Qualified Insurance

The Power of Leverage in Financial Planning

When on a search for financial freedom, there are a lot of different opinions out there and it can be hard to decide what is the best decision for your situation.

The other day, I was having a conversation with a prospective client, and they mentioned that they had $1.2 million in cash, and they were looking to put money to work for them. So before our conversation, they had put $500,000 into a piece of property. After learning about the infinite banking concept, they were rethinking their decision because, yes, now that money was put to work for them, but they realized now that they could be leveraging that money to do more than just produce one piece of property.

You see financial planning financial management or money management, is an art. It’s not a science. If you talk to 100 different people, you’ll probably get 100 different answers. That puts us in a situation of, Geez, is this right or is this right? Or how about this other guy? And that could really create stress, anxiety, and more importantly, indecision.

In this example, putting $500,000 cash into a property could be a good decision. However, we do know that people have had extreme success, especially in real estate, by leveraging other people’s money. And one of the things we found about most people who use their own money or pay cash to make large purchases such as real estate, they do so in order to avoid paying interest. What they don’t see or what they’ll never see is the interest that that $500,000 could have earned them.

Now, these folks were in their mid-thirties, so it would be a fair assumption to say that they would be around for at least another 30 years taking them to age 65. So the real question that needs to be asked is how much would that $500,000 be worth in 30 years? Assuming 4.4% interest compounded for the next 30 years. It would have grown to over $1.8 million.

So the question I asked the client was this. What are the chances that in 30 years that property that you’re paying $500,000 for, what are the chances that that property can sell for $1.8 million? Their reply was not a chance in hell. And even if it could, we still have to consider that that property has taxes. There’s a cost to holding the property, even if you are paying cash.

We always tell folks every major purchase has its own universe of expenses. For example, if you buy a boat, you’re not just buying a boat. You’re buying a slip. You’re buying winter storage. You’re buying gas. It has its own universe of expenses. Same thing with a house or real estate.

Another idea of what you could have done with the $500,000 is to leverage it. Put down the down payment and have cash-flowing properties to pay the debt and have several properties to build a portfolio of assets rather than just one by deploying all of your money into one property.

And see, that’s the key to leverage, right? Leverage is using the least amount of money to control the largest amount of assets. This individual who was trying to pay cash for properties was using a lot of money for one property. Completely blowing away the concept of leverage and the power of leverage.

You see, with leverage, you’re able to multiply your wealth. And fortunately, in this case, it’s not hard to get a mortgage on a property. And in this case, I believe it does make sense for a mortgage versus a line of credit because the mortgage locks in the rate for 30 years. It locks in the payment. With the line of credit, you have to consider that there could be a variable interest rate on that loan. and if the bank wanted to, they could call that loan and all of that money would be due. Let alone the fact that you have to re-qualify every several years by providing financial statements and what your income status is.

So you want to get ahead financially, but conventional wisdom teaches us that debt is bad and therefore we give up control of our money. If you want to get ahead financially, you need to think outside of the box. How can you leverage the least amount of capital to control the most amount of assets?

If you’d like to learn exactly how we put our process to work schedule your free strategy session with us today. We’d love to chat.

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

Unlocking Your Financial Ferrari: How an Old Life Insurance Policy Rescued a Family from Debt

Do you have a Ferrari in your garage, and you’ve never driven it? Someone recently reached out and they had a 12-year-old life insurance policy sitting doing nothing. This means they had cash value in the policy that’s accumulated over the last 12 years, and they’ve never put that money and deployed it in their financial system before. So we were able to create a plan for them to get out of debt.

You’ll hear us talk often about specially designed whole life insurance policies designed for cash accumulation. However, all life insurance policies have a cash value aspect built into the cake. You see, when you have a whole life insurance policy the insurance company is making two promises. The first is to pay the death benefit when the insured dies, as long as that policy is in force. The second is to have a cash value equal to the death benefit at the age of maturity, which is typically age 100 or 121. In order to keep that second promise, the insurance company is required to stash away more and more cash over time.

Now, the policy owners have something called a loan provision built into their contract, which guarantees them access to that cash value via policy loans. You see, these people bought their original policies for death benefit purposes, but they also had the cash accumulation.

