All right, everybody, welcome back to the fastest growing life insurance podcast on the planet. My name is Caleb Williams. I'm here with Dom Rufran. And we're gonna be talking about this idea between compound interest and amortized interest. This last week, we talked about borrowing against life insurance. Dom and I had some lively conversations back and forth around different ideas, frameworks. Dom, you actually shared an example of life insurance and real estate and I shared kind of like a part of a presentation that we give around how to think about internal value, external value. And so very, like, had a blast jamming with you. And we got a question actually from someone a while ago, and we just thought that this would be a great episode to talk about this. And it's around this idea of compound interest versus amortized interest. And it's around the premise of compounding is far more valuable than... amortize interest. And if you can get compound interest and pay down interest, like you're actually going to be way ahead. And we're going to address that because there's parts of that that are 100% true, but it's also half true. So before we jump into the math and all, I want to just welcome you and get your update on last week and what's on your head right now. Thank you, Mr. Caleb Williams. It's funny that we say the fastest growing podcast when this doesn't even go on the podcast platform. It's just, I think it actually does. I think we actually have a, I think Joel puts on the podcast. So clearly you're not a listener. I'm sure not. I'm sure not. If you do, let us know because clearly we don't value you as listeners, but I, you know, Dom doesn't. I do. I value you. I did not say that. But nonetheless, I'm grateful. I appreciate it. It's fun to be back in the lab with you. It consistently brings me back to the old days. And so with that being said, guys, you guys have shown some love as of late with some of our last videos. And so we appreciate you guys supporting us as we talk about, as I always say, the sexiest thing on the planet of conversational topics, life insurance. So, Mr. Caleb Williams, with that being said, let's have some fun. Let's have some fun. Okay, so I want to bring you back to my book. the end asset, you'll see on page 24, I'm going to read from a chapter around the most efficient way to buy a house. We talk about the most efficient way to buy a house. And the purpose of this chapter is to get people to start thinking a little bit different on the question around how you buy your home. And we talk about in this section, earning interest versus paying interest. And this is my older version. And I literally talk about. compound interest versus amortized interest. And this is what I said. In our example, the interest you would pay the bank on $250,000 loan over 30 years at 4% is $178,040. And the interest that you paid if you invested your $250,000 for 30 years at 4% is $578,374. And And then I said, it is a good use of your money to spend $178,000. thousand forty dollars in order to earn five five hundred and seventy eight thousand three hundred and seventy four dollars efficiency says yes so i just want to be very clear as we're having this conversation when i first got into this space when i wrote this book this concept of compound interest versus amortized interest was um a big deal to me and i uh wrote that section in this book and then when we when i rewrote it this was one of the only sections that i revised It's one of the only receptions that I revised because while the math that I articulated is correct, it's a half-truth. And it's a half-truth because we're not factoring in opportunity cost. And so what I thought we would do today is walk through the math, and hopefully by the end people can at least understand where we're coming from. And we can still talk about the compound interest and amortized interest is a real thing. It's just not applying true. apples to apples. And so Dom, is there anything that you want to say before you share your screen and we're actually going to have you run a basic rate calculator to show people in real time how we work this out? Yeah, I'm grateful that we're having this conversation. I think this conversation is the thing that gets people confused because just looking at the math and the numbers, sometimes it's just as hard to grasp and understand what it is that the infinite the banking space is really trying to hit home on. And I do believe that there is some validity there. But for me, I think the math is going to be fun and it's going to be great to look at. But I also want to just be very clear on just if we're using this as an example of just life insurance and homes and amortized and compounding, I just want to make it very clear on how life insurance really works at the end of the day. So people have that understanding and don't make it any gray areas like this is how it works, this is how it functions, this is how the loans work. And so you understand the tool better at the end of the day. Yes. Yes. All right. So, Dom, what we're going to do is I'm going to, first of all, share with you this thing that one of our audience members shared with us. This is a common concept that many people talk about, and it's around this compound interest versus amortized interest. And so in this example, you have $50,000 borrowed at 6%. And what you do is you have this borrowing or amortized interest getting paid down. And so you look at this and say, Over 25 years, this person is paying $46,645 worth of interest