Money Insights | Investment Optimizer Webinar

Hello everyone. Thanks for showing up live. Those of you who are here, this is super exciting. Again, Passive Income Pilot's first webinar. We hope to be doing an occasional one of these more often, but gosh, what an opportunity. If you've listened to episode 70 of the podcast, you know that Ryan and I have been pretty impressed with this strategy, as I've mentioned on the podcast as well. Took me personally about seven years and walking away from 30 grand to figure out these life insurance policies, and just really was difficult to wrap my head around them. Now that I do, thankfully we've brought on some amazing people like Rod and Blake to really break it down and people that understand what we're actually trying to do with the policies so that they can be built appropriately for your investing strategies. And yeah, we've just been very impressed. I've got a policy myself, and we just wanted to take the opportunity to invite Rod and Blake on an open forum where they can actually present visuals and break down these plans and how they work and help streamline the process for everyone that took me so many years to figure out. So Rod, Blake, thanks for coming on. Do you want to go ahead and introduce yourselves and give us a little bit about your background for the people that maybe haven't listened to episode 47 when I first interviewed you guys? Rod, what's your background? Rod Reilly Yeah, absolutely. So I'm the president of Money Insights. And Money Insights, basically we pub ourselves as an alternative wealth building firm for high-income earners. And there are a lot of different ways that we do that. We introduce people, we teach people how to invest in alternative assets. You guys are doing a really good job of that, so we won't try to do too much on that side. But the second thing that we do is we have these unique strategies that we use using life insurance in order to enhance the investing that people are doing. And so that's where the conversation today with the investment optimizer comes around. And we've been doing this for a long, long time. So my background, I read Rich Dad, Poor Dad as a college kid and kind of caught the vision of what that would be. I wanted to be a business owner, kind of was doing some different things in 2010, started working in the financial services industry with my partner Christian Allen. And we just kind of developed and evolved to where we are today, where we're just helping people across the country to just make the investing that they're doing better. Preston Pysh When you folks have spoken at the Anderson Advisors Conference, you're at a bunch of events in person across the country all year long. So thanks for being with us today. Blake, what's your background? Blake Levin Yeah, so I've always enjoyed business and studied entrepreneurship in college and got out of school and was starting to save money and found these insurance strategies, which we'll kind of dive into today. So I've been implementing these things personally here for now 10 years and just enjoy getting to meet with people across the country. So I'm kind of the client-facing guy, get on Zoom calls with people day in and day out. I love to be able to do that. And it's super fun. I'm excited to jump into some of the details here today. Preston Pysh Thanks, guys. Well, I'm excited to see and watch you guys present the mathematics behind it because as pilots, we're that was what really helped was to actually see it in action. So if you have questions, everyone, we're going to get to a Q&A after. I think you guys are going to present for about 20 minutes. If you have questions that you'd like to bookmark, throw it in the chat, we'll get to them during the Q&A, or you can just sit on them and you'll have the chance to unmute. But without further ado, I'm going to sort of join all of you as a guest here. I'm going to turn the mic over to Rod and Blake to walk us through this. Rod Okay, thanks so much, Tate. Let me share my screen here. As Tate mentioned, we've been able to present on the podcast a couple of times. The first time we got into maybe a little more of the basics. And then more recently, we're able to maybe dive a little bit deeper, talk some specifics about Tate and Ryan and how they've been using it and potentially could use it. And so as part of the idea came up that, well, what if we just do a webinar like this? And it's less conversational as kind of what the podcast is. It's a little more presentation style. But what it does is it allows us to get into a little more of the details in terms of what it is, how it works, how it came about, why people are using it, and then ultimately the benefits that it is going to give you. So that's where I want to start is with kind of the value proposition. I'll kind of walk through this and then I'll hand it over to Blake. He'll get into, kind of start down the path with some of the nitty gritty, get into some case studies. We want, like Tate said, we want to show you some numbers, help you see how it's being used and working in real life for people. And then I'll kind of take things back and bring us down the home stretch. But the idea is that we work in the alternative investing space. And that could be anything between business owners, but real estate investors, investors in notes and funds and oil and gas and all kinds of different things out there. And the idea with the investment optimizer is we're saying, continue to do all of those same things. We're just going to make it better, create a higher overall return by the way that you flow your money. And that's really what we'll talk about today. So when we talk about an opportunity fund, we're talking about the money that you have, that you're stocking away, that you're going to use and go out and invest. Okay. Where do you hold? That is very important. And again, that's what we'll get, get onto. But if we can tell you where you can create a five plus percent return on that, that is also tax-free. Well, that's, that's, I think, intriguing for people and hopefully why you're here. And then the last piece is, is that you leverage your money. So in other words, we're going to show you how you're able to create value in two places at the same time. So again, with this whole idea of leverage using other people's money, we're able to make it so that you literally are creating value in multiple places at the same time. So with that, Blake, why don't you talk to us about the problem? Yeah. So Rod, as you mentioned, basically what people are doing before they meet up with us and start implementing the strategy, if you're investing in cash flowing assets, typically you're building up money as your opportunity fund somewhere that's safe and liquid. So most people are turning to, you know, savings or money market accounts. So you're storing your capital there. Then you have an opportunity to invest in a syndication or whatever you were going to do. You take the money out of that bank account, put it into the investment. And as that creates cash