Now, the policies were 12 years old. They were very well seasoned, meaning that at this stage of the game, the cash value increase was over $2 for every dollar they paid in premium. That was a really good moneymaking machine, so to speak. And I explained to them, it’s sort of like you have a Ferrari in your garage and you’ve never taken it out on the street. We’re going to give you the keys to that Ferrari so you can get it working for you, not the insurance company.

You see that policy has that cash value that you’re able to access through the loan provision on a guaranteed basis. You’re able to repay it within your cash flow because it’s an unstructured loan from the insurance company. And what this family is able to do is borrow against their cash value and pay off this high-interest credit card.

Now, the key here is that as they repay that policy loan, it’s going to reduce the lien against their cash value and they’ll have access to more and more cash value over time. With that, they’ll be able to pay off all of their credit card debt using this process. The beautiful part about it is that they’re going to get out of debt quicker than if they put all of their payments and snowball them on one credit card, then the next, then the next.

That’s the amazing thing about this. Because now they’re filling up that policy equity with two hoses, the premium hose, and the loan repayment hose. Before they were only filling it with the premium hose and they weren’t even tapping into it.

You see, there’s a big difference between paying off debt with a regular snowball and just putting all your cash flow towards getting out of debt as soon as possible versus using a policy loan. Because if you just snowball the traditional way, you spend all of your money and send it all off to the credit card companies, and at the end of the day, what do you have to show for it? Nothing. A zero debt balance.

However, when you use the policy loan to get out of debt, at the end of the day, you have a policy full of cash value that you’re able to access and leverage again, so you are less dependent on those credit companies in the future when it comes to finance your next purchase.

Another key distinction between policy loans and traditional debt is that there’s no qualification. It doesn’t impact your credit score. So actually, their credit score is probably going up after they pay off that credit card debt. And it’s an unstructured repayment schedule so that they’re able to fit the payments into their cash flow.

If they’re feeling cash flush and have a lot of extra cash flow, they can put extra towards that policy loan and get it paid off and built up faster. But if they’re feeling pinched and they only want to make a small amount, they have the flexibility to do that with no questions asked. Because the entity that is guaranteeing that debt is the insurance company, and coincidentally, the insurance company is also the one who’s lending the money to the insured.

And here’s a better distinction when they made the credit card debt, they had to actually apply for the credit card and get permission for that lending amount. They were applying for permission from the bank or the credit company to give them a revolving line of credit. When they went to get the policy loan they were giving an order. They were literally telling them, This is what I want, go get it for me. That is not a small distinction.

The bottom line is, would you rather be controlled by the process or be in control of the process? Do you have a life insurance policy just sitting around doing nothing while you’re accumulating debt?

If that sounds like you, hop right on our calendar by clicking the Schedule your Free Strategy Session button. We’d be happy to talk to you about your situation and how to get you on the path to financial freedom.

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

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.

4 Steps to Cash Control

As a business owner, you know that cash flow is the lifeblood to any business. If you don’t have cash flowing through your business, it could feel suffocating.

Whoever controls your cash flow controls your life. And that’s why we focus so much on control at Tier 1 Capital. In fact, it’s our mission to help as many businesses as possible to make the best financial decisions possible. And it all starts and ends with one thing, and that is control.

According to a recent survey by Intuit, 61% of all businesses around the world struggle with cash flow. And 69% of business owners admitted to sleeping less or losing sleep due to cash flow concerns. This is exactly why we’ve put together a four step process to put you back in control of your cash flow.

Step number one, we identify where you’re giving up control of your cash flow unknowingly and unnecessarily. Unknowingly means that you don’t realize you’re doing it and unnecessarily means that working together, we could fix it.

Second step is the hardest step in the process. You got to stop doing what you’ve been doing to give up control of your cash flow. But it’s the hardest step because these are strategies and techniques you’ve been using all of your life, and you may have an emotional attachment to a lot of those strategies.

But keep this in mind, the thinking that got you in this situation is not the same thinking that’s going to get you out. It all starts with a simple paradigm shift.

Step three: You start to save in an entity where you own and control, meaning that you could access the money on your terms whenever needed, and the money will always continue to be working for you, meaning that it will earn uninterrupted compounding of interest.

