Blogs

4 Reasons You Don’t Need a 401k

https://youtu.be/DK1Sb59GfzM

When I first started getting into financial independence, the first things you find are index funds. And so I just haven’t really looked at it since, and in my opinion, it’s not a significant dollar amount in terms of if the market dropped 50%. Yeah. I’d lose 10 grand or 15 grand. It’s not like I’m sitting there with hundreds of thousands that I would lose a ton of money.

Yeah. Let’s keep it on red mentality. Just let it ride significance. Not make sense. And also with my logical and with my mindset too, could I ever run my bank zero, like really low to invest in a deal. And so I’m always going to keep some cash available and this is being a little bit more aggressive and the cash is a little bit more conservative and all this stuff for you.

Like I’m getting really nitpicky. You’re not working with too much, but this is the foundation for when you get over half a million, then you won’t really care about all this stuff. If you were to take this and maybe think about taking the Roth out, because you’ve already paid your contributions into it and just taking it out cash to invest it.

We talk about this a lot. Why do you not want retirement accounts? Number one? You’re going to be retired well before you’re 50 on the way to your sending to get it. Number two, your tax bracket is probably a lot lower today. So you want to pay your taxes on it today, then in the future, number three, where this country is going, taxes are going to be going way up.

But what a lot of people don’t realize is number four, when you invest in a retirement account, you don’t get the passive losses from your investments. So that is you need the passive losses, especially from the syndication. To get out the simple, passive cashflow gravy train, which is all about lowering your W2 activity, come and paying little to no taxes.

You don’t get that opportunity to do that. Yeah. You got to get real estate professional status at 750 hours. You don’t get to do that until you get those passive losses. So that’s the fourth reason why you don’t do retirement accounts, but something to think about, like Richard, like just maybe take out the Roth because you already paid a tax on it.

So it’s not really that big of a deal. And at least take out the contributions. You not the gains because you take out the contributions. You don’t need to pay the penalty. 10% penalty. So drain that out. But at the same time you want that magic number. I don’t know what that is in your head, like 20 to 30 grand of emergency savings.

But if you have to increase it, we’ll then put money into your 401k via the match. .

Don’t Let Your Money Burn

https://youtu.be/FMUdj4snpGc

Now some investors, they have a huge glut of lazy equity, maybe even half a million or $2 million of lazy equity that they haven’t done. Like I said, I’ve seen investors invest a million dollars in the first year with me, but I think that’s an outlier. Right. I suggest people try things out slowly, hang up for a year.

Make sure we’re competent. And I know we’re competent. We’ve done a lot of deals thus far. I’m just being empathetic to new people coming in because that’s the prudent thing. That’s the thing I would do. I don’t recommend anything that I don’t wouldn’t do at the same time. You got money burning a hole in your head.

And for every billion dollars of Lacy liquidity, you have, you could just stick that into something at 10%, pretty easy. It’s such as HP. I wouldn’t suggest putting all that money in one place or all that money in a private equity deal, but you want to deploy the funds, but you want to do it prudently a nice way of doing this is putting a chunk in private equity to just get it working because the idea is you’re going to get that much.

A lot of the, these deals, they make us put a lot of this money is reserves. So once we hit certain milestones, but we refinance the money out, return a lot of that initial nonprofit equity capital to investors right off the bat. And maybe originally went in with a hundred grand off of equity. Maybe you’re only sitting with 50 grand on a year’s time.

Every year, every deal is different. And I don’t want to set any precedents. But the pref equity is a shorter term lifespan. You’re sticking money in there. You got to think that you’re getting a heck of a lot faster than most people on the traditional equity side. So it can be a strategy thing. The way of thinking about it is you’re putting loading money in, but you’re leapfrogging it too.

Maybe one to three years into the future that, you know, you’re going to get it back, but then you go to redeploy into more of a traditional equity, eight to Sarah. I do this a lot of times. It’s kind of like a short term, one to three years, E in a way that you want to get your money in traditional equity, but you’re waiting for the deals that come around, which, and they’re even frequent.

And if you’re starting out, you may not have good deal flow. You’d likely though, right? So you want to be patient, but you still want to get your money working. And that’s what the private equity option.

Which is BETTER: Pref Equity OR Traditional Equity?

https://youtu.be/1JMzY_7b0XA

Another investor asked me one time. What do you think I should do? I’m torn between the two. They both sound right. Well, I asked them the question like, Hey man, how’s your job? Do you think you’re going to get fired any time soon? The company downsize? The reason I asked that as well. If there, if you’re a government worker or you have a pretty steady W2 job that arrived, if you’ve got your emergency savings account, few months of expenses, the kind of tie you over to find your next job, where you have opportunities to harvest some cash money from a Roth IRA.

Cash savings or he locked. You’re good. Put it in traditional equity, especially if you’re under a million or two network, you need to grow your money. Pref equity, 10, 11%, a great return. Personally, I think you can grow it better in a traditional equity. That’s what you should be doing. If you’re not to two to $3 million and above, you’ve got to grow your money.

You’ve got to use it now. You got to score more points. You’ve got to put up more points on the board. If not, you’re not going to win the game. And the flip side of that is say in an investor said, I worked for oil and gas industry. Things are weird or. I’m on a contract work this year. I don’t know what’s going to happen in six months.

Then I would say you should do the private equity at the stage of the game. Get your money working, get the cashflow. That might be a better way for that particular person to go. But again, it’s different for every situation. Every person has different. Ideally you’re segregating your portfolios. You see me?

See my portfolio. Sometimes I take more. Most of my portfolio is pretty conservative. Mostly stabilized cashflow. .

Fun Story – Operating/Investing ATM Machines

https://youtu.be/AvAdSmFNEE0

hey, Simple Passive Cashflow listeners. Today, we have a simple passive cashflow who we deal pipeline club member. Who’s invested in some deals and has an absolutely crazy story to share with you guys. Now, the people that sign up for our group and especially come out to our events are definitely not average.

I think a lot of you guys say that. Yeah, I can’t talk about like how much money do I take out of my retirement account? To make my AGI not go over a certain threshold. So I don’t pay those taxes. Not buying a house to live in. Like my friends, family, coworkers, think I’m absolutely crazy.

And I have nobody to talk with, but if that’s you guys need to get involved with our tribe go to our networking section and events section on the website to learn more how you can get more involved or if not, just join our investor clubs, we’ll pass the cashflow. Dot com slash club. But everybody, I think in our group the common thread I see is, we’re not trust fund kids.

A lot of us are first generational wealth. Which means our parents did not have a million dollars. My parents, even on real estate, they told me not to ever buy stuff and have people live in. Cause people screw it up. Boy, were they wrong? But everybody who comes in there they’re very frugal, actually a lot of people did a lot of crazy stuff in their twenties, such as travel hacking.

If you guys remember the mint coins where you. Buy $10,000 of coins and take it to your bank. So you can get the 2% on the credit cards. Had a one guy who rented a storage closet, so he could build the Ikea furniture. So you could sell the pre-made furniture on the internet. Daniel, Yeti, crazy stuff like that.

Okay. From your earlier days, when I was 18, I got bit with the network marketing bug, the multi-level thing. So I tried that for a long time going from different one, the different one, I was hanging out with the people that were making all the money. That’s definitely not making the money.

That was not so great, but it did open me up to the idea. That’s when I found out about That little purple book that most people read that got me into thinking about real estate, but I never did anything because I was so young and I didn’t have any money. And so I just never did anything with it, but nothing really crazy, like what you’re talking about, but I definitely did some different things that I guess most people don’t do.

I know in my. In my late teens, I did the Apple Rama’s so I could get a whole bunch of credit cards and business credit cards. So I could get back in those days, you could get like 6% interest rates in checking accounts and savings accounts. So I got, I racked up like 50, a hundred grand. This is during college and I just milked it for five, 6%.

And then in my early twenties, To my thirties. I did that. Those rewards checking accounts the ones we have to make full debit card transaction and get East statements. I had four of those accounts because a lot of the times you max out at 10 grand per account, some accounts I could set up with Venmo or PayPal transactions, I could do that from the comfort of my house, but there was always that one that I had to actually go to the freaking gas station and pump.

12 transactions, but you couldn’t do more than four because they would flag your account and And they’ve shut you down. And they had called my cell phone that was like the low point of my life doing this stuff. I was like, what am I doing? It was like 40 degrees outside driving around to all these crappy gas stations and pumping small micro-transactions.

So I could hit my 12th transaction so I can get my three, 4% at the time. I’m a recovering. Covering person today, but so Danielle is, I’m gonna be talking about a really cool story and it’s just mainly for fun. I think we don’t recommend people doing this strategy at all, but I think how we first met, you came in through the investor club, we connected and then you actually came to some events, but I don’t know, maybe I think you misinterpreted what I said.

I think he said You’re not allowed to invest. I told you, you can’t invest with me because you don’t have enough money. Is that she thought, I thought you had said you wouldn’t let me invest all of it. So I had made in what I thought was a substantial amount of money in the stock market fairly quickly.

