All Forum Posts by: Thomas Rutkowski

@Ronak Shah

My $0.02: A syndication is a private placement security. Its still an investment that should probably be reported on the FAFSA as an investment and not a business interest. They may not care that it has limited liquidity as compared to a publicly-traded security.

leveraging the cash value of a life insurance policy WILL lead to greater long-term wealth accumulation. I would be happy to show you the financial model. You are literally putting your money to work in two places at one time. 

However, if you think of leveraging the cash value as a "double play", then what you are contemplating doing is a triple play: using borrowed money to fund the life insurance policy that will in turn fund the real estate investments. you would be literally putting your money to working three places at one time.

However, most life insurance companies will not take your premium if they know the source of funds is a home equity loan.

The concept of leveraging a high cash value life insurance policy to invest in real estate is thoroughly discussed in this thread...

https://www.biggerpockets.com/...

If you assume the use of a HELOC on the front end of all this, it all gets done with borrowed money... Infinite ROI.

The concept of leveraging a high cash value life insurance policy was thoroughly discussed in this thread...

https://www.biggerpockets.com/...

You can also check out my blog.

@Stephen Thomas

I can't help you with the podcast, but the topic of leveraging high cash value life insurance was thoroughly discussed in this thread...

https://www.biggerpockets.com/forums/519/topics/245380-paradigm-life-infinite-banking-whole-life-insurance?page=3

Links to my podcast interviews are on my profile page.

@Nathan Herber

I've done an analysis/comparison of the approaches you've described. I have a spreadsheet model that I used to do the analysis. All the inputs are user adjustable to account for growth assumptions, tax rates, etc.

The cash in hand vs cash in a tax-deferred account is entirely up to personal preference. We all need to eat and pay bills today, so there is a lot to be said for cash in hand.

I'm personally several years into liquidating my own SD-IRAs and moving the proceeds to High Cash Value Life Insurance. 

1. I can put the entire amount to work. i.e. if I take a $50K distribution, I DO NOT have the taxes withheld at the time of distribution. I make a 50K premium payment with the money. LATER, when the the taxes are due, I use a policy loan to pay both the taxes and the 10% penalty. I'm doing a 5 year funding.

2. This creates a lien against the policy's cash value, but It also creates a "hole" that I can fill later. I can avoid fees by getting the cash into the policy by paying back the loan rather than paying premium.

3. I don't have to wait till I'm 59.5 to access the funds. I can leverage the cash value from now till the time I retire.

Here's the logic behind this: Life Insurance Cash Value can generate 2 to 3 times the retirement income of money in traditional retirement assets. So even if I lose the ability to generate income from the cash value that is securing the loans to pay the taxes, the remaining cash value will still generate more retirement income. The reason is explained in this blog post...

https://www.biggerpockets.com/member-blogs/7595/86513-should-you-buy-term-and-invest-the-difference

I am personally using an Indexed UL, not a Whole Life. Don't believe the hype. The cash value of an IUL will capture a portion of the Equity Premium with no less risk than a Whole Life. For two identically-designed policies (same premium, same death benefit), the IUL will generate more cash value over the long run than the WL.

This is a good primer on Life Insurance that explains the REAL difference between WL and IUL...

https://www.biggerpockets.com/...

Good luck!

@Khoa Ha

One of the best ways to reduce the tax cost of selling a highly appreciated asset is to couple a monetization loan with an installment sale.

This planning approach puts cash in your hands that you can use to reinvest wherever you please and in whatever asset class you please. You can take your time and find the best deal as opposed to having strict timelines as with a 1031 exchange.

If you choose to continue investing in real estate, you start over with a fresh depreciation schedule in your new property.

@Dmitriy Fomichenko

I don't even know where to begin with your response. If you are going to post here, add some value. Take the facts and data that I have provided in the thread above and start there. 

You clearly have no idea of the difference between an over-funded life insurance policy and a basic whole life. I literally just posted that the cash value to premium ratio in a properly designed and over-funded policy is about 85%. That is clearly not "up to 1st year premiums paid. You don't know what you are talking about and you're not providing any support for anything you state. 

Your statement about buying term and investing the difference is wrong. Refute the numbers in the simple business model I just posted above. They show otherwise. I've also dealt with this myth here...

https://www.biggerpockets.com/...

When the death benefit is minimized, the ongoing cost of insurance is only about one-quarter of one percent (0.25%). That is on par with an index mutual fund.

@Mandy Cohen if the gains are sizable, you may want to look at some charitable giving strategies like a Charitable LLC. This could create an offsetting deduction from your income.

Savvy business owners of small, profitable, closely-held businesses know that an old-fashioned Defined Benefit Pension Plan is the best way to maximize the amount of tax-deferred contribution to their own retirement savings. A pension plan allows for far greater contribution limits than either IRA or 401(k) plans.

But the key question everyone has is, “Can I have a “self-directed” Defined Benefit Pension Plan?”

Yes.

It is easy to set up and administer. You don’t HAVE to place your plan assets in traditional Wall Street Assets. You just need to work with an Innovative plan administrator that realizes Wall Street isn’t the only option AND has almost 50 years of actuarial experience and the skills necessary to deal with financial alternatives and real estate.

If you are a profitable small business, a Defined Benefit Pension Plan is the most effective way for you to simultaneously put money away for retirement AND reduce your taxable income.

Take action to get your plan documents in place before 12/31/2019. You'll have until you file your taxes to fund the plan.

Set an appointment now to learn more...

https://innovativeretirementstrategies.youcanbook.me/

@Trey Knight - No. A Solo(k) allows for tax advantaged growth of the assets within the plan. You may borrow from a 401(k), but then the asset is no longer inside the plan generating a return. The idea of becoming your own bank is that you borrow against the cash value in an overfunded life insurance policy. Big difference.