing bonds that you hold, making the value of your bonds worth a little bit less.

Now, the problem arises in this case, when you want to sell your bonds because they have a low interest rate, you can make more money, more interest somewhere else. So let’s get the bonds out of here. We could get a better opportunity somewhere else. But what happens is, we have to sell those bonds. You can’t redeem the bonds before the maturity date, so you have to sell them on the open market. But with that, they have a lower market value. So you could incur double loss in a sense.

Our third and final issue with this inverse relationship, and that is portfolio volatility. Bonds tend to be more stable than other investments, such as stocks and maybe even mutual funds. And consequently, they’re an ideal candidate for diversification of portfolios and risk management.

What this means in plain English is when you have a riskier portfolio full of real estate stocks and mutual funds, oftentimes advisors will incorporate bonds into the portfolio to stabilize and make sure you’re not losing all of your money, or all of your money is not at risk. But here’s the problem. During volatile interest rate environments, when the bond interest rates rise, because of the inverse relationship, the value goes down and that introduces risk to an asset that you may have considered to be less risky.

So, ultimately here’s the point. Fluctuation in bond interest rates can have an adverse effect on your overall portfolio performance.

Is Your Cash Flow Prepared for Student Loan Repayment

August 14, 2023

The most recent word on the street is that student loan repayments are going to begin again in October of 2023. What does that mean if you’ve been spending that money instead of saving it or paying toward your student loans all along? Well, basically, it could mean that you’re going to experience a cash flow pinch. Between inflation, high interest rates and now an extra debt payment it’s all about cash flow. Whoever controls it, controls your life. Let’s talk about how to create some cash flow relief and set yourself up for a better financial tomorrow.

They call inflation the stealth tax because it’s not written in the tax code, but it affects each and every single one of us. Some more than others. And recently, the costs of goods and services has been increasing at a faster pace than our income can keep up with.

According to the Federal Reserve, in the last quarter of 2022, consumer debt increased by $6.1 billion, which was one of the highest recorded quarterly increases. And that’s just in three months. This is proof that the cost of living is increasing faster than our income. If you don’t have the cash flow built in, it makes sense just to obligate your future income and put it on the credit card.

However, with student loans coming due and yet got another bill that we’re going to be responsible for, how are we going to fit this into our cash flow? This is why it’s more important than ever to make your money more efficient. You see, there’s only so much revenue coming in. There’s only so much income coming into your household or coming into your business. It doesn’t make sense to be using your money inefficiently and wasting the control that you had over that money. That’s why our process is more important today than it’s ever been, because we show you how to regain control of your money.

What that looks like is looking at your cash flow for areas of wealth transfer. Areas you’re giving away control of your cash flow unknowingly, meaning you’re not aware of it and unnecessarily, meaning it can be corrected. And once you’re able to identify those wealth transfers, you could start saving in an area where you own and control, so ultimately, your goal could be to regain the finance function and control of that finance function in your life so that you’re less dependent on banks and credit companies for access to capital in the future.

You see conventional wisdom teaches us to save in areas where we don’t control that cash flow. Let’s take a look at a 401k, for example. Yes, we’re saving for retirement, which is admirable. However, when it comes to making these small milestones along the way, we don’t have access to that money and we certainly don’t have access to it without paying taxes, and a penalty in most cases.

You might be saying, “Hey, I’m using my money very efficiently.” Well, this is where the problem is. If you’re implementing conventional wisdom or traditional financial advice, in all probability, your money is inefficient. When we say inefficient, what we mean is your money is not accessible when you need it for whatever you need it. No questions asked. If your money is inefficient and inaccessible, that can create some huge financial problems.

I would argue that most financial struggles come from not having access to money when you really want or need it. Take, for example, when student loans are coming due. Imagine if you had access to money, instead of feeling pinched, you can have some cash flow relief built into your system. Flexibility is key when it comes to these issues.