And I was like, wow, I have some money now. I want to do real estate. And so of course. Got to you. And I think, I remember you saying, okay, you can’t put it all in right now, so you eat, you can do something. So I took some and started with you, but then I took the other half and I was like, okay, what can I do?

Did you look at like turnkey rentals, you go down that road. I did. That’s where I started was okay. I better get a single family home. Let’s start looking into that. I started looking into that and then I started finding the turnkey rental companies that were out there and I was following the breadcrumbs, so to speak.

And I just kept thinking to myself once I do one or two of these. There’s gotta be a bigger way of doing this. I was thinking, what about the people that do the apartments? Maybe I could check in to how they do that. They must pull their money together and started looking around. And that’s when I found you started listening to what you were saying.

And I was like, this is it. This is exactly what I’m wanting to do. And so I set the single family home part aside. And just went straight in and took my other half of my money. I was like, okay, what other kind of business can I do now to make money? And I had originally looked into doing vending machines, cause I thought about that a long time ago.

So I started looking into that again, cause I didn’t want employees, I didn’t want overhead. I didn’t want a building. And I saw this little ad. While I was looking around for ATM’s, which isn’t a vending machine, they just spending cash. So I started looking into that. So how that got started.

Yeah. It’s funny how, when you told me this, I was like, Oh, you went into these the ATM funds that everybody goes into, you hear about that. I’m not a big fan they’re decaying assets or how the fund is created they are a little misleading with how they also put in like the tax benefits there as returns, which is, I don’t think is what you should be doing in a performer.

Anyway, we’re not really here to discuss that stuff. That’s more for inner circle type discussions, but I was like, Oh yeah. Okay, cool. Daniel did a ATN and I tell him, I bought ATM machines to take us through. How you did this and how does it all work? I first started looking around online to see what this was all about.

There were a lot of YouTube folks out there that were promoting doing it yourself, which I guess most people. Don’t know that you can do it yourself. I started checking those out, listening to videos and podcasts and things about that. Just to learn, I liked the idea of how it was similar real estate in that these are things that you can own.

These are things that you can depreciate. These are things that cashflow we’ll call it. Half passive income because you do have to do things with it. And so I was looking at that and then I found out there was another way to do it besides doing it on your own. And , that a company offers you to able to join with them and have them do most of the work, the calling the contracts.

The leads, all of that. I wanted to go that route because I don’t like rejection. I don’t like meeting people and them telling me no all the time. And so I decided I’m going to go that route. Like a ATM turnkey ATM and to me, that’s the daunting part. I don’t know too much about the business, but like you have to make a deal with the corner deli or the shopping mall to put that thing in there.

The one part of this where you don’t have the technical expertise, so that industry knowledge and so they would set up the leads where I could then go and visit the hotel or the mall or the event center or whatever it was. And so I went that route and actually even went further than that

and decided I was gonna buy into an existing what you might call a route.

Where there were already ones placed already making money, and I’m just buying it from somebody else, stabilize asset or stabilized cash crop. Exactly. Or you can start from scratch. So I did both where I bought in, but then I also started myself trying to get my own. And so I did both of those and.

Obviously it costs more money to buy in than to start from scratch. And it’s definitely more lucrative to start from scratch, but it also takes a lot longer and there’s a far more rejection involved in doing it on your own. So to speak, trying to find your own leads and that kind of thing.

It varies depending on how you do it. And not that they. Always have it where you can buy in. They don’t, they just happen to be doing an acquisition at the time. And so they funnel those out to those people that want to do it that way as well.

Now there’s a lot of this stuff. You gotta be careful here.

Daniel can reveal all the numbers and everything. I think he likes beer. So if you guys see him in real life, I’m sure you can bribe him. And he’ll tell you all the dirty little secrets, but

just to give people some magnitude in their head, was it one of these ATM machines cost?

if you were to do it on your own and if, using these kinds property management type of companies that kind of gets you going. , I think an easy way to think about it again, not an expert, but from what I’ve learned, you can get an ATM for a couple thousand. If you want to go turnkey, let’s just call it just double that.

So 4,000, let’s just say then of course, you’re going to have to put money in and that is going to depend on what type of place you put it in. So if you’re in a mall, you’re going to need a lot more money than if you’re at the tattoo shop around the corner. The amount of investment on that side of it varies drastically.

And then of course, how busy the place is, will determine either how often you go or how much money you choose to put in at the time. that’s an easy way to think about the cost of the ATM as far as. The cashflow again, that’s going to depend greatly, but let’s just say an average of $300 a month.

Two to $300 a month is a nice, easy way to think about it. The annual lies, that’s a few grand. Yeah, 3030 500 somewhere around there. And you’re going to spend anywhere from two to 4,000 on the machine, the cash to put in it. So let’s just say $10,000. one, that’s how I think about it. Like when I was finding out about the turnkey rentals and everything for the real estate, okay. 20,000 to get you a hundred thousand dollar home. I think about these the same way, $10,000 to get me a home, but I’m going to make two or $300 a month, which may be somewhere, which is on par, right? Yeah. But as one of the podcasters would say, there’s no tenants, toilets or trash with this.

I thought that was a pretty funny way to think about there’s no leverage to involve. You’re buying these ATM’s cash, right? You can’t leverage. , you could possibly, once you get more. At this, you can probably get a business loan, I would think. But at this point starting off, it’s pretty lucrative actually has got my wheels turning.

It com it could be. you’re making about what a hundred. I got some random questions. The repairs, do these things break, what do you do on it? Because then what typically breaks on these things? Usually around 10 years or so before, you’re going to have to start replacing parts 10 to 15 years. And at that point you might replace a card reader. The piece that actually reads the card that goes in or maybe the speaker. Just little things. There’s not major that I have been made aware And obviously I haven’t been doing it 10 to 15 years, but there are people that I’ve met that have been doing it 15 to 20 years.

, I think that’s the most. Detrimental part about the businesses I’m buying this piece of metal and it’s just going downhill and it’s not something where I can just, Oh, Hey, I’m going to upgrade this and it’s going to be awesome. No, you’re going to have to buy a brand new one. And so it’s like just starting over.

It’s like a car, a depreciating asset. And. When these things break, right? I’m sure you had little mishaps, like you just call somebody and they go check it out themselves. If you, you don’t have to go out there and do diagnostics on yourself, cause you don’t know what you’re looking at.

I do. And I have access to technical support to help, but yes, I do everything , that could be a hurdle for a lot of people would, if people are very on. Technically inclined. They could just call a dude to go do that for them. I know that there are people that you can call that, do this kind of thing.

I haven’t done it it’s not that technical. more, unscrew this and turn that and okay. Put that back in and screw it back on. It’s not too techie. that makes sense. But you got to watch your six in case someone comes up hits you in the back of the head, right? Yeah. You want to go when nobody’s around?

Sure. Okay. So tell us, okay, now this is the fun part. You gotta feed this machine and Daniel’s not made of money, so he’s not stack overflowing this thing with the 110, the 50 grand in an ATM. You can’t even put that much. And if you wanted to, , you got,

Cheaper real estate. So the throughput on these things, isn’t super high, I’m assuming. So you’re how often are you refilling these things with five grand, 10 grand or something? Something like that every week or two just depends on the location and how it does. You got half a dozen of these things?

Yeah, I have eight technically. Okay. So how much take us through that day and what, when you go, so it’s just a route that you drive, right? You’re like a paper boy. Yeah. I go, I get my stuff ready. I go, I fill them up. I download the transactions on a little SD card and I go home. It’s really quite boring, but that’s what I love.

You’re missing out the good part. You go to the bank, you pick out. Oh yeah. I forgot about 40 grand of cash telling you. I’m telling you the first time I went, it was a little dicey. So I go to the bank and I’m like, all right. Give me 40,000 or whatever. I don’t remember what it was, but it was a lot of money and these were not hundreds.

So it was more than you would think. And so they’re just bringing their like, stacking, just. Stacks is like a movie. I felt I was like looking around. Is anybody else here? I was it was fun. I felt like I was robbing them, but yeah. How much shoe boxes of money is that 40,000? It’d be like. It’d be like that.

Okay. Just one or two for stacks of 10,000 or something. Yeah. You should make like a YouTube channel, just like you going to the bank and like getting all this money and putting it in your car or at home and just stalking people like that type of stuff. Oh yeah. It’s all over.

It’s already out there. I couldn’t do any better than whatever is out there already. You can watch people do their little videos. It’s funny. You’re taking this money around and you gotta be safe, right? Gotta be cool. Yeah. I am, I guess maybe lucky enough.

I don’t know. When I go there I go. When nobody’s there. So either before the place is open or whatever, obviously I know somebody that’s there, it’s very low key for me, which I’m very happy about. I would definitely not want some convenience store where I have to go. And there’s, 20, 30 people in there that’s not smart.