flow, it's just going right back into the bank account where you're building it back up before you go out and do the next deal. Right? So you may love what you're doing on the investment side. The problem that people run into is, you know, my money's not really doing a whole lot for me in between deals, right? It's sitting there. I have access to it, but it's not really growing. There's no tax benefits. There's nothing like that. So what the investment optimizer is, is really just the ideal opportunity fund, the place to store your capital. It replaces your bank account with the funds that you're planning to go out and invest. So ideally what we're looking for is something that has liquidity, right? Of course, we need to be able to access those funds right away, but we also need them to be safe, right? You could get liquidity in a brokerage account or something like that, but the market could go down, things like that. So we want safety and guarantees knowing that our money's going to be there like a bank account. But then when we implement this strategy, you're going to get more growth, right? Rod, as you mentioned, we're earning 5% plus and doing so on a tax-free basis. But then really the kicker is the ability to create benefit in multiple places at the same time. And again, we're going to go into the details and the numbers in a few slides about how exactly that works. But one of the big benefits here is you don't have to choose this account like a savings account or an investment, but literally you can choose both. You can have your money growing for you in here and in your investment at the same time. And again, we'll get into more details of how that works. But in terms of what are your options in terms of where you're storing money in between your deals, how are you flowing money in and out of your investments? You can use a savings or money market account. And we'll just get into here why the investment optimizer is really the most profitable way to be storing up your capital. So let's jump into a quick case study, pretty high level here. But we have two characters in the story. We have Norm and Prosperity, right? So Norm and Prosperity both have access to the exact same deals. They're just going to go about funding those deals in a different manner. So Norm here, again, doing what most people are doing before they're implementing the strategy where he's a high income earner, he's saving capital, he's putting it aside that he eventually wants to go invest, but that money is going into a savings account, right? It's just sitting there until he's got the opportunity. The opportunity comes up and in this pro forma, he's able to earn a 16.5% IRR, right? Obviously a good investment. Now, Prosperity, on the other hand, she has the same amount of capital. She's just using the investment optimizer as the place where the funds are sitting before she goes out and invest in the exact same deals, right? So that same pro forma, the same investment, all of this, she's able to turn that 16.5% IRR into a 20.8% return, right? So she's taking no additional risk, not doing any other things with the investment strategy that she's implementing other than implementing this investment optimizer as the place she's storing money in between deals. So as we put these numbers up side by side, we took an actual pro forma net cashflow from a opportunity with $104,000 initial investment. Again, we'll get into more deep dive into the numbers here, but we just ran the math that we put the 104,000 in, Norm was able to grow that to 183 for that 16.5% return, where when we implemented the investment optimizer, again, using that money essentially as a pass-through account, the total jumped to 215,000 in terms of the total return in an IRR of 20.8%. So a pretty significant jump just by implementing one little tweak in terms of how the money's flowing in and out of the deal. So let's talk about the vehicle that we're actually using, because we're mentioning life insurance. We've talked about these strategies a little bit, but I want to kind of break down exactly the type of policies that we're using, because this is very different than maybe what you've heard about life insurance or as a way to use it before. So when we're talking about the investment optimizer, we're talking about a very specifically designed high cash value, dividend paying whole life insurance policy. So it's a mouthful to even say that, but if you've talked about insurance or life insurance before, typically you're starting with, hey, what's my death benefit? And then how much is that going to cost me to get, whether you're getting term or whole life, and what are my options? With this strategy, we're doing the exact opposite, where we're very focused on maximizing the cash value. So cash value is essentially your equity in the policy. And then we're trying to minimize the death benefit as much as we can. So it's really the opposite way of thinking about insurance, and you may have thought about before. So when we structure policies in this way, what we're doing is taking the capital that you're eventually going to be putting into investments, getting that into the policy first, we're focused on building up this cash value and minimizing the death benefits. So when we do it in this way, your cash is going to be growing at that net five plus percent return that we've been talking about. And then from a taxation standpoint, it's very much like a Roth IRA, where we're funding the policy with after-tax dollars, all the growth is tax-free, and we can access it tax-free, but we're also able to do this in a very safe and predictable way. Rod will jump into more of the details here, but there's guarantees in these policies. It's contractually guaranteed to grow in value every year. So you're not taking any additional risk by implementing this. And then of course, liquidity. So you may have heard in insurance, you might not have access to your money for five, seven years, something like that. With the way that we're designing policies, you're going to have instant liquidity. Within 30 days, you'd be able to tap into those funds to go out and invest in the same things that you were already planning to do so. And then the fifth benefit here is this death benefit. As I mentioned, we're trying to minimize the death benefit as much as we can. The reality is when you throw significant capital through these policies, the death benefit that it creates can be very significant, seven, eight-figure type of numbers. This is a benefit that you're getting that you really don't have to pay for in any other way. And then the sixth big benefit here is this loan provision. So this is the way that we access funds as opposed to withdrawing from the account. You can take a loan against these policies. I'm going to let Rod go into more of the details on exactly how that loan provision works. But that loan provision is really the secret sauce to be able to really have our cake and eat it too, have our money growing in the policy and fund the investments that we're planning to