If you’d like to learn exactly how we help our clients to become more in control of their cash flow and their assets Check our free web course that lays out exactly how we put this process to work, The Four Steps to Financial Freedom.

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

3 Steps to Avoid the Great Resignation within Your Family Business

August 11, 2023

As a small business owner, you could feel limited in the ways you’re able to attract, retain and reward your key people. Let’s dive into how to use a whole life insurance policy to accomplish just that for your key people, so you’re able to keep them in the game.

As a small business owner, there’s no way to do it alone. It’s so important that you have a team of key people around you to help build your business. During the Great Resignation, over 48 million employees voluntarily left the workforce. Some left the workforce before they even secured another job. According to Gallup, 48% of all employees, that’s basically half of your employees, is either actively looking or searching for opportunities.

Let’s ask this question. What impact would it have if you lost any of your key people? The cost of replacing a key employee could be as much as 200% of that employee’s salary. Recently, one of our clients had their plant manager retire. It took three people to replace that one individual. In a small business that could be very close knit and the key employees could end up taking on several roles to move that business forward. They’ll do what it takes.

This all leads us to why it’s so important to incentivize your employees to make them want to stay. How can you incentivize your key people to stay without giving away equity in your business? Let’s face it, you want to keep the family business in the family.

There are ways to make your employees feel valued and to take care of them for their future. Because it is a family business, we do care about their well-being as well. So how does the process work? How do you get started with holding these key conversations with your employees?

Well, the first step is to actually have the conversation. We’ll meet with the owner and we’ll meet with the employee separately. We want to find out the key value for the employer. And we also want to find out what is important to the employee. Because let’s face it, if your objective is to incentivize your key person to stay. If the benefit isn’t perceived as valuable to him or her, they’re not staying.

As a business owner, it’s really important to keep your key people incentivized to stay and help you to grow your business. But the reality is 48%, one out of two of your employees, is looking for another opportunity.

The second step is to design a plan that meets both the employer’s objectives and budget, as well as meets the needs and desires of that key employee.

The third step is our secret sauce. We’ll meet with you and your financial team to find areas of great potential, where you may be giving up control of your money unknowingly and unnecessarily. This is where we literally find money that’s hidden in plain sight. It’s money that’s baked into your cash flow cake, but you think it’s moving you forward and it actually really isn’t. That’s the money we can use to fund the incentive plan to keep your key employee.

If you step back from this process, basically what we’re saying is we can provide a benefit to incentivize your key people with having very minimal, or no impact, on your current cash flow. Because we all know that cash flow is the lifeblood to any business. So it’s important that we keep it as steady as possible.

If you’d like to get started with incentivizing your key employees and building your strategy, 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.

4 Key Questions to Ask Before Signing Up for a Whole Life Insurance Policy

August 7, 2023

So you’re thinking about getting started with a specially designed whole life insurance policy designed for cash accumulation. Maybe you want to expand your business or protect your family, or you want to get started with the infinite banking concept. Today, let’s dive into the four questions you need to ask before you sign the final policy papers.

Let’s get started with question number one. Do you like the agent? This agent is going to be with you for the life of the policy, and it’s important that you have a good working relationship with this person before you sign the contract. And that’s why it’s important to have a key conversation with your agent to make sure the agent understands exactly what your goals and objectives are. If not, you may end up with a policy that doesn’t meet your needs.

Number two is you need to answer the question within yourself How do you plan on using the policy? And does your policy meet your needs? With most life insurance policies, you’re going to be building cash accumulation, but you want to make sure upfront that you know how your policy is going to perform over time.

For example, with monthly contributions to your policy premium. It’ll take some time for your policy to grow and accumulate a cash value. So with that, it will take a little bit more time before you have enough cash value to loan against that policy cash and go out and achieve your financial goals. That’s why it’s important that the agent understands exactly what your needs and objectives are to make sure that the policy fits your needs.