Think about it this way. What impact would it have on your peace of mind if you were able to control the financing function in your life? Not banks and not creditors. Wouldn’t that be a huge burden off of your shoulders? We think so.

The fourth step is where the magic happens. We teach you how to borrow against your own capital and pay interest back to an entity that you own and control. Because let’s face it, we finance every single purchase we make, whether we pay cash and give up interest or finance and pay up interest. This solution allows you to regain control of that financing function in your life so that you are the borrower and the lender and you take out any middle man.

Conventional wisdom teaches us that debt is bad and it’s not uncommon for business owners to believe this, to pay off their debt as quickly as possible, to pay cash for major purchases. But what does that do? It gives away opportunity cost. Every time you spend a dollar unnecessarily, you not only lose that dollar, but you lose what that dollar could have potentially earned you for your business. So we work hard for profits and then we give them away because we’re focused on the wrong things.

Let’s face it, we’ve all been conditioned to give away control of our profits. We pay off our debt quickly. We pay cash for purchases. We fund our retirement with qualified retirement plans. And what do these strategies have in common? We have no control over our money, and we have no access to our money. It’s always like we’re chasing our tail to get control of cash.

But the answer is literally hidden in plain sight. Stop giving away control of those profits. What we found is that when you stop giving away control of your profits, that’s where you can start enjoying a better life for yourself and grow your business.

So what is the solution? It’s real simple.

Stop giving away control of your profits. When you do that, you’ll have more cash flow. When you have more cash flow. You can redirect some of that cash flow to start building cash assets. And when the cash assets get large enough, you can borrow against those assets and pay interest back to that entity that you own and control. After that, you just rinse and repeat throughout your entire business lifetime.

Then, when you go to retire, you can access that cash on a tax favored basis to supplement your retirement. The retirement income is just one piece of the pie of how this tool could be deployed in your business. It could also help with business succession, business exit strategies and key person retention.

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

What Happens if I don’t Qualify for a Policy?

So you wanted to get started with the infinite banking concept and you went through the underwriting process and lo and behold, you didn’t qualify for the insurance. What next?

Not everyone who applies for a life insurance policy will qualify. There are two pieces of underwriting that you go through to get an insurance policy. First piece is financial, where they’ll look at your income and other assets to determine if you qualify financially.

The second piece is medical, where they’ll look at your overall health, maybe do a blood test, medical history, order your medical records to determine what the risk is of insuring your life, what is the risk of dying on time or prematurely from an actuary standpoint?

So you didn’t qualify medically or maybe even financial. So what does that mean? Well, it means that the insurance company won’t issue a policy on you, but that doesn’t mean you can’t get a policy on somebody else. Maybe your wife, your business partner, one of your children, and utilize the cash value in those policies. You see, all you really want to do is be the owner of the policy so that you can control the cash value and use the cash value through the loan feature to buy whatever you want, whenever you want. No questions asked.

You see, with a life insurance policy, there are two key players, the insured, whose medical information is used for the policy, and the owner, the person who has all of the benefits, the death benefit, but they’re also responsible for paying for the policy. But as the owner, you’re able to take policy loans out against that cash value, even though you’re not the insured.

 

So what that means is you can still implement the infinite banking concept. It just means that you’re not the insured. No big deal. You still own and control the policy and could again use it for whatever you want.

So what qualifications need to be met to ensure someone else and at the time of underwriting, that’s real simple. We need what is called insurable interest. Basically, you need to be able to suffer a loss from the insurance company’s perspective once that insured dies.

Think of it this way. I can’t insure my neighbor’s home because I don’t have an interest in that home. And similarly, I can’t insure some strangers life because I don’t have an interest in that person’s life. But I can insure my spouse, I can insure my business partners, I can insure my children or anybody else that I literally have an insurable interest in.

Other examples may be a roommate, someone that you split monthly expenses with or a cosigner on a loan. Another person you may want to consider insuring may be one of your parents. You’d have insurable interest and once they die, which statistically would be before you as their child, you would receive the death benefit. And keep in mind, life insurance, death benefits are always received income tax free.

If you are still interested in implementing this process with a specialty designed whole life insurance policy designed for cash accumulation, be sure to check out our website at Tier1Capital.com to schedule your free strategy session today.

