structure iul correctly and fund it properly that's the way it was intended by EF Hutton the brainchild behind the emergence of universal life and now indexed universal life so this is the first thing stop funding a policy just based upon Target that's not going to cut it and the original death benefit was a million what's the net death benefit at risk zero yourself insured out your cash value has grown to equal and exceed the death benefit that is a properly structured maxf funded index universal life you fill it up as fast as the IRS allows under Tamara and it will provide tax-free income so uh in this episode I'm going to talk about what that means how to structure it correctly to accommodate uh uh the goals to be able to accumulate money taxfree allow you to access that money taxfree and when you ultimately pass away it blossoms and transfers income taxfree but to create a a a perfect dream solution for retirement or any other Financial goal in order to do that but you have to fund it [Music] properly so I'm Doug Andrew I've been a financial strategist and retirement planning specialist now for five decades helping people optimize their assets minimize taxes Empower what I call their authentic wealth uh if you've watched very many of my educational episodes my favorite Financial instrument without question is a properly structured maxf funded uh index unversal life so what do I mean by that well uh the biggest problem I see is a lot of insurance agents or financial advisors in America uh they set up a an index universal life policy and they fund it based upon Target Premium now you may not know what that means but Target Premium is not only the premium that generally the insurance company recommends that if you pay the Target Premium every year into that policy based upon um uh certain uh uh assumptions in the policy or rates of return uh that they feel like you're guaranteed or whatever or that they can assure that the policy will stay in force until a given age let's say age 65 that's that's generally what it means but it's also the the portion of the premium uh that the insurance company bases commission compensation on so fortunately there's a lot of agents who only sell policies based upon Target Premium uh because maybe they're looking out to try to maximize uh their earnings on a policy and they're not really trying to achieve a financial goal for you at the optimum rate of return they could what does this mean okay I'm going to just cut to the chase if you're setting up an IL policy for living benefits uh as an alternative to IRAs of 401 case the difference between uh setting it up on target uh would be that if over a 20 30-year period you were putting in 500 a month a th000 a month or whatever or even repositioning lump sums uh if you don't rebalance and diversify if all you do is pay Target Premium you might be lucky to earn an average gross rate of return in the 7 to eight % range but your net internal rate of return I can't believe how many insurance agents mostly whole life agents don't even understand that term uh the net internal rate of return that means uh after all costs what is the the rate of return that you would need to accumulate that much money by a given date or age okay age 65 so for example whole life insurance many agents will say oh this whole life policy will average 8% well it takes until age9 5 before the net rate of return internal rate of return is 5.9 meaning the actual cost uh clear until age 95 drained out more than 2% if you earn eight you're netting six does that make sense um I would rather earn 10 or 11 and and net nine okay or Net 10 you can do that with index universal life and a lot of whole life agents don't even understand how to do this they don't even uh understand internal rate of return return so if all you're going to do is pay Target Premium you're going to be lucky to earn maybe you know 7 or 8% but you might only net 2 or 3% because uh the cost of insurance was draining out a big chunk of your overall rate of return most of my clients came to me wanting the best internal rate of return to use it for living benefits so that by rebalancing and diversifying we can move the gross rate of return up to 11 11.17 has been my average to be honest with you okay but net uh over 10% 10.07 U uh with within about 1% of the gross rate of return retroactive back to day one meaning if I'm going to end up with a million dollars let's say at age 65 uh on what I've paid into that ilul policy I would have had to have been earning 10.07% interest compounded taxfree to end up with a million dollars uh the cost of insurance uh came along for the ride it was being paid for because I actually earned 11 and netted 10 because that one percentage Point paid for all of the costs and fees in the policy that is money that would otherwise go out the window in unnecessary taxes if I follow the herd and put my money in traditional IRAs or 401ks I'd have to be earning 15 or 16% uh after taxes and fees to Net 10 in a property structured Max funded iul I only have to earn 11 to Net 10 does that make sense uh if it's not making sense you need to learn this cuz this is critical so this is the first thing stop funding a policy just based upon Target that's not going to cut it so what am I talking about when EF Hutton Who is credited with being the brainchild behind the emergence of universal life in 1980 and then indexed universal life came out in 1997 when interest rates started to come down it was based upon three sections of the Internal Revenue code that have been around for 108 plus years now