over that 25-year period of time. And if we put that $50,000 and earn 6% over that time, you're getting compound interest. And so the difference between compounding is it's earning on a greater amount every single year. And so the interest that you would earn is over $164,000 worth of interest. And so what is a lot of people have said, and I even mentioned it kind of in my book on chapter three, is wouldn't you rather pay $46,000 to earn $164,000? Like that's obvious, right? Like I would do that all day long, pay $46,000 to earn $164,000. And actually that's not incorrect because that would be exactly what would happen in this scenario. But we're not having a true apples to apples comparison because one is just looking from the interest that you're not paying but you're putting money every single year into this equation. And on the flip side, you're getting all the benefits of your money growing. And so what we want to be able to show is we want to actually compare this to an apples to apples. and what you're going to find. is it's going to be a complete wash, which some people in the infinite banking community or some people that have been teaching this, I think it's really, really important that you tune in and listen to what we're talking about. But I'm still going to make the argument to why you should want as much money compounding for you as possible, because even if it's mathematically a wash, doesn't make it a wash from a planning standpoint. So, Don, before I share my screen and we're going to jot some notes down. Let me like recap kind of what you're thinking about any questions that you have as we as we start calculating some things? Yeah, I think the best thing that you can do, as you're speaking through this out loud, is potentially if possible, use real life examples of a tangible asset of just like contributing and what one may be for versus the other for people that may not understand like, when would I be using amortized interest? When would I be using compounding interest? when does it even make sense because I think for maybe the uh super infinite banking nerds, people that like really understand just like this stuff, it may be easily understandable. But I think for normal people, this stuff doesn't come very intuitive. So I think just trying to make it very standardized to what people are used to will be helpful as we communicate this. Okay. So what I'm assuming is I'm assuming, and we're doing this in real time here, I'm assuming this person has got $50,000 that they could put in. And they could either put it in a 6% earning or they could pay off the debt. Caleb's writing in Japanese, just so don't worry. Just look at the numbers. Look at the numbers. I need to use my... So they're either earning or... So here, let's do this. Let's do 50,000 is either earning 6% or pays off 6% debt. Okay. Now, you could easily say if you paid off that debt, you're saving $46,000 worth of interest. forgoing $164,000 of growth. You could say that and we're going to actually break down this math. So let's first talk about if you put that $50,000 in, so the present value for those of you that, this brings back any good memories, we're putting $50,000 into the present value, we're assuming a 6% interest rate, we're not adding anything to this right now. So we're not adding anything to the payments. And over time, future value, your money, it grows to $214,000. $593. So exactly like that graphic said. So if you put $50,000 earning 6%, that will grow over 25 years to $214,593. Okay. Tracking so far, Dom? Amazing. I am tracking straightforward, simple. I love it. Okay. So now what we're going to do is we're going to say, okay, well, on the other side of the coin, We're, uh, we're paying down a, a loan, but we're paying down the loan with new cashflow. So this, this is assuming that we're making payments. So what we, what we have to do is we, we have to figure out what those payments are. And, uh, that's, what's being missed in this whole equation is we're not factoring in any payments, um, to, to the opportunity cost. So if we started with a $50,000 loan, we paid it off over. 25 years. We're going to say the future value is zero because we've at the end of 25 years, the future value is zero. The payments would come out to be an annual payments. The annual payments would be $3,000, $3,911.34. Okay. Now that's the payment on an annual basis. So if you took this payment of $3,000. $3,911.34. And you said, okay, let's say I actually take my $50,000. And instead of compounding it at 6%, I'm going to pay off my debt completely. So I wipe out my debt. Is it fair to say in that scenario, you have $3,911.34 that you were going to be paying for the next 25 years in this scenario? Like, are you checking with what I'm saying? Yep. And I think that it was good to know that it was the annual number because I was like, man, monthly, that seems very high for $50,000. That's interesting. Now we're doing annual. So, yes, it's tracking. For a year, $3,911 is what you would have paid. So, in other words, I put my $50,000, have no debt, and I'm an honest banker, which most people are not. Just to be clear, most people would not do this. But I would have paid the bank over 25 years $3,911.34. But instead of that, I'm going to be paying myself and I'm going to be earning that 6% because I can, I can, I have this magical place that I can earn 6% every single year for the next 20 years. And so drum roll, please. My future value would grow to, Oh, wow. That is a very number. It actually, believe