Max-Funded IUL Explained SIMPLY!

IUL made easy. What is max funded IUL? Okay, get ready in this episode. I'm going to clarify what IUL is. I'll keep it as simple and sincere as I possibly can. That's called the KISS method. Keep it simple and sincere because I am definitely sincere that I think that most Americans ought to consider a max-funded IUL as probably the foundation of their entire financial plan far more than putting money in traditional IRAs or 401ks or what have you. So, get ready. Let's keep it simple. I'm going to go through what it isn't, what it is, how it came about, and why it's so magic, why it is the dream solution for many financial goals for most Americans. So, I'm Doug Andrew. I've been a financial strategist and retirement planning specialist now for five decades helping thousands of Americans optimize their assets, minimize tax, and empower what I call their authentic wealth. If you've watched very many of my 2,000 YouTube videos on this channel, you quickly realize That I'm very partial to my favorite financial vehicle for many financial goals, a properly structured max-funded IUL. Having said that, I don't recommend you put all your money into IUL. But I do recommend that 40 to 60% of your income at retirement not even show up on the front page of your 1040 tax return because it's tax-free, okay? And that's generated by having an IUL portfolio. Not for all your money, you should diversify, but for a pretty good chunk of it, depending on how much income you want to be totally tax-free. So, let's get into what IUL is, and I'm going to try to keep it as simple as possible. First of all, as a financial strategist, I've been teaching this for years. You have to understand the key elements of a prudent investment. Any place where Where you put money, okay? So, most advisors actually get these in reverse order or at least investors do. They're always going after rate of return. That's the most important thing and they give up safety and liquidity. So, the key elements of a prudent investment in order are number one, liquidity. The ability to access your money when you need it. If you can't access money when you need it, if you get disabled or unemployed or something happens, that's when most people get into trouble and they lose a ton of money. If you can't access money out of an IRA or 401k without incurring a 10% penalty or a tax, or you have to wait and sell your house or that real estate or refinance it, that's not liquid. Number two is safety. Safety, not only of the institution, the safest institutions in America, the multi-trillion dollar insurance industry is the backbone of America. It's where banks and credit unions put 30 to 40% of their tier one assets to increase the safety and the rate of But safety of principal. Whatever I set aside, I don't want to lose. And in a year, I make money. I don't want to lose in future years money I made in previous years. I want to lock in my gains and reset every year. So, I never lose in future years money I made in previous years. Most financial advisors don't know how to do that. Third would be a rate of return. You don't need pie-in-the-sky rates of return. If you earn a rate of return of, you know, 7% to 10%, that you will usually outpace inflation. But you've got to be able to diversify and rebalance, which you can do with IUL. And then your average returns will bump up to 11% to 14%. And you can earn 11 and net 10 cash on cash. So that every million dollars you accumulate can generate 100,000 a year payout without depleting principal if you live to be 120 years old, okay? Rate of return has to outpace inflation, right? And then you want to have tax advantages. And you're going to see that nothing else comes close. So, I keep it simple. You can score any investment in America on a scale of 1 to 10, a place where you put money, a scale of 1 to 10 based on these four criteria. So, the reason why I like to do this is because what I call the risk-return paradigm. And I used to have this in many of my books. I've been blessed to have authored 12 best-selling books thus far. And so, I would list 16 general categories of investments from rank from highest risk to lowest risk and then I would apply these tests. The first one, liquidity. This many of these investments do not pass the liquidity test. You cannot access your money quick enough if you need it. Or if you do access the money, there's a 10% penalty. It triggers tax. It's not really liquid. And so, people don't touch it. This many more don't pass the safety test. You can lose your principal that you invested, okay? Even that happens with real estate. You can invest in real estate and it can go down in value. Hello? Rate of return. Now, to pass that test, you've got to earn a rate of return greater than the inflation rate. You can't be rowing upstream, so to speak, at 1, 2, 3 miles an hour or interest in a bank or credit union when the current of inflation is coming down at 9. You're going backwards. If you understand how money works and you want to become your own banker, you have to have a rate of return greater than the cost of the funds, okay? This is business. You hire employees. You buy equipment. Not because you just want to shell out money for an expense, you hope the employee or equipment makes you more than they cost you. That's what I'm talking about here. So, there's only three survivors after applying liquidity safety rate of return. When I apply the fourth one, there is only one out of these 16 that accumulates money totally income tax-free, allows you to access that money totally income tax-free including all the gain. And you don't have