Tier 1 Capital Blog

Unraveling the Stealth Tax and How Inflation Impacts Your Wallet

Have you noticed it costs a lot more simply to exist these days? They call inflation the stealth tax because it’s not written in the tax code, but it affects every single one of us. So what impacts inflation?

First and foremost, it has to be the amount of money in circulation. The Federal Reserve, which is not part of the federal government, defines M2 money supply as the amount of money in circulation, plus money set aside in retirement accounts.

So why does that matter? Well, 20 years ago, the M2 money supply was $4.9 trillion. 20 years later, it stood at over $21 trillion. In 20 years, it grew by 400%. The reason that impacts inflation is that you have more dollars chasing the same amount of goods and services. That increases the price of those goods and services. 

So basically, as the government is digitally printing more and more money, the value of that dollar is going down every single time. And what’s happening is, as the government’s trying to decrease inflation, they’re putting a squeeze on that money supply, taking money out of circulation to try to bring inflation back down to a reasonable rate of what they define as 2%.

But what impact does that have on us as consumers, whether we’re a family or a business? Well, we’re fighting to buy the same goods and services with a pre-inflation cash flow in many cases, it could cause a severe cashflow pinch in your economic system. Our money has less buying power, meaning we’re buying fewer goods and services with the same dollars. That’s called the depreciation of the dollar.

One of the most recent pinches that we felt is with homeowners insurance because it only comes around once a year. But all of the costs of labor and materials have gone up so much that the cost of insurance for your home has also increased because it’s not locked in.

Here’s another thing that impacts our finances. 20 years ago, the federal debt stood at $5.6 trillion. Today, it’s over $32 trillion. In five years, it’s projected to be over $40 trillion.

Have you guys ever checked out nationaldebtclock.org? It’s kind of freaky.

Although the national debt is projected to increase by 70% in the next five years, the amount of taxpayers is only projected to increase by 8%. Where is the government going to get the tax dollars to pay for everything? And what impact will that have on our ability to live our lives and save for the future?

This is why it’s important to pay taxes on our dollars now and pay debt on our income now, rather than postponing it into the unknown future. Because the government has obligations and they’re going to have to pay for those obligations, but they’re not our obligations. By paying taxes on our income now, we’re not postponing that into the unknown future and taking it one step further and saving in a place that’s sheltered from taxes, where we pay taxes on the money once and then never have to pay a second time, is imperative to our financial security going forward.

Wouldn’t the best way to make your money last longer be to reduce or eliminate the taxes that you’re going to have to pay in the future? This is why it’s important to make your money more efficient. And again, one of the things that you can do is to shelter your money from taxes, but also do it in a way that you have access to that money. So you’re not deferring the tax, or kicking the can down the road, you’re sheltering the money. That’s a big difference.

If you’d like to learn about how we put this process to work for our clients so that you’re able to keep the money in your family and your business and out of the government’s checkbook.

Check out our free web course, The Four Steps to Financial Freedom that details exactly how we put this process to work. Or, if you’re ready to get started, feel free to schedule your free strategy session today.

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

Revealing the True Cost of Your Money

Something I’m sure you heard us say before, is you finance every single purchase you make, you either pay cash and give up interest that you could have earned on that money, or you finance and pay up interest to another entity outside of your control.

Nelson Nash used to say this is Basic Finance 101. You’re either going to pay interest when you borrow or give up interest when you pay cash. The consulting firm Stern Stewart & Company charged their clients for consulting on how to make better financial decisions with their money based on Finance 101.

The problem was these multinational corporations were making poor decisions with their capital. They were recognizing the fact that when they borrowed, they paid interest, but they put a price on their own capital of zero. And consequently, they were making bad decisions with their money.

And here’s the point that Nelson Nash was making: your money, your capital has a cost. To think that your money does not have a cost basically means that the laws of gravity don’t apply to you.

Let’s take a look at that example.

Say you need to make a major capital purchase and the bank is going to charge you 8% to finance. And you’re putting a capital cost of zero on your money. The blended rate, the actual cost of that money would be 4%. In this example, if you were to earn 6% on that purchase that would be an acceptable rate of return. Because 6% is higher than the 4% blended cost of that capital. Basically, you’re making a profit. But in this scenario, there’s a fatal error baked into this cake. That is, your money has no cost.