Also, check out our free web course to see how we put this process to work for our clients. 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.

Retirement Planning: How to Avoid Paying Higher Taxes

What would be the safest way to make your money last longer in retirement? Wouldn’t it be to reduce or eliminate your tax obligation? Stick around to the end of this blog and we’ll show you how to use a specially designed life insurance policy to reduce or eliminate your tax obligation and keep the government’s hands out of your retirement.

When people come to me with their yet-to-be-taxed retirement accounts: 401K’s or IRAs, they’re literally shocked as to how much taxes they’re on track to pay in retirement. The reason they’re shocked is that that’s not what they were told. They were told that they were going to be in a lower tax bracket in retirement. So let’s take a look at exactly what happens when you’re making contributions to your IRA, 401K, 403B, or your other qualified retirement accounts.

Basically, you’re putting a piece of your income into these accounts and you’re deferring the tax into the future. As your account grows and the interest accumulates, eventually you’ll have a large pile of money to use for your retirement. But what happens is, as that money is growing, so is your tax obligation. Here’s the key to utilizing specially designed life insurance to help supplement your retirement. We know what taxes we have the potential to avoid. We just don’t know what the rates are. 

There are six potential taxes you could avoid by using these specially designed whole life insurance policies. That includes:

    • Federal income tax
    • State income tax
    • Social security offset tax
    • There’ll be no increase in your Medicare premium
    • In most states, you’re going to avoid probate and state inheritance tax. 

So what would it look like and how would we proceed to move money from forever taxable in a qualified retirement account to never taxable in a specially designed whole life insurance policy? Basically, after age 59 and a half (so you could avoid the 10% penalty for withdrawals prior to age 59 and a half), we would start taking distributions to fund the annual premium on your life insurance policy. 

The key questions you need to ask yourself are basically, do you think taxes are going up in the future? Do you think that with everything that’s going on in our country, and keep in mind we’re $30 trillion in debt, do you trust the government to do what’s in your best interest or what’s in their best interest? And if you think taxes have the potential to go up really high, here’s the question, do you want to pay those taxes? And I bet there’s not a lot of people that asked you that question. But the key is you have a choice. What choice will you make to make sure that your money lasts longer in retirement?

If you’d like help designing a specially designed whole life insurance policy for cash accumulation to help your retirement go further and keep the government off your payroll. Be sure to visit our website at tier1capital.com to get started today. Feel free to schedule your free strategy session. And remember, it’s not how much money you make, it’s how much money you keep that really matters.

What is a MEC and When To Avoid It

Have you ever heard of a modified endowment contract or a MEC?

Well, stick around to the end of the blog, because today we’re going to do a deep dive into the nitty-gritty of MEC contracts.

Basically, a modified endowment contract or a MEC is a life insurance policy that gets stripped of its tax advantages because it doesn’t pass the seven-pay test. The seven-pay test is a test used by the IRS to determine whether or not your policy will become a modified endowment. And the seven-pay test is really simple. It compares the amount of premium needed for you to pay up the policy in the first seven years. If the premium you actually put into the policy exceeds that, then your policy is determined to be a modified endowment contract. Once a MEC, always a MEC. If you put one penny more than is allowed by that seven-page test, your policy will always be a MEC and it will always be stripped of its tax advantages. So what are the tax implications of having a modified endowment contract or a MEC?

 

Basically, once the policy goes from being a life insurance contract and crosses that imaginary MEC line, it goes from being a life insurance contract to being treated as a non-qualified annuity. As with any non-qualified investment, a MEC, any distribution taken from a MEC will be considered ordinary interest or a return of the interest earned. That goes for any distribution, whether it’s a dividend distribution or a policy loan, which generally aren’t taxable. But if your policy is a MEC, the distribution can be taxable.

Additionally, just like a non-qualified annuity, any distributions or policy loans or surrenders prior to age 59 and a half are subject to that 10% penalty. Despite losing some of the tax advantages of life insurance when you have a MEC, there are some situations where it makes sense to go for the MEC. Particularly, if you don’t plan on accessing the cash value prior to age 59 and a half. Or a lot of times it makes sense if you have assets that you need to shelter from the expected family contribution, FAFSA calculation. 

