All right, we're going to be talking about a PDF strategy for the normal person. If you've not watched one video that I previously did with Austin, we did a front load for the normal person. And Austin's meaning by normal is we're not showing these crazy big numbers. That's a comment that we've gotten. It's like, okay, we always say that this concept will work for smaller numbers, but just show us, like prove to us that it will. And so I'm here with Austin Williams, and we're going to break down what is a PDF, why a PDF could make sense or be better than a front the pros and cons, and then ultimately how it works in real life. And so without further ado, Austin, welcome back to the show. Excited for this episode. Thank you very much. Thank you very much, Caleb. Yeah. So PDFs, one of our favorite things here at Better Wealth, all the wealth coaches here, we love PDFs. And for the right person, it's absolutely a great strategy, especially people who have a lot of liquid assets that they have currently that really aren't doing very much for them, that they would like to redeploy into is something that's much more efficient. And their kind of main goal is, you know, maybe either supplemental retirement income long term, or maybe even just creating generational wealth for their family. So a couple different buckets that you could fit in if this is a good strategy for you. So a PDF stands for premium deposit fund. And a premium deposit fund is a lot like a private annuity, right? So it's this bucket, if you want to think of it like that. And what's happening at Penn is that this year, and obviously it's going to be different every year, but if you were to get a PDF this year, Penn says, hey, if you give us money to put in this bucket, we'll give you 5.5% a year for as long as it's inside there. You're like, okay, that's pretty cool. And so you can do anywhere from five to 10 years. We usually design them to be 10 years, but every year that it's inside this bucket, it's going to earn five and a half percent. Now, it's important to realize that while it's inside this bucket and it's earning money, it's also has underneath it, there is this life insurance policy. And this life insurance policy. is going to receive money from the PDF every year. So every year, think of that like there's a hole in the bottom of the bucket, the hole opens, and then the money falls from the PDF into the life insurance policy underneath. So it's earning growth inside the PDF at 5.5% a year, and it's earning dividends inside the life insurance policy at whatever the dividend interest rate is in a given year. So it's earning growth in two places at once, which is really, really powerful. Now over time, over usually like a 10 year period is how we design them. All of the money from up top will be transferred into the money underneath. So all money from here goes up here. It's earning and it's transferred down here. Now, by the time it's transferred from the top bucket to the bottom bucket, it's actually grown to be a lot bigger. In this case, it was 500,000. It's a lot bigger than the 500,000 number. I just find it funny. You used a $500,000 example for the normal person. Normal people are probably feeling very bad about themselves. Yeah. Yeah. Normal people feel very badly about themselves. Well, right. I would say I would go so far to argue that I think the PDF route I would say is definitely not for everyone because not everyone has $500,000 laying around, but it is, I guess, on the smaller end of what some people put in. So that's what makes it the normal size. In your opinion, what's a minimum? PDF strategy? Minimum PDF is a good question. So like, I mean, I've, I've ran some really small PDFs before, like 50 K and that's just, in my opinion, it's just too small. Like, like it's just the concept is still, the concept is still valid. Yeah. Like it's still, you can still do it. There's nothing wrong with doing it. It's just that generally if you only have 50 K laying around. generally that 50K means more to you than for somebody that has 500,000 laying around. The idea of the strategy is to set this aside, have it fund the life insurance policy over a set period of time. And while it is accessible, like you're not locking up your money, you can withdraw that money. You can also, in a lot of cases, take a loan against that. But either way, if that's built into the plan, like you just have to know that that's one extra step. A lot of people that are doing PDFs like the idea that they could take that money out. They like the idea that they can loan against. But in a lot of cases, they're like, you know what? I like that I'm taking money off the side. Five and a half percent right now, pretty dang good. The fact that it's funding a life insurance policy, pretty dang good. The fact that I get immediate death benefit, pretty like all it checks a lot of boxes. And it's like, yeah, I love this. And for the most part, we're not seeing people bank. with it or use their money in multiple places, even though they have the ability to do so. So I just, I think the PDF strategy is awesome. The other thing is like, you're just also truly creating this policy on autopilot where you don't have to think about it, which is also could be really beneficial. So I'll hand it back over to you, but yeah. Okay. Yes. Thank