What people don’t realize is that it’s very hard to acquire capital. It’s hard to save money. And if you have money sitting around waiting to be deployed, the worst thing you could do is deploy it in a way that is detrimental or costing you money. And this is what Stern Stewart pointed out to their clients, their capital had a cost. 

We see this all the time. People will say, hey, why should I take a policy loan and pay the insurance company? 5% when I have cash sitting in the savings account, earning 0%? But there’s a cost to that capital.

First of all, there was a cost emotionally to build up that capital, and to deploy it without taking advantage of any opportunity cost that could be earned on that money, is not being a good steward of that cash.

Now we’re going to take a look at that same decision after applying economic value added. Economic value added is a financial measurement of your use of capital. It will indicate the profitability of your operating decisions or how you’re using your money.

So looking at that example, again, the borrowing rate is 8%. So we know what it’s going to cost to finance. But now the market environment where you could invest your money has an average return of 12%. That becomes the cost of your capital. If you can’t get 12% on your money, then you would be better off putting your money in the market.

In other words, if you’re going to buy a piece of equipment and you can’t get at least 10 to 12%, 10 is important because that’s the blended rate. If you’re borrowing at eight and you can invest at 12, your blended cost of capital is 10%. If you can’t get at least 10% out of that opportunity, then there’s no sense taking advantage of it. You would be far better off or far better served by just putting your money in the market.

At Tier 1 Capital, we look at things through the lens of control and making your cash flow and your money work as efficiently as possible for you, your business, and your family. If you’d like to learn exactly how we put this process to work for our clients, check out our free webinar, The Four Steps of Financial Freedom, which lays out exactly how we do it.

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

Why How You Use Your Money Matters More Than Where It’s Parked

Most financial advisors out there are focused on accumulating assets under management, meaning you have a lump sum of assets managed somewhere else. How could that advisor obtain those assets to manage them and hopefully earn you a better rate of return?

Today we’re going to talk about why it’s more important to focus on how you’re using your money rather than where your money is parked.

When we meet with people to discuss finances, the conversation usually revolves or turns towards how they’re using their money. And I like to use a golf analogy. The financial services industry manufactures financial products. We’re going to call them the golf clubs. We as advisors show our clients how to use the financial tools. We look at how they’re using their money, or we call that the financial golf swing.

Now, here’s the question. If you want to get better at golf, which approach would serve you better? Approach A would be to buy the best golf clubs, and approach B would be to improve your golf swing, and how you’re using the golf club.

And so it is with finances. people are in constant search of the Holy Grail. The best financial product. It doesn’t exist. If you want to improve your situation, you should really work on how you’re using those products.

You see there are a few reasons why there is no perfect product. Number one is because they’re all designed differently with different rules and regulations around them. Number two is because people have different temperaments and there’s no one-size-fits-all financial product for everybody and it will depend on what your personal situation is, as well as what your goals are.

And I would add a third factor. We are in constantly changing economic times. What was right today may not be right tomorrow and certainly may not be right in ten or 12 years. And the point is, it’s not a one-size-fits-all type of thing. Ultimately, you need to custom tailor something towards you, your situation, and how you’re using your money.

One of the main characteristics we focus on when designing plans is flexibility. Flexibility for cash flow, flexibility for access to cash, flexibility to take on your financial goals even if they change as we go along the plan.

If you’d like to start building a financial plan and working on your golf swing, be sure to schedule your Free Strategy Session today. 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.

Taking Control of Your Cash Flow with a New Financial Strategy

Have you been looking at your finances lately and realized it’s time for you to kick it into gear? Here’s a secret. The strategies that got you to where you are today are not going to be the same strategies that are going to move you forward toward financial freedom.

Most financial strategies promoted out there leave you out of control when you really need it. What do I mean by that? Well, you may be doing all of the right things according to conventional wisdom, paying off your mortgage as soon as possible. Living a debt-free lifestyle. Maybe you’re paying cash for your cars. Maybe you’re investing in the market with your IRA or your 401K. But here’s the trick. All of these things leave your money at risk. Even if you’re investing in real estate, you don’t have any liquid money.

