Hey everybody, it's Justin Gartman, Wealth Coach here at BetterWealth. And today we're actually going to take a look at kind of a case study, a client that we recently worked with, or I recently worked with here at BetterWealth. It's going to give you an idea of some of the options that you may have. So maybe you're in this specific person's situation, very similar situation that you have, and this can be helpful for you, or maybe you're not, but it can just give you some ideas of at least the planning that is possible whenever you get on a call with us and why we like to ask lots of questions, get an idea of specifically what is going on in your situation. And so here, we're actually going to take a look at combining some whole life with some term and the benefits of that to meet this person's specific goals. So to start, we're going to take a look at who this person is. So here is the story. He was a 31-year-old. He worked a tech job made about 180,000 from that job there. Also was very involved in real estate, liked to make real estate investments of many different kinds and was making about $48,000 on average from that every single year for at least the last few years. And so altogether bringing in almost $230,000. Also had a wife and three younger kids all under the age of six. And so he was really looking at one, the death benefit. So he wanted to have a $5 million death benefit. He saw the value of that, wanted to make sure if something happens to me, I have a wife, have three kids, I want to make sure that they are taken care of. But he also wanted the cash value. That's what led him to us. He liked the idea of having a safe place to put his money, a safe place that he could always have access to it because he was a high saver. He was saving and investing in real estate or different things or saving his account. sitting there until he could invest in another deal. He was putting about $4,000 to $5,000 in there per month. And that's beyond what he was doing in his retirement account. So this was the excess cashflow he had. He knew what he wanted to do with it. He was saving that to make investments. And so he saw life insurance as a place that he could add that money. It's going to be growing for him. He can borrow against it, pay it back, rinse and repeat to do exactly what a lot of our clients like to do there. So. He wanted that amount of death benefit. And so we had the conversation, walked through a couple of options. As you know, traditionally, if you are looking at a high cash value life insurance, we can think of it as sort of a meter. Over here, we're going to have very high initial death benefit, but no cash value. Over here, we're going to have maximum cash value, but we're going to start off with a very low death benefit. So there's not really a way to get the best of both worlds. So of course we can say, hey, we're going to. up the minimum cost of insurance there. So you're going to be able to, for the same amount of dollars, you're going to get a higher initial death benefit. You're going to have less cash value. And then over time that will grow. And so traditionally what we do, a high cash value policy, the way that it works, those paid up additions are paying up more insurance. So that death benefit is going to grow somewhere depending on the company. But a lot of times I see if you fund it properly to the max, you're going to have a death benefit that starts off at least at a the company will look at today starts off and by year 10, 11, it's going to have doubled. That's how fast it's going to grow. Where if you get pure whole life, all base, it's going to start off and it's hardly going to grow, but you start off with an initial higher death benefit. And that's what this person wanted. They wanted a high initial death benefit, but they also wanted the cash value. And so like, well, we can't really do that. There's not a way to make that happen. You can't have the best of both worlds unless we combine whole life with term. So We can't do it in one whole life policy. I mean, there's some things we could do, but he wanted a maximum cash value, wanted the full efficiency, but wanted that death benefit. So what we walked him through was, hey, let's consider this. Let's do a maximum cash value for the amount that you wanted to put in, wanted to do about $3,000 of that. Didn't want to take everything that he had, which again, wouldn't necessarily be the recommendation, but take $3,000 of that, $36,000 a year. Let's take that. put that into a policy maximized for the cash value. But since you want more death benefit, let's also look at some term to go in there. Honestly, that's what a lot of our clients, we would recommend and want them to do. So what we ended up doing, and here is the whole life policy that we looked at. So our traditional, I'm sure you've seen lots of times here, we're going to put $36,000 in per year, that's going to have a million dollars of death benefit. So that was very key what he wanted to to know they're a million dollars of death benefit as you see that's about four million dollars short of his five million dollar goal but for cash value this year we're gonna have maximum cash value so you see that we are growing that like so we start off at a million by year 10 we've almost doubled there then it's going to continue to grow so by the time he goes all the way down here at 36 000 So he gets to age 60. He has $2.3 million of cash value. By that time, he also has a $4.7 million death benefit. And all along the way, plans to borrow against