to wait till you're age 59 and a half. There's no 10% penalties. And then at the end of the day, when you die somewhere down the road, none of us are getting out of this life alive. Whatever you leave behind transfers tax-free and it usually increases or blossoms in value. Okay. Nothing else does that except number 12, a max funded insurance contract. So, IUL is my favorite choice because all these others are eliminated when I go through the laser test. Let's do it on a scoring system. You can score any place where you put money and investment on a scale of 1 to 10 based on these. Max-funded IUL knocks the socks off of all other investments by far. When we talk about liquidity, it scores at least 8 out of a possible 10. A lot of investments don't even score 4 or 5. And when it would come to safety, man, it's 9 out of 10. It weathered the Great Depression with flying colors, 2008, not one single legal reserve insurance company went under in 2008, even though 400 banks went under, 900 more were on the brink of going under, okay? When we talk about rate of return, it scores at least 8 out of 10, okay? I've always outpaced inflation with my money in IUL. When it comes to tax advantages, nothing else does what I just said in Internal Revenue Code. Accumulates money tax-free, allows you to access that money tax-free, and when you die, it blossoms, the transfer is tax-free. I've taught advanced continuing education to CPAs and tax attorneys for years. I've always asked them, show me any other financial instrument in the Internal Revenue Code that does that. They've yet to show me anything, okay? So, in scores, when you add these four numbers up, that equals 35 out of a possible 40. There's no other place to put money that scores 40. But most people in America have their money in IRAs or 401ks, mutual funds, annuities. Those only score 18, 20 or 22 out of 40. So, max funded IUL, it's not a little bit better. It's a whole lot better than where most Americans have their money, okay? Okay, let's also make it easy. I like the story of the three little pigs because money has to have a home. Okay? You have to park it somewhere. I choose to keep my money safely tucked over here in a house of bricks if I'm using the metaphor of the three little pigs and the big bad wolf. Okay? Why? Because out of all these places over here, a max funded insurance contract is structured correctly, funded properly, passes liquidity, safety, rate of return tests, and tax advantages with flying colors over these others here. So, that's why I choose that one. But here's what I mean. This is where I have my money. I own real estate. I benefit when real estate does well and goes up in value. But when it goes down in value, when the big bad wolf, when the recessions happen like 2008, when my house went down in value from a million five down to a million one, I didn't lose one dime. I didn't lose 400,000 because my real estate equity wasn't here. It was over here. Okay. Earning three times more than the cost of the mortgage. I was in control. I benefit when the stock market goes up with indexed universal life. If it goes up eight, I usually get credit eight or 12 or whatever. But if the stock market, if the big bad wolf blows down the stock market, you know, pandemics, recessions, terrorist attacks, I don't lose. I can sleep when the wind blows. I benefit when the market goes up, but I don't lose when the market goes down. I keep it safely tucked in a house of bricks. Does that make sense? I'm just trying to make this easy for you. So, if you want to get a little bit more technical, what is it? Well, in the Internal Revenue Code, Sections 101A, 72E, and 7702, what is max-funded IUL? It's a property-structured max-funded insurance contract where you're trying to get the least amount of insurance the IRS will let you get away with, okay? Because you're using it for living benefits. This is dictated by two tax citations TEFRA and DEFRA which were passed in 1982 and 1984 that dictates the minimum amount of insurance required based upon your age gender and health. But it gives parity, okay? It doesn't matter if you're a 22-year-old athletic marathon running female or a 60-year-old or a 78-year-old friend of our family who had three blocked arteries, adult-onset diabetes, a prostate cancer episode, six sisters, all predeceased him and three brothers predeceased him He wanted to put $500,000 into a universal life back in the 1980s He wanted to earn 11 and net 10, which he did He put in 500 grand and immediately started pulling out 50,000 a year tax-free because the cost of insurance was only using 1% because the amount of insurance required under TEFRA and TEFRA at age 83, even with bad health was the same cost as a 22-year-old taking one of these out. The cost was the same. The amount of insurance was less for him than a 22-year-old was required to have, okay? So, and the older you get, the cheaper it becomes as you fund it Now, if you don't understand this, you need to watch some other episodes on here. But have you ever seen an insurance policy that gets cheaper as you get older? All these myths out there. Oh, this is going to crash and burn. It's going to lapse. No, it isn't. The cash value in properly structured max funded IUL usually grows to exceed the death benefit within 11 years I'm going to show you this in a minute. Now, you have to comply with TEFRA Which tells you how fast you can fund it But now it accumulates my money tax-free. I can turn on tax-free income so that every million bucks can generate a 10% payout 100,000 a year of tax-free income from age 65 clear to age 120 without depleting principal Nothing