So what happens when it’s time to finance something? Because everything in life is financed. You either pay interest to use someone else’s money, or you give up interest by paying cash. But where is the solution? Where is the financial freedom in this?

You see, following conventional wisdom puts your money out of reach when you need it most. And consequently, that forces us into borrowing when we have a lot of money, we just don’t have access to it. And consequently, this causes frustration. We’re frustrated because why do we have to borrow when we have all of this money sitting in these other accounts? 

Not to mention some of our clients do have money and accounts that they do have access to. But they don’t necessarily want to access that money because they’ll either be locking in losses or making themselves pay a huge tax bill next April.

So here’s really the point. What’s the use of having money if you can’t use it when you need it or you want to use it either for an emergency or an opportunity? Again, your money’s inaccessible. So what’s the solution?

I would argue that most of life’s frustrations come from not having access to money when you really want or need it. So how do you transition from this frustrated way of life to a life of financial freedom?

There’s one answer and one answer only. It comes in being in control of your cash flow and your assets. And you see, when you view things through the lens of being in control, all of a sudden your decisions become easier to make. You’re making decisions with much greater clarity because ultimately it’s really simple.

You say, If I do this, will I be more in control of my money or less in control of my money? And if you’re not in greater control, don’t do it. It’s that simple.

Let’s take a look at an example. Let’s say you want to buy a car and you go into the actual bank And they say, okay, you could finance over five years and pay 6%, or you could finance over seven years and pay 9%. Which option are you going to choose?

Here’s what happened.

The bank took your eye off the ball. They positioned it in a way that focuses on the interest rate. The five-year loan has larger monthly payments. The seven-year loan has smaller monthly payments. Again, when you’re looking at things through the lens of being in control of your cash flow, the decision is easy. 

Another great example of this is with qualified retirement plans. Money goes into these plans on a tax-deferred basis. Meaning, you don’t have to pay tax on that income in that year. However, what you’re actually doing is postponing that tax liability into the unknown future. These are just two examples of how financial services companies, and financial institutions, get us to do what’s in their best interest but is actually detrimental to us. 

So if I could give you one piece of financial advice, it’s this. Keep your eye on the ball. Keep your focus on controlling your cash flow and your cash. And that is a great starting place. If you’d like to get started with our process to put you back in control of your cash flow and make your cash flow as efficient as possible. 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.

Guaranteed vs Non-Guaranteed Values of a Whole Life Insurance Policy

When you’re dealing with a whole life insurance policy, whether it be a normal whole life insurance policy or a whole life policy designed for cash value accumulation, there are a few values that you may want to look at. The guaranteed values and the non-guaranteed values. And you may be wondering what’s the difference between the two.

Assuming you purchased a life insurance policy with a mutually owned life insurance company, you’re going to have guaranteed values and non-guaranteed values listed on any policy illustration.

Basically, the guaranteed values are the worst-case scenario. How is this policy going to perform if there are no dividends credited toward that policy?

You see when you’re looking at a policy illustration, there generally are two columns. One column for the guaranteed values and one for the non-guaranteed values. The guaranteed values assume no dividends are ever paid in any year. The non-guaranteed values assume that dividends are paid at their current rates prospectively into the future. When you’re looking at those non-guaranteed values, the only thing that we can guarantee is that those numbers are not going to be what you actually experience. 

You see, that stands true for the guaranteed and the non-guaranteed values in most cases with these mutually owned companies because as soon as a dividend is credited towards your policy, the guaranteed values change. The only non-guaranteed dividends are those that haven’t been credited yet. Once that policy dividend is credited, it’s set in stone. However, next year’s dividend is not. That’s to be determined.

You see these illustrations show you the worst case scenario and a scenario projected going forward, and the scenario projected going forward based on today’s dividend scale. However, neither of those values is actually accurate. You see, dividends could be better in the future, they can be worse in the future. Meaning that they don’t necessarily have to declare and pay a dividend.

However, the companies that we recommend have been paying dividends for a minimum of 125 consecutive years. They’ve paid dividends through world wars, recessions, and depressions. The assets of the life insurance industry actually grew during the Great Depression. So as bad as things got, the life insurance companies were a rock during stormy times.