. Cause the institutional guys. Are sending in two dudes about two times your size with guns and a van truck. Got it. Oh yeah. And it’s even funnier to me. Sometimes I’ll go to a particular place that I have and the armor truck is outside. I’m just laughing because they have no idea what I’m doing.

And if they know they would probably laugh as well. Are you like trying to lift weights? At least look the part or I just try to look like your everyday Joe walking around. I think I do. Okay. I hope you you don’t have your like air buds in your ear. ABC have some situational awareness.

Yeah, I don’t, I’m good. I’m watching around. So one question I always ask for, like, when you vet any investment, is that aspect of insurance, right? What is the worst skin happen? And that’s okay. If you can mitigate that like some agriculture deals you can ensure the crop, in case it burns or there’s a flood.

What’s another one. Like some guys like to play around with like sports cards that just stresses me out. You’re not keeping that stuff in a safety deposit account. Most times you’re docking at it in your bedroom and you can smudge a corner. Your house could catch up fire, maybe it can fall on your homeowners insurance, but is there any insurance at this stuff? What if somebody does whack you in the back of your head and takes your money and, or steals the ATM machine? That’s very common. You see it in all the movies, they chain it to the back of the check and drag it around main street.

I guess the way I think about it is the type of locations that I chose to go with are more, the, I don’t want to call them higher end, but just less in areas where that kind of thing goes on. So convenience stores obviously are going to have way more opportunity for them

to hook that thing up and rip it right out. Whereas mine is in a location where it’s not even near the front door, so it’s just literally not possible for anybody to do that. Not to mention you can bolt them down. To the floor. That definitely helps a lot, most times in my reading and looking around as they’re stolen, because they’re not bolted down, they just throw the ATM in there and not too difficult to rip out.

Cause it’s not anything to rip out. You just take it. Yeah. I haven’t really had to think about that much. Thankfully I don’t think about it. But as far as insurance, I know you can insure the ATM and I’m required to through what, the way I do it. But I don’t believe you can insure the cash.

I’ve heard some people say you can, I’ve heard other people say you can’t. My research says can’t. So I wonder if they take it. Yeah. But once it’s in the machine is locked up. You’re covered at that point. Maybe you can cover it on your, like your homeowners. Of course.

You’re going to have to talk to your insurance guy off the record first to change because they may not like this idea. They won’t, I guarantee they won’t it’s just even getting a bank account is not easy. Yeah. This is like a money laundering stream. This one. Absolutely. Yeah. I, it’s funny just thinking about it.

Your broker brings you the location and you’re vetting it from there is your top of funnel filtering process. Then if I say, okay, go then they’ll try and get the deal. Okay. And the deal is how much do I make? much do they make that kind of thing?

So where is this all going? Are you just gonna fill it out? The goal, the end game is sell them hopefully in five to 10 years. It’s not like it can grow like. You can’t grow. It just does what it does. There’s nothing you can do to make it any better. And so that part, I really disliked.

So it makes sense. There’s no value add there’s no ability you can’t increase anything. There’s nothing you can do. Literally you can’t increase the fee structure. That’s them. That’s a no, I can’t change it. And the kinds of deals that they get when they sign the contracts are usually one to three year contracts.

After that, I haven’t been doing it long enough to know what happens after that. What if they say, no, we’re done. Get your ATM out of here. I guess I go find another place. I wonder if your broker’s business plan is that you’re captive to them. But maybe you can be your own like kind of commercial real estate broker and find other ATM folks.

So maybe that’s another part of this business you might want to build out where you start to build lists and cold call, cold email, different owners and make a deal with them. Hey, how would you like to have ATM machine? Here’s the splits and trying to cut, cutting that company out if you’re so inclined, right?

That’s how you want to use your time. Technically, I can’t do that, but if I didn’t go the route I went and you did it on your own, that’s exactly what you would be doing. You’d be going and meeting owners of businesses and trying to see if they’d let you put it in there. A lot of times you might not even pay them anything.

And that’s how you can technically make more money doing it on your own. But it comes with also other things that you have to deal with. The people that call when they say. That it didn’t give me money, but took my money, but it didn’t give me the money. I don’t not want to deal with somebody calling me and 2:00 AM, however, an issue, no way I don’t have to deal with that, but I’m sure there’s like a service or you can just outsource that part too.

Or if you want to stop doing the driving around with stacks of cash, you can outsource that. I assume. That gets into A little bit dicey thing where they’re walking around with my $20,000. And obviously I can know if they don’t put it in there, but it would take some time to figure that out and then they could be long gone.

I don’t know. I don’t, I have trust issues. I think we talked all about the bad stuff, but some of the good stuff it’s okay. Not only having $40,000 of cash in front of you taking selfies with can be a little therapeutic, but you mentioned to me last time we saw each other that you enjoy the taper out aspect.

Yeah. I liked driving around. I liked doing my own thing. I like being low key. I just do my thing and it works for me. I could be out doing whatever whenever for however long. And. I can check on it anytime I want online, see exactly what it’s doing, how much it’s done, how much is left.

And cool. It’s almost like checking my stocks. So I got addicted to checking my stocks when I was doing that. And so this kind of gives me that outlet as well. A little bit are you more from a tax perspective? Are you like what expenses you’re incurring? Like you writing off?

Mileage and definitely mileage administrative office reimbursements the accelerated depreciation. I did all of that. It’s really pretty cool. But I definitely had to get a CPA who knew what they were doing. So thank you for that, by the way. It’s nice to have somebody that knows exactly what to do and exactly how to do it.

Now you can justify buying a big lifted truck. That’s part of the branding. Yeah. No, thank you. It’s good. You could also justify a big pit bull or any kind of cool dog that makes you feel safer to go on your runs with you and a gun, that could be a business success.

I don’t know. Is there anything else that you could write off that would be necessary? Not really anything else, just normal expenses buying paper and different things like that. The bonus depreciation was definitely the biggest and most lucrative depreciate thing that I could write off.

So that was very helpful. Yeah. Maybe a gym membership. Maybe you could put down in there too. You could, or maybe a tattoo invented tattoos on your ear. That’d make you look a little bit more. The part I definitely don’t look the part I know. Cool. Yeah, any other insights from this?

A little fun when you making activity? I only if you’re going to do it all from scratch. If you’re going to buy in, it’s fine. It’s just when I compare it to what we’re doing in the Hawaii club, it doesn’t really compare unless you do it all on your own, and it’s going to take you a while to build it up.

So if you’re willing to do that or you like doing that might be something to do, but I liked the more passive route than the half passive route, especially if it makes the same or more. Yeah. I think what I like about this stuff, and a lot of people have that itch, right? Checking your stocks, seeing the money, hits your bank account, whether it’s like a short term rental, something like this, or some kind of side gig, or maybe note investing, something that a lot of people live in places where they can’t invest.

Something that is fun, like a hobby to them to justify some expenses. I think this is add that to that list. Yeah, I agree with you. Definitely. Thanks for jumping on Daniel and a lot of cool stuff you guys are doing. Like of course this is the simple passive cashflow group where we try and keep things simple and passive and very unsinkable and not passive at all.

But I think it’s a lifestyle and you always had the wheel spinning. Come in check us out, meet folks like Danielle here is a crazy stories when she, when they happen, hopefully they don’t happen. And yeah. Thanks. Thanks for joining us.

And we’ll see you guys on next week. Bye. Thanks.

Quick Announcements + Special Events + Intro to Infinite Banking

https://youtu.be/o7T36FPx5x0

This is a special announcement.  We are doing a special webinar on September 4th we’ll try and get it done in a couple of hours in a cram school type of format, where we go over the infinite banking policy. A lot of you guys had a lot of questions and we’re going to be unveiling the new free banking.

E-course have you guys come to that. You guys can get free access to. More details, go to simple passive cashflow.com/banking. And again, that’s on September 4th. We’re going to be starting around 9:00 AM and going to 11:00 AM. Pacific time. The next announcement September 18th, there’s going to be a tech seminar put on by Anderson, September 24th.

 

We’re going to be doing a little get together in Houston, Texas. We’re going to be trying to do another get together in quarter four in Northern Cal and Southern Cal. Full members, the family office, quantum mastermind members get first access to that. As we’re trying to keep it small, more intimate, you guys want to learn more about joining the exclusive inner circle.

 

Go to spool, pass a castle.com/journey. And if you guys want any more details on these full new events, coming up, go to simple passive cashflow.com/events and check out all the future events we have coming.  We’ll see you guys on Saturday for early in the morning, 

 

we’ll teach you guys all about infinite banking

 

now for some of these events, you’re going to need to. Access  past the member site. Go and sign up@simplepassivecashflow.com slash club and sign up for a free account there. There’s a lot of things I can’t really put up there on the internet, on the public site.  We try and restrict and get all the good stuff in that  member portal .

 

 What are you waiting for? Sign up.

