Speaker 0 | 00:00.020

Hey everybody, Alden here, head of product and case design with BetterWealth. Welcome back to the And Asset channel. Today, we're just going to play you a video that I actually recently recorded for a mastermind group that we were invited to. I was not able to attend in person, so I pre-recorded this short video. For your benefit here, we're repurposing that video, putting it out here on YouTube for you to take a look at. Basically, all I'm doing, this is going to be fairly high level for a lot of you guys who would like to dive into the weeds. We're just going to look at a cash flow design policy and then a front load design policy. Different premiums, trying to link the two together conceptually so you can understand why one may make more sense than the other for your situation. So I hope it's valuable to you. Please feel free to like, comment, and subscribe. Let us know what you want to see. More of something, less of something else. More of me, less of me. I don't know. You tell me. Appreciate you guys. Have a fantastic rest of your day. All right. So looking at the policy here, this is on a 40-year-old male. This is showing an. end of year number. So it'll be a year older by the end of the year. We've got a $50,000 annual premium going in for a period of 10 years. After 10 years, I'm doing what's called a premium offset. More detail on that a little bit later. But effectively, we're going to have the policy completely pay for itself after 10 years. You can fund it if you want to, but we're showing for illustrative purposes that you're no longer funding this policy. We go over two columns. we see this cash value section here. Cash value is going to grow. and compound every year guaranteed the only question is going to be how fast that that grows in each year the growth in these types of insurance policies is really based on the dividend so because we're working with mutual insurance companies you experience a non-taxable think of it as a profit share every year that profit share comes in and accelerates the growth of your policy see on this left hand side here these are the dividends now the cash value As it continues to grow and compound, this is your asset that you have access to. You can borrow against it. You can plug it as collateral to a bank. You can have access to it within 30 days of funding. So for you, as well as for myself as an entrepreneur, as a business owner, I like access to capital. And I want it without having to go to the bank and go through 5011 forms to apply, first forms, blood talk, all that nonsense. I like to be able to follow the insurance company and say, hey. send me a loan for $100,000. They give me a thumbs up and it's in my bank a week later. That's a pretty cool system. And so in this structure, we develop a large degree of cash value as you can see. And over time, even after we stop paying premiums, in this example, it's supposed to zero, we still have a growing compounding cash value for the rest of my life, or the rest of this person's life. I'm not 40 yet. On the right-hand side, you'll notice something. If you've seen any traditional insurance policies, You say to yourself, I'm paying $50,000 and I'm only getting just over a million dollars of death benefit. That's insane. This is the most expensive insurance policy I've ever seen. In a way, you're exactly right. The interesting thing about life insurance is that the IRS knows that this type of life insurance is fantastic at effectively never paying taxes on the game. So we're putting money in this product that cash is growing tax deferred for the rest of your life. You can access it cash free at any time. And in the death. benefit is also paid income tax free. So why do I mention this? Here's the reason. When the IRS effectively figured out that this is where a lot of wealthy people were putting their money, this was back in 1986, they decided to change the rules. They got with legislative body, changed the rules, and they limited the amount of money you can put into life insurance based on how much death benefit you're buying. So what that ended up doing for us in the insurance industry is now we have a minimum and a maximum premium level. for any amount of death benefit that we're buying. So the minimum premium to buy this $1.2 million of permanent insurance is just around $10,000. The maximum premium of what we can pay is 50. The difference between those two numbers pretty heavily shows up here in cash value. So because of that, we're drastically dropping the death benefit from what's possible to as low as we can get it legally with the IRS to avoid any taxable consequence. And then we're shoving in a lot of extra capital. to give you more living benefit out of this policy, more access, right? Another real unique thing about life insurance is that it has protection under state law in most states that has protection such that if you are a business owner, entrepreneur, or just walking down the street and you get hit by a car and they try to sue you, that asset is protected. So frivolous lawsuits, having cash value life insurance will not be affected in most states. Talk to your attorney, obviously. So I hope this gives you a bit of an idea. about why these policies can be so powerful. And if we're just looking over a 10-year period, we put in about a half a million dollars. We have just over 600,000 in cash value that's going to continue to grow and compound moving forward. If we just go out to a hypothetical retirement age, that's turned into about 1.3. We go out to an entrepreneurial retirement age. Here you are at age 94. You've had access to about $5 million of cash value in your entire life as that's grown. And then you pass and you leave a large death benefit for your family. Notice that death benefit is much larger than what you originally purchased. This is because over time, it grows. It grows your death benefit. It grows your cash value. That's one of the reasons dividends from mutual insurance companies are so, so powerful. So this is just one example of one design. in a snapshot in time for a 40-year-old. And this is at a standard health rating if you're interested. What I'm going to show you next is a slightly different design. So for individuals who are sitting on a lot of capital, so say right now we have an opportunity fund built up in a savings account. A savings account, depending upon where you are and what time you're watching this, could be anywhere from half a percent with Chase Bank up to maybe 4% with Ally or some other online banking system. The problem with banks, their rates are varied. So this year, they're paying 4%. Three years ago, they were paying 1%. Yeah, yield savings. What if there was a better way? What if there was another place to store capital for the sake of opportunity? This is an example of a very similar policy design, but just the only thing I'm changing is in the first year, instead of putting in just 50, I'm going to add on an extra 150. So for a total of $200,000 going into this policy in year one. What this does for me is it jumpstarts the policy compounding. all of a sudden, my compounding base is much larger, as will drive the growth of the cash value over time to a quicker degree. So with $50,000 a year after that, we still go out to the end of the 10th year and I'm turning that policy off. You could fund it if you wanted to, but for illustrative purposes, I want to show you that option of you're not paying any more dollars into this policy. On the far right-hand side, so a couple of columns farther than the last one, we have that cash value. So this cash value, as you can see over that 10-year period, we've turned about $650,000 into $765,000 of cash value. That number, just like the previous illustration, is going to continue to grow and compound, even though we're not putting any additional premium into it. So what's the benefit, right? What's the benefit of doing this versus the first one I showed you?