else comes close to that. A whole life policy can't do that, okay? So folks, I compare it metaphorically to a bucket. So what is Max Funded IUL? It's a bucket. It's a repository where you're trying to structure to accommodate the amount of money you want to put in. And you want the minimum death benefit. You could buy way more life insurance. That's not the objective. So, you fill it up as fast as the IRS allows and it turns into a tax-free cash cow. So, let me give you an actual example here. IUL, max funded IUL. If I had a 60-year-old that wanted to reposition $500,000 to increase what? The liquidity of that $500,000 over where they have it invested right now in IRAs or 401ks in the market, in rental properties, in the bank, wherever, okay? They want to reposition underperforming or non-performing assets to increase liquidity, safety, rate of return, and tax benefit. So they come to me and they say, I want an IUL policy to accommodate $500,000. Because I want the 500,000 to grow as fast as possible tax-free so it will generate tax-free income. You got it? That's what max funded IUL is. It's for living benefits. So, you take the least amount of insurance you can get away with. It would be about 960,000 to a million. Sure, he could buy way more life insurance than that with 500 grand. That's not the objective. He wants the least amount, okay? That's dictated under TEFRA and DEFRA. Now, the fastest he can get it in there under TAMRA would be, oh, maybe $125,000 the first year. He can put that in the first day of the first year. He can put in another $125,000 the first day of the second year. Now, one year and one day into this, it's half full because he has to comply with Tamra. If he didn't do this, then it would turn into a MEC, a modified endowment contract. And now it's taxable when he starts income. He wants tax-free income. So, he has to comply with TAMRA. Two years in one day, you can put in the next and then three years in one day. Okay. So, he can get his $500,000 in there as fast as three years in one day, four years in one day if push comes to shove. But now, I've complied with TEFRA, DEFRA and TAMRA. Now, it's a cash cow. What did I say earlier? You're self-insuring. When I have $500,000 in there, if I die, the death benefit is still only a million. That's actually a positive because the net amount at risk is the difference between my money and the original death benefit required to make sure it's tax-free. The insurance company, the spigot on the bucket, the cost of the insurance is only charging me for the net amount of 500,000 if I died. Because they're going to have to pay out a million but 500,000 that they're going to pay me was my own money now. But see, I didn't do it for the death benefit. I wanted that cost to get cheaper as I got older. So, I wanted my money to qualify as part of that death benefit ASAP. Now, my average return since 1980 has been 9.62%. If you divide 9.6 into the rule of 72, money will double every seven and a half years. We've had people put in 500 grand. It doubles to a million in seven and a half years. To 2 million another seven and a half years, to 4 million another seven and a half years, and by the 30th year is now worth 8 million and it's generating 800,000 a year of tax-free income. Show me any whole life policy that can do that. You will not find one that'll do that. Show me any IRA or 401k that can do that. Folks, 500,000 when it doubles to a million in seven and a half years, what's the cost of insurance now? Because my money equals the death benefit. I've self-insured. Now, technically speaking, if I died, the insurance company is going to pay out $1,050,000. They have to pay me 5% more than my cash under TEFRA and DEFRA. But they're only charging me for $50,000 of insurance. My insurance 11 years into this is 1 20th what it was when I started. The insurance is getting cheaper as I get older. You can't believe how many agents don't understand this. How many people don't? So, the cost of 50,000 of life insurance now at age 70 is dwarfed by the interest I'm earning on a million bucks. If I started taking out 100,000 a year, tax-free income, that's fine. If I don't need the money yet, a million in another seven and a half years doubles to two million. If I died when I have two million, the insurance company pays me out 2.1 million. But they're only charging me for 100,000 of actual insurance costs, even though I'm older. The amount of insurance I'm paying for is 1 20th what it used to be and the interest on 2 million bucks dwarfs the cost of the insurance. Folks, this is what max funded IUL is. I compare it to a five-story building. If the IRS said, Doug, you can build a five-story building and if you'll just rent out the first floor the first year and then the first day of the second year, you can fill up the second floor and then the third floor fourth year. Then after you filled it up, okay, It turns into a tax-free cash cow. All of your rental income forever after is tax-free. That's a max-funded IUL. You comply with the least amount of insurance and fund it as fast as the IRS allows under TAMRA, and it turns into a tax-free cash cow. What else is indexed universal life? It allows you to participate when the market goes up. It's called indexing. Crismont Research studied from 1960 to 2010, a 50-year study, and they said, Most 10-year periods, you'll have seven up years compared to three down years. The Great Recession, 2010, there are five down years compared to five up years. And yet, our clients doubled their money during that time period tax-free with IUL. But it was Crismont that said, you know what? If you just