it or not, based on how it's, it's, it's a 60 cents or 50 cents or 40 cents greater, but it's a, it's a wash. Trust me. Like, uh, mathematically it's a wash. So So what I could do... is I could put $3,911 per year for the next 25 years at 6% and I would earn, at the end, I would have the same thing, $214,593. Okay. So what does that tell you? That tells you at the same interest rate. Whether you compound your money over the next 25 years or whether you pay off your debt and then take those payments and put them into that 6% investment, it's a total wash when you factor in opportunity costs. The reason why I'm bringing this back, the reason why this is a half-truth is it's true, but you're not factoring in, in one scenario, you're... actually paying off this debt with cash flow. And in the other scenario, you're not. And so you're getting the, you're, you're, you're almost getting the credit of, um, paying off this, this interest, but I guarantee you Dom, and this is going to be obvious, but if you didn't make any payments and you were paying debt at 6% and you were earning 6% at the end of 25 years, it would be identical. You would have your total debt that you would pay with compounding interest. would be exactly the same as the money that you're earning because there's no difference when it comes to math, whether you're paying interest or earning interest. And so a lot of times these scenarios get inflated and extreme because you're looking at, you're essentially looking at one scenario adding cashflow, which you're not seeing in this equation, but in the other, you're not. So I don't know. I feel like I'm saying the same thing over and over. I would love to see, like, do you think this... This makes sense, or is there another way that we can unpack this to help someone understand the math? Because then I'm going to make the argument next why I would still choose compounding. because of control and risk management. But I need to make sure that we're, we're, we're at least looking at the truthful numbers before we dive into what we would do. Yeah, no, I think your, your last example was way more clear. I even think sometimes that slide still becomes like a little bit, um, it's, if it's marketing misleading, that's why I think things become more confusing. I think this slide here where you're showing, it's like very simply, right? You got 6% in green, 6% in red. regardless of the path you choose, if you do compounding 6% or pay it off, and then you invest the dip for your cashflow, you're going to get the same number at the end of the day, right? That's what's important. I'm curious, just from your perspective on why, before we go into the next phase of this, like around risk and what you'd rather do, why is this such a big topic in the infinite banking space? Like, why is there so much energy around this? Because to me, this doesn't even feel relevant in... just in general, maybe, maybe I'm missing something, but it just feels so in consequential to like the conversation of life insurance and how we operate. I'll tell you why. And it's, it's, it's based on actually something that you mentioned last week is the, the, the message is, well, Caleb, if you're only earning right now, this is 6%, 6%, but I've seen graphs that say, if you're, if you only earn 4%, Caleb, over the next 30 years, this is how much you're earning. But if you paid 6%, this is how much you're paying, you're even ahead because compound interest at 4% is greater than 6%. And you could easily make that math work. And so the reason why this is so big in infinite banking is they believe, I don't think people are doing this maliciously, but they believe that there's something magical about compound interest. And you're even going to be ahead financially if you're earning at a lower rate because it's quote unquote compounding versus you should be glad to pay. amortize interest all day long, especially on activities that are cars and vacations and all that aren't actually earning you money. So that is the pitch is like your compounding is so much greater than amortized. So you should be happy to pay amortized interest all day long. And what we just showed you is if you factor in opportunity cost, it's a wash at the same interest rate. But if you're paying six and only earning four, newsflash, mathematically, you're not ahead. You're actually behind. Now. We've had many videos Dom on the channel that we talk about the value of insurance. So I think it's fair to say insurance might give you more values than just the actual rate of return. But that's not what people are talking about. They're all they're giving bad math when it comes to compounding versus amortize. And they're just looking at the cash on cost arbitrage. And that's why this is so big when it comes to the infinite banking space is this is almost like this concept is what you need to believe for them to go all in on infinite banking. with the way that they're pitching it because they're not talking about all the other benefits of insurance. They're literally just talking about the cash value compounding the rest of your life. It's amazing when you just start to see everything that's out there just in regards to just how people communicate marketing, right? The ideation around compound interest, amortized interest, simple interest, you don't want to add some more interest in there. I think this is the stuff that confuses people. And this is the stuff that I unfortunately... I mean, I've been in the space for almost a decade at this point. And