fund anyways. And it's doing so in this loan provision. We'll get into some more of the math here in a moment. Sweet. So now we've given you a little bit of context in terms of what people are typically doing in the beginning, how we're suggesting you change that out. Now we want to get into the actual flow of how this is going. Because initially, we talk about capitalizing your opportunity fund, which is basically setting up the policy in the way that Blake has described so that when you put that money in, it is liquid immediately. Within that 30 days, you're creating that predictable growth. There's also an asset protection element to it. And now the money is in the account, sitting in the cash value. Well, next, you're going to go and find investment opportunities. Again, same stuff as you are or would be anyway. And when you find one, you're going to actually take a loan against your cash value to do that. And all that means is that you have an asset sitting there inside of the cash value of your policy. And the insurance company makes available a loan against that. So the cash value stays there, is acting as collateral for your loan. You're now taking that loaned money, and that's what you're using to go invest. And then when you do that, you create some sort of returns and cash flow, however that might be with a specific investment that you're in. But as you're receiving that cash flow coming back, you're funneling that back toward the policy. And technically speaking, what you're doing is you're paying down the loan the way that I think of it strategically is that I'm replenishing my opportunity fund. But the point is, is that the money that's in my account stays there and continues to grow the whole time on a compound basis. And then what I do, I've replenished my opportunity fund. I'm going to go back out and find more opportunities and repeat the process. So this is kind of how the flow works in and out of it. But the point is, again, I know we keep coming back to this, but it's really critical that you remember the money we're putting in the policy is not because we just want to have money sitting in a policy, right? We're doing it because we're building an asset that we're then leveraging and going out and investing with those funds. And when I talked earlier about how we're creating value in multiple places at the same time, well, this is how it because when I do access the funds, I'm taking a loan, I'm leveraging the money that stays there and continues to grow. And that's what I'm using to go out and invest. Okay. Let's talk about it maybe a little bit of a different form here. So here we're going to use, this is our example, Dr. Z and he has money he's ready to put into his opportunity fund. So he puts it in there, puts it in the policy and Blake kind of touched on how we're creating this 5% predictable return. Well, how's that happening? There are two elements to the growth of these policies. The first one is there's a guaranteed interest rate and that what the exact rate is may differ from company to company, product to product, but typically it's right around 3% as a guarantee. In addition to that, you're earning a dividend. And what that means is that when I start a policy with what's called a mutual insurance company, all that means is that I become a partial owner of the company. And as a partial owner, now when they declare a dividend, I get a part of that. Okay. So as time goes on and I'm earning, as my cash value in the policy is growing, it's growing in a very predictable and consistent way. The dividend part of it isn't guaranteed, right? We talked about guaranteed interest, but we're using companies that have just been so consistent paying a dividend. It's just very consistent, very predictable. And that as our opportunity fund is what makes us very confident that as we're then loaning against it and going out and using it, that predictable nature of what's happening in the account in the meantime. Okay. All right. So now we have the money in the opportunity fund. Now, again, in our example, Dr. Z here, he's ready to go out and invest. And so when he does that, he's actually taking a loan, right? I mentioned earlier. So it's much larger bucket on the right-hand side represents the general account of the insurance company. They're making available money that you are able to loan using the cash values collateral. So he takes that loan, he invests it. And again, it could be anywhere. We're just representing real estate here. Let's say he uses it to buy a piece of real estate, creates cashflow and flows that back towards the loan, right? He's paying down the loan with that cashflow. And in order to do what, well, build up the account and go back out and do it again, right? So in over time, we end up with multiple flows moving through different investments and we're just capturing that back again, building it back up, going and doing. So hopefully you're kind of catching the vision that the flow of money is actually very similar to what people are doing when they're using the savings account. But by substituting in this kind of insurance policy, we're creating all of these additional benefits, additional layers of benefits with the fact that the money on the left-hand side just stays there and continues to grow while I'm flowing the money through the loan side. We're going to talk about this in a minute, but what happens is I'm paying interest on the loan, right? As I'm paying it down. But what happens is I ended up paying simple interest on the loan side while I'm earning compounding interest on the cash value side. We'll show you an example here in a minute just to kind of show the power of that. But again, that's another layer that creates value for me as I'm flowing my money through here. And the other thing is when I'm using this loan to go out and invest, well, then the question might be, well, what's my payback terms, right? Is the insurance company telling me this is the schedule that you have to pay on? And the answer is no. I actually get to decide that myself. The reason being, again, my bucket sitting here on the left-hand side is acting as collateral for that loan. And it's sitting with insurance company, right? Who's the entity offering me the loan. So they give me complete freedom to decide how I want to pay that back. It's really just going to depend on what I'm investing in. If it's something that is really heavily cashflow heavy, then I take that cashflow, I just flow it all back through there. I'm covering the interest, again, on a simple basis. I'm replenishing the opportunity fund, go out and invest in something else. There might be something else. Maybe I invest in a syndication that has quarterly payouts or annual payouts, right? Whatever schedule that's on, that's the schedule I'm going to use to flow the money back through here. So it's very, very flexible in the way that we do that. Okay. So now I talked a minute ago about kind of how the different ways that we're leveraging it. We talked about the tax-free growth. We talked about creating value