 

Announcing my new book coming out next month. If you guys want to help me out with a review, I’d like to get you in advanced copy and the audio book should be an emaLane@simplepassivecashflow.com. 

 

And I appreciate you guys helping me find the book when it comes out. That’s probably the only way I’ll probably make my parents proud of me by having an Amazon bestseller. Cause after all they still wonder what I do these days. If I’m not an engineer,  they think I’m like a real estate agent.

 

 Help me make my friends proud and thanks for supporting 

 

 

 

we’re going to be going  over the infinite banking scheme that you guys have been hearing about profusely from  a lot of podcasts out there, they get like an insurance salesman and they talk about how the wealthy do this. I personally do this.

 

I started with a $50,000 a year policy back in 2017, 18. And now I have a bigger one and a lot of people in the family office group are using these policies.  We want to give, this is a primer really quick presentation. These are the slides we’re going to be going through today. This is going to be a little bit of a high level 20 something slides.

 

If you guys want to go through the company of men on the simple passive cashflow.com/bank, you guys can be to this year as we go through this presentation, but we’re going to be doing a special a couple of hours cram school, . We’re going to be going to this a lot more in detail on September 4th. If you guys are somehow watching this video, after that date, all these videos will be posted@simplepassivecashflow.com slash banking.

 

Or it will be put into the e-course a much more in-depth and curated course, which you guys can go through and learn about this stuff,  📍 but let’s get into it. If you guys haven’t met me before, my name is lane Colwell. I run simple passive cashflow.com. Here’s my bile.

 

The other person helping me present today’s tether for the Kala. Do you want to introduce yourself real quick, Tyler? Sure. Hi,  📍 I’m Tyler . I’m currently residing in Honolulu. Hawaii. I grew up in Hilo, went to university of Washington. Got my degree in  engineering. And then I was an active duty Navy officer about eight and a half years.

 

Transferred out to the civil service. Or I was a project engineer, construction manager, eventually first-line supervisor, and then the chief engineer in the end up in 2001. Retiring from there. And as far as from my real estate experience, I’ve been investing in real estate since 2002, where I bought my first single family home in Jacksonville, Florida.

 

I did house hacking then they didn’t know that term, but that’s basically what I was doing. Auto fuel more over the next few years got overwhelmed, stopped married with kids and put investing on hold until.  2018 or so when I met lane with online, with simple passive cashflow and ever since been so deep into syndications currently have about 24 active syndications going on.

 

And enjoy that. And that’s what allowed me to basically retire as far as for my insurance experience. I got my first policy about three years ago.  I looked at trying to get, understand how that works. So I got licensed  and then eventually started actually writing policies and I’m currently.

 

I’m licensed in many states across the United States. So Tyler he is an investor first and this whole discussion on this infinite banking concept that we’re going to call simple, passive cashflow banking here in the future. I been a lot of it is stemming from, how do we use this liquidity in these insurance policies to do what we do, which is.

 

Totally different than what most life insurance salesman of create and customize this stuff for.  Those guys just don’t get it. They don’t understand how the wealthy used this. These policies basically gets whole life insurance over-funded, but configured in the right way with lower fee structure.  Just making it better for the investor to use for their investing purposes.

 

But, yeah. So where this all came from, I asked Tyler A. Long time ago, Hey, if you’re interested in this stuff, go get a license. And then cut the fees down for me and my friends. And he went and spent what, a couple years  learning  that’s what you get. When you get an engineer to do this stuff, they actually read everything.

 

 Let’s start off here.  I think a lot of people, they go online, they look up whole life, infinite banking and everything that comes up is it’s a scam, right? Dave Ramsey will absolutely, talk really badly about it. But I think the difference here is  we’re not configuring this, like how most people do where they’re configuring it for high death payout and high interest rates.

 

We’re doing the complete opposite work at food bank for higher liquidity instead, so that we can take the money and invest it in, producing assets, such as real estate, or, if you guys still want to do your stocks and mutual funds, you can still do that.

 

So we’re taking the traditional finance method and turning it around. This is typically how.  Normal people do it, they put it in the bank, it deflates and value with inflation and inflation is running rapid. And that kind of makes it even more case to do this.

 

 Tyler wants you to talk to us about some life insurance works.  I think that the main point here is that if you search online, you may hear from some financial advisors that, whole life is a bad investment. Don’t do it. If it, it’s just that it’s not structured correctly.

 

The ultra Walty or wealthy, or even banks, they own tons and tons of life insurance. And the reason for that, it’s a safe, secure assets.  And it’s liquid. So this slide is just basically showing that banks on and hold a lot of assets of their assets in bank owned. Life insurance is basically life insurance that is owned by the bank.

 

So it’s called Bali.  But yeah, if you look at any large bank  on their asset sheets, they have tons of life insurance. 

 

The thing is, they like the pros. This is what they. And effectively what we’re doing here is getting rid of that, man. 

 

 

 

This is the loose framework and  we’re trying to bang from ourselves and that term, it sounds school, right? Like instead of using a bank that the bank is able to leverage our money and go invest. We’re doing this on our own, working directly with the insurance company, which by the way, to me is a lot more secure than any bank FDA.

 

Sure thing out there of insurance companies are some of the largest companies that have the longest track record. When you have a contract with an insurance company, it is very secure.

 

Like a lot of you guys jump into these apartment buildings  and you guys know we never buy a class assets, a class locations because the returns just aren’t there. A lot of times the insurance companies are the ones buying those large class, a assets in the class, eight areas because they are going after capital preservation.

 

lot of times is their cap rates are anything from two to 3%, but they don’t care. Because they want to just preserve and they don’t need to make that high rate of return. They’re in the game of just being secure with people’s money, but not every life insurance carrier is weighted the same.

 

Tyler, I want you to I think everybody has a little bit different definition of what infinite banking is. Depending on the way, people understand things, different things resonate with different folks, but why don’t you take a first crack and what this is, or something never heard of that.

 

I best define infinite banking is it’s really a process in creating, private vault for you to use as your bank and overall it’s a process. The vehicle that it uses is holding. Insurance and its dividend paying whole life insurance is the product of choice that I specifically like from multiple reasons that we’ll go over.

 

But that policy then is you overfund it. And in that way it has a cash value that you can ask. Your cash at any time via policy loans.  That’s the overall concept. And as you pull that out, the money still continues to work in their vault or in that, in your account. And you’re able to deploy that elsewhere and pretty much have your money work in two places at once.

 

 The way I personally use it, when I had a policy, when I first started to do $50,000 a year, after a couple of years, two, three years, I had at least a hundred thousand dollars of cash value built up in there. And, I always try and keep my liquidity low in my bank.

 

You never want to have too much cash making nothing,  that’s why the next money is in your infinite banking policy to cash value where it’s making it a nice little tax-free yield that’s the first component of why, we’d like infinite banking so much when the money is in.

 

 I would call this a government in full, but it’s just for some strange reason when it’s life insurance, your yields, there are tax-free.  That’s a place to store my liquidity. And then when I need to go into a dealer too, and  need to drain that liquidity, I have it, but at least it’s not sitting in my normal checking account savings account.

 

Not doing anything.

 

The guaranteed growth. The use of the whole lot. Insurance. It has a guaranteed aspect of it.  Current gross rate of that is 4% that is about to change, but the policies are ranging from three, three, 3%. It’s three and a half percent uncorrelated  not tied to the stock market directly.

 

On some policies you may have the choice and you can be in control of that, of how much funds are correlated. But one of the main benefits for investors that this is not correlated to the stock market  

 

protection.  It is a product. So there is a life, the death benefit portion of it. But in addition to that in states, It varies, but there is also some liability and bankruptcy protection with the cash value or the death benefit over your policy.

 

 Some of our doctor clients, what they like to do is they stuff a lot of cash in here mainly for this protection aspect, right? There’s all these different asset protection strategies out there. There’s not one that’s going to get you to trying to build your castle with multiple layers of protect.

 

And diversifying. So by putting some money into your life insurance policy, you’re shooting at one part of your portfolio, your network. Yeah. And  the liquidity, that’s one of the main appeals for investors where your funds are not tied up. You have access to them.

 

And it, you would have access to it in the forms of policy loans, and that’s what keeps it also tax-free where you have access to the growth and of your policy.  I think a lot of us, myself included  my wife, Tyler’s wife, we all got swindled at some point in our early twenties, maybe early thirties where,  a long lost college.

 

Classmate or high school classmates calls us up for lunch and China’s and stuff us into one of these badly customized, full life policies. Typically the way that they’re structuring it, it’s not built with good liquidity  customization, as you can see this is a lever here. There’s. If you were to imagine there’s different ways, you can customize these different components.

 

 A lot of these guys, they will ratchet up like the growth rate, but that’s not the point, right? The point is we can get much more, better returns outside of these policies. So this is why it’s counterintuitive to a lot of these life insurance agents who just aren’t real estate investors. And, we’re just glazing over the top.