still, to some degree, I'm just like, man, this is not the most intuitive thing that is on the planet, right? And so like, you do have to like really think about it. Like even when you just explain, you're like, hey, did we even explain it well enough, which I think you did. For the average person, you know, that is even sophisticated, and they're trying to like make a decision on life insurance is a good tool for their, their portfolio or not. I think we're making things way too complicated, versus, you Maybe some of the things we talked about last week. which we talked about multiple benefits that it has. And what you just mentioned, all of the extra values that come with it, the death benefit, the control, the compounding, the cashflow, the tax benefits, the, you know, long-term care, like esque stuff to it. Like there's a lot of really cool things that come with life insurance that if we can focus on how it functions holistically versus just like the ideation of compounding, amortizing, you know, simple, I do think it's important to understand how the loan function works and how it grows. Right. That is super important. Like, so I don't want to mitigate that, but I just think we, sometimes we, we major in the minor sometimes when it comes to this stuff versus like actually focusing on how we can improve people's lives. Yeah. And I think we said this last week, but when it comes to borrowing, there's two, two things that you need to hear here. The reason, the thing, number one that you need to hear is if your loan rate, let's just say is 8%, that's on the high end, but let's say it's 8%. You need to fundamentally value your life insurance as a tool to you greater than 8%. Okay. And I believe 8% is easy to beat when you look at all the benefits that you get with life insurance. But if you're not there. Work with your agent. Work with us. If you're working with someone else, really understand the value of where your life insurance can fit. Because if it's not more valuable than 8% and you want to take a lot of loans, that's dumb mathematically. So that's like step number one. You're not going to get there on the cash side, but you should get there from the benefit side. So that's step number one. And then step number two, if you're going to take a loan, then you have to make sure that that activity is... Greater than the cost of the loan. So if you're going to loan at 8%, you have to make sure that the activity you value the activity greater than the cost of borrowing. And those are like the two things that people get those two things. I think this whole overfunding life insurance as an asset class or as a tool and using it throughout your life should not be that complicated. But we we like I've seen people have calculators that are like factoring in the cash value growth. And then. into your external activity. And it like, it confuses me, Dom. I'm like, I'm confused. And if I'm confused, I guarantee you the majority of the person that's watching this for the first time has no idea what the heck is going on. Most people have no idea where to start or how to really evaluate whole life insurance. That's why we've built The Vault. It's all of our best life insurance resources and educational tools all in one place, all for free. We have calculators, handbooks crash course deep dive videos on numbers If you want to learn more, click the link in the description or tag comment below to unlock the vault. All right, back to the video. Amen. Amen. And now we got this fancy drawing tool in front of us. And my drawing is going to get better because I don't have to type anything. Okay, so Dom, we got Dom and we got Dom 2.0. Okay, we got Dom and we got Dom 2.0. Okay, so Dom has 50 grand. And Dom 2.0 has 50 grand. And both have the ability to have this 6%, we'll say, investment. So the assumption is you can earn 6% guaranteed, which is a dirty word. But just for the assumption, you can earn 6%. Now, Dom is going to say, you know what? I am going to pay off. I'm going to pay off debt. I'm going to pay off debt. I'm going to make Dave Ramsey happy. I'm going to not pay anybody. Nobody's going to earn interest on my dime. Okay. I'm going to pay off debt. So that $50,000 is gone, gone. But the payment, because Dom is paying himself back and he's being an honest banker, what Dom is doing is he's taking the payment of, let's go up, his payment of $3,911. Just to be clear, we're going to add just $3,911. Okay. I'll be honest. 34 cents you're taking that exact same thing and you're gonna put it into the six percent and then at the end of 25 years 25 years later you're gonna have 214 000. beautiful this is good i think seeing it for a second time they like it clicks a lot more so so okay That's what Dom does, and that's great. Okay, Dom 2.0 is saying, you know what? I'm going to put this into the 6%. I'm going to earn over 25 years. I'm going to have $214,593. Oof, that's rough, man. I'm going to rewrite that. $2,104. Okay, same idea. you get the point. And then I'm going to take the payments and knock out debt over 25 years. And yes, I'm going to have to pay, what is it? $46,000 of interest. Let's just $46,600 and $45,000 worth of interest. But we get that. At the end of the day, end of 25 years, we have paid off home both ways, and we've both earned to $214,000. Okay. Now, obviously, if we don't factor in any risk, either way is identical. And so that's the problem a lot of times with math is it's just like, well, Caleb, why is 2.0 like they did the same thing? Well, when I look at