One of the reasons why we love these whole life insurance policies so much is because they’re actuarially designed to get better and better every year. They’re not dependent on the stock market or other economic factors. They depend on the well-being and the profitability of the insurance company.

There are three things that are going to determine the performance of your policy. 

Number one, the insurance company has to assume that people die. That’s assumed mortality. Insurance companies are really good at overestimating the cost or how many people are going to die. If there’s a saving on the mortality costs, meaning people die later rather than sooner, that money gets to be used or transferred over to the dividend account.

Similarly, the insurance company assumes what it’s going to cost to administer the policy. Again, they usually overestimate what it’s going to cost. And any savings are transferred over to the dividend account.

Lastly, the insurance company needs to put that money to work. All of those savings get put to work or invested into various asset classes and they use the interest rate that they earn on that money to further build the dividend account.

In conclusion, those illustrations that you see, can and will change. One thing that is for sure, though, is that after you have cash value credited to your policy, you can’t lose that money.

If you’d like to get started with the whole life insurance policy designed for cash value accumulation, schedule your free Strategy Session today or check out exactly how we put this to work for our clients and watch our free web course, 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.

The Value of Life Insurance: How Much Can I Insure

Have you ever wondered how much life insurance, is too much life insurance? Well, here’s a secret. A life insurance company won’t insure you for more than you’re worth.

Now there are a few ways you’re able to calculate the value of a human life. These are methods that the insurance companies use to determine how much life insurance you’re actually able to get on a life for each different purpose. 

One method is called income replacement. The insurance company takes your current income and projects how many years you should be working to determine how much life insurance death benefit you can have on your life.

For example, if you’re in your twenties or thirties, or even your forties, the insurance company might determine that you could apply and receive a policy in the amount of 30 times your current income.

Contrastingly if you’re later in your life, the insurance company may determine that you only qualify for, let’s say, five years of your income. And that’s simply because we’re using a calculation to determine how much income you’re going to be losing if you were to die prematurely.

This is why it’s important to find the balance between when you’re making a decent income and when you are still young. That way you could get the maximum amount of death benefit on your life.

Another thing that the insurance company will take into consideration is the amount of debt that you have. It could be that you qualify for 30 times your income, plus 100% of your outside debt: mortgages, business equipment, car loans, or student loans. They’ll allow you to insure that separately over and above your income.

Another thing the insurance company can take into consideration is your net worth. They’ll take your assets, subtract your liabilities, and determine what is your net worth. Based upon that, they may allow you to insure 100% of your net worth. So that pretty much encompasses the personal uses. 

However, there’s also a business side. If you are a key employee of a business or an owner of the business, there’s a separate calculation that would be determined for additional death benefit coverage on your life. 

So if you’re a business owner, you can ensure the value of your business interest. For example, let’s say you own a business that’s worth $500,000 and you’re a 50% shareholder or 50% owner of that business. Your business interest is 250,000, and you could purchase up to $250,000 of life insurance coverage to insure the value of your business interest.

Another business use for life insurance is a key employee policy. With that, the insurance company is able to calculate the value of that key employee as it relates to the business, and you’ll be able to purchase a life insurance death benefit for that key employee. You’re able to have both a business policy where you’re insuring your equity in the business, and if you’re a key employee, you could have a separate policy or separate interest for the key person.

Life insurance companies are in the business of insuring risk. The thing they will not do is provide insurance for more than what the risk is.

You see, adverse selection is a distortion of market value. And simply what it means is you’re insured for more than you’re worth. Just like you couldn’t purchase a $500,000 piece of property and be insured for $10 million. The same thing applies to life insurance. You can’t take somebody who’s earning $20,000 per year and get a $50 million life insurance policy on them. The insurance company knows that there’s adverse selection in that situation.

That’s why it’s important to know all of these nuances or have your insurance agent know all of these nuances so that they’re able to advocate for you to get the most death benefit possible if that’s what you’re looking for.

If you’d like to get started with the life insurance policy, be sure 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.

Transitioning From Earned to Passive Income

As you go through life, everything changes. The only thing certain in life is, in fact, change. So when you first get a job or you first start in business, your goal is to create 100% of your earned income to support your lifestyle. And as time goes by and you evolve towards retirement, your reliance on earned income will go down and you will transition to 100% of your lifestyle being funded by passive income. And as we’re evolving from 100% earned income to 100% passive income, there are various stages.