you. That was my color commentary. Yeah. Okay. Thank you. Yes. I would have like demanded it back over if you hadn't given it back over soon enough, but yeah, that's, that's amazing. So this kind of policy, like I was saying before, Like, obviously, you know. The less money you have, the more that money means to you and the harder it is to just... put it somewhere where you have no access to it for a long period of time. So usually the PDF strategy is probably going to be most effective for somebody that already has quite a bit of money and that there's some money that they really don't need, but they would like to see grow over time just in a really efficient environment. And that's where this comes from. So as you see here, this is the same age, same health rating client as we did in the front load video. And it also, coincidentally, it's the same number. which gets contributed, which is 500,000. Now this is not true apples to apples because ultimately the 500,000 is available to this client all at once. Whereas with the front load person, it wasn't necessarily all available all at once. It was only 75,000 at once, but still only 500,000 gets contributed to this and no more. And you're going to see just how wildly efficient this is. As you see, the numbers stop after 10 years and that is by design. Just draw your eyes here. So as you see this number of 62,000 for 10 years, and you might be thinking, wait, hold on, pause, pause. How is 62,000 getting contributed for 10 years when you put in 500,000? Excellent question. So the last two years, your nine and 10 are pretty much all driven by gains from the money as it was inside the PDF. So, you know, years one through eight, that pretty much spits out the money that you would put in there. And then years nine and 10 is all just gain from inside the policy, which comes out to about $628,000, which is super cool. Penn also has a nice cumulative premium outlay column. And you know that is this the 628, 757, that after this in year 10, it does not increase, which means that no more dollars gets contributed to this policy for the rest of the life of the policy. So every, all the gain that you see experienced by this, even without you doing anything else, is just this policy, just kind of self-funding and self-growing itself. As you see here, the cumulative, so we're gonna look at the total cash value over here. and then also the total death benefit over here. So years one through 10, you've put this money in the PDF, and you'll notice that the cash value, which is in this column right here, is that it starts super low, which is 37,000. And you're like, you might be like, hey, I gave them 500,000. Like, are you telling me that I only have 37,000 as net cash value? My answer is yes. And this is what you have to accept with the PDF, is that you just, you don't have all the liquidity that you... otherwise would have had if you just kept the money in your bank account or whatever, is that they only put about a 10th of it from the PDF into the life insurance policy in the first year. So 62,000 gets contributed, 37,000 is available in cash value. And that's just something that you have to be all right with now. Well, and Austin, you do get liquidity in the other PDF account, even though the goal is not necessarily to withdraw that money because you You can't put it back, but you, that money is still. technically available to loan against or withdraw if you want. What Caleb is saying is true is that yes, you can withdraw the money from the account in the PDF, but like Caleb said, you can't put it back if you do. So it's not to say that your dollars are locked up and there's no way to get to them, but inside the life insurance policy, it does not have the same level of liquidity that otherwise you might expect. Now that will change as time goes on. So as you see, I'm going to 62,000 is getting contributed a year, you know, by year six, it is you know, that's kind of the technical break-even point of this. You put in 377, there's 389 available, and then there's 1.4 million of total death benefit. By year 10, that 628 number has been contributed. There's 747,000 of liquid cash value. And then there's 1.nearly 6 million of total death benefit. So what's so cool is that not only have you experienced the gain of the 5.5 from 500,000 to 628,000. But then you also then have the cash value aspect of the life insurance policy where it's not just 628, it's actually 747. So you've actually gone from 500 to 747 in 10 years with virtually no risk. I was thinking like, yeah, that's actually accurate. You're protecting your family. You're having those type of numbers and you're not taking on any risk. None at all. And I could run, there's ways to run the internal rate of return for the life insurance policy, but But with a PDF, I wish that there was a way that I could have Penn do it a little bit differently because it only calculates the rate of return based upon the 62,800 number that you see here and how that changes over time. It doesn't take into account the fact that you only contributed 500. And if it took that into account... We could do that right now. Let's do it. Let me in real time. Okay, so what I'm doing is I'm putting in present value of half a million and then the future value at 10 years is what? 747. 