All Forum Posts by: Thomas Rutkowski

@Duke Giordano

It works. You just have to understand that it is a long term wealth building strategy. By putting your money to work in two places at one time, you are acheiving a higher overall growth rate on your assets. So even though your dollar turns into 85-cents of cash value, that 85-cents will eventually catch up and surpass where the dollar would have been if it had been invested.

The delta between the cash value growth rate and the borrowing rate helps the business case, but its the tax advantage that is more powerful. I would argue that you have a much better opportunity for interest rate arbitrage with an Indexed Universal Life than you do with a Whole Life. The growth rate on the cash value of an IUL will beat that of a similarly-designed whole life policy. Guarantees are meaningless in maximum over-funded policies. 

This is what it looks like when graphed:

Double Play = Putting money into life insurance and then leveraging the cash value to invest in "A".

Status Quo = Taking all of your money and investing it in "A"

@Duke Giordano

The issue with using a MMA is that you are trading returns for liquidity. The beauty of leveraging the cash value of a maximum overfunded life insurance policy is that the insurance company is investing its assets for the long term so your cash value will capture a long term debt market rate of return. The beautiful thing is that you still have liquidity. The statutes in all 50 states mandate that insurance companies MUST make loans to their policy owners SECURED BY the cash value of the policy. By virtue of the higher rate of return, you'll quickly make up for the haircut that your premium dollars take before they become cash value.

If your cash value to premium ratio is not at least 85%, then the policy is not a maximum over-funded policy. Infinite banking was never intended for what you are doing. The policies are usually not maxed out for cash value. They include more death benefit than is necessary so that you can "pay yourself interest" which is really just you adding paid-up additions to the policy later. If you want to do it right, you want your policy designed to minimum non-MEC death benefit right from the start so that you'll have access to a bigger line of credit: more money working in two places at one time.

You shouldn't use a policy loan for this. The interest is not tax deductible. Get a cash value line of credit so that you can deduct the interest expense. Otherwise the numbers will probably not work. The lender gets an assignment of collateral against the policy.

Hope this helps. Good luck!

@Joseph Schommer

If your premium is $23,550, then your illustration should be showing end of year 1 cash value at ~$20,000 give or take. That's how you know if your policy is truly designed to be maximum cash value/min death benefit (a minimum non-MEC death benefit). The "charges" of the policy will be the balance. Since those charges are partly a function of the death benefit, charges in excess of 15% are due to the policy being designed with too much death benefit (assuming your goal is maximum cash value)

@Joseph Schommer - Just make sure your policy is designed properly. The cash value in a properly-designed, maximum-overfunded life insurance policy should be about 85% of the premium dollars. You are putting your money to work in two places at one time and will achieve a higher overall growth rate, but you must catch up to where you would have been if you simply invested directly. In poorly designed policies, not intended for leverage into real estate, the cash value to premium ratio is much lower and it takes far longer than you might think to break even with where you could have been.

@Brett Grimm - 

Life Insurance is about covering risk. What is the financial risk to your wife and children if you are not around. And vice versa. If you have eliminated all of that risk through your investments, then there is no need for life insurance. But...

You look like you a fairly young. Life insurance is still cheap. So if you drop a $1,000 a year premium and invest that money, what is your best expected return? Let's say 20% cash on cash? Is a $200 annual improvement in your returns enough to offset the $ Million(s)? your wife will receive if you pass?

Description:

In this session we're going to be talking about the number one mistake that I see when I'm reviewing policy illustrations. This policy design mistake can cost thousands of dollars. Seriously.

I will show you an actual policy illustration that was sent to me for review. And the biggest problem is that this is a very common mistake. I see it all the time and it is what inspired me to do a webinar on it.

If you're thinking about setting up a policy, you won't want to miss this week's webinar!

Upcoming Webinars:

4/23/2020 – 3X the Income from the Same Amount of Savings: Life Insurance as a Retirement Plan

4/30/2020 – Understanding Indexed Universal Life: Caps, Floors, Crediting Rates, and Myths

5/7/2020 – Is Buy Term and Invest the Difference Really Better? Let’s Analyze the Numbers.

5/14/2020 – Why you Shouldn’t Use a Policy Loan. What to do Instead

5/21/2020 – What is a reasonable return to expect? (Dividend Rate)

5/28/2020 – Common Tricks Agents Use on Illustrations

Here's the link to the "Infinite Banking and Real Estate Investing" webinar replay:

https://meetingdemo.zoho.com/p...

If you're thinking about setting up an "infinite banking" policy for investing in real estate, you are going to want to attend this webinar. We're going to be talking about the policy design modifications needed for real estate investors.

“Infinite Banking Concept“, “Be Your Own Bank“, “Bank on Yourself”, "7702 Plans" and other Life Insurance marketing systems are simply Private Banking strategies utilizing Over-funded Cash Value Life Insurance.

When it comes to Private Banking and Real Estate Investing, I like to refer to it as The Double Play: putting your money to work in two places at one time by leveraging the cash value of a maximum over-funded life insurance policy. The key word is Maximum.

Sign up to learn how to get the maximum amount of cash value in your policy so you can put your money to work in two places at one time.

I forgot to hit the record button, so I don't have a recording link to share. :(

I did convert my notes to an article that I posted on my blog. You can check it out here:

https://innovativeretirementstrategies.com/Blog/what-to-look-for-in-a-properly-designed-life-insurance-policy-illustration-for-real-estate-investing/

I'll post a video on youtube shortly as well.

If you want to use a life insurance policy for real estate investing, you need to have a maximum over-funded life insurance policy. You need as many of your dollars working in two places at one time as possible. When you get an illustration from your life insurance agent, how do you know that the policy has been designed properly? And is a maximum over-funded life insurance policy?

In this webinar I’m going to show you how to read a life insurance illustration. I’m going to give you a short list of things to look for to make sure that your policy is designed right and is a maximum over-funded design. Not only that, I’m going to give you a few extra tidbits to make sure that all of the assumptions that the agent is using are reasonable. There are a lot of tricks that the agent can use to make the illustration look better. and if you stick around to the end, you will learn everything that you should watch out for.

Future Topics:

4/9/2020 – “Infinite Banking and Real Estate Investing

4/16/2020 – The #1 Costliest Mistake Most People Make When They Set Up a Policy

4/23/2020 – 3X the Income from the Same Amount of Savings: Life Insurance as a Retirement Plan

4/30/2020 – Understanding Indexed Universal Life: Caps, Floors, Crediting Rates, and Myths

5/7/2020 – Is Buy Term and Invest the Difference Really Better? Let’s Analyze the Numbers.

5/14/2020 – Why you Shouldn’t Use a Policy Loan. What to do Instead

5/21/2020 – Understanding Life Insurance Illustrations

5/28/2020 – Common Tricks Agents Use on Illustrations

6/4/2020 – Understanding Fixed, Variable, and Indexed Policy Loans

6/11/2020 – Understanding the Guaranteed Rate in a Life Insurance Policy

6/18/2020 – How to Get the Most Cash Value in a Policy

6/25/2020 – When is the best time to use a policy loan?

7/2/2020 – The Advantage of an IUL for the Double Play

7/9/2020 – How Long Does it Take to Build Cash Value?

7/16/2020 – What Companies are Best for Double Play Policies?