All Forum Posts by: Thomas Rutkowski

Quote from @Josh St Laurent:

Devin, thanks for sharing your perspective. I’ve been in the financial planning industry for nearly 13 years, hold a Master’s in Advanced Financial Life Planning, I’m a CERTIFIED FINANCIAL PLANNER™, and I also teach these concepts to aspiring CFPs and graduate students at Golden Gate University. I run a full-time planning practice focused on real estate investors, so I wanted to add a few thoughts for context:

1. Cash Value Takes Time

Many IULs (Index Universal Life policies) may take 7–10 years before you can borrow a meaningful amount of cash value. This can be a big roadblock if you need funds sooner to secure deals.

2. Fees and Commissions

A large part of your early premiums may go toward commissions and policy fees. Over time, cost of insurance, monthly charges, and surrender fees (which can last 10+ years) reduce how quickly your cash value grows.

3. Policy Loan Costs & Performance

You’ll still pay interest when borrowing against your policy. If the index underperforms—or if caps and participation rates limit returns—you might not get the growth you expected.

4. Other Funding Options

For most real estate investors, it’s worth comparing mortgages, HELOCs, or partnerships. These options can provide simpler and cheaper access to funds, especially if rapid property acquisitions are your main goal.

Life insurance is a powerful tool when used for the right reasons—like estate planning or key-person coverage. But if real estate investing is your priority, it’s important to consider all the costs and timelines before committing to an IUL. Hope this helps!

You are once again spouting incorrect information. You clearly do not understand the difference between a maximum over-funded life insurance policy and a traditional life insurance policy.

Point by point response:
1. Approximately 85% of the first year premium, in a properly-designed policy, goes to the cash value. If a client funds a policy with a $100,000 premium, that means ~$85,000 can be leveraged right away. THAT IS a meaningful amount. And it will grow by a meaningful amount each year as new premium is added. Your statement is patently false.

2. A maximum over-funded policy is solved for minimum legal death benefit for the premium. That means fees and commissions are minimized as well. An agent is taking a hit in their pocketbook to write these types of policies. The expense ratio in most of my policies is below 0.25% of the cash value. This is because the main fees are taken up front over the first ten years. And even with these fees, the policy owner can still do better than investing with their own money.

3. You are mistaken to compare loan costs against the cash value growth. Loans do not impact cash value growth since they are only secured by the cash value. The cash value never leaves the policy. So even if my policy was growing a 5% and I had to borrow at 5%, I can still take those borrowed funds and use it to make a private loan at 12%. I make 7% on the investment, plus the 5% of the cash value growth.

The real advantage is in the taxes. If I used $100,000 of my own money to make a private loan at 10%, I would have $10,000 at the end of the year. But if I was in a 40% tax bracket, I would net only $6,000.

If I use $100,000 of borrowed money to do the same thing, I make the same $10,000. BUT, my taxable income is only the $5000 left after paying off the loan. I net $3000 after taxes.

If the $100,000 securing the loan grew by 5% and I netted 3% outside the policy, my total gain is 8%. This is 25% higher than if they used their own money to do the same deal.

This really isn't that difficult to understand.

4. By your logic, if I use a HELOC at 7% and my house only appreciates at 4%, I'm going to be underwater.

I've explained this to you like 3 or 4 times now. Either its too complicated or you have an alternative motivation for repeatedly putting out this false information. Reader beware.

Quote from @Josh St Laurent:

@Deb S. That's so weird about the link, I appreciate you pointing that out!

I'll give some more context since the link isn't working.

I've been insurance licensed for 13 years, started my career at Mass Mutual, and have put in place thousands of policies for clients over the years.  After Mass Mutual, I spent 10 years at Fidelity Investments, specializing in different areas of finance, including managing a team specializing in insurance planning.  I then started my own virtual family office focused on helping real estate investors. 

 I have a Masters in Advanced Financial Life Planning, a CFP (Certified Financial Planner), CFT (Certified Financial Therapist), and am a candidate for both the EA and APFC.  I teach aspiring financial planners at the graduate level at Golden Gate University and often hear this sort of sales pitch for IULs, Infinite Banking, etc. 

Earlier today, the Institute for Fiduciary Standards gathered, and part of what was discussed was the negligence of the "infinite banking" community in not educating themselves on holistic financial planning and how they violate their fiduciary duty to clients.

I believe that @Thomas Rutkowski,@Brandon Beaudoin, and @Deb S.  believe in what they're selling.  I thought the same when I worked at Mass Mutual and had only been educated on insurance concepts from salespeople.  As someone who doesn't work on commissions, charges flat fees and has no incentive to sell anyone anything, I like to offer a different viewpoint when I see these types of posts.  Especially on BP where it could really hurt a RE investor. Brandon is amazed at how many people choose to ignore facts so let's cover a few that might help as you look into committing to a whole life insurance policy.