 

A lot of this stuff, a lot of this is in that infoPage@simplepassivecashflow.com slash bank. You guys can get access to the e-course for free there. And then, we’ll be doing that cram school later on where we get to go into this in more depth and ask any particular questions.

 

 I can summarize, I  the purpose of this is basic to really emphasize. That it’s really the design of the policy. That is the most important factor. You could have the same product at the same insurance company and they would perform much differently and that’s all based on the design.

 

Yeah. And this is the classic. Hey, let me just shoot Layne an email ASCO, Hulu, the CPA lower he’s using, or are you guys going to. Mass mutual Penn, whatever, like top AAA rated life insurance company. And let me just go work with them. Whether you work with them or us, like everything is the same except the design.

 

And that’s the critical part of what we’re talking about here.

 

 I can cover this all. There’s two main factors of the policy design.  The two things you must maintain, so instruct to keep it an insurance product, which then reaps the tax benefits of it and the tax treatment. You need to meet some IRS limit. So there is some limits in there and you people may hear the modified endowment contract or the seven pay limit that keeps it an insurance product where it’ll be tax favored.

 

And along with the design maximizing the cash value. So you have the liquidity early to go use and do investments as you choose. And those are the two main levers  in the design that you’re playing around with  and, way back long before there was simple, passive cashflow, a lot of smart people figured out that, with being life insurance, you could have your yields in there grow tax-free.

 

And of course, there’s always people out there that get a little greedy. So that’s where the government started to put these limits in there that you have to have a search and above the actual life insurance,  you don’t get a dollar of life insurance, but stuff like the zillion dollars in there and still make it tax free.

 

People did it, which is smart actually, there’s limits to it today. And this is what we’ll go into more detail  in the e-course and then in the cramps.

 

Yeah. And just that IRS limit that’s based on the insured’s age, gender, and the amount of death benefit there is.  We’re designing it a specific way to minimize fees. The death benefit is needed there in order to be able to max fund it to your targeted amount that you want. And one common question that comes up here.

 

Some people who think that they’re older in their fifties, sixties,  they think that this is going to be more expensive.  And then, guys are typically a little bit more expensive than females for some strange reason.  Really at the end of the day, it really doesn’t matter.

 

Like we’ve compared policies from, 30 year olds  and 50 five-year-old.  It the cost of insurance really doesn’t matter. And why is that? Again, we’re not really doing this for the death. Hey, out again, we’re just, we’re doing this just to call it life insurance and the bare minimum so that we can have this policy book tax-free to be able to stuff cash into it.

 

And that’s, I think where a lot of people, they missed the boat on this. This is, yes, this is, there was a debt payout for it. It is life insurance. But that’s not the purpose. And that is why, the agent, the gender, and, people also say Hey, can we ensure my kids will talk all about that type of stuff?

 

And the e-course in the webinar,  this doesn’t really factor too much into the cost of this.

 

And the the second main limit other than the IRS limit, when designing that we have to be careful of is just the individual policy limits. Each individual company has  some limits. And specifically one of the main ones that they’re starting to limit is the amount of paid up additions, one can put in.

 

So each company has different limits.  For example, one company may have, you can put up  five times the base premium or 10 times the base premium. We just have to design it accordingly for that specific company. And that’s where the flexibility comes into play. That helps decide  which company is best suited.

 

 This is when I was learning this stuff. This stuff gets to be really complicated and it changes all the time. When I was just learning about this, I thought it was pretty simple, this is something that I learned and realize, we need to have somebody that’s under the umbrella of our group.

 

Kind of be on the look out for all , these changes. Coming down the pipeline to keep us out of trouble, but also optimize getting the best policy for our situation.

 

  Where does your payments go? So every year there’s a premium payment. There’s two main places that your money goes. One is to the base premium. So that’s basically to cover the cost of the insurance. That base premium is specifically what we want to drive down as low as possible, because that is a pure expense to you as a client that paid up additions, that’s really a cash.

 

Very little fees on that. , you almost see one for one  cash value increase on any paid up additions that you contributed.  There’s different premium splits. Some people may hear, 50, 50, 30, 70, 10, 90 traditional whole life.  Normally you may,  have seen in the past, that’s really a hundred percent.

 

 Base premium. That’s why it takes 15 to 16 years, maybe for you to break even  on your cash value for the amount of premiums you paid. And we’re able to  modify that so that, you’re breaking even sometimes years, between years three and four, five, usually at the end.  And that’s the use of this premium splits was also introduces a lot of flexibility that you may have throughout the year.

 

 Most of the credit investors over a million dollars net worth, they’ll probably do a policy where they dump a hundred grand in here. Add another couple of zeros onto them. And again, what, the way we’re trying to do it is we’re trying to minimize the amount of base premium. So the paid-up additions can build up our cash value so that we can take this out the next day as a policy loan and stick it into a multitude of different deals that make a much higher yield and sort of the industry secret of life insurances.

 

If you’re a sales. And you’re just worried about your commissions. You try and trick your clients into getting as much base premium, the more life insurance, but that’s the complete opposite that what we’re trying to do here with simple passive cashflow banking. Not that we’re,  we want to maximize the paid-up additions, typically going much better than a 50, 50 premium split.

 

That’s less insurance premiums and fees for us. But that’s better for the client at the end of the day, so they can keep most of that cash value, but that’s typically what’s wrong with most normal, full life insurance. And I think this is why, Dave Ramsey, all these online, Google’s kind of actually demonize this stuff.

 

And I went to if you’re doing like a 50, 50 premium split and a lot of this is going to your base premium, this is where most of the commission certainly calculated.

 

 This is an extreme example that 10 90 premium split, in some cases, some of the people in the family office group have found that the 70, 30 premium split is actually better. That’s an I actually use,  this is just more of the extreme about that example where you’re still complying with those mech limits.

 

So you’re getting the tax free treatment. But you’re stuffing as much money into the cash value and you’re minimizing your feet on this side.

 

One unique way that someone explained it to me, as far as understanding the premium PUA relationship was relating it to your house. The base premium is like your mortgage. So that’s an expense or a cost that you have to for your house. 

 

 By slowly paying down the principle. So base premiums does add a small amount of cash value. Just like how paint on your mortgage slowly pays down the principal. You can think of your paid up additions as if you were to do a renovation where you spend, $50,000 to renovate the kitchen, that $50,000 spent on the kitchen basically increase the value of your house.

 

Hopefully not almost exactly the same or even more so that’s the home relationship as far as the base premium, paid up additions to mortgage  and our renovation. Again, different ways to understand this and to me personally, and it really took me about a year and a half to really grasp this school.

 

And the differences between typical whole life insurance, configuring it in a way and using it in a way that the wealthy do have for some of you guys use that strategy where you’re taking a hilar out on your mortgage and paying down your mortgage with simple interests versus amateurs interests.

 

It operates in a very similar way. And in fact, when you’re using a whole life overfunded or infinite banking or whatever you want to call it, simple passive caching that. It is superior to using a hilar in my opinion.  And I actually think that’s, this is a lot better than using a 5 29 plan for your kids’ college savings too.

 

 How do you access the cash value within your policy? So that’s in the form of a policy loan  with the low interest rates, there are other ways also of accessing the cash value of basically collateralizing your cash values through a traditional.  That is also an option, but for here specifically how a policy loan.

 

 This is a loan you’re taking through the insurance company.  You’re basically utilizing your cash value that you have in there. You’re usually able to take about 95% of that cash value in the form of a policy loan. Your cash value actually stays there in the account. But your death benefit is collateralized.

 

From the insurance company, they’re basically able to give you the loan because they know at some point.  If you pass away and you don’t pay back the loan, they’ll basically just decrease it from the death benefit of your policy. So whenever you take out a loan there’s an interest charge to it.

 

However there is no payment or set payment plan. You are in control. You can choose to pay it back or not.  Very similarly to a Heela. They’re very similar. And tie it in with the other slide up here. This is the cash value, right? We’re stuffing money into the cash value.

 

And this is what we’re taking the volts out of to put into deals. If you want to buy jet skis, at some point, you can use the money for that. You don’t have to ask the bank or tell the bank what those annoying questions that the hilar  application always has. You’re in control.

 

And, some of the people in the family office group or, going to another bank and collateralizing this cash value policy getting anywhere from both 3% interest rates. And for some of you guys who are good business operators who drive your adjusted gross income very low at the same time, it screwing yourself by not being able to get a loan for a home.

 

This is a great way you buy the home cash. But you dip out of your cash value of your life insurance policy to essentially put debt and, get your leverage up, which is always a good thing. If you can pay your debt service.  That’s just one of the merit of different ways that we’ll go into more detail and we’ll ask individual questions on the webinar next week.

 

But, this is if you’re seeing how the wealthy are doing things, it gives them a lot of options and it’s something that they control that they bank from themselves.

 

And this slide was basically just go over an example. If you were to take on a loan to invest in real estate. You can create some sort of arbitrage use of the cashflow from your investment to also cover your debt service team for the policy loan. And as Leanne mentioned, one of the, one of the big benefits is that the policy loan interest is calculated as simple interest.