this, leverage this, invest in real estate to go along with everything else that he is already doing. But the problem here that he saw and that we needed to fix was, hey, he doesn't have enough death benefit for what he wants. So the way to fix that is we're actually going to look at a convertible. term policy. So first, before we look at that, let's talk about what is convertible term. So convertible term, think of that. And there's other videos that you can look, they go into more details, but think of this as a way that you just term insurance. So you're going to pay, eventually it will expire. So it will go away, but you always have the ability to convert. So if you convert now, you can convert that to a permanent policy. That was another thing. He was I could buy a lot of term, but that's going to go away at some point. whether it's 30, 20 years in the future, he wants to have something that he knows will be there when he dies, whether he's 115 years old or it happens to be sooner than that. So he wanted to make sure it was permanent. And so what this is, is term, but it has the option to convert into permanent at any point throughout that. So what we'll look at is a 30 year term. So any point, whether it's year one, five, 25 or 30, he has the ability to convert. And that is. most importantly, regardless of his health. So say in the future, he becomes ill, something happens, he's no longer insurable, he'll be able to get that same health rating that he initially got. So here it's a preferred health rating, he would be able to, even when he's 55 or 60, say his health has somehow declined, he'd still be able to get that preferred health rating. Now, it's going to be at the same age that he's currently at, but he'll get a health rating there. So, and you can convert this at least. at this company, which we'll look at to any design that you may want to. So as long as we have enough death benefit, we can convert that there. So the term that we're going to look at, get $3 million for $2,369 per year. So again, at that preferred health rating, be able to get $3 million for 30 years of coverage. So what that does is that's going to give him an initial death benefit of the three plus the one that gives him $4 million. you may be thinking wait a second he wants five he was only getting four well he actually had a few other policies some term policies that he had got when he was he was younger in his early 20s that he was paying for and so said hey let's just keep that you already have a million dollars of coverage keep that and let's not change that over here we're still going to have three million dollars that can convert which would be plenty to convert down the road so that's what he did there that's why you're seeing a little bit of a shortfall but regardless that 2,369 stays on there for 30 years, gives him that extra $3 million of death benefit. And that 30 years, his whole life, we come back and take a look at that. You'll see here was the 30 years. She'll be about 4.8. So he's going to be within 200,000 of that initial goal that he had always wanted to have 5 million. And so he would be able to have that. That's what we ended up deciding on, that's what they went with. And one thing that. we can do here for fun is look at what if he decided to convert now he could convert at any point during this sometimes someone gets a policy they're doing 36 000 a year he's a real estate investor he's earning a lot in tech and so maybe his income goes up and now he has a lot more money that he can save and so he's like hey let's start another whole life policy let's convert that at year five and i want to do another 36 000 per year another 20 whatever it may be we can convert to that so he would be able to convert all of that policy, maybe a portion of it, maybe he wants to convert 1.5 million, but he keep the other 1.5 million, he would have that option there. He could also wait and do it later. But what we're going to look at today is an example of what if he converted when he was 60. Hey, everyone, it's Justin Gartman, a wealth coach here at Better Wealth. And if you are a high earning professional, an entrepreneur or someone who just wants more control over your money. we are offering something called a clarity call. It's a one-on-one conversation with someone like myself where we are able to walk you through exactly how overfunded whole life insurance could help you build a safe, liquid, tax-advantaged foundation for your wealth. No pressure or fluff, just real clarity on whether this strategy is right for you. So click the link in the description below or tag, comment, and we'll walk you through exactly how we can possibly help you. Now. Back to the video. So say he makes it all the way to 60 and he decides to convert at that point. And the reason he's deciding to convert at that point, say his income stayed the same. He never wanted to put more in whole life. He kept that policy. It was good. He used it. He gets to age 60 and receives an inheritance. So sometimes you'll see, hey, we want a place. We receive an inheritance. What do we want to do with that money? Well, in this case, let's say he receives an inheritance. His parents had a death benefit and uncles. had something could be anything just receives a windfall is what we're going to look at here so he receives a windfall say of anywhere however much you want to call it he could be three million could be five million but he decides i have plenty other investments my real estate portfolio has been built up i'm doing well i want to take