Now, whether you are a W-2 employee or a business owner, When you’re first starting out, oftentimes you’re just making enough to get by. All you want to do is to support your expenses and your lifestyle. However, over time, and as things change, hopefully, you’re able to earn some more. Maybe you got a promotion or expanded your business. 

You’re earning enough income to not only cover your lifestyle but also to put money away in a savings account or an emergency fund. And then phase three, really simple. You have enough to cover your lifestyle. You have enough for your emergency fund. And now you can start investing to create assets that will generate passive income. And the fourth phase is when all of your lifestyle can be covered with income from passive sources.

According to a recent study by Intuit, 61% of business owners around the world struggle with cash flow. That means they’re not covering their lifestyle. 69% of business owners either sleep less or admit to losing sleep due to cash flow concerns. And the point is these people are having trouble covering their overhead. So it’s almost impossible for them to start saving because they’re dealing with these cash flow issues. 

So the question becomes, how do you transition between these phases? A lot of times people try to go from phase one all the way to phase three, where they have passive income generated for them through their business. However, it’s important to build a foundation of savings that you have liquidity, access, and control over so that you are not completely bogged down by debt and other financial pressures that come with these big expenses.

That’s why it’s really important to go from phase one to phase two. You need to create that emergency fund, that savings that can be your backstop whenever you go to another phase and then all of a sudden the rug gets pulled out from under you.

One way we help our clients to build that safety net and to build an actual pool of cash that they have liquidity use and control over is by using specially designed whole life insurance policies designed for cash accumulation so that they’re less dependent on banks and finance companies and they’re actually able to own that finance function in their own life.

So instead of going to the bank down the street to finance a purchase for their business or their family or anything like that, they’re able to go to an entity that they own and control and they have a contractual guaranteed access to that cash to finance the things of life. Whether it be a business purchase, like a new vehicle, or they want to go on vacation with their family and they need the cash flow to do so.

The key there is that because they’ve taken this step to create that savings through a specially designed life insurance policy, they now have access to capital and nothing is telling them that they can’t take some of that money and use it to grow their business, to create passive assets. And that’s the key. 

You see, these policies are great for a few things. Number one is getting out of bad debt and debt that has an excessive amount of interest being charged or maybe you want to refinance that debt through the policy so you own and control those terms.

Also, it’s a great place to warehouse wealth because you have tax-deferred growth within the policy as well as guaranteed access through the policy loan provision and it’s also a great place to store money for investments.

You can put money into the policy and then borrow against the cash value in that policy to go out and make investments so you’re able to earn a higher rate of return on your money. Whether that be investing in your business or a great stock opportunity, or maybe you want to make a loan to your family member.

The possibilities are endless with these policies because you own and control the financing function the only person you need to qualify for the loan with is you. And that’s a key point. You’re not asking permission when you request a life insurance policy loan. You’re giving an order that is not a small distinction.

If you’d like to get started with this process, be sure to schedule your free strategy session today. Also, if you want to learn exactly how we put this process to work for our clients, check out our free web course, 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.

Effects of Inflation on Whole Life Policies and Premiums

With inflation being a hot topic these days, a natural question may be, are my life insurance policy and my life insurance premiums inflation-proof? And how exactly are they impacted by inflation?

Based on the data inflation is officially a problem that we’re going to have to deal with. And based on experience, we all know the impacts of inflation. In December 2021, inflation stood at three-quarters of 1%. It wasn’t even calculated at 1%. In August of 2022, inflation was over 9%. And in December of 2022, it was down to 4.6%. Still a far cry from 75 basis points.

Now they call inflation the stealth tax because we don’t see it as a tax. It’s nowhere in our tax returns. It’s nowhere on our payroll checks. However, it impacts each and every single one of us, some more than others. We know we’re dealing with inflation, every time we go to the grocery store, every time we fill up our gas tanks, every time we get our utility bill, we are experiencing the damaging effects of inflation.

Now, pivoting to life insurance, how exactly does inflation impact the death benefit and the premiums? Well, keep this in mind. Inflation impacts everything. The question that needs to be answered is, is inflation impacting us positively or negatively? Because the news is not all bad.