In most policies that are designed for this cash value accumulation or the infinite banking policy, you could expect about 50% of the premium contributions to be available for policy loan within that first policy year.

Number three is to look at your contract and make sure it’s not a MEC or a modified endowment contract. Modified endowment refers to a contract status that the insurance company must perform on an annual basis. Basically, the insurance company just needs to make sure that it is performing like a life insurance contract versus an investment.

Number four is to confirm you’re with the right type of company. You want to make sure your company is mutually owned, dividend paying and non-direct recognition. Mutually owned means that the policy owners are owners of the company, not stockholders. Dividend paying is important because the policy owners are the owners of the company, they’re entitled to dividends if the insurance company makes a profit that year. And non-direct recognition, meaning that the policy performs exactly the same way, whether or not a policy loan is taken.

It’s really important that you have the answer to all three of those questions when choosing a life insurance company, because some mutual companies pay dividends but they are direct recognition, meaning that they’ll give you a lower dividend if you borrow. And the point is this: if you intend on borrowing, you shouldn’t be penalized for borrowing.

If you’re looking to get started with the Infinite Banking Concept check out our latest YouTube video. We do a deep dive on the four questions that you need answered before you place that policy in force. Once you have satisfactory answers to all of these questions, you’re going to be in a great position to move forward with your whole life insurance policy designed for cash accumulation.

If you’d like to learn more about how to get started with the infinite banking concept or getting started with a cash value life insurance policy designed for accumulation, hop on our calendar for a free strategy session.

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

Saving Money in the Proper Bucket

August 3, 2023

When accumulating assets for your future. There are three buckets where you could store your money, so hopefully it grows. Most people don’t realize they can choose whichever bucket they want their money in. What bucket are you saving in and does that match up to the bucket you want to be saving in?

So here’s a picture of a cake. We’re going to call it your money cake. It is literally all the money that you have accumulated for your retirement. And not only that, all of the money that you will accumulate throughout your lifetime.

I’m going to take the knife and make the first cut into your money cake. I’m going to hand you back the knife and you’re going to make the second cut. And that second cut is going to depict the amount of your money cake you want exposed to taxation.

I bet that’s a pretty small slice you just cut in your head. You want to keep as much of your assets for you, your business and your family as possible. That’s the name of the game here. Why are most of the choices you’re making exposing your money to unnecessary taxation?

Let’s start with the first bucket: always taxable. What does that even depict? Always taxable money is money that you’re putting into your pretax retirement savings. It’s things like IRAs, 401Ks, 403Bs. You see, these accounts are advertised as tax deferred, meaning you get to pay the taxes in the future. But in essence, it’s just postponing the tax. But not only that, also the tax calculation. And let me ask you this. Do you think taxes are going up or down in the future?

We’re over $31 trillion in debt as we speak. Do you think our government is going to need more money or less money to provide the services that they’re currently providing, let alone paying the interest on that debt?

Another thing to consider with this always taxable bucket is you’re getting a tax deduction now on the contribution, the seed. But in the future, when you’re taking the money out, you’re being taxed on the accumulation value, the harvest.

That brings us to our second bucket: sometimes taxable. This is money that you have saved. But at the end of the year, the institution where you have the money parked is going to give you a 1099 or a capital gains statement. This would include mutual funds, brokerage accounts, anything that’s not in your retirement account and even savings accounts if you’re earning any interest on them.

With this type of account, your taxes are paid each and every single year. However, most people don’t even realize it’s because the taxes are typically paid out of cash flow versus deducted from the account. So that account is able to accumulate. When you get a 1099 for interest or dividends or capital gains, that reduces the amount of tax refund you would get or increases the amount of taxes you have to pay. Doesn’t that reduce your lifestyle? Are you okay with that? So on paper, it looks like you’re earning this great high rate of return, but it does not account for taxes.

This brings us to our third bucket: taxed never. These are accounts like Roth IRAs or cash value life insurance where you can access the cash on a tax favored basis so you’re not unnecessarily paying taxes that you don’t want to or more importantly, you shouldn’t have to pay.

