All Forum Posts by: Matt Ruttenberg

This is a great post @Jessie Dillon!  This is basically a Buy/Sell agreement with your business partners and is a great practice.  It's like the Will of a company.  And to extend this a bit further, a Disability policy could also be considered.

The policy takes place of having to buy out the heirs your late partner with liquid assets.  The term insurance is a cheap alternative to protect your business/partnership.

My company and I are looking to partner with hard money/private lenders in our footprint: OH, MD, NC, SC, PA, GA, FL, VA, IL, MN, MI, NY, AZ (more to come).  I personally live on Oahu, so bonus points if you live here and work remotely!

We're a 401k administration company and speak with quite a few business owners and entrepreneurs daily. We often administer plans with REI, and also build plans to help fund REI and other business ventures through loans against their plan.

Many of the business owners are also looking to get into real estate investing or are already into REI. Most aren't too knowledgeable about what's available in terms of hard money/private lending, BRRRR, etc. Once we're off the phone, they're usually pretty motivated to speak with someone.

If you're open to a conversation about a reciprocating partnership, please message me!

@Nathan Woods IUL can be a great long term funding option for future deals.  Takes time to build up efficiently, but if you treat it like a lending partner (lend > payoff > repeat), it can help magnify your purchasing power.  

The key is to make sure it's structured properly with the internal costs.  Keep the death benefit low to promote cash value growth.  Look for a net 0% loan rate, or "participating loan".  Paying interest in arrears is another subtle piece that can help maximize the cash value.

Feel free to reach out with other questions on the IUL.

@Rocco Talarico

I can help you with this if you like?  Another book btw to reference on the IUL side would be Look Before you LIRP.  It explains what a properly designed IUL looks like.  

Don't forget to look at the loan provisions on the tail end as well.  Need to find a net 0% loan.

Feel free to reach out if you want to chat.  I am licensed in NY, but not local to there.  Link to my site is below in my signature line.  Have a PDF on there that explains optimized policies.

I would have to agree!  The benefit of using a properly designed policy is primarily being able to utilize the cash value for real estate investments, investing in businesses, etc. outside of the policy.

In addition, it's a good idea to use it as a supplement to your 401k, IRAs, REI, etc. The tax benefits make it an even more attractive vehicle. However, I wouldn't try to compare it to traditional investments.

In short... it's a piece of the pie!

To be fair, this information isn't accurate.  When a policy is properly designed, the commissions are brought down to a level that is more similar to term insurance.  An improperly designed policy is usually 3x(ish) that commission

Second, when properly designed, the fee (cost of insurance) is pretty level throughout the years, versus an AUM fee grows as the assets grow.  If you look at a properly designed illustration in the later years, the difference between death benefit and cash value is minimal, hence the insurance company is "on the hook" for very little, which causes the policy costs/fees to be lower.

Thirdly, I agree, the loan is much more important than most discuss.  You must have a net 0% loan, otherwise the cash value depreciates.  Even a net -1% or -2% can give you much less to use over time.

I do agree that these are not a replacement of traditional retirement accounts and investment vehicles. I also don't believe these shouldn't be the very first investment for ANYONE. It's a supplement to everything else, and a means to fund other investments (REI).

Most of the information you've mentioned are what is passed through blogs, and other media that just isn't true.  It's definitely not comparable to a straight Vanguard fund with little to no fees for self-investors, but these to have a place in the overall financial picture.  The overall tax strategy alone is enough to give it a second look.

@Xavier A. Malave
This is a fair question!

It's definitely good to contribute into the 401k as well, but I understand your question.  And for that much, you'd see some significant results.

You might even consider doing it for a short period of time, then revert back to the Roth TSP so you don't have all your eggs in one basket.

The policy needs to be designed properly, to enhance the growth of the cash value, which there are a handful of carriers that do that.  

Full disclosure, I own an agency, but Indexed Universal Life vs. Whole Life is the conversation you're looking for.  I personally lean towards IUL because of the flexibility.  It does take some time to get the policy working for you, but also depends on how you're funding it.  I would wait until you're able to contribute at least $500 a month towards it.

Also, the design of the policy needs to be optimized properly.  In short, the death benefit needs to be "squashed" in order to promote cash value growth.  Thats because the majority of the costs are based on the death benefit and could, in the long term, cost you 6-digits in lost assets to the insurance costs.

The other thing to consider is the loan provisions and how they are calculated.  You want to achieve a "net 0%" loan in order to use it's full potential.  

A few more details here, but this is a good start.

@Todd Goedeke

Ok I see which direction you’re going there… thanks for the explanation!

Question for you regarding the S Corp.  I'm a 401k administrator and yes, you can use an S Corp to fund a Solo 401k (can use Schedule C, w-2, K-1 as a partnership, or 1099 income towards a 401k...).  My question is what do you mean by saying "if you're an agent"?  I've seen folks create their own management company to convert the Schedule E income to Schedule C (or w-2 if it's an S-Corp), but how does being an agent help with that?  Always looking for strategies to help clients!