Take your premiums, for example. With a whole life insurance policy, your premiums are locked in for your whole life. Whether your policy is a ten-pay policy paid up at 65 or a paid-up at age 121. Those premiums are contractually guaranteed to never increase. So the longer you can extend that premium payment period. You’re also paying those premiums with dollars that have been affected by inflation. So when you get to the tail end, let’s say age 121, the value of those premiums has been greatly affected by inflation. 

A candy bar back in the sixties cost, what, $0.10? Today, you’re lucky if you could get a Snickers for $1.50. Think about that in terms of your premium. Your premiums are going to stay the same. But if you waited all that time, it’s going to feel like a nickel. And that’s the point. Inflation is going to affect your life insurance premiums positively because the dollars are going to have less purchasing power, the longer you extend your premium payment periods.

Now, going on a little tangent, the same applies to your mortgage. This is why it’s important to consider taking out a 30-year mortgage instead of a 15-year mortgage because you have a lower payment to begin with. And by the end of that term, that payment is going to feel like nickels. 

Inflation is also impacting your death benefit. So if you start out with a death benefit, let’s say, to pay for a funeral. The longer you extend that payment period or the longer you live, the value of that death benefit is going to buy less of a funeral. You may not be able to pay for the band or the dinner. Maybe just the burial.

When I first started in financial services back in the mid-eighties, we were selling burial policies for $5,000, meaning you could have paid for a funeral for a little bit less than $5,000 and had some money left over. Today, you can’t touch a burial for anything less than $15,000.

So the point is inflation is always going to be there. It’s always going to be affecting us, sometimes positively, sometimes negatively. But the point is we’re going to have to deal with it. 

The only way to combat inflation on a long-term basis is with proper planning. If you’re ready to start planning for your future, whether it be premium planning or death benefit planning, be sure 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.

Maximizing Retirement Benefits Using Life Insurance



I recently had a conversation with a longtime client who had some life insurance set up prior to his retirement. He’s now ready to retire and he called me to discuss his options for his pension. He has a defined benefit pension plan through his employer. And he wanted to know which was the best choice for him as far as leaving survivor benefits for his spouse.

Well, the good news was that because he had such a large amount of life insurance. That life insurance will be more than enough to replace his pension without having to take a reduction in his monthly pension. His life insurance is now paid up and consequently, he has a guaranteed death benefit. He doesn’t have to take a reduction in his monthly pension to leave his spouse a survivor benefit.

You see, a lot of times people view life insurance premiums as a cost, not an asset. However, when you have a specially designed whole life insurance policy designed for cash accumulation, it’s both an asset as well as a death benefit. You’re able to access cash value via the policy loan provision while you’re alive and take advantage of those living benefits as well as take advantage of the death benefit so that when you pass, the main beneficiary receives a death benefit.

You see, you’re able to purchase death benefit dollars, with pennies, the premiums paid. What this allows you to do is take more risk in other parts of your portfolio. your I.R.A., your 401k or your pension plan.

In the case of our client, he had a defined benefit pension for $5500 per month. However, his wife is a lot younger than him, almost 15 years. So the defined survivor benefit was going to cost him about 1,500 dollars per month, meaning that instead of getting $5500 per month, he was going to get $4,000 per month. And he said, Tim, I can’t afford to retire on $4,000 per month. I can retire on 5500. What are my options?

Well, it was really simple because he had a paid-up life insurance policy that he had funded for over the past 20 years. He was in great shape. He had a guaranteed death benefit that would have more than compensated his spouse if and when he dies. They’re able to maintain the $5500 per month and provide the survivor benefit through the death benefit of his life insurance policy that he would have had to have paid for had he taken that survivor benefit through his retirement system.

Not to mention, because this is a specially designed whole life insurance policy designed for cash accumulation. He also has access to the cash values via the loan provision while he’s alive. So if he wanted to control the financing function, let’s say, for vacation or their child’s college education or anything else while they’re still living, he has the ability to do so and access that cash value on a tax-favored basis.

And you may be wondering what impact would accessing those cash values have on the death benefit. It’s really simple. If you die while there’s a policy loan on the policy, it will be reduced dollar for dollar against the death benefit. In essence, the policy loan is just an advance on a portion of the death benefit.