 

The cash value continues to grow in your policy, but it’s compounding interests or compounding dividends you’re receiving.

 

A quick policy example. So this is for a 50 year old male.  And when you’re looking at this, the target amount that this individual would want to put in is 50,000 per year. So you’ll see that. And then the breakdown of the, that amount is pretty much a 10 90 split. So the base premium is here.

 

 The 45 45 is what is required annually. And that’s 10 per that’ll cover the base premium. And the about the 44,000 or 45,000 of P Louise is truly unscheduled, or you’re able to stuff that in throughout the year  here shows it where you’re funding it for seven years and you are after that seven years, we’re basically doing what you call a reduced, paid up option.

 

So you’re eliminating any additional premiums needed from there on out. And then you’re just letting the cash value and the dividends girl throughout the year.  On this specific policy, even as of 50 year old, you’re breaking even at around year five. In cash value or between years four and five.

 

 And you from year one you’ll have liquidity or your cash value is about 88% or so of what you’ve contributed. So you still have you lose some of the quality up front and that’s the cost. That’s the main cost of starting these policies. But from then on, it truly feels like a deposit where that 50,000 you’re putting in every year, your policy cash value is growing by larger than 50,000 from year two on.

 

And this is I think this is where people get very confused, right? Because the difficult part of this industry is an insurance agent and ratchet up and take whatever fees they want like a home loan, but worse. So that the way.  Shop this stuff around is to figure out what Tyler is saying.

 

That break even point when dad is, that’s the quick and dirty way of comparing policies and colors always does that for our folks. We always beat them anyway, but  that’s the quick and dirty way of comparing the policies that you have now. Of course, there’s some, different nuances with certain kind of exclusion.

 

That different types of more flexibility of one year being able to pay your rider or the other you’re taking off those types of things that we’ll get to more detailed in the e-course and the webinar, but,  for the most part that’s, if you just ignore one thing from this little webinar

 

A question we also get often is what, the policy loan rates.  The normally most insurance companies for their variable interest rates, it’s based on the moody AAA corporate bond index.  Granted we’re in this super low interest environment. It’s two point something percent, but the company also has their floor, their limits, as far as how low their policy loans will go.

 

Most of them are all at the company policy floors, which is hovering around four and a half or 5% as far as their variable interest rates.  The company declares these rates annually, it becomes effective on your policy anniversary date. It’s that policy anniversary date may be different for everyone yet.

 

The company does declare it annually.  And the good news with it.  If your variable interest rate can increase by more than 0.5% every year. But it can go down. It has no limit on going down, but keep in mind that, the corporate bond index that, that, that doesn’t fluctuate, like what normal interest rates fluctuate.

 

 It is a slow moving number. But there, there is some safeguards in there where you’re not sure. Get blindsided by this large increase in policy loan rates. 

 

We have a lot of FAQ’s that we’ll talk about in the e-course, here’s some of ’em, the difference between the whole life and term life.

 

I’ll talk about, when you use one or the other  we also discussed IUL, no, people always have that question and that’s the way we do, everything is a lot of this is products. But when is the product right for you? I honestly don’t care which one you use.

 

It’s I care when it’s the right one and I’m the person let’s say when you do term, when you do whole life, and the such  we’re going to talk a little bit about.  There’s a lot of rogue insurance companies that have really like loose standards, , it doesn’t make sense when you actually are with a company you want to be with a secure company.

 

We’ll talk more about that small insurance companies for as large insurance companies. Talk a little bit about different ages, who to get the policies on a lot of business owners out there. This is definitely something to think about, getting it on key employees.  This is what all like the big boys, like Walmart.

 

Talk a little bit about taxes. And again, all this is in the e-course  which you guys can get access to@simplepassivecastle.com slash banking. And we’ll talk about this on the webinar. We’ll be going to the cram school format. We go into this stuff that much more to tell us.

 

 Here’s the big picture and the toddlers, you never seen this slide. I made this yesterday.  This is the roadmap here. Step one, put a hundred grand in and not say you got to do that, right?  We help you figure out what’s the comfortable level for you to start.

 

When I first started doing this a few years back, I did that $50,000 a year for six years.  Today I’m doing a much larger one and I always tell people to start off small and probably, makes more sense for the agent to have you do a bigger policy than you’re comfortable with so that you can teach him to collect his commissions.

 

That’s not where we’re about here. We want set people up, you stuff a hundred grand in there in this scenario or 10 grand or whatever you want. Step two, you start to establish a banking firm yourself system, and you are able to take a big loan from that cash portion.

 

 We’ll talk more about detailed on the next in the e-courses in the beginning is when it’s,  the cash value loan is going to be the least. You’re going to be able to take the lease out in the middle. But as time goes by year two, year three, you get typically 90% of what you put in and your 4, 5, 6, it’s essentially everything.

 

 Again,  these are front loaded into this stuff, but in the first year, just to using that as an example, as being the worst case scenario, and you’d take that 85 grand on your original hundred grand, we stick it in a deal and you make more money that way. Step three here, you’re leveraging money in two different places.

 

 Step four is once you’ve act, once you’ve invested the money into a deal or you’re producing income there, which is paying back the loan, right? Just if you would have taken the money out of your heat, lock out of your house and invest it in deals and use that money, the payback. Or what a lot of people just simply do is you just take it a little bit extra and put it on the side.

 

So they’d know they can make their debt payments for the next year or two. That’s just more of a mindset security thing. Like Tyler says, there’s a lot of flexibility on paying back these life insurance policies.  We’ll talk about  worst case scenario, which isn’t that bad, not paying back your principal and not paying back your.

 

It’s not the end of the world. It takes a lot for the policies to decay it. Cannibalize itself is the term that we use. And we’ll talk about exactly when that happens. When you’re customizing the amount of your policy, those are the things that you did have in the back of your head to be able to meet your commitments.

 

 And then the step five here, you have your income generating assets paid back the loans of the policy.  Or like they said, just keep that stockpile on the side and just pay it back when you want. That’s what I do. I’ll take a loan out. I’ll go into a deal. I’ll take a loan out and I may not pay it back for six months or a couple of years.

 

I just whenever I get a glut of money or when the deals exit, like we just had a deal exit a little while ago, Tyler was limited in that one. That’s what we did. We take that money. We put it back into those cash. That’s how we use these policies. Really no real motivation to really payback the policy because it’s ours.

 

 Life happens here, a little cone I put here,  so you have unexpected expense loss of job. College savings. Use this cash value as your emergency savings account while let’s making yield, give a nice four or 5%, but it’s making a tax.  In actuality, you could probably argue that to making five, six, 7% potentially, or even 8% for somebody you hide in cupboards is not there.

 

, step six is,  grows over time. And then you start to get a handle how to use this account, right? Like I’ve gotten a handle how to use it. I take it out. I put it into deals when it deals cash out. I put it in here, but then I go into two more deals. In the time being  it becomes a very fluid kind of state and it’s very similar to it.

 

You guys have gotten really accustomed to managing your passive activity losses on your taxes to offsetting your capital, gains it, depreciates recaptures on deal exits, and then a sub seven all this time. You’re enjoying the benefits of asset protection. And at the same time, if we always joke, if I died or toddler died or wives are gonna be,

 

 it’s sad, but they’re going to be set. I always ask what would you do if you had X amount of money? If I die, she just tells me to go play theater again, but yeah, you’re setting them up. And  it, we’re technically not doing this for death payout, but that’s some of the, also the benefits to them.  And Tyler, is there any kind of other he wants to get assisted living benefits.

 

There’s disability, there’s all these types of things that can be put in there too.  Definitely. I think the biggest thing is truly the flexibility  the flexibility of funding, the flexibility of what you can use it for, you are in control.  Personally, this has replaced the five to nine a long-term care plan.

 

All of those other things that I would normally contribute to where it locks in money, or even remember my retirement plan all of these will cover that you’ll be able to contribute. It grows. We’d like to call this the, an asset where you’re doing this in addition to what you were doing already.

 

 You don’t have to choose between a policy or a syndication deal. You do the policy and you do the syndication there layer. So you’re just enhancing what you were going to do. Already, but surely the flexibility if it’s properly designed allows you to choose what you’re going to do with this and allows you to set it up super benefit, your self while you’re living along with legacy planning for your beneficiary.

 

And in the course we’ll outline all the advanced strategy. What people typically will do. They’ll dump in a bunch of money the first year, sometimes based on where your birthday is, what part of the year it is, you can backdate and double this about and get her to the jumpstart on it.

 

And then, these guys are dumping money in there quick, so they can quickly put it into the next deal.  Usually it takes another like a week or two to get this stuff really wrapped.  Get all the banking relationships, direct deposits all set up, once it’s all set up, it’s as simple as calling up that life insurance company or just going into their online portals.