in multiple places at the same time. And now what I want to focus back in on a little more is the arbitrage that I'm able to create between paying simple interest on the loan side versus earning compounding interest on the asset, the cash value side. Okay. And I think most people understand kind of the difference between the two. Visually, you can kind of see it here. It actually becomes a little bit more powerful because in this case, I have this continually compounding curve on the left-hand side. On the right-hand side, I'm paying simple interest, but I'm doing it on a decreasing value. As I pay down the value of that loan, I'm paying less and less interest each time as I do that. And so it just becomes really powerful. So let's just use a really simple example. Let's say Peter, the pilot, has money built up in his account. He's ready to go out and invest it. He goes and finds a property. Let's say it's a $400,000 property. He's going to pay 25% down. And then the other 75% is going to get as a loan from a bank, a traditional lender. The $100,000 that he's using as the down payment, he's going to get from his policy. Okay. So he reaches out to the insurance company, hey, I want a $100,000 loan. They send that to him. It's now sitting in his bank account. He goes out and buys the property. Okay. And then based on the cash flow that he's able to create, let's just say that he is able to pay down that loan over a 20-year period, just evenly amortized over that 20 years. Okay. Let's look at both sides of the equation on this. So first we're going to look at the loan side. Okay. So he has a $100,000 loan. That's what he used for this down payment. The loan interest on this is 5%. Okay. So in year one, he pays $5,000 in interest. Right. But you'll notice in year two, he pays less interest. In other words, as he's making these payments, the $8,000 payments each year, he's paying down not just the interest, but he's paying down the principle of it over time. So that as he goes, he's paying a little bit less, a little bit less each time. And when we fast forward to the end of the 20 years, then he will have paid a total of about $60,000 in interest over that time. So that's on the loan side. Now we're going to look at the cash value side. Okay. 100,000 earning 5%. So you would think, well, if he's paying five and he's earning five, well, that's a wash. And in the first year, you're right, right? He paid five, he's earning five. But because now this is a compounding on an increasing value, you'll notice each year he's earning a little more and a little more so that by the end of the 20 years, he ended up earning a total of $165,000 in interest on the compounding side. So now you put those side by side over that 20 year period in the course of taking this hundred thousand dollar loan and then paying it down, he earned $105,000 more on the cash value side than the interest that he ended up paying on the loan side. So this idea of this kind of word arbitrage, all that means is I'm able to leverage an asset to create more value on the side versus costs that I'm paying on the other side. And we did that without any difference in the interest rate, right? 5% on the loan side, 5% on the growth side. There'll be times where you're able to earn higher interest than what you're paying on the loan. There'll be times when you're paying higher interest on the loan than what you're earning in the cash value. But the cool thing is, is we don't have to focus necessarily as much on the interest rate so much because this powerful difference between paying simple and earning compound just makes it so that we're able to create an arbitrage either way. And that becomes very powerful. That's a, again, additional layer of benefit that we're able to create as we're doing this. All right. So now with some of the kind of the principles behind us as our foundation, now what I want to do is show another case study. And in this case study, what we're going to do is we're going to pit the two sides against each other. Because if we're saying using the investment optimizer is better than just flowing the money through the savings account, well, let's prove that out. Okay? So here are our assumptions. We're going to assume person A, person B, person A is using the investment optimizer, person B is a savings account. In both cases, they're setting aside $100,000 a year for five years and putting that into this opportunity fund to go out and invest with. Okay? Initially, in year one, we're immediately going out and investing as much as we have available into real estate syndication. Any cashflow that we're creating from that, we're flowing back into the system. And then what we're going to do is every five years, we're going to take what's available and go out and invest in a property, basically the way I just described it. Go buy a piece of and create cashflow. And as we create that cashflow, we just keep capturing that back into the system. So over the course of the 20-year cycle that we're going to talk about, there's a lot of money flowing in and out of the system, but it's that initial 100,000 for five years. So 500,000 is the total outside capital that has come in. And we're going to show what that does as it grows. So here's kind of the side-by-side. So let's talk about year one, 100,000 in on person A, 100,000 in on person B. You'll notice right away, well, the savings account has 100,000 to go out and spend, right? And invest. No cost, right? But when we're setting up these policies, there is a cost. Okay? And so we own that. We're putting that out there right up front. As we set these up and you put the initial amount in, the costs are somewhat front and loaded to the first couple of years. And so you'll have roughly 70 to 75% of that initial amount that you put in that's available to go out and use for the investing. Okay? So you might say, well, man, you said this was supposed to be better, right? And it is, but it takes time, right? We have those initial costs. We are able to overcome those costs with the growth, with the arbitrage, with the tax benefits. Tax benefits don't show up as much just because it's money in, money out. We're not trying to make it overly complicated. But the point is that if you watch what happens over time, every time we're going out and buying a new piece of property, year five, year 10, year 15, year 20, we're just able to buy larger and larger properties on the left-hand side for person A compared to what we're able to buy with person B. And again, it's those interest, the dividends, all that growth, all those different things that we're able to create. So when you fast forward to the end of 20 years, we're able to generate a little over $2 million of additional value for person A by using the investment optimizer. And I'm going to be the first to admit, the majority of the value created in this was in the real estate that they were investing in, right? Turning that $500,000 into $20 million or $22 million is no joke, man. That's really cool stuff that we're able to do in this kind of