So when wouldn’t you want your contract to be a modified endowment contract? You wouldn’t want your policy to be a modified endowment contract if your plan is to access the living benefits of the policy, whether it’s to make major capital purchases, educate your children, or supplement your retirement. If you have enough time to do the planning and you plan on accessing the living benefits of a life insurance policy, you would want to avoid a MEC at all costs.

It’s easy with the way we designed the life insurance contracts for cash accumulation to avoid that MEC. But sometimes people have a large lump sum of money that they want to put in immediately, and we have to split that up over several years so that the policy doesn’t become a MEC and we could take advantage of the tax advantages and the tax shelter offered by a life insurance policy.

But one of the things that I’ve found is the MEC issue is much to do about really, not a lot. The key is this number one, the MEC status could be avoided with proper planning and design, and that’s where we can help you. Secondly, keep this in mind. Whether your policy is a MEC or it’s not a MEC, you still enjoy the tax-free death benefits that are given to life insurance policies. And because of that, it still creates a nice little tax advantage.

If you’d like help designing a life insurance policy for cash accumulation or a modified endowment contract, be sure to visit our website at tier1capital.com to schedule your free strategy session today. And remember, it’s not how much money you make, it’s how much money you keep that really matters.

Benefits of Life Insurance for Kids

 

Once they reach adulthood, they’ll have access to their policy’s cash value. They could buy their first car. They could help fund college. They could put a down payment on a house.

 

Are you thinking about buying a life insurance policy on a child or grandchild, but aren’t exactly sure what the benefits of this purchase are? Fundamentally life insurance is a transfer of risk, and in most cases it’s a transfer of risk from the insured to the insurance company for the case of premature death. But let’s face it – when it comes to a healthy child, the risk of premature death is pretty low. That’s why we think the more important thing to look at is locking in their insurability.

The most important reason that we recommend that parents or grandparents purchase insurance for their child or grandchild is to lock in their future insurability. So in other words, when you purchase life insurance on a child, you’re able to “lock in their current health”.  That is so important because if  later in life, they lose their insurability because of a mental or nervous problem, a health issue or an occupational issue, they’re going to be guaranteed by the insurance company, through the policy rider, that they will be able to purchase a stipulated face amount $25,000 up to $125,000, every few years from the ages of 25 through 40. This allows them – as they become adults and maybe have become uninsurable – to take care of the things that are most important to them, their families and their businesses.

So adding that Guaranteed Insurability Rider for just a few dollars a year onto the policy for the child is going to lock in their ability to purchase more insurance throughout their adult life, which is really important.

The next point to consider when thinking about insuring a child is the cost of the premiums. Now the premiums cost much less for a child than it does for an adult because the insurance company has many more years to collect those premiums.

We often hear from people to gee. I wish I purchased insurance when I was younger. What better time to purchase the insurance than when you’re a child? Now, obviously a child doesn’t have that ability, but the parents do. My parents purchased small policies for me that would have the funeral covered in case I died. Well, I use those policies today. I borrow against those policies to purchase my computers and every couple years I pay the money back and then it’s time to buy a new computer.

Well, the other practical purpose of having insurance we talked about earlier was guaranteed my youngest son when he was 18, had a stroke he’s uninsurable, but he has a large policy with options that he can purchase additional insurance in the future. So he can take care of his family and his business.

This brings us to our next point – the savings component of the policy you see with every whole life insurance policy. The insurance company is making two promises. The first is to pay a death benefit whenever the insured dies. The second is that the cash value in the policy will be equal to the face amount at the age of maturity – so the cash value is guaranteed to be there. Because of that aspect of a whole life insurance policy, you’re actually getting multiple duty dollars. Think about it instead of just putting money away in a savings account or a mutual fund or a 529 plan, you’re also getting a death benefit. You’re also getting future insurability and you’re also giving them the ability to choose how they want to use their money. It’s almost like their money is going to be in two places at once. They’ll always have access to cash in the policy and they can use it for whatever they want. And the money’s going to continue to grow uninterrupted on a tax-favored basis.