Speaker 1 | 07:19.406

Hey guys, I just wanted to interrupt real quick. If you're watching this and have an indexed universal life policy, a whole life policy, have any type of insurance policy. in general and you're like, I want to know if I'm on the right track. I want to know if this is set up properly. We at Better Wealth want to help you. We want to give you a free policy analysis and show you, are you on the right track? Is there some things that you potentially could be doing better? And so we have a link down below that you will have access to. We would encourage you if you have a policy and you want to see if you're on the right track, check that out. And if you're someone that's watching this and you're like, I want to talk to someone, maybe setting up a policy for myself or I have questions, we would love to serve you. You can also see a link to have a call with someone on our team. Back to the episode.

Speaker 0 | 07:58.891

At the end of the day, it comes down to what capital you have and what you want to do with it. If you want to get money into a policy to warehouse that capital, to make it grow and compound for the rest of your life, and then borrow against it to go fund the business deal you were going to do anyway, or go buy that piece of property you were going to buy anyway, this could be a phenomenal way to do that. The only thing we change is where your money goes first. If it goes first into your... personal banking system within these insurance policies, you then have access to a line of credit of $180,000. You can borrow, go buy a house, go buy your business, and then take the cash flow to pay that policy back. It's just like refilling the opportunities when you would do in a savings account anyway. Now we're refilling your bet. The beauty in this whole thing, in my opinion, is because this insurance policy will work without you, it will also work when you're leveraging your money. What the heck does that mean? Guys, what I mean by that is you You borrow out, let's say, $100,000 and you're paying 5% interest for using the insurance company's money. Your money in the policy never actually left. You still have a compounding base at cash value of $180,000. So year to year, even though you're using somebody else's money, you've collateralized that contract. Your money is still growing and compounding every year in a non-taxable manner. This is the power of life insurance if we build it this way. It gives you a lot of flexibility in cash. to be able to do the different activities in your life you already want to do. But now you can look at doing it a little bit more efficiently. But to wrap up this video, the last thing I want to touch on for you is looking at about seven years out, we have a drop in death benefit. It goes from about 4.1 down to 2 million, and then it continues to grow. Recall back when I was talking to you about the IRS, right? They want to limit the amount of money you put into life insurance based on the amount of death benefit you're purchasing. So for this type of policy design, I needed about $4.1 million of death benefit to justify putting in $200,000 in the very first year of dreaming. The IRS only really cares about the first seven years. So after the first seven years are over, I can drop off that death benefit. By doing so, we now create a more efficient growth in the policy because we take out extra charge that after seven years does not need to be there. So that's why we see a drop in death benefit. It then does continue to increase because we have that dividend, which at this point is getting to be quite substantial. Going out again to age 65, almost $1.5 million to continue down, that story continues. You just see the compounding cash value increase as well as the death benefit over time. So I hope this was helpful. This was just a brief look at this type of policy design. The first one was a cash flow design. This is a front-loaded cash flow design. And at the end of the day, your design, whatever you decide to do, is going to be customized. Your health, your age, or your gender, all these things will play into ultimately the decision on what type of policy to get if you decide to go that route. But understand we'll go through a curated process to make sure you get the most value. We work with seven mutual insurance companies. Each one of them has their own strengths, their own weaknesses, and we go through a process to make sure you get the right one. So thank you so much for your time. Appreciate it. I look forward to speaking with some of you soon. Please use the link below to get in contact with my team, and then we can have an additional conversation from there.

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