uh section 72e which says money that accumulates in sight of an insurance policy a permanent life insurance policy is tax-free okay and uh section 7702 says that you can access money while you're alive totally income tax free for all kinds of living benefits or whatever and then at the end of the day when you finally pass away sooner or later anything left in the policy will Blossom and transfer income tax free under section 101a of the code but the objective is not to get the most insurance for the least amount of Premium you can do that with term life insurance if you want the objective is to take the least amount of insurance that the you can get away with under the IRS rules and put in the most premium that the IRS allows as fast as they allow so you're actually doing a backdoor approach is what I call it uh people would come to me and tell me how much they could afford to set aside uh you know uh 500 a month uh 10,000 a year 20,000 a year 500,000 a year whatever okay we're going to use an example of 500,000 here in just a moment then you're taking the least amount of insurance the IRS will lets get away with well how is that dictated well uh in 1982 and then 1984 uh the IRS convinced Congress to come up with some tax laws these are tax citations and these are acronyms the the tax Equity fiscal responsibility Act of 1982 and the deficit reduction Act of 1984 what do they mean well tefra and defra provides this Corridor based upon your age your gender and your health that gives parity that means equality what does that mean if your objective is living benefits you want the best rate of return on your money tea and defra allows you based upon your age your gender and your health to squeeze down the death benefit to get away with less insurance the older you are and more unhealthy you are so that you can get the same rate of return you can earn 11 and Net 10 just like a 22-year-old athletic Marathon running female even though you're 78 years old like one of the friends of our family back in the 1980s he came to us at age 78 he had three blocked artery adult onset diabetes a prostate cancer episode six sisters pred deum and three brothers he was rated to table D that means he has to pay twice as much for the cost of insurance as a normal 78-year-old who's healthy we were able to squeeze down the death benefit so that he could earn 11 and Net 10 just like a 20-year-old could and uh he got away with less insurance he put in $500,000 and started taking out 50,000 a year taxfree instantly yep because the cost of the insurance is the same no matter how old you are unhealthy you are and it gets cheaper as you get older you ever seen an insurance policy get cheaper as you get older you haven't seen one done done right then okay te and defra then has to do with the minimum amount of insurance that has to come along for the ride based upon your age your gender and your health the older you are and the more unhealthy you are the less insurance you can get away with so that you can get the same rate of return now in 1988 June 21st be exact the technical and miscellaneous Revenue Act was passed that tax citation said uh golly these are so good the banks and Credit Unions lobbied Congress and they said you got to slow the flow we can't compete so that is Tamar and that has to do with if you want to have tax-free income out of this you have to comply with Tamar so what does this mean I use the metaphor of a bucket have for years let's say this bucket is an ilul policy and to structure it correctly and fund it properly uh I want to uh design a bucket big enough to accommodate the amount of money I want to be grandfathered to put in it to pay into it so let's say that I'm a 60-year-old male and I want to reposition $500,000 to increase the liquidity safety rate of return and the tax benefits of that money it could be uh $200,000 coming out of IRAs and 401ks uh that are in a volatile market and they're going to be taxed uh and you're not in a lower tax bracket so you do a strategic roll out of that 200 Grand and that's what you net after tax it could be another 200,000 from let's say um a a rental property a rental home that you're sick and tired of being in the landlord fixing the toilets taking out the trash and evicting tenants you just want to get rid of it you want to know what to do with that 200,000 I've done that many many thousands of times and let's say you have another 100,000 of underperforming assets it's money in a bank or credit union you're rowing Upstream at the rate of one or two miles an hour one or 2% interest and the curent of inflation's coming down at 5 6 7 8 9ine 10 you're going backward so you want to increase the rate of return and also uh hedge against inflation so there's 500,000 now if I put in 500,000 on one Fell Swoop I violate Tamra um it'll still grow tax-free and it will Blossom and transfer income taxfree but if I want tax-free income I need to comply with Tamra so te and defra says this if I'm a male age 60 yeah there's a whole bunch of life insurance I could buy for 500,000 that's not the objective I want the least amount of insurance so I go into there and if I'm a healthy 60y old I I can get by with about double what what that is about a million dollars if I'm an unhealthy 60-year-old but can still qualify I might get by with 7 or 800,000 of insurance because it's not the insurance that I I'm going after it's it's this growing taxfree this I am totally uninsurable I can use uh this my spouse my kids I can use a surrogate because it's the owner of this that gets all the taxfree accumulation