some of this and i want to put it into what we've done here is just a 10 pay policy so it means we're going to pay for 10 years after 10 years you're done paying, you can't pay more. And he's fine right now. He has. all that cash coming in. So he's not looking to maximize his cash value, which in a 10 pay, you're going to have a little less cash value early on. Now it's going to grow substantially there. And we get to a very good point after a few years, and then it's going to be more efficient after that. But we take a hit in the early years. There's not much flexibility, but for his case, he wants to take a million dollars of that, just a portion of his inheritance and get that into life insurance. Even if he's not insurable at that time, doesn't matter. He converts that policy that he has there. And so what you see here, we've taken that initial $3 million of death benefit now drops to 1.4 because he's getting this whole life policy here. And it's not going to have as high of a death benefit, but it will grow. So he converts to that. And then after 10 years, he has $1.7 million of death benefit, also has over a million dollars of cash value. The reason he wanted to do this is one, he sees he's about to lose his term. It's about to go away, lose that death benefit. sees the value of the insurance, wants to make sure that he has a death benefit to leave behind. At that point, he could have six kids. Could be that. We're looking out into the future, so we don't know exactly what it could be like for him there. But he converts that. And then also, we look at a combination now of the two policies. So now he has this policy that he got, the $100,000. He still has this one. And you'll notice here, this is $0 a year going into. this policy he hasn't been paying on this since he was 60 years old we stopped those premium payments and what you'll see here is that by the time he gets out here to age 85 now he's going to have a 10 million dollar death benefit so that's going to continue to grow you have your cash value continuing to grow at age 70 he's would have a little over four million dollars cash value so He's going to be in a very good spot. combining the policies there. And if we look together at the end of the day, at age 70, still utilizing his cash value, he's going to have $5 million that he's sitting on that can be used maybe at that point for some retirement income. He was also investing in other things like real estate, other retirement assets through his work. So he may not need this. He may use this as a supplement, a volatility buffer, but he has $5 million that he could use. And then at age 85, So going a few years in the future, a combined. death benefit of $13.1 million. So he took all that from the beginning, wanted $5 million of coverage, had that coverage for all the way to age 60, did a conversion. And now he has a permanent death benefit at age 85 of 13 million. And that's something he can now pass down to his kids. I'm sure with all the insurance planning he was doing, he's taught his kids that maybe they have policies of their own. Maybe they have convertible term. They received that money. now they can open up more policies and do something like that and again i'm not saying you receive money all of it needs to go into a policy but that can be a safe place to store the money especially because he was doing very well anyways and all that total premium went in was about 2 million a lot of that went in at age 60 so a million dollars of that went in at age 60 the rest of that was just a million dollars a little over a million dollars combined from the permanent policy that he had been funding for 30 years as well as the term that he did have to pay for 30 years so all that gives him that 13 million dollars there and if he lives longer so past age 85 that's going to continue to grow and end up being even higher could be 15 could be 17 could be 20 million depending on how long he actually lives all that to say that's a lot of what we can look at now this last part looking in the future kind of playing with i look at how you can convert main thing is just knowing regardless of health with convertible term you're going to be able to convert and if you are someone who you like whole life But you look at that as the cost of, hey, that's a lot of money going into a policy for the amount of death benefit that you're getting. And you want more death benefit now where there are ways that we can do that. We can do that in a whole life policy. We can give you a little bit higher death benefit for a little bit less cash value. If that's what you want to do, that's one way to do it. Or we can give you a max cash value policy that's going to grow the fastest. We're going to have maximum paid up additions and combine that with a convertible term policy. so you can have the best of both. world. So if you have questions, if you're interested in any of this, go ahead and schedule a call. We'll walk through your situation, see what may or may not make sense based on the goals that you have, the current financial situation you're in, and we can have a conversation about that. So don't forget to do that. Also go check out all of our other videos. If you have more and more information about convertible term or more information about how this can be a savings vehicle, there's plenty of other videos that you can dive in, kind of go down the rabbit hole and if whole life insurance specifically high cash value life insurance can be right for you
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