 

And in that direct deposit to your account, then you are off your funds that you signed your PPM and other certifications.  You’re set, you’re making money to places and, that’s where we get to at the end step eight, you stop worrying how to grow your wealth because you’re optimized.

 

What’s the passive cashflow is it’s not that hard. What we outlined here is exactly what the wealthy do, but it’s a little bit of a twist, right? We’re using the same technology, the same product that is full life insurance, where we’re configuring in a very special way that benefits what exactly what we do.

 

If you guys are real estate investors or you invest in other types of deals.  This is your jam guys. This is exactly what you guys need to be doing to augment and make money at both places and get the asset protection. But even if you’re not real estate investing, like Tyler said, for a lot of people, this replaces the 5 29 plan or any long-term type of insurance options, or just a place where you just get cashflow building up.

 

It’s a lot better than in your bank and it’s something that you can try.

 

 But anything else you think I missed out Tyler? No, we’ll go over a lot more in details and answer specific questions during the e-course. Make sure you guys sign up here. If you guys are listening to this video or after 20 20, 1 of just check out this website here, it gets signed up for the free I-Corps.

 

And if you guys have any questions contact information, this was up here earlier.  We always tell people, get educated  and then we can help you guys out, whether it’s taking a look at your current policies or  getting you set up with fresh new ones, get this infinite banking set up for you sooner set up.

 

Thanks for listening guys. And we’ll see you guys next time. 

What Type of Company to Choose [Infinite Banking FAQ]

https://www.youtube.com/watch?v=48JCThIKbJE

Tyler, what type of company do we choose?

I was speaking earlier about the different types of product. In regards to the company, the importance of the company is you would want to focus and look at a mutual insurance company versus a stock insurance company. A mutual insurance companies are where the policy holders are basically the owners of the company.  Whereas the stock insurance there’s actual stock, and  shareholders are the ownership of the company. So there’s a conflict of interest there. There are basically four large performing mutual insurance companies where they have a proven track record on actual payouts not just illustrations and those for New York Life, Northwestern, Mass Mutual and Guardian are the top four companies when looking for that.

Again, it’s not only the company itself and each company has maybe its own different quirks and pros and cons. I don’t want people to get so caught up on the actual company because it’s the product. The process is also much more important than just the company itself. Policies within the same company or products within the same company if they’re not designed correctly will not serve your purpose. Might not be beneficial for you.

So the mutual insurance companies are those four that you mentioned?

Yeah.

Is there like a website we can go to? Where it’s like they are rated.

I think you could just go, you could Google top rated insurance companies, mutual insurance companies. A lot of times it’ll be a blend of the stock insurance and mutual insurance. It’s how they rate the companies could be different and even though at the top four a lot of them have their quirks. Some have flexibility in the sense of funding period allows a lot of flexibility there. Others have funding each within the year. You’re flexible. Some of the loans are handled differently between the companies. Some of them have different online portal so it’s not just the product itself. There’s some of those soft things that maybe make a company stand out for you personally.

And so the mutual insurance company is the ones that we’re used to. And I think some people will say, oh, they found this other company that has less requirements on the health screening and stuff like that. Those are like your lower level ones.

Very worried about a insurance company that doesn’t have a stringent underwriting process because it has a policy holder for a mutual insurance company. You are the owners of that, you want the insurance company to do well because you receive that back in dividends. And there may be some smaller insurance companies willing to forgo, maybe under medical underwriting, take  a little bit more risky clients on. But that may hurt in the long run as far as the policies overall.

If you guys have questions on this particular question, type it into the chat.

Importance of Policy Design [Infinite Banking FAQ]

https://www.youtube.com/watch?v=vYF5AaASUgk

Importance of policy design.

Touched about it earlier. As mentioned within the company, there are different products. There are limitations. The first one is an IRS limitation. Again, it’s still an insurance product. It has to be considered an insurance product in order for it to maintain its benefits.

You’ll hear it and if you exceed that it will become a modified endowment contract and it’ll lose those tax benefits. That’s something I mentioned earlier about MEC or the MEC. Then how you design the specific product, I think  for IBC or at least for a lot of the investors there, the main goal is to have the maximum cash value.

The death benefit is a feature of the product and it does help with generational wealth and legacy planning as well. But as far as the main design efforts, you’re designing it for maximum cash value. And the death benefit is a secondary benefit from that. Versus traditionally, when you design insurance products, you’re looking at what kind of death, the maximum death benefit you can get for the smallest amount of premium. IBC turns that upside down and says,  “how much funding do you want to put in for maximum cash value growth?”  and the death benefit is a requirement needed in order to maintain those taxable or the favorable tax requirement.

And so it is very counterintuitive and this is why Dave Ramsey says that whole life is a scam. He doesn’t know the legal way differently. And then the other lever that you can play around with is you can make a policy where you get big, higher interest rates. If you’re doing like an IUL policy comes in order for her to be able to talk about today. That’s when you start to skew the policy more for higher returns, the stock market. But when you do that, then you give up what the whole point we’re doing that for, which is to maximize the cash value to invest in deals and stuff like that.

Yeah! One more part. I did add down there with flexibility especially with investors and maybe non steady income, the flexibility becomes a huge aspect as far as what you need to fund annually in order to keep the policy enforced. You want me to have some flexibility in that year to year to help you withstand maybe some of the unknowns or the maybe large capital events that happened if we’re investing in syndications, for example.

The Two Main Policy Limits IRS/MEC Limit [Infinite Banking FAQ]

https://www.youtube.com/watch?v=5L9LH9t1_WE

Next question here, the two main policy Clements. Maybe define the MEC, what is MEC?

The MEC limit is really something that came out in the eighties from the IRS. That prior to the eighties, before the 7702 rule, you’ll hear that also is that there was no limit as far as the amount of funds you could put into a policy. The IRS put a cap on it and it’s really just a calculation based on the person’s age, gender, and death benefit. And it’s a ratio basically how much death benefit is needed. For that policy amount and it’s a seven year. And so they’re saying over that seven years, this is how much, the maximum amount that one can put into a policy with this death benefit and still be called and be considered a insurance policy versus prior to that law, someone could just put in a dollar premium and then put a $20,000 of paid up additions or the cash value part of that, and still be considered insurance. IRS put a limit on that. So that’s the big IRS limit that we do not want to mess around with in that sense. And it is a seven year lock so that’s where it may be called a seven pay lock or a MEC limit. Those are all basically the same.

Yeah so I’ll explain it a little bit different. I don’t know if this is the true story. All these politicians are making these laws to find ways not to pay taxes and they created this life insurance, but then they start to stuck all their money away. It’s like insurance policies, but that’s where the equipment strengths of this stuff at the whole thing.

The second limit and this is company derived. It’s the paid up additions limit so you have that the MEC limit and then what you hear is the paid-up additions limit. Two main companies we use, those limitations usually is one company is 10 times base. So if for base premium say at $10,000, you could put up to 10 times that in paid up additions  which is basically a cash dump. So you could put in $10,000 of base premium PUA, you could put in another a hundred thousand and PUAs  and that’s the company limit. Another company we use a lot it’s the 10-90. It’s 10%. It’s not really 10 times so it’s the 10-90 split is the max. If you have $10,000 of a base premium, you can put in up to 90,000 in PUAs. So it’s slightly less, but again, those are policy or insurance company limits. And then there is some flexibility. And that’s what you mentioned or Nash mentioned earlier that we’re just testing that out because essentially if you have a longer funded period that you’re able to maybe put in a little bit more and the companies have allowed you to do. Granted, you’re still locked into the target amount.

For Nash’s example, 116,000 for 10 years, that’s 1.116 mil total of funds who wants to put into the policy. If he puts in 150,000 year one, which is under the MEC limit, he’s not going to be able to continue to do that for all 10 years. So the maximum would still be 1.116 mil. So in those later years, he’ll be putting in less why he’s doing that would be because you want to front load the policy, have the compounded dividends start earnings earlier and it’ll have a greater effect down the road. So that’s one of the benefits to it.

The Two Policy Limits: EPP vs. PUA [Infinite Banking FAQ]

https://www.youtube.com/watch?v=–yDzBkzT5s

We had a question here, follow up question. This doesn’t apply with EPP. Maybe define what that is too.
I think every company cause has different names for PUAs. So I’m mainly familiar with guardian and mass mutual, they call it unscheduled and scheduled PUAs. That guardian mass mutual has ELAR additional life insurance rider or Lisser life insurance supplemental rider.

Matt, can you explain the EPP PUA? Is that like a scheduled PUA? 

It was my question but  from what I understand a PUA is that it was with Penn mutual, but they’re saying like what the EPP PUA, you said like their traditional would be seven or eight years pay then after that you stopped that.

But what the EPP PUA, you’re able to keep the max fund or a longer amount of time. Let’s just say, you put with an EPP PUA where you do a maximum of a hundred thousand and after that seven year, eight year limit, you can’t do the maximum anymore. You can only do a certain amount of that. But with EPP you can set up for a longer period of say, 20, 30 years, if you wanted to.