this, we have to look at planning. there's nothing so perfect about planning. We'll assume that a 6% can be guaranteed, but that's not even assumed. That shouldn't be assumed. But we have to say, okay, so let's say Dom... put all his money in debt, and now is putting $3,911.34. Well, let's look at human psychology. What's easier, to make a payment to a bank or to make a proactive payment to yourself? I think paying a bank is a lot easier. I've never missed a payment, knock on wood, to the bank, but I for sure have missed payments to myself as it relates to growing. It's just human behavior. And so, first thing is most Most people would easily, it would be easier to pay a bank than yourself. So that's the first thing. The second thing would be, what if Dom gets hurt or has a hard time financially or loses his job or gets disabled? Well, he's got a paid off house, which is great. But depending on when he loses his job or gets disabled and all, we don't know how much money he'll have here. It would be fair to say. that he would have way less money than Dom 2.0 because Dom 2.0 will by fact have more money any part of the way because he's starting with more that's compounding. So from a risk management standpoint, if Dom loses his job, if Dom, you know, gets disabled and whatnot, now it's like, yeah, not only are these payments potentially going to go away, But we don't even care about that. We want to now survive. We need money to survive. And so we have a paid off house, which is great. But depending on when you get disabled, you're going to have $214,000 or way less, depending on what that happens. Does that make sense? Caleb, would you be able to just explain that a little bit more in regards to like, how would you actually have physically more money because you took the 50K and it's gone? Right. And you don't have that. But at least you and you still have the control of the 50 grand. Yeah. Let's say in five years, let's say five years from now, five years, Dom gets disabled. Well, you have five years not assuming interest. I'm just doing really basic math just from speed. So you take three thousand nine hundred eleven dollars, multiply that by five. Well, you have... not including interest so those in the comments just know it's going to be a little bit higher than this you have $19,555 so let's say five years from now Dom loses his job or gets disabled he's got a paid off house but he's only got around $19,000 to $21,000 that he has available still still better than the average person but if Dom 2.0 got disabled in five years he would have this is a basic future value calculator. And I want to be clear that I'm not showing apples to apples, but he would have $50,000, 6%. Here, hold on. Five years. He would have 66,000. Okay. So in this scenario, five years from now, 66,000. Okay. So, you know, five years from now, now again, the person would say, well, Caleb, Dom 2.0 still needs to make a debt payment. Well, you're 100% right. You do need to make the debt payment, but you have $66,000 to deal with versus not having to do a debt payment and only having 19. So some people would be like, well, I would rather not have a debt payment, but I would rather have more money because I see just more optionality here. I have more options. Yes, I have a debt payment, but I have... three times more money in this scenario if something happened to me five years from now. Amazing. So what you're saying is all things equal. The only thing from a control perspective makes it equal is if they all make it to the end of 25 years without any hiccups, right? So along the way, there's going to be hiccups and having more control is more advantageous to you because it gives you more options, flexibility, and gives you the ability to make better decisions for your family. Correct. Now I'll play devil's advocate here. Let's say the 6% is something optional and you're someone that's a terrible investor or gambles or make some investments. Well, now you have $50,000 to do dumb investment ideas and maybe you might lose it. Whereas over here, you don't do that. You know what I'm saying? Like you're, you know, so there's that aspect. And then the flip side is also true. Maybe. maybe you have the ability as an entrepreneur to earn 15% because of businesses and all. Well, now you can blow this out of the water if you can earn 15%. and you're only paying debt at 6%. So at the same interest rate, it's easy to be cute at the end of the day. But like, what really factors into this whole thing is risk and future opportunity costs, risk of like worst case scenario, would I rather have a payment and more money? Or would I rather have less money, but a paid off house? That's what you have to decide. And then on the flip side, if how confident am I over time growing money, if I'm not super confident at all, Or if I'm like, I'm afraid of actually losing, then actually having money could be a disadvantage and you would be way better off not having a big chunk of money over there. Because if you lose the $50,000, now you have the debt and no money, which is obviously like, that's not apples to apples, but that's when you, when you include human behavior, that's could be a real thing. If you gave everyone $50,000 10 years from now, some people would have millions of dollars and some, most people would have zero. How is that even possible? Well, everyone's... activity with money is different. Amazing. Now tying all this together, how does all of this work well with just life insurance? Like where's the headspace on