Now, the way you get money into these accounts is with after tax dollars. After your money is taxed and put into these accounts, they’re able to accumulate on a tax favored basis. This allows you to accumulate more wealth with more tax benefits so that you’re able to keep the government’s piece of your cake as small as possible. You see, you pay them once you get them out of your hair and you’re able to grow and prosper in the long run. And not only that, keep it for you and your family and your business. And it’s a real simple philosophy.

We believe that our client should be in control of their money, not the government.

If you’d like to learn more about how to build your taxed never bucket, schedule your free strategy session with us today.

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

5 Questions to Ask Before Choosing your Insurance Company

July 31, 2023

Not all life insurance companies are created equally. Some are better than others, and some are better for specific uses, like implementing the infinite banking concept than others. Let’s go over exactly what you need to be looking for in a life insurance company as you get ready to implement the infinite banking concept.

My father once told me there are no deals in insurance and this holds especially true for life insurance. So you want to implement the infinite banking concept. There are over 750 life insurance companies licensed to do business in the United States. Which is the best company for you?

So here are the questions you should be asking when you’re getting ready to implement the infinite banking concept. First and foremost, maybe the most obvious question is the company you’re dealing with a mutual company or a stock company?

Both stock and mutual companies have owners of the company. The difference is that the policyholder in a mutual company is the owner of the company as it relates to his or her policy, which means the profits that the insurance company makes on your policy are funneled back to you in the form of dividends when those dividends are declared.

Conversely, with a stock company, the policyholder is not necessarily the owner of the company. The owner of the company will receive the profits. If you’re a policyholder with a stock company and you are not a stockholder, you will not get the profits that the company makes on your policy.

Now, recently we had a client call in and say, “Hey, Olivia, am I able to have the dividends offset the premiums on my policy? I’ve had this policy for a long time. I should be earning dividends. My wife has the policy with the mutually owned company, and she’s able to reduce the premiums due on her policy using these dividends.”

And unfortunately, I had to tell him, “Hey, this company doesn’t declare dividends for their policyholders, so there’s no way to reduce the premiums due without cutting back on that death benefit.”

The second question you should be asking is, does the company have a track record of paying dividends? And more specifically, the company should have a minimum track record of over 125 consecutive years of paying dividends. That means the company paid dividends through World Wars, through depressions, through financial crisis.

And that’s the key. You want a company that has a long history of paying those dividends. Now, dividends are important to the policy because they do two things. They allow you to accumulate cash value within the policy on a tax favored basis. And also they buy up a little extra chunk of death benefit and increase that death benefit over time so you’re able to keep up with inflation.

The third question you should be asking is, is the company licensed and preferably domiciled, meaning that their home office is located in the state of New York? Now, why should that matter?

Well, simply put, the state of New York has the highest level of regulatory protection in the industry. And because of that, if a life insurance company wants to do business in New York, they have to follow New York law in the other 49 states. New York law limits the amount of commissions that could be paid. And again, if you want to be licensed in New York, you will have to follow New York law in the other 49 states.

Here’s a little secret. If your insurance agent is selling you a policy and a company that’s not licensed to do business in New York, they’re able to get paid 100% of the first year’s premium, and maybe even more. Versus if you’re working with a company that is licensed to do business in New York. New York regulates the amount of commission that could be paid to the agent.

The fourth question you need to ask is, does the company recognize policy loans and therefore reduce my dividend? Because I’m taking a loan or is the company non direct recognition? And what does that mean?

Well, basically, if your company is direct recognition that means that they will give you a lower dividend if you borrow. And let’s face it, if the point of buying the insurance policy is to implement the infinite banking concept, that means you want to borrow. Why would you want to be penalized for borrowing or for doing the thing you want to do? It doesn’t make sense.