To me, it just seems simple. if you plan on using this as a bank account for the long run anyway, for investment purposes, that would make sense just because you already have a policy open, you can just keep funding it for the rest of your investing years.

Got it! I would say mass mutual is something similar in the sense that their funding period is flexible, where you can go lock, 20, 30 years flexible.

I think it’s just different. They call it different things. I would have to look specific at that and I have some pen-pal I’ll go look at the true definition and probably reach out specifically without, or send it out to the group.

I think, as Tyler said, like all these companies have little nuances, right? Like I got a Penn and I’m aware of this,  like you say, you can keep paying it for awhile after your initial period of six or 10 years, whatever you set it up based on your situation. But the downside that they have is that you got to keep putting to it every year where like a guardian, they don’t have that long-term flexibility. But you can choose not to pay the rider one year and take a break. It’s different. I think this is where you have to look at multiple policies and figure out based on your situation. Some people in the group are business owners, right? Business owners have a lot of variability in income. Whereas if you’re just a straight up salary guy, you may want that more. Their cashflow is very stable. Therefore you’re not going to have these big fluctuations so you would rather do that arrangement where you don’t have that flexibility, but you have that long-term flexibility in that respect and policy is changed too. 

When I was choosing between, or when I was building my policy, I looked at both or I spoke to the agent about doing both an EPP and EPP PUA. Both of them, you have to make the payment so that the premium don’t lapse the contract. They both had the same catch-all provision where you have one year, where if you don’t make your fee, you can fill it up the next year too. If you were to not do it, then you would lose it. In terms of losing that rider and had to average a certain amount over any three year rolling period. It’s not really where you can have if you were to miss it one or not. It’s an average over three years, but I opted with the EPP PUA  because my funding, I could max out my PUAs for 62 years. So I started when I was 34, I can put in 120 K every year until I’m like, a hundred. And what I was told was the ROI is 0.1% about 0.1% less, but that  will essentially make up for it in some flexibility of making the payments and being able to do it for longer. A sacrifice for a little bit of return for more flexibility and being able to max stuff more.

Yeah.  I think I might’ve talked to the agent about the same thing and he pretty much said that if it came down to it and you really wanted to stop paying, you can say after the eight year mark or whatever, just say “This is paid up now and I’m not going to make any more additions to it”. Obviously, then you can’t add anymore, but that’s where the flexibility is.

And I think, truly, it’s the policy design, because the flexibility means different things or has different values. Someone wants to have flexibility of the different amount of being able to put in different amounts throughout the year, or they want to be able to put it in for a long time. Those are the main two different flexibilities. And I think there’s multiple companies. Each company has its different benefits based on their policy limits. Just keep in mind that for that long funding period, I think as Lane mentioned it and Matt also it’s yeah, three years. I think they do a look back three years on that average. So say maybe you, you had the ability to fund it a hundred thousand if over that three years, that average you only funded it to 30,000. From that point forward,  the max you can fund, it would only be up to that 30,000. It drops down. Just be aware of that. Now I get it, I don’t think there’s one pro or con there there’s one better than the other. It’s really what your goals are and what you want to achieve that. 

The good thing all you guys have set up and it gets always constant. It’s always there. I don’t know. Personally, I always like to move stuff around every so often. It’s the more radic so that kind of just fits my style.

I don’t want to speak bad about any other companies. I would say there is a company where you’re able to not have that three year look back and still have a pretty long funding flexibility, and maybe not 60 years that 20 or 30 year mark, where that’s a pretty good funding period for the purposes of this.

My question directed to what we were talking about was, you were talking about being able to stuff a little bit more. You have those new fixed funding periods and I think in that other scenario where you have the long funding period, that the same thing doesn’t apply. You’re already at the max. You’re hitting the max every time.

Got it!

I think some people, they just don’t want to get a another health screening cause they’re freaked out about not passing or something like that or they just don’t like health screenings so I could see why some people don’t. We just want to set it, forget it.

Or if you’re going to plan on getting out of the policy, you would have to pay expenses all over again.

Impact of 7702 Rule IRC [Infinite Banking FAQ]

https://www.youtube.com/watch?v=dA8Iv8zJON4

Next question impact of the 7702 rule IRC.

This is the IRC change rule that just came out in December of last year. It goes into effect. Now, basically the insurance companies, they were mandated to provide a guaranteed gross 4% rate that will no longer apply for products in the future. The companies will be able to choose anywhere between two or 3.75% so it allows some flexibility for the insurance companies. Now, again, this is the guaranteed rate, and this does not talk about the dividend rate. So dividend rates for all insurance companies are that above and beyond the guaranteed all strong insurance companies have been paying dividends over the past 140, 150 plus years.

So no insurance company has really been operating in the guaranteed environment but the true impact may not really be seen. But the insurance company is now no longer needed to provide that 4% guarantee. The true impact is also still hazy for most of the insurance, the whole life products have not come out with their new product yet so this is a relatively big change. The insurance companies are figuring out what to do with it. What may happen and what people are starting to see is that it made decrease the cost of insurance premiums may go down and this could also increase the MEC limits which may seem good. But again, for our purposes, we’re trying to stuff in, I think, desired amount of funding if the MEC limit increases.

So that means that I can buy more death benefit with less premium when we’re qualifying for insurance, that there is that income limitation. So it’s not, if I only make a hundred thousand a year, I can ask for a $15 million death benefit that there is some qualification, as far as income with a higher MEC limit or lower premiums, someone making a hundred thousand. Typically when you’re in your thirties, you can have a death benefit 30 times that when you’re in your forties and fifties, that drops down to twenties. And when you’re older, that drops down to 10 times. For an older person, you can only get 10 times your annual income. So if I’m making a hundred thousand, the death benefit I can get is only a million now.

And because your premiums are lower, you can’t stuff in much money. So it may seem like it’s a good thing. It may limit how much funds one could put in if they’re on that threshold. But it also may not have impact to most people, that it may just have a smaller impact than what people are anticipating.

Companies do need to have a product out by the end of this calendar year. And usually when a big change like this happens, anyone who recently got a policy and it may be looking back as far as having one issued in 2021, you’ll have the choice of shifting over to the new product if you want to.

There probably be also a grace period as far as when new products come out. There’ll be maybe a month or two, where if someone applies. Yeah. In that time period, there’ll be able to choose the old product or the new product. At this point, a lot of the four major, or even with mixed plan into that, no one has come out with any product as of today.

And we’re looking at probably the end of August for the first ones to start coming out with that.

Typically these newer products aren’t as good as them?

Yeah. Typically you may add some flexibility. So for example, the P wave limitations, those are things that have dramatically got more stringent over the years, purely because insurance companies are recognizing that they’re not making a lot off of it. That’s just a cash dump. So they’ve started to limit those rather drastically. And as Lane mentioned, usually newer products are not as favorable as the older products.

Best time to invest as yesterday. It’s time to make an IBC was yesterday. My guess is like the rates are lower today. Overall people are starving for yields. That’s just my quick guess lie that grades are drop.

This helps definitely the insurance companies and so again, with a mutual insurance company that gets transferred back to you in the form of dividends. It’s not all bad. There’s bullies coming out, bank owned, life insurance products. Those have come out already on the new law and people are not seeing as much impact as what they thought it was going to be. It’s pretty much in line.

Part of that has to do with a guaranteed is just a guaranteed rate but that’s not the dividend. Maybe you can talk through when people are looking at big paper, like they’re looking at the guaranteed rate and there’s actually rate that is  paid.

The guarantee is I guess the worst case scenario and like the company declares no dividend typical dividends of the insurance companies right now range between five and a half to 6%. That’s not four plus five. That’s just the difference. So like one and a half to 2% over the guarantee is the dividend. What the companies are providing above the 4% as mentioned earlier, no company has been operating in the guaranteed or only  providing zero dividends since existence. And you’ve always been paying out dividends through all the, the down cycles. We did not anticipate a company saying they’re not going to be providing any dividends. So even if a company claim their guaranteed rate drops to 2%, it’s not saying that their dividend rate will drop by that amount also Dividends will probably remain pretty close to the same.

Explain this to me, some people, they show me their policy and then it’s like a high rate, but then I look at this company is like some random, like no documented medical screening company. There can be like a bait and switch right on that rate that they show on the paper.

When a company says 6% is their dividend rate and another company says 6% as a dividend rate. The actual pay out or the actual return may be different, even though the stated dividend rates are the same. The reason for that is because these are gross rates what’s embedded in, it is company expenses, mortality costs, commissions, and each company handles that differently.

And that’s really the proprietary black box that even as an agent or broker, we don’t really have privy to that. Those costs vary even though illustration may show a strong return. That’s why those four mutual companies are what we heavily use, because those have actual performance. The actual payouts have been more in line with the illustrations versus just illustration that may look good and the actual performance may not be the same.