how this concept works integrated with life insurance? That's a great question. And it really comes down if you're funding money into a policy and the question should be, should you pay off your mortgage? pay for your car loans like the question is like like should you like how does that work um and and instead of saying well amortize interest and all like i i would find that i want to keep cash available over here and actually pay my mortgage and car loans um and and not vilify that like i'm okay paying my car loan and mortgages by having capital over here i value having capital over here versus it being super magical of amortized versus compounding. So I think it's more of this concept is what's being talked about and pitched in the infinite banking space. But I think the big takeaway is just understanding that there's nothing magical about amortizing compound. When you factor in opportunity costs, it's usually identical if if the interest rates are identical. So it just should help us. make better decisions if we're looking to go purchase other things to really separate your cash value to the activity. Amazing. So essentially, Dom 2.0 is the guy who decides to take the funds and put it into something like life insurance and has the optionality where he could borrow against and use it for some type of activity in the business, in real estate getting 15 plus percent. And or how's the optionality if at any point in time, technically could borrow against it to pay off the mortgage as well, if they really wanted to. Not saying that that's like just based off of DOM and DOM 2.0, like that's what we would suggest, but it does give you the option to do that at any point in time if you want to maybe more peace of mind, especially knowing that your cash value loan is unstructured versus the other side is definitely structured. Spot on. Super correct. Yes. Amazing. Amazing. Okay. Well, is there anything else that you want to add to this? I think this was an incredible, like it actually helped me better understand, better see it, uh, with the maths and get twice being able to use it in real life examples, being able to figure out, um, is this something that I, I should or shouldn't do? Like, you know, just playing devil's advocate. I thought that overall, like this was, this was really good when we're talking about, um, you know, the compounded versus amateurization. Is there anything you want to wrap it up with before we go into Q&A? I think this, it'll be interesting to get feedback from people. And maybe we do a 3.0 based on the feedback that we're getting, because there's the math and then there's the actual planning. And overall, I value personally more protection for my family, greater emergency reserves and greater options for opportunity. but I also am you could say I'm a disciplined entrepreneurs. So I see opportunities, but I'm not, um, I'm, I'm not letting money just flow through me. And just like, I, I'm, I'm, I'm, I would say maybe more savvy so that there needs to be some awareness there. And there would be the same type of person, Dom, that I would give the exact opposite. No, you need to be like, you know, so I think it's, I think there's that awareness. And I think if you're watching this, um, I would, I would go on the, I would, I would just ask yourself, like, What scenario would I thrive in? And the challenge I would give you is if you're someone that doesn't thrive by having control, then... Really figure out why, because that's hard. It's going to be hard to win long term if you can't control your financial impulses. And if money, by having money hurts you long term, well, I don't know what to say. I'm not trying to shame you. I'm just saying like that could be the most important thing for you to figure out because no amount of calculators and compa is going to solve your issue. It's a more of a heart and emotional issue. And that's the reality of most financial things is not because people don't understand compound interest and amortized interest. It's because they're buying things to impress people. They're trying to get into status games. They're getting greedy. A lot of those aspects are actually the reason why people are where they are financially. That's good. And I think you're the one who talks about the book, The Psychology of Money from Time to Time and how you think it's a great book. And it seems like that is one of the. the few that really do hit home on what you just shared. I mean, because even people that make a ton of money, right, they just decide to ruin themselves because of the greed piece of it. And I do think that that's why in financial planning, we're having these conversations, eliminating the least amount of risk, whether that's you getting hurt, disabled, you know, cancer, worst case scenario, lose your job, putting those pieces in place. are all around psychology as well versus just like chasing the shiny object of right of return right so i think that this was a great conversation and shout out to morgan housel he just came out with a new book called the art of spending money simple choices for a richer life i read it about two months ago great book and it's all about the psychology of how people spend and it's a it's definitely read psychology of money first because that's a better book but it's a really good book from a standpoint of tagging along Amazing. All right. Well, with that being said, let's go ahead and get into some Q&A. We have about four or so different questions that we want to answer from you guys and