That’s why we recommend companies that are non-direct recognition. That means they will not reduce your dividend if and when you borrow against the cash value.

The last question you need to ask is does the company you’re about to work with support the infinite banking concept? You see, there are a lot of good insurance companies out there for other purposes. They support whole life insurance policies, universal life insurance policies, term life insurance policies, and they have great ratings.

However, there are other companies that really embrace the use of these policies and love that their policyholders are taking policy loans and also repaying them and fully embracing the infinite banking concept in their lives.

Are you ready to implement the infinite banking concept and you’re ready to choose a life insurance company? Check out our latest video where we go over the questions you should be asking the agent when choosing a life insurance company for the infinite banking concept.

The point is, there’s absolutely no sense in trying to put a round peg in a square hole if the company doesn’t support infinite banking, don’t do business with that company. It’s that simple. After asking all of these questions, you should be fully ready to move forward with the infinite banking concept and take back the finance function in your life.

If you’d like to learn more about exactly how to put this process to work for you, schedule your free strategy session today. Or if you’d like to see exactly how we put this process to work for our clients, check out our free web course right on the homepage, The Four Steps to Financial Freedom.

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

5 Reasons to Own a Whole Life Insurance Policy

July 27, 2023

Sometimes you’ll hear that whole life insurance is a bad investment. And let’s just get that off the table now, because life insurance is not an investment. Let’s go over five reasons why you would want to own a whole life insurance policy.

Life insurance is not an investment. In fact, to call life insurance an investment would be an insult to what life insurance can and will do for you. You see, investments, by definition, inherently have risk. And with whole life insurance, there’s no risk baked into this cake. In fact, all of the risk is transferred over to the insurance company. So it’s a very safe asset to have in your portfolio.

Let’s get started with the five reasons why you would want to own a whole life insurance policy.

Number one is to protect your family and your business. Remember, it is life insurance. And life insurance pays a death benefit if and when an event occurs. Meaning the death of the insured. And if that were to happen, the family may suffer financially, and the business may suffer financially. So at its core, life insurance provides protection to make sure that the family can continue and the business can continue.

And I hate to break it to you guys, but we’re all going to die. So when that event occurs, that is when you want the death benefit to be paid out, when there’s a problem, no more income, no more principal running the business. These events are detrimental to the units and the death benefit could help you along the way. Let’s face it. Dying is bad enough. There’s no sense doing it for free.

Number two is the living benefits of whole life insurance. Whether you have a regular whole life insurance policy designed for death benefit or a specially designed life insurance policy designed for cash value accumulation. Either way, they have living benefits. This includes the policy loan provision that allows you access to your cash values throughout your life as the policy owner. One of the best parts of that loan provision is that when you borrow against your cash value, your money continues to earn interest, as if you hadn’t borrowed because it’s a collateralized loan. What that means is, you’re borrowing against the equity of your policy. Your equity never leaves the policy.

Number three is other benefits. These are special riders added to the policies that could allow you to have your premium waived should you become disabled, or chronic or terminal illness riders, that allow you to tap into the actual death benefit, that huge pool of money, before you die to take care of chronic and terminal care needs. And because of that rider, you’re actually allowed to tap into the death benefit on a tax favored basis. Which brings us to number four, tax benefits.

There are a ton of tax benefits with whole life insurance policy including tax deferred growth, a tax free death benefit and tax, favored access through the policy loan provision. Not to mention the fact that life insurance distributions are given favorable tax status, which means that the first dollars you pull out are considered the first dollars you put in. It’s called FIFO, first in, first out. Contrasting that to investments where the first dollar’s pulled out are considered the growth or the gain and therefore are taxable.

Here’s a life hack, if you’re considering deducting your premium payments that you’re putting into the policy, this is a big no no. You never want to do that because on the back end, it could cause your death benefit to become taxable.

Which brings us to our fifth and final reason why you would want a whole life insurance policy, and that is to supplement your retirement income on a tax-favored basis, As we mentioned earlier, the money is accessible on a tax-favored basis.