alternative investing world. But if at the end of the day, I could have $22 million instead of $20 million, well, of course I would take that, right? And that's the value that the investment optimizer adds to this kind of alternative investing that we're doing. Let's just really quickly recap, and then we'll get to questions and make it a little more interactive. So the value proposition, we're doing the exact same investing, but creating higher returns, creating a 5% plus tax-free return on the opportunity fund, the money we're setting aside for our investments. And we're leveraging, we're creating value in multiple places at the same time. So at the end of the day, it's a vehicle, it's a strategy using that vehicle and just creating the value. So that is our kind of presentation piece of this. Tate, do you want to, if you have any questions, go ahead and jump in, but we'll invite everybody else. Go ahead and type in on the chat or in the Q&A, and I'll be happy to answer your questions. Yeah, I'm going to kick us off with one. I'd like to know how does the interest rate get set, and is it floating or fixed? So if you take $100,000 out of your policy, what determines that interest rate? Does it float with SOFR or with the 10-year treasury like mortgage interest rates do? And then does it fluctuate? If rates come down and you have that loan out, does it adjust? Yeah. So the answer is that it is a floating rate and it adjusts based on a Moody's Corporate Bond Index. So the nice thing about that is that it's actually more favorable right now than it would be if it was tied to SOFR or Prime or something else where pure interest rates are a lot higher. But when you look at bond rates, they're obviously higher than they were, but they're not as high as Prime is or whatever. So maybe you said it a different way. We have the ability to go out to banks and get these loans. So we can actually compare what is the interest rate in the insurance company versus what it would be if we were out and getting the bank loan. And the bank loan would be 7.5% to 8% right now, whereas the interest on the loan with the insurance company, depending on the specific company, is right around 6%. Understood. Got it. And again, I really wanted to underline the fact that this is not the investment strategy. We talked about this on episode 70, where if you're not going to take loans against this policy, it does not make sense. There's other places that you can put your money that are going to make better than 5% without these fees. But if you're planning on making alternative investments, then it's a fantastic layer. The other thing I wanted to note is that while there are those front-ended fees, something that you sometimes forget about when you're looking at this, because you're looking at it as a supplement to your investing, is that there's an insurance component. So day one, you have a death benefit that's, if anything were to happen to you, is going to pay out to your beneficiaries tax-free as well. So do you want to touch on that at all and maybe the tax-free component of the death benefit and the use of it as an estate planning tool? And please, everyone, if you have questions, please type your chat in the Q&A box. I can hit on the death benefit piece. So when we're setting these up, day one, as soon as you fund the policy, a very significant death benefit is going to go in force. So again, it depends on your age, your health, how much you're funding, things like that. And as we jump on calls with people and learn more about their situation, we show them these exact numbers. So if you're interested in that, we can provide those specifically to your situation. But yeah, you're going to get this death benefit that's going to go in force. If you're putting in $100,000 a year at, say, 45 years old, you might get two, $3 million of insurance or something like that. Each year as you continue to fund the policy, that death benefit's going to continue to grow. And even after you stop funding it after a couple of years, that death benefit's going to keep growing. So if you kind of look at a pro forma and say, okay, hey, if I fund this for four or five years and we run this out till my age 90, my life expectancy, those death benefits are going to be, can grow to the eight figure sum. So it is a very significant death benefit. Then from the taxation standpoint, when you pass away, life insurance passes out income tax free to your beneficiary. So if you get hit by a bus day one, or you pass away at age 90, then that death benefit, it's going to get paid out tax free. Now it can land as part of your state. That's where we'll use some trusts or things like that. We can move it out of your state essentially. But yeah, that death benefit, while we're not doing the strategy for the death benefit, that can become very significant value that you're, again, we're doing this for the investment piece, but it's just something that comes along that you're not really needing to pay for in any additional way. Excellent. We have a couple of questions that came in, but real quick, you said when you stop funding the account, can you speak more to that? Because you were saying you're front-loading the account with say $100,000 a year, and then there's a point where you can just stop funding it, right? Yeah. So we can use different designs, and again, those are all individual conversations. But the way we set these up is you're putting in way more money than you need to for the insurance portion. So you may have had grandparents or something be like, hey, I still have to pay on my insurance every year to keep it in force. The way we're setting this up, we'll look at, hey, what does it look like if you fund it for seven years and never put any more money in? But the reality is, is after three or four years of funding, you wouldn't need to put any more money into the plan, and you're going to see that cash value and death benefit grow for the rest of your life. So because of the way that we structure it, it's going to give you a lot of flexibility with how much you're putting in. So you don't, going back to my $100,000 example, you don't have to put in 100,000 a year. It could be anywhere between 20 to 100,000 a year, and then you could fund it for five years, or you could fund it for 25 years, really however long that you want to continue to fund. The way that we design the policy is really important, and then it's going to give you a lot more flexibility. So they become self-sustaining at some point. And remember that you can have as many of these policies as you want. You can start with a number that's reasonable, and if you like how it's going, you can always layer on policies as well. David asked, can you speak again about the 5% plus growth and what market it is tied to? Maybe just talk about how that return within the policy is being produced by these insurance companies. Yeah. When we use whole life, there are basically two pieces that grows. There's a guaranteed interest rate that's offered by the insurance company, and then there's the