1. Cash Value Takes Time

Many IULs (Index Universal Life policies) may take 7–10 years before you can borrow a meaningful amount of cash value. This can be a big roadblock if you need funds sooner to secure deals.

2. Fees and Commissions

A large part of your early premiums may go toward commissions and policy fees. Over time, the cost of insurance, monthly charges, and surrender fees (which can last 10+ years) reduce how quickly your cash value grows.

3. Policy Loan Costs & Performance

You’ll still pay interest when borrowing against your policy. If the index underperforms—or if caps and participation rates limit returns—you might not get the growth you expected.

4. Other Funding Options

For most real estate investors, it’s worth comparing mortgages, HELOCs, or partnerships. These options can provide simpler and cheaper access to funds, especially if rapid property acquisitions are your main goal.

Life insurance is a powerful tool when used for the right reasons—like estate planning or key-person coverage. But if real estate investing is your priority, it’s important to consider all the costs and timelines before committing to an IUL. Hope this helps!

P.S. I know this will anger the infinite banking supporters on this thread.  My intention is only to educate not to argue.  I challenge you all to learn about some alternatives and have more tools in your toolbelt to help clients and the people you care about!

 It's great that you want to offer comprehensive financial planning advice. However, the original poster was simply asking about the best way to go about getting a policy set up for a very specific task. Real Estate investors are running a business. And for savvy business owners who get it, maximum over-funded policies are simply a tool to accelerate wealth accumulation over time.

This is a case of "when all you have is a hammer, everything looks like a nail". Not everyone is looking for comprehensive financial planning advice.

Despite the creds that you whipped out (appeal to authority fallacy), you still don't seem to understand how life insurance works under the hood. I purposefully made the words maximum over-funded policy bold and italicized just for you. But it was in vain. If you understood these policy designs, you would never make a statement like "It can take years to access the cash value". My clients can access a significant amount of cash value immediately.

It's also important to understand that in a maximum over-funded policy, the fees and expenses are much lower than a traditionally-designed policy. In a properly-designed policy, the fees add up to only 15% of the premium. That means 80-85% goes to the cash value and can be accessed via policy loan immediately. 

A client funding a policy with $100,000 annual premiums can access ~$85,000. It only takes a few years of "The Double Play" to recover that loss. 

I see you are also repeating the "IUL is a scam" nonsense. This again shows me that you don't understand how these policies work under the hood. No one who understands life insurance would say something ridiculous like that. I'm not an "IUL Guy" or a "WL Guy". I use Both in my business.

Both IUL and WL work off the exact same mortality tables. Insurance companies invest in the same asset classes, that generate roughly the same returns. They really only differ in how the gains of those investments are credited to the policy holders. And, this may come as a shock, but the cost of insurance in a WL increases just as much as in an IUL... That's how life insurance works.

Both IUL an Whole Life are great tools. For the person that can tolerate the variability of returns, the IUL is probably the better choice with the best long-term prospects for growth.

@Josh St Laurent

Leveraging the cash value of a maximum over-funded policy absolutely makes sense for real estate investing. It allows the investor to put their money to work in two places at one time. This allows for greater wealth accumulation over time. 

@Laura Higgs

Stay away from companies offering "systems". Just talk to an agent who specializes in maximum over-funded policies. 

I've never heard of an MBR. But it sounds like you are talking about a life insurance retirement plan (LIRP). Someone put a fancy brand name on something relatively common.

When the policy is designed properly, they should always outperform traditional retirement plans (dollar for dollar). A maximum over-funded life insurance policy is very much like a Roth. The premiums are made with after-tax dollars and the cash value in the policy he grows tax-free And can be access tax-free. 

But unlike a Roth, there are no contribution limits. It can be funded with as much money (premium) as you want to put in it.

Just to be clear, however, you do not "withdraw" money from a life insurance policy. You take policy loans. The cash value in the policy service as collateral for the loan. That means your entire principal keeps on growing. And that is the reason why a LIRP can provide much more retirement income.

You don't pay interest on the loans and the death benefit pays off the loans when you die. The beneficiary will get the remainder. The insurance company loans you the money to pay themselves the interest on the loans. So even though you have a compounding loan balance, 100% of the cash value, securing the loans is also growing and compounding. This is what allows for so much more retirement income.

Quote from @Crystal Smith:

Quote from @Nilusha Jayasinghe:

Hey all, I'm a smalltime investor currently living in a flat of a Chicago 2-flat while renting the other out, and also have a SFH rental in OH. I'm not looking to scale anytime soon. I have my personal emergency fund stored away in a HYSA, and am working to build up a15k property reserve as well, but am conflicted on where to keep that 15k. We don't have kids (might in the future), my husband and I are young and healthy, have stable high-income full-time jobs, and just put in a lot of work to both properties so don't expect huge expenses in the near future. Both properties are in A areas with great tenants. I know that the general guidance is that emergency funds aren't to be invested, but given our financial security and the fact that we already have a personal e-fund in a safe, non-volatile location, would it still be crazy/unwise to invest this 15k in an S&P500 index fund in a brokerage?