gals. If you are anybody that has chosen to leave a comment, we want to do our best to answer them, especially if they're life insurance specific. And so, Caleb, you're going to take the first two and then we'll go from there. Okay. First question is, can one place a life insurance policy inside a self-directed Roth IRA. Short answer is no. And even if the answer is yes, you wouldn't want to. I think this is a, you would not want to take a Roth IRA and put a life insurance policy in there. They're very similar wrappers. And so there's really no, there'd be no tax benefit to putting the insurance in a Roth versus having it outside. There'd be a lot more restrictions. And um I'm not anti-Roth IRA. You should maximize your Roth and maximize insurance and don't try to like take two good things and combine them into one. So I think a short answer is don't do that. And second answer is I don't even think you could do that if you tried. And yeah, so there could be some arguments to be made where you want to put insurance into like traditional retirement accounts. And for the most part, you can't do that. But there's defined benefit plans. There's things that you can do. And there's There's a world where that could potentially make sense. You get a deduction, then you get to buy it out of the plan. And there can be some of that tax arbitrage. But when it comes to something like this, there would be no reason to put a permanent life insurance policy into a Roth. It kind of defeats the purpose. Yeah. And when I hear self-directed or IRA, I think of the standard people use it specifically for real estate. It gives them the ability to step outside of the typical asset classes that they want to use it for. that give them more tax benefits. The cool part about life insurance is it already gives you tax benefits, right? So you're, you're kind of, you're actually making it probably worse because it already has some of the good benefits. Yeah. You're, you're, it's not like you're getting an extra deduction. You get no benefits by putting it into that structure and you just get more restrictions. And so, but that's a great question. And I think with that, how we answer that, it might help people realize like, um, that's why some people call this the rich person's Roth is it's a Could be a Roth on steroids if you understand the value of life insurance. All right, next question. What do you think of Gerber Life? I think it's fine. I mean, if you want to insure your kids and have special kid policies, go for it. Gerber Life is a big company, massive brand, but don't get it twisted. Gerber Life does not check the box to the type of kid policies that we're talking about. So while it's a great company to do basic life insurance for your kids, if that's important to you, awesome. But when we talk about life insurance and kids policies, Gerber is not one of the companies that we're working with when it comes to structuring that. Now, Western Southern owns Gerber Life and Western Southern also is the company behind Lafayette Life. So that's why the company itself is solid. But that the way that they the way their their sales model, their their sales pitches, their way that they distribute products is totally separate. And so that would be. My thoughts around that, not a bad company, but not whenever we talk about permanent policies for your kid, we're not thinking through the lens of using Gerber Life. Yeah. And it's fascinating because when I talk to people and they're like, yeah, my dad got me this policy and it's been in for like 20 years. And you start asking questions like, what was the cash value and all these other things that come with it. A lot of the people, they end up just canceling it and withdrawing it. One, because they weren't educated, right? education is a very important piece. And there's usually not a lot of education around, you know, Gerber life and how to make it a strategy outside of it just being a death benefit perspective and definitely not going to be focused around like building cash value as like an asset class. And so the way that we will design it for people when we're looking at kids policies with us is like we do focus heavily on like the cash value growth that that way in the future it becomes an asset that you can borrow against and use for school, real estate business, so on and so forth. And so- It does make the policy so much better when designing it with a mutual carrier that specializes in this, that pays dividends, strategized for the future. So amazing. Okay. Next question is what insurance companies are the best for both whole life and IUL? I'd love to know the steps to becoming an insurance agent. Okay. So there's two folds. I'm going to start with what insurance companies are best for both whole life and IUL. So if you're putting them into separate buckets, right, whole life, or IUL, we could list off 10 for each one of them. I don't know if you're asking it in that context. You're asking like, which ones can I do both, like sell both because I want to be an agent and I want to get appointed with very few companies. Well, if that was the case, there's only two companies that I would say, hey, I think they're decent companies relative for having two product lines when it comes to whole life and IUL. And that is Penn Mutual and that is Emeritus. You know, Emeritus has a lower Comdex score, so on and so forth. You know, both their IULs are designed and used in two completely different contexts as well. So that's important. And the Penn Mutual whole life