eliminate 100% of the lost years, the 30% of the years where the market's down, just eliminate them. You would only need 25% of the up years to outperform the market by not losing money. That's Warren Buffett's rule. Don't lose money. His second rule was don't forget rule number one. So here's how it works. A lot of times our clients will end up with, you know, a million, 5 million, 10 million of cash value. It doesn't matter. You can extrapolate from this. But if I have a million dollars in my IUL policy and I feel bearish about America. I think we're headed for a recession, let's say. I can just settle for the general account portfolio. Now, ever since universal life was introduced in 1980, I have earned as high as 15.5% from the general account portfolio rate. That's what the insurance company is earning on their money. When interest rates were high, I got credited as high as 15.5%. I've been credited as low as 4%. So, let's take the low. If I feel bearish about America in 2008, I could have just said, just give me 4%, 40 grand on my million tax-free, which would have been wonderful because banks were not even paying 1% back then. But if I feel bullish about America, I think that the economy is going to go up, which during boom times, then you say, hey, I want to protect myself in case I guess Yes, wrong, but I feel bullish. So, I am willing to relinquish the interest on my million, this 4%. You can take that 40,000 of interest on my million and do whatever you need to do to have the wherewithal to credit me whatever that market does. So, they take the 40,000. I'm talking about the insurance company and they fund an options budget. They're the number one purchaser of options in the world. They buy them hourly. And that gives the insurance company the ability that if the market is up 8% that year, they'll pay you 80,000. Because 40,000 of options doubles to 80. Hello. Or it triples to 120,000. If it goes over 12, they'll have 120 grand to pay you. They wouldn't offer it if they couldn't do it. It's like how can they afford to do that? Then you don't understand options. But if you guess wrong and the market tanks. If you had your money in the S&P, your million in 2008 would have dropped to 600 grand. Our clients didn't lose a dime in 2008. You still have your million, the options expire worthless. Zero is your rate of return but zero becomes your hero because you don't lose 40%. Does that make sense? This is how we explain it in the book with the diagram. So, if you want to learn what IUL is made easy, study figure 6.2 in the book I'm going to gift you here in just a moment. But here's what it does. This is the great recession that I was talking about. November of 1999 and then in November 2012, money in the S&P, if people accumulated a million bucks and their IRA, 401k, nest egg, they saw that million-dollar nest egg dwindle down to $600,000, $700,000 in three years, four years. They felt like they lost their future. It took four years to make back what they lost. They had to put off retirement seven years. Then as Warren Buffett put it, he said, when the tide went out in 2008, it revealed who was swimming naked. They weren't protected. They lost again. It took four years to come back to break even and finally have a million 46,000 for the million you started with 12 years earlier. That's a pathetic one-third of 1% compounded rate of return. Let's say we just measured from 2007 to 2012. 500 grand would have gone down to 314 and barely been back to 497 in five years. People with index universal life with a measly cap of 10.5%. Our clients had bigger, higher caps than this. Zero, zero, 10.5, 10.5, 10.5. They would have had 691,000 instead of not even coming back to break even. This is as conservative as I can show you. So, folks. What I wanted to accomplish in this episode is to make IUL easy by showing you how powerful it is, what it does. If you really want to understand the intricacies of TEFRA, Defer, and TAMRA, and why it's a sacred tax-free cash cow in the Internal Revenue Code, you can read my book. But take my word for it, if you sit around and you don't believe it because you've never seen one, Uh... that's like saying, well, how do you know you have a brain? Have you ever seen that? That's stupid reasoning. I can show you dozens. Go on my YouTube channel and see all the IUL policies under the subset of playlist does IUL work because it works for the people who employ them who have it structured correctly and funded properly. I don't want you to miss out. So, I recommend you claim a copy of my book and reach out. You simply go to laserfund.com or click on the link below. You can buy this on Amazon for 20 bucks up to 60 bucks. And if you do, thank you. But I'll gift you a copy free. I do require a little bit of skin in the game. Come on. If you go into Laser Fund, I want you to contribute towards the shipping and handling. A nominal amount. But I'll pay for the book. I'll fire it out to you hard copy via priority mail. And while you're in there claiming your free copy, if you'd like to listen and learn or watch and learn, there's options there for a nominal investment. And it will be a game changer for you to not outlive your money when you get educated. You can even schedule an appointment to talk to an IUL specialist with no cost or obligation while you're in there. You can schedule to attend a free educational webinar that we teach on a weekly basis. But what I'm telling you is Because this is not about me. This is about you. I want you to be financially independent and not outlive your money and be immune from taxes, inflation, and market volatility. You got it?