But what taxes do you save? Well, quite simply, federal income tax, state income tax, no Social Security offset tax, no increase in your Medicare premium. And let’s face it, by having to pay a higher Medicare premium, isn’t that really a tax?

Additionally, the death benefit passes to your name beneficiary on a tax free basis. And in most states, the death benefits pass outside of probate and outside of state inheritance or state estate taxes.

The long and the short of it is using your whole life insurance policy to draw from during retirement can save you a ton of money in the long run, plus, guarantee your legacy gets passed on to your heirs. And wouldn’t a great way to make sure that your money last as long as possible, be to avoid as many taxes as you possibly can in retirement? We have to protect our assets any way we can. And life insurance provides a great way to do that.

Check out our latest YouTube video to learn more.

If you’d like to learn more about how to utilize a whole life insurance policy in your portfolio, 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.

Can I use my Policy for Monthly Expenses?

July 24, 2023

In Nelson Nash’s book, Becoming Your Own Banker, he mentions that your goal should be to have your premium deposits equal to your expenses. Does that mean you should be paying your expenses through your policy loans? Not necessarily.

Specially designed whole life insurance policies designed for cash accumulation are powerful assets. They provide safety compounding and a guaranteed death benefit for a named beneficiary. They allow a way to pass on generational wealth, primarily through the death benefit, but also offer many living benefits that the policy owner is able to take advantage of during their lifetime. Mainly, they’re able to take policy loans, a contractual guarantee in these contracts, and the utilization of policy loans can make your money more efficient.

However, you don’t want to overestimate what these policies are capable of achieving. It could leave you in a position where you’re feeling pinched and consequently making poor financial decisions.

One of the most misleading concepts that we’ve seen people advised on is running all of their expenses through their policy, whether it be personal expenses, household expenses or business expenses.

You see, these policies are great for a few things. They’re a great warehouse for wealth. They’re a great place to store money to build up for investment, and they’re a great way to help you get out of debt and get out of debt more quickly, on the positive side, instead of at the zero line. However, running your expenses, on a monthly basis, through this policy is not advisable.

In some cases it may make sense. For example, if you have a job loss and you don’t have access to other money, your whole life insurance policy is a great way to have an emergency fund built into your financial plan where you have guaranteed access to that money.

And that’s the key. You set up this policy. Maybe it should be an emergency fund, and an emergency occurred. Now you have access to capital, but to willy nilly run your expenses through your policy. That is a big no-no.

You see traditional banks are still good for the convenience of debit. When you hear the term becoming your own banker. It’s for major purchases. Financing major capital purchases, vacations, paying off debt investments, larger purchases on a less frequent basis.

But stepping back and looking at this whole concept of running your expenses, whether it’s a business expense or personal expenses, through your policy, what you’ve literally done is you’ve added the concept of additional interest to your financial equation. Paying interest is never a good thing. And make no mistake, when you borrow against your life insurance policy, you are paying interest not to yourself, to the insurance company.

With the investment banking concept it is suggested that you use a dividend paying, mutually owned whole life insurance company where the policy owner is part owner of the company, as it relates to their policy. But you’re not directly receiving that interest back.

If the insurance company makes a profit on your policy, they pay a dividend. Those dividends are credited back to your policy. Why? Because you are the owner of the company as it relates to your policy. And if you’re the policy owner, then all of the profits that the company made come back to you.

In conclusion, these policies are great for financing major capital purchases, investments and paying off debt. However, running your everyday monthly expenses through the policy is causes you to pay undue and excess interest. Every dollar you pay unnecessarily towards interest, you’re not only going to lose that dollar, you’re also going to lose what that dollar could have earned you, had it been invested. It’s called opportunity cost.

If you’d like to learn how to make your cash flow more efficient and how to put this process to work for you, your family, or your business, 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.

Valuable Finance Insights from Tier 1 Capital