dividend also offered by the insurance company. So the answer when he's asking about what market is it tied to, whatever, it's not tied to any kind of market-based index out there or anything. And probably the reason he's asking the question is because there are life insurance policies out there that do that. There's variable universal life, which means your money is actually invested in the stock market, and your cash value rises and falls depending on how the investments are doing. So that's actually directly invested in the market. There's what's called indexed universal life, where the money isn't actually invested in the market, but what it's doing is it's using a market index as the kind of measuring stick to determine how much interest you earn each year. So let's just say it's using the S&P 500. The year the S&P 500 is up, you match those gains up to a cap. But in years where the S&P 500 loses value, you don't participate in those losses. You just don't earn any interest in that year. So that's called indexed universal life. So those are examples where it is tied to a stock market-based kind of thing. But in this case, when we're talking about whole life, it's not at all. It's a guaranteed interest rate and the dividend from the insurance company. And that's actually one of the reasons we use whole life as it relates specifically to this strategy, is because when I take a loan, I know the cash value is going to grow in a very predictable way long-term. I don't have to be concerned about what's happening in the market or other things and how it impacts my cash value. I can with confidence take that loan, go out and invest it, take the risk on the investment side, but know that my underlying cash value is just going to be growing in a very predictable way. And it's not to say that you can't use those other types of policies. So we had someone email us and asking about, well, I have this VUL policy already. Can I use that? And the answer is, well, as long as the insurance company offers a loan on that policy, then yes, you can. Now, typically, it's a lot lower loan to value. In this case, after he looked it up, it was 85%. I've seen a lot where it's only 50% of what you have in the cash value is what you have access and available for a loan. With the indexed universal life, because there's still some volatility, but not as much, you might be able to get 85% to 90% on that. But the whole life, because of just how predictable it is, it's about 95% of what you have in your cash value is what you can access for the loan. And these are contractual guaranteed growth, which they're able to produce because they've been in business for 200 plus years in some cases with some of these companies. Very interesting. Jon's got a question, which I really like. It relates to one of mine. What are the downsides of never paying off the loan and only paying off interest every year? That sort of relates to a question that I had versus taking a loan against your policy and investing in a deal that cash flows, that provides cash flow to pay down that loan over time versus investing in a deal that has no cash flow, maybe a ground up development deal that you're not going to see anything and so that you're not going to be paying down that loan. What are your thoughts on both of those as they relate to one another? Yeah, it's a great question, Jon. I was even glad to see that pop up because it's a great question and the way that you outline it, what are the downsides of never paying off that loan, but only paying the interest each year, we have plenty of clients who are implementing that strategy. So they will leave that loan balance outstanding and they're just paying the interest on that each year. So by doing it that way, you're going to keep that loan simple, right? That's how we keep that loan at simple interest is that by at least paying that interest each year and then your capital in the policy is going to be compounding. So then the question obviously becomes then, well, how does that loan get paid off? And the way that it eventually gets paid off is through the death benefit that we have on the policy. So for example, if you get to your life expectancy and you pass away and you had a $5 million death benefit and your loan currently outstanding was $2 million, the first thing the insurance company is going to do is repay that loan of $2 million. And then the surplus is what's going to go to your family. So that in my example would be a $3 million check gets written to your family as opposed to the full 5 million. So you can keep that loan outstanding for as long as you want. And that death benefit is what allows us to have that unstructured loan repayment and give us the ability to have a lot of flexibility doing that. And so, yeah, that can be a very powerful strategy. And again, we have people doing that as well. And I can add a little bit to that as well, because to your point, Tate, it very much depends on what you're investing in, right? So then if you're saying, okay, well, does it ever make sense to use this strategy with something where I'm investing and it's not creating cashflow? And the answer is that you can actually do that. You could let the interest capitalize on the loan. Now, you're not going to get the simple versus compound in that case. It's going to compound in both cases. But the point is that the insurance company allows us to skip a loan payment and let it capitalize on the loan if we want to, or if just the timing of payments works out that way. And that can be important. So in that case, again, I'm losing the value of the paying simple earning compound, but I'm still able to have that underlying growth while I'm still using the money somewhere else. Or the way that I usually actually see this is people, you will usually be investing in a variety of different things. And I'll just use myself as an example. I've invested in things that are very much cashflow heavy, things that have reasonable cashflow, and then things that aren't at least initially creating cashflow, it's going to be two or three years before they will start to cashflow. But because I have the combination of all of those going on, even that investment that's not cashflowing now, I'm still able to keep up on those interest payments with the cashflow coming from other things. So maybe to clarify that a little bit, it's a single access line of credit that I'm using. So when I'm talking about taking loans, I'm basically tapping into that line of credit, using it to go invest in one thing. Later on, I find another investment, I'm going to tap into the line of credit and use it to go and invest in that. And then as I'm flowing it back, it's all going back towards the same line of credit. And so in combination, I can be covering those things and have the ability to invest in things that aren't necessarily cashflowing upfront, but still covering the interest, keeping that simple by the other things that are flowing through there. And I suppose you could also just come out of pocket to pay that interest. Right. So it