and tax-free income okay but let's say you're 60 you're in decent health so I can get a million dollar of insurance on that 500,000 and then Tamra says well you can't put in 500 Grand all at once or it'll be taxable when you go to turn on income uh I I have to spread it out over let's say about five years so let's just divide it by five let's we can put in 100,000 the first year 100,000 the first day of the second year so that's one year in one day and I do that third year fourth year and so in four years in one day I now have my 500,000 in there and so in four years in one day it now has 500 Grand in there what's the net amount at risk well if 500,000 of that million is my own money now then if I died and they pay out a million well 500,000 of that is just a return of the the half a million I put in there but the insurance company's only charging me this is the sping on the bucket the cost of the insurance the insurance compan is only charging me for the net amount at risk the difference between the million and the 500,000 which is now my money well on many of mine I've averaged you know 9 to 10% let's say 9.6% 9 .6 divided into the rule of 72 my my money will double in 7 and A2 years uh many times uh my clients the 500,000 once it was in there doubled by the 11th year of the policy to a million now you've got a million of cash and the original death benefit was a million what's the net death benefit at risk zero you're self-insured now your cash value has grown to equal and exceed the death benefit this is like by term invest the difference on steroids this is why it's so critical to understand how to how to uh structure it properly and fund it because you're self-insured in 11 or 12 years maybe 15 years you don't have to wait 30 or 40 years uh to have uh uh the cash equal the death benefit now T and deer says the death benefit if I happen to die has to pay out 5% more if I died in the 11th year the death benefit would pay out a million 50,000 but the insurance company's only charging me for 50 ,000 of death benefit the interest on on a million dollars of cash is way greater than the cost of insurance for 50,000 of net death benefit let's say the million doubles in another 7 and a half years to 2 million if I die it leaves behind 2.1 million but I have 2 million of cash in there that can generate 200,000 a year of taxfree income because it's structured correctly so I'm getting a net internal rate of return of 10% you just do the math okay so that's the beauty of structuring it correctly and funding it properly the internal rate of return gets within 1% of the gross rate of return retroactive back to day one when I first open it up but when I first opened it up and it was only 20% funded this isn't a short-term investment how can this perform well when it's only 20% funded so I like to use the metaphor of of a five-story building okay if I if I built a story five-story building and the IRS said Hey listen you've got five here but if you just sort of rent out um one floor a year after four years in one day the building could be fully occupied and then it's all taxfree uh do the math that's worth it and so if I fill up the first floor in the building the first year and the first day of the second year I can rent out the second floor and then the third floor and then the fourth floor and then in four years in one day my my building is 100% full now it turns into a cash cow and it's totally tax-free that is a properly structured maxf funded index universal life you fill it up as fast as the IRS allows under Tamar and it will provide tax-free income that will then give you like a 10% payout into perpetuity so that every million you accumulate can generate 100,000 a year of tax-free income without depleting principal if you live to be 120 we have many many clients who have done that so folks uh if this is resonating with you and you want to learn more about this uh I would strongly recommend you claim a free copy of my most recent bestselling book it's flying off over our warehouse shelves uh we're in the ninth edition of this uh we send out over 500 of these a week I don't want you to miss out it's 300 pages jam-packed with charts graphs and explanations and 62 actual client stories uh you have the left brain side and then you have the right brain side it's actually two books in one so to claim your free copy of this book you simply click on the link we go to laser fund.com you contribute a nominal amount towards the shipping and handling I'll cover the rest of that and I'll pay for the book I'll fire out a hard copy to you via priority mail but when you're in there claiming your free copy if You' like to listen and learn or watch and learn check out those options uh we teach educational webinars all the time they're free you can register for one of those but if you want to talk to a an iul certified professional I oversee them there's just a handful in the country I can point you to them and you can schedule an appointment when you go to claim your free copy to have a free consultation and Analysis with no cost or obligation on your part to see how these strategies May apply to you if it's structured correctly and funded properly that would be well worth your time and I would strongly recommend you only talk to a certified ilul professional so that you know that it's going to be structured correctly and funded properly or it's going to be extr extremely costly and you're going to end up with one that where you could have earned 11 in neted 10 you might only earn seven in net three don't let that happen to [Music] you