747-030. And we're going to 10 years, zero payments. and a return that's a compounded rate of 4.1% over 10 years. And we're not calculating the death benefit or any of the other benefits that you get with life insurance. It's pretty incredible. 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. The other thing that I want to just mention is if I hear you correctly, this company, Penn Mutual for this example, Other companies do PDS, by the way. They'll allow you to lock in 5.5%. They'll lock that in for the next five years. So even if it is as interest rates potentially will come down. And right now, I don't know of any high yield savings account paying that. They're going to lock it in for the next 10 years, which is wild. And worst case scenario, you can always withdraw that money. You're not, it's not like a CD where it's like you're penalized and all. So it's one of those, it's one of those things where it's like, again, and we said that this is guaranteed. It is, but it's. it's technically only as solid as the insurance company backing it. Penn Mutual and all the insurance companies that we work with are super solid. There's heavy regulations and there's a version of FDIC insurance that you could say, but at the end of the day, it's like, there's nothing guaranteed in life, but this is like, there's a lot of things that have to fail and hit the fan before this crumbles, you know? Yeah, no, this is not guaranteed, but certainly assumed. you know, pretty much is that like it's their track record is so strong that 4.1% number that you just mentioned is an incredibly strong number that you can very, very fairly depend on, you know, for the next 10 years. And the crazy part is that that number is only going to get better as time goes on, right? Because, you know, no more contributions get made, you know, in year 10. And so all of the gain you see, you know, by year 15, you see right here is you're at nearly a million dollars, even though you haven't contributed anything else besides the initial 500,000. And you have 1.8 million of death benefit. In year 20, you have 1.3 million of cash value and 2.2 million of death benefit. In year 25, once again, only put in 500,000. You have three extra liquid dollars by year 25. You have over three X'd it. You have 1.7 million and you have nearly five X'd your death benefit dollars. You have 2.5 million death benefit. That's just giving your dollars multiple jobs. I just did a basic calculation and that's a compounded annual rate of... 4.9% over 20 years. And we're not including death benefit. We're not including the taxable equivalent. We're not including any of that. That's pretty cool, man. There's an argument to be made that this, if you're thinking about a front load, you should for sure run this example with the PDF versus the front load, run the different examples, pros and cons. And what we find is a lot of people choose to do this instead of a front load. It's the same concept of your you're front-loading money. It's just how it's going. Is it all going into the policy immediately or is it going into an account that's going to fund the policy over time? I think it would be a deal breaker if you couldn't access that money in that PDF account, or if they made it tricky, or if they made it where you're penalized and all. But the fact of the matter is if they're giving you flexibility and potentially giving you the ability to loan against that, and you're able to fund a policy, like you kind of get the best of all worlds. through a policy like this. I think my only criticism is, I don't know if a normal person resonates with having a half a million, but in all reality, there might, someone might exit a real estate property as you know, they might be sitting on money. So that would be like my only pushback is maybe we should have done like a hundred thousand dollar PDF, but maybe the people can speak. And maybe we do another example with a hundred thousand dollar PDF. That's right. That's right. We could always could do that. Great idea for future content. Cause there's, there doesn't seem to be any end to a kind of content that we want to bring. And you know, we want to increase. bring value to the lives of the people who watch our channel. So definitely something for future videos. Okay. So if you're watching this and you're like, I want to learn more, I want you to audit my policy. Like I've done life insurance and I want to see if I have the right setup. We want to hear from you. We have a link down below for you. If you want to talk with us for the first time or like, I am interested in this strategy, I want to see my own numbers. We have a link that you can use and we would love, we would absolutely love to help you with this process and help you discover. and figure out, is this a strategy that would benefit your lives? One of the things that we always go back to Austin is, is this going to make you better? Is this going to make you more intentional? And if the answer is no, it doesn't matter how amazing any of these strategies are, we shouldn't do it. But in a lot of cases, these types of strategies do help unlock that idea of intentional living. And so that's why we love what we do. So thank you. That's right. Absolutely. Thank you, Caleb. Appreciate it. All right. Take care.
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