doesn't have to be coming back from your investments. It could just be the additional money that's coming from your wallet in the policy. Yeah. Got it. I have another question. Is there a point of diminishing returns for this strategy based on your age? So pilots coming up on 65 years old, does it make as much sense as somebody who's in their 30s and 40s or even 20s? Yeah. So for this one, it's not even necessarily as much age. I mean, it is. So really the direct answer to the question is age 70 plus, we have a hard time building policies that are efficient enough to create the growth and things that we need. So that's where it becomes difficult. We're talking about someone in their 60s. We write a lot of these policies for people in their 60s. It just depends on their investment horizon. Because if they're at a place where they're saying, well, I'm going to retire in two years. I don't plan on doing any investing beyond that. Then I would say, no, it doesn't make any sense. But if they say, well, I'm going to retire in two years, but I'm still going to continue to invest. I'll be flowing money in and out of these different cash flowing deals for the foreseeable future. Well, then it does make sense, right? Because even beyond that retirement age, you're still flowing it through. And you can even still be living off some of those proceeds, right? Let's say I create cashflow. I'm living off of a portion of it. I flow the rest of it through the system and it continues to create that value for me. There are a lot of situations where we are working with people who are doing that and in their 60s, even when they're starting. Excellent. I'm going to skip down to Aaron's question. Then we'll come back to Charles. Can I take cash out not as a loan later in life if I need the liquidity, but I don't want to pay interest on it? And the answer to that is definitely yes. So anytime you're taking out money, you have two options. You can withdraw the funds or take a loan, right? So you can take money out. Life insurance works as FIFO or first in first out. So any money that you've put into the policy has already been taxed. So you can take that money out in the form of withdraw and you're not going to pay any tax on that. Now, after you've taken out your basis or what you've contributed, if you would draw more funds after that, drawing from the growth, there's going to be taxes on that. So you can at that point say, hey, I want to withdraw the funds I put in. And then all that growth, I want to take a loan against. And Aaron, we have people doing that all the time. When you take that loan, again, that death benefit is eventually what's going to repay that loan. So you can take a loan, use it as retirement income, but then never pay it back, right? Because you have this death benefit that's eventually going to pay it back. Kind of to summarize, you have options and we can show you those options. So, hey, what does it look like if I withdraw funds? What does it look like if I withdraw and then take a loan or just take loans? So you control all the cards there and we help walk you through what's going to be most profitable. And we call that phase two. In other words, phase one is I'm using the policy, investing, et cetera. But then we're often asked the question, okay, great. So I've built all this money inside of life insurance policy. What good is it going to do me? Do I have to die and I pass that on to my kids? And the answer is no, you have all this value built up. It's to Blake's point, it's completely liquid and available to you. You can use it however you want. The way we mostly see it done is it creates a tax-free income in retirement. And I'm taking that money out. I'm living off of it. I'm not planning to pay it back. Even if I use it as a loan and kind of to Aaron's concern, well, I have a loan there. I'm accruing interest. I'm not paying that interest, but my cash value is still growing. I'm offsetting any loan interest with growth that's happening in the policy. So that's why I can take a loan, not make any payments on it, let it just accrue that interest. And then to Blake's point, when I pass away, the tax-free death benefit is going to pay that off for me anyway. So that's a way that we can still use the loans, not be concerned about the interest because it's offset with the growth that I'm creating. Preston Pyshko, Transcripts. Fantastic. So from Charles, when you say fund your next investment, is that funding a cash purchase, a down payment? Do you help decide when that makes sense to take that loan out? So I'll kind of answer that first question, Charles. Typically we see these policies used to invest passively in real estate. So when you find a syndication deal that you like, you take that loan against your policy and you use that cash to invest in the syndication deal. You of course can use that cash for anything you want. Probably best not to go out and buy a Lamborghini with it. But if you wanted to buy physical real estate and investment property, that would work as well. But for Rod and Blake, do you help guide clients on when is the right time? When has that cash balance built up to the right amount to make sense to pull that first loan out? I would say we consult with people. In other words, because this is a strategy, we're not just on the front end setting up the policy and hey, good luck. We're involved and we're helping people along the way. So at a very minimum, we're reaching out once a year at the policy anniversary just to check in, make sure that everything's good, see if there are any questions, if we get together and have a conversation. But of course, anywhere along the way, if someone is at a point where they're saying, okay, great, I've built up money inside of this opportunity fund and my cash value and policy, I'm ready to use it. Then jumping on a phone call, kind of talking through now next steps, that's a very common thing for us with our clients. And so we are involved in that. Now, if you're asking, are we bringing deals to the table? I mean, we can help be a resource, but you have great people like Tate and Ryan that can help you with that as well. And so we're not as much trying to bring those deals as we are trying to just make those deals more efficient. Fantastic. And also from Charles, 100,000 a year funding, even 20,000 a year seems intense for smaller investors that's just starting out. Do you have personalized formulas that would help a client decide when and if it makes sense to implement this strategy? I can say from personal experience, I'm dumping 5,000 a month into a policy and yeah, it's a lift in the beginning. But again, you can decide how much you want to put in and you can always layer these policies as your income increases and your passive income increases. Do you guys have some thoughts on that? Yeah, I can hit on that because I think I threw out that 100,000 to $20,000 number. And in reality, we're just going to set up the policy, however it makes sense for how much you're putting away to invest. So I mentioned at the start of this, I've