is definitely a lot stronger when it comes to looking at, you know, A and B on just that side alone. And so I think there's a reason why most insurance companies don't do both. You know, they want to set themselves as a brand. There's a lot more risk on the books if you have IUL on the table. Some of these mutual companies, they just stand and they've been around for so long. They're like, you know, we're going to do what we're good at. There's companies like Nationwide that they are in a really good IUL company that have had conversations about dropping a whole life dividend participating whole life as well. And then that would be a third that would kind of get added to the list. Every other company that I'm aware of at this point, either just specializes in whole life or specializes in IUL. Now, when it comes to becoming a life insurance agent, that's a whole nother step. There's a whole other, you know, you could have a whole other episode on it. Long story short, get your license, find someone to put your license under, get contracted, start marketing yourself and sell some life insurance. Well, and mentorship is everything. So find someone, don't care about money in the short term. Find someone that can really mentor you that will pay massive dividends in the long run. No pun intended. Hey, all right. Um, let's see here. We got the next question. Uh, what happens if the amount you pay back to yourself from the investments is more than you're allowed to put into the policy on a yearly basis? Do you have to take the extra money as ordinary income? Okay. So first and foremost, right, you're going to have money that's in your policy. If you're borrowing against it and using it for an activity, right? You're going to have a policy loan. So if you're getting your great return on your investments, right? One, you were going to have to pay taxes on that investment. Like, so that's just know that that is a separate bucket of the life insurance versus the investment. However, that functions. The interest that you are getting charged on your policy, definitely take that Delta and pay back to the policy loan, right? The other that you're making from the investment that's not going back to the policy loan. You can't necessarily make more payments to the policy unless it was designed in a way that gave you buffer to put more money into it in the future. And usually the only way that that happens is if you actually increase the base on the policies that allow you to fund more into it later on. And some people do intentionally do that. They increase the base when you design it so that in the future, you can actually put more PUA into it because they know that they're going to be a great investor, get more opportunities. They're going to grow into it. But you do sacrifice a little bit of efficiency. And so that's something too important to know is that everybody's going to be different. And so if you talk to like one of our coaches, we'll ask you the questions like, how old are you? What are you trying to do? What are your goals? Do you want to design it for a little bit more so you can put more into it? And if you like, hey. If we're having the conversation of max efficiency, well, there's not going to be space to put in anymore except for your annual premium payment that was originally designed, plus paying back your policy loan. And everything else after that, you got to go put it somewhere else. Go put it in the bank, go put it in another policy technically if you wanted to, go start another investment, right? Just save it. And yeah, hopefully that answers your question. Well said, Dom. I would say that just because you're using a life insurance policy doesn't make the activity that you use outside the life insurance policy doesn't matter. Like you're going to get taxed regardless. Like you're going to get taxed on that outside activity. And if you get taxed, that usually means that activity was somewhat successful. So whether it's capital gains, long-term capital gains, ordinary income, it just all depends on what you're doing with that money. And yeah, it's a first world problem when you're not able to put any more money into life insurance. That's where you get another life insurance policy or diversify in a different asset class. Well said. And this was a fun one. I can't wait to read the comments on this. I think it's going to be fun to hear people's takeaways and their questions. We've really been enjoying the genuine questions that we're getting on the show. Bringing old school Caleb Williams back. You brought the book back, brought the drawing back, talked about amortization. Wow, it's just an episode. This is my go down in history of one of the greats. Maybe the content in itself isn't, but at least specifically the roadmap to get us here was, nonetheless. I actually thought this was a really good episode, so I had a lot of fun. I'm always grateful. And if you guys are watching, per usual, if you guys want help with setting up a designed policy, specifically higher the cash value, overfunded policy, all the fun benefits with a mutual carrier, we are here for you. We feel like we are one of the best in the space and we'd be more than happy just to give you an honest opinion on if this is even right for you because it may or may not be. If so, click the link below. And until next time. I only went for a day and that was my biggest regret because people start to see something in themselves they haven't seen before.
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