With the loan provision, they’ll have guaranteed access whenever you’re ready to transfer the policy into the child’s name. Once they reach adulthood, they’ll have access to their policy’s cash value. They could buy their first car. They could help fund college. They could put a down payment on a house. The possibilities are limitless. There’s no stipulations that say what policy loans can be used for. The only stipulation is that it’s guaranteed, that they’ll have access to the cash value via the policy loan, which is a really great thing for a savings vehicle for a child or a grandchild.

So now that we looked at the benefits of owning life insurance on a child or a grandchild, we have to also discuss the rules because insurance companies have special underwriting rules that they abide by when considering offering insurance to a child.

The first rule is that the child can’t have more insurance in place than the parent, unless there’s a good reason such as the parent is uninsurable.

The second rule is that when the child has siblings, then all of the siblings need to be equally insured. In the case of a grandparent purchasing on a grandchild, all of the grandchildren would also need to have equal amounts of life insurance in force.

In conclusion, life insurance is a unique financial tool for children or grandchildren. It could literally protect them from the cradle to the grave. They’ll have access to cash everywhere along the line. They can use the money to supplement their retirement income on a tax favored basis. And then they pass away and the money goes to their children or their grandchildren. It is a unique financial tool that should be considered. It may not be everybody’s choice, but it definitely should be considered and in the conversation.

If you’d like to get started with a policy on your child or grandchild, or would like to learn more about the options, feel free to give us a call, or to schedule your free strategy session today. Please leave us a comment down below, let us know what questions you have about life insurance. And we’ll be sure to answer them in upcoming videos.

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

Becoming the beneficiary of your own life insurance policy: How to use the living benefits

 

“You see, instead of becoming a victim of market volatility, owning cash value life insurance allows you to access that money so that you could actually profit from market volatility.”

 

There are two main types of life insurance. The first is term insurance, which has one benefit and one benefit only, the death benefit. Then there’s cash value life insurance, which has a death benefit, but also has several other living benefits. By taking advantage of these living benefits, we’re able to overcome the five financial challenges that we all face. 

It has often been said that there are two certainties in life, death and taxes. So let me ask you a few questions. Number one, do you think taxes are going to be higher in the future? Number two, do you think that with all that’s going on in our country, and keep in mind that we’re nearly $28 trillion in debt, do you think there’s a potential for taxes to go up much higher in the future? Now here’s the most important question. Do you want to pay those taxes? You see, after you pay tax on your earned income, the choice of whether or not you pay taxes in the future on that money is completely voluntary. 

Which choice have you been making? And with that in mind, wouldn’t it make sense to build a pile of money that the government could never access ever again, as long as you live? You see, the living benefits of life insurance allow you to have that money grow on a tax deferred basis, and you could access it on a tax-favored basis via the loan provision. Finally, that money passes to a named beneficiary on an income tax free basis. Do you know of any other financial tool, financial product that could be that tax efficient and provide liquidity use and control of your money? 

The next challenge we all face is lower benefits in the future, you know, higher premiums, higher deductibles, and more out of pocket expenses. But, doesn’t that mean a lower standard of living for you and your family? Are you okay with that? Because I’m not. If there was a way to replace those expenses, when would you want to know about it? Before or after the benefits are lost? By using the living benefits of life insurance, you’ll have access to money to supplement your income when those benefits are lost, and still have death benefit to pass onto your family. 

If there’s going to be higher taxes and lower benefits, will that be enough to fix all the problems that are about to happen in our country? So how will our government respond? Won’t they print more money? When they print more money, doesn’t that cause inflation? You see, inflation is the third financial challenge that we all face. So what’s your strategy to overcome the effects of inflation? More importantly, when you’re retired, how are you going to overcome inflation? The living benefits of a life insurance policy provides multiple duty dollars. What that means is, the money can be accessed to overcome a long-term care event, a chronic illness event. We know that it can be utilized to supplement your income for anything. Finally, it can do all of the above on a tax-favored basis. 

That’s multiple duty dollars, and that’s how the living benefits of cash value life insurance can help you overcome the effects of inflation. So if there’s higher taxes, lower benefits, and the government prints more money, won’t that cause more and more volatility in the markets? Higher volatility in the markets is the fourth financial challenge that we’re all going to face. If there’s higher volatility in the markets and you make a mistake, can you lose some money? If there’s higher volatility in the markets and you make four or five mistakes, can you lose it all? 