been doing this for 10 years. I promise you my first policy I started when I was 22, I wasn't putting 100 grand a year into it. I was putting $12,000 a year as my maximum. The minimum might be 2,000 or 3,000 in that time. So again, that's just all part of a conversation which says, hey, what are you setting aside? What would the numbers look like? How much flexibility do we have? And we're telling the insurance company, hey, we want to set this specific funding range, whether it's 2,000 to 10,000 or 20,000 to 100,000 or whatever the case may be, we're helping you figure that out, look at different numbers and implement from there. So very customizable. There's not a stock policy that we're using. And we can set those funding ranges up to make sense for wherever you're at right now. And Tate, as you're mentioning, as your situation changes, we can just add more policies down the road if you want more capacity to fund them. That's great. One more from me. If someone has $100,000, $200,000 just sitting on the shelf, can you front load this policy? Or do you have to have a specific monthly cash that you're putting in? Yeah, it's a great question. The answer is yeah. We have a lot of people who do build them where they're more front-end loading them. And specific design might look different from person to person. But basically what's happening is because we have that funding range, like use the example of the 2 to 10, 20 to 100,000, whatever, then we can be creative in the way that we set them up. So if someone says, well, again, I have 200 grand right now. Okay, great. Well, we can set it up. So let's say you put 100 in year one, 100 in year two, but then you're backing off and you're only putting in 25 a year after that. You can keep putting up to 100,000. So it kind of helps you build in that extra capacity in a sense as well. But it's okay if you only ever put in 25 a year after that or something. And in some situations, again, depending on the specifics, we might even be able to put that more in year one. The long-term IRR might be lower in that situation, but again, we can run different scenarios, look at them side by side, and then the individual gets to decide, oh, I'd rather have more upfront rather than phasing it in, or I'd rather have a better long-term IRR and pick that one. So we have a lot of different companies we work with, different products. And so we're going to match you up based on the specific goals that you have and what you're trying to get out of it. Yeah, they're very customized. So obviously, getting on a call with Rod or Blake, they're going to be able to walk through your specific scenario. Speaking of specific scenarios, is a health exam required to create a policy? David asked that. Yes. Yeah. So we go through the same kind of process as you would if you were going out and buying your own term policy or whatever. And so if someone has a health concern, we're more than happy to help talk through that. But in a lot of cases, even if an individual can't get the policy, we can write it on a spouse or a partner, a business partner, whatever, child. So in most cases, there are other ways that we can still take advantage of the strategy, even if an individual isn't able to qualify on their own. Great. And an important question. I'm sure you find A++++ companies, but what happens if one of these companies goes under? Yeah. So the answer is yes. We are very picky on the companies we use. We only want companies that have been around a long time, have a track, a very consistent track record of paying dividends, not just for the last 10 years, but the companies we've been talking about have paid a dividend consistently for 170 years. Right. So you're correct from that assumption. But then if something happens to the company, then there are a couple of different ways to think about it. The first one is if it just plain goes under there, there is a what they call a guarantee association. And basically what that means is, is all the different insurance companies that do business in that state pool their funds to bail out policyholders. If that happens up to a max, it's kind of like FDIC, not government dictated, but 200, 250,000, depending on the state you're in is the number that is kind of guaranteed on that. Now in real kind of in real life, when you see, well, we haven't seen any of the companies we described go under, but even when you've seen other companies, they don't actually usually just go under, they usually get bought out by another company. And then that company takes over the contracting and continues to honor it. But those are really kind of the two possible scenarios that you could see. And at the end of the day, I mean, these are incredibly well-capitalized companies that have been around for a hundred plus years and been through depression. So- That's important to point out because when you compare them to banks, banks use a lot of leverage, right? It's fractional reserve, right? $1 can turn into $7 loaned out. With these insurance companies, it's the exact opposite. The regulations that they are having to honor is for every dollar they have promised out, they have to have $1.10 or something in reserves ready to do that. And so to your point, they're very well-capitalized and when you look at their books, you can really see that. Fantastic. Well, on that note, because these policies are highly customizable and they're built to suit, highly recommend that if you're interested, reach out to Rod and Blake. So guys, how can people get in touch with you? Yeah. If you just go to moneyinsightsgroup.com slash pilots, we have a custom built page just for you all. And there is information there. You can watch a webinar there. We're actually going to post this one and it'll be housed there for future if you want to come back and reference or send anybody else over. But there's also a form there where you can fill out, drop in your information and actually schedule a meeting on one of our calendars. And so that'll be with either myself, Blake or Brennan, another of our group that'll be taking those. And we'll be more than happy to sit down and initially we'll just kind of get to know you and your situation, what kind of investing you're doing, what you're looking to accomplish. And then we can put together some custom tailored examples and things to send over and really have a conversation. So as you're probably noticing, we're very education oriented. We're not here to try to just put volume above principle. We want to make sure that anything that we're doing is in the best interest of the person. And so it's conversation, it's answering questions, it's education. And then like I said earlier, staying involved and being involved with the implementation as you're moving forward. So that's kind of how the experience goes. With that, moneyinsightsgroup.com slash pilots. And we'll send that out in the replay for anybody that couldn't make it live. Thanks for showing up and we appreciate your time, Rod and Blake. Thanks so much for coming on. Thanks Dave. Take care, everyone.