This really underscores the flexibility and the options you have when you get to retirement. You get to use the money prior to retirement, but now you have options. And those options can help to make your retirement lifestyle so much better. When you access life insurance policy loans, they’re not recorded anywhere for the IRS to see, meaning they don’t increase your taxes.

So what taxes will they not increase?

There’s no increase in your federal income tax. There’s no increase in your state income tax. There’s no increase in your Social Security offset tax. There’s no increase in your Medicare premium, which, let’s face it, is a tax. As well as in most states, The death benefit passes federal income tax-free. And in most states, the death benefit passes outside of probate and outside of estate and inheritance taxes. So when you add up all the taxes that you’re not going to have to pay. That’s a huge way to make your money go a little bit further.

If you’re interested in making your cash flow and your money, now and in retirement, more efficient, schedule your free strategy session today. Or if you’d like to learn 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.  

The Benefits of Owning Multiple Life Insurance Policies

We’re often asked how to implement multiple policies using these specially designed life insurance policies designed for cash accumulation. When we talk about being in control of your cash, being in control of your money, or being in control of your life. One of the main tools we use is the infinite banking concept. 

The infinite banking concept allows you to take back the financing function in your life. Take it away from creditors, banks, and other outside entities and control that family banking function within your family or your business. The most important step of this process is to start where you are. However, as time goes on and situations change, it’s important to adapt your banking system to meet your current situation. 

Let’s say you had money in your left pocket. Now, in that left pocket, everybody can and will try to get in there. The government, banks, large corporations, credit companies, and Wall Street. Everybody wants access to that pocket.

Now what we teach people how to do is to take some money out of that left pocket and put it back in your right pocket. Now, it’s still in your pants. But here’s the key. The only ones who could get access to the right pocket are you, your family, and your business. Now, if you knew that there was a pocket designed that way, how much of your money would you want to put into that pocket? 

These life insurance policies, specially designed for cash accumulation, are a great place to warehouse your wealth. Now, after you build that warehouse for wealth and have inventory or cash, you’re able to access that money to finance the major capital purchases that you make. 

You see, we all make purchases. It’s part of being alive. The question becomes how are you going to finance those purchases? Are you going to pay in cash? Are you going to go to the bank? Are you going to use a credit card? Or are you going to use a life insurance policy loan that you have complete liquidity use and control over to make those major capital purchases?

And keep this in mind. If you pay cash, you’re no longer in control of your cash. If you finance, you are no longer in control of the process, the bank or the credit company is. But, when you borrow against the cash value of your life insurance policy, you’re in control. Your money is continuing to earn uninterrupted compounding interest. You are in control of how and when you pay back that loan. It’s sort of like having your cake and getting to eat it, too.

When it comes to implementing the infinite banking concept, we talk about becoming your own banker. And the policy is kind of like a bank branch. How many bank branches do you want to build within your system? 

You may not be able to handle all of the financing in your personal and business life with just one policy. That’s why we recommend multiple policies. You don’t have to buy them all at once. You buy them over time.

Another caveat is that you may want to start buying policies on other people, other people in your family, or your business. And the reason why you want to do this is to diversify. You see, everyone is going to die, but not everyone is going to die at the same time. And when you have a life insurance policy on a certain insured, a death benefit is paid at the time of their death.

What this allows you to do, if and when somebody dies first, you’re able to recapture the capitalization cost of that policy. Not only do you recapture the capitalization cost, but you also get an explosion of value, meaning a much larger death benefit comparable to the premiums you put into the policy.

In comparison to other types of insurance, you buy car insurance, but you don’t know if you’re going to have a claim. You buy homeowner’s insurance and you don’t know if you’re going to have a claim. You buy an umbrella policy and you don’t know if you’re going to have a claim.  Comparing that to life insurance, we know you’re going to have a claim. That’s why the system works.

Now, implementing this process in your life, your family, or your business is a great way to create generational wealth, wealth that will pass on and the legacy will be sure to pass on for many, many, many years to come.

If you’re ready to regain control of the finance function in your life and ensure generational wealth for generations to come. Be sure to schedule your free strategy session or check out our web course, 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. We’ll see you in the next one.