Wouldn’t you benefit from a strategy that allows you to lock in your money when the markets are high so that when the markets go down, you’re in a position to access that money because your money wasn’t correlated to the market and you can profit from all the mistakes, errors, and blunders that are made in the market. You see, instead of becoming a victim of market volatility, owning cash value life insurance allows you to access that money so that you could actually profit from market volatility. 

The next challenge we all face is the challenge of outliving our income. If we retire at age 65 and only live till age 72, would we have much trouble planning for that retirement? But what if we retire at 65 and live all the way till 95, but run out of money at age 72, what would the rest of our retirement look like? And by the way, isn’t 72 the new 52? Aren’t 72 year olds doing what 52 year olds used to do? Do you have a strategy in place that could provide you with an income that you can outlive? By taking advantage of the living benefits of life insurance, you could provide supplemental income when all your other streams have dried up. 

Do you realize that most people view these five issues, higher taxes, lower benefits, higher inflation, greater volatility in the market and longevity, outliving money, as challenges. Here’s what owning cash value life insurance can do for you. What if you never had to worry about these issues ever again for the rest of your life? What if any time any of these issues occurred, you’d be in a perfect position to take advantage of it. Wouldn’t that be a great benefit to have? 

Do you know of any other financial products that can provide these benefits with certainty? Can a CD savings account, money market, IRA, stocks, or bonds provide you with these benefits? You see, the living benefits of life insurance can help us overcome these five challenges, and in essence become the beneficiary of our own life insurance policy. But then we still have the death benefit that goes to our family. So if I can show you how to be in complete control of your money until you take your last breath, but instead of leaving that money to a nursing home hospital or the government, you can leave that money to your family for generations to come. Wouldn’t you want to know about it?

 

 

 

How much should you contribute to your retirement plan?

 

How much should I contribute to my retirement plan? Conventional wisdom tells us that from the day we start working, to the day we retire, we should maximize contributions to our qualified retirement plans. Traditional retirement plans leave your money inaccessible and out of your control. Your goal should be to save in a tool that you can control. This video provides a closer look at retirement plans, and whether or not they are suitable for you and your needs.

 

“Another thing to keep in mind with retirement plans is that they’re often invested in the stock market and there’s no guaranteed that when you go to retire, your savings is going to be intact. “

 

Have you ever wondered how much you should be contributing to your retirement plan or 401k? Traditional qualified retirement plans leave your money inaccessible and out of your control. If your goal is to regain control of your money, then perhaps you should consider saving money in a place that’s safe and allows you access to your cash for things like cars, vacation, tuition, home renovation, and any other purchases, whether planned or unexpected.

When all your money is tied up in retirement plans, you’re at the mercy of the government, wall street and the banks. Let me give you an example. We were introduced to a client who had $1.4 million in a 401k plan. He wanted to take his family on vacation to Disney, but he couldn’t put his hands on $13,000 in order to do so. On paper, this man was a millionaire, but the reality of it was he couldn’t put his hands on $13,000 to take his family on vacation because he didn’t have access to his cash.

The point of the story is it’s not a bad idea to save for retirement. In fact, it’s a very good idea. However, it’s also important to save in a tool that you control, somewhere that’s flexible and allows you access to cash. Another thing to keep in mind with retirement plans is that they’re often invested in the stock market and there’s no guaranteed that when you go to retire, your savings is going to be intact.

People view their retirement plans as savings, but there’s a big difference between savings and investing. Savings should be money that’s accessible and safe. Conventional wisdom tells us that we’ll be in a lower tax bracket when we retire, but taxes is another area in regards to retirement plans that we don’t control. We may be in a lower tax bracket; we may be in a higher tax bracket. The fact of the matter is nobody knows but think about this. You’re deferring taxes into the future of the unknown. It’s like driving a car off the lot, not knowing what the final purchase price is. Would you do that? Most people wouldn’t, but yet every day we fund our retirement plans not knowing what the future cost is going to be to get our own money.In conclusion by maximizing our retirement plan contributions, our money is inaccessible and because our money in accessible, we have to go to banks and credit companies to finance the things of life. Additionally, we’re deferring taxes into an unknown future.