I've looked through the forums and can't find answers to a question similar to mine so I thought I'd post. Would love to know your thoughts and hear if anyone does anything similar with their personal vs property funds. Thanks in advance! 

This is a great question.  An emergency fund needs to be liquid, and immediately available to you in addition to being low risk and protecting principle.  For these reasons, we don't invest our emergency funds in anything that has volatility and we can't write a check against it the same day for an emergency. I don't like the returns but we use regular savings accounts.  The returns suck at a little over 3% per annum but we deal with it. 

Another idea that we have been exploring is using the cash value of whole life insurance funds for emergencies.  We'll only do it if we can access the funds immediately.
 

 I am a proponent of using life insurance as an emergency fund. It earns a great rate of return compared to a bank account and is fairly liquid. It is not something that you can access immediately, like same day.

It usually requires 2 Business days to process loan request. But somebody could use a credit card fund the immediate need and then pay it back with the policy loan fairly quickly.

Quote from @Tim Silvers:

Quote from @Thomas Rutkowski:

Seller sells to an irrevocable trust on a 30-year installment sales contract. Trust sells to buyer for cash. Trust invests the cash to make the payments on the installment sale to the seller. In 30 years the balloon payment is due to the seller and that's when the taxes are due.

Coupling a monetization loan to an installment sale accomplishes the same thing but puts cash in the sellers hands that can be re-invested. I think THIS can be better than a 1031 exchange because the seller will start off with a fresh depreciation schedule in the new property. That immediate tax savings in the new property is better than the infinite tax deferral of the 1031 exchange.

Some questions:

1) why use an irrevocable trust?
2) wouldn't the interest be taxable to seller?
3) can the seller refinance or extend the terms of the contract?
4) would this also work to defer gains on fix and flips?

 1. It needs to be irrevocable so that it stays outside the estate of the seller.

2. Yes.

3. I don't see any reason why a legimate, arms-length transaction could not be done.

4. No. Income vs Capital Gain.

@Gary L DeSoto

The fact that you are a real estate investor does not matter. 

However, if you want a well-designed, maximum over-funded policy that can be leveraged for real estate investing, there are really only just a few companies that have everything you need.

Minnesota Life

Allianz

National Life

Ameritas

I don't want to write a book here, so if you want to know why most other companies WONT work, just PM me.

@John Salcedo

Interest rates on a Cash Value line of credit are pretty high right now. Most of my clients are choosing to use a policy Loan instead (from the company). Policy Loan rates are pretty low right now... but it depends on the company too.

You can try Integrity Bank and Trust in Colorado Springs. Ask for Toby.

@Kylie A.

Maximum Over-funded Life insurance policy for sure. Where else can you earn 6%+ and have immediate access to your funds when needed?

And when you do take a loan against the policy's Cash Value, the Cash Value continues to grow (since its only serving as collateral).

Quote from @V.G Jason:

Quote from @Thomas Rutkowski:

Quote from @V.G Jason:

Quote from @Mike S.:

Quote from @V.G Jason:

 No, life insurance in all forms is an incredibly stupid vehicle to put money in. 

I strongly disagree with you. A properly structured cash value permanent life insurance can be an incredible tool in your wealth building strategy. You obviously have not studied enough this asset class.

By borrowing from it you can make your money work at two places at the same time, increasing your total return. It's a long term play as the front loaded fee takes a few years to recover from. But in essence it is not different than using a refi on a real estate property, except that you are protected on the downside as the cash value only goes up while real estate can go down. And on top of it, you have a life insurance to protect your family in case of early demise.

If it was so bad, why would so many sophisticated investors using them? You just need to find the right insurance agent specialized in this kind of policies as the run of the mill policy is definitely not what you want for that purpose.

 If you're paying your expense fees up front, it's going to be a terrible investment. I don't need to get into why, it should be obvious.

No sophisticated investor uses them. I don't know a soul in a real high net worth that has it, I see people maybe under $10,15 MM use them and think they're magic. Maybe $25MM net worth but they are new money and/or dumb money if not both that blindly follow an "advisor".  The real HNW don't touch this. 

Only people to fight me on this is the ones who sell them.

 Your money is literally working in two places at one time. Even though you take a haircut on the fees, you will accumulate more wealth over time. Would you rather have 85% of your money growing at 9% or 100% of your money growing at 6%? 

You're right. It's obvious.

Again, a financial advisor. You guys sell this stuff, no one promotes this besides the one selling it. 

 It still works. Despite what you think.