On today’s podcast, we are going to be replaying the almost two hour long webinar that we did on the introduction to infinite banking. Now, if you guys wanna check this out on the YouTube channel, go to simple passer cash flow.com/banking. And you can access the YouTube video there. So you can also go along with the slides. I wanted to leave it here because I think a lot of you guys are audio learners and also the team has gone on the road this past week.
Depending on when you’re listening to this audio we are either getting over our October 1st Napa valley hangover. Or we are already doing our property tours and our grand opening party of our new Chase Creek apartments in Huntsville, Alabama.
If you guys have been trying to get a hold of us to book your introductory calls with us, we can get to know you a little bit better. Please get on that right away because my schedule is booked up as I get back into the swing of things later on in October, but super happy to meet all of you guys in person.
If it’s not too late, please sign up for that October 6th, seventh in Huntsville, Alabama, If you really like this infinite banking concept again, you can go to simple passive cash flow.com/banking, and you can get access to this video, of course, but you can also get access to the two to three hour long eCourse where you can go through each of these sections. We dive into a lot more detail in more, a readable and short video.
Format. So if you guys put in your email address in there, it will get you access to the closed end member site where you get access to infinite banking eCourse enjoyed this webinar that we.
Welcome everybody. This is the intro to infinite banking. Here’s what’s gonna go on in the next couple hours. We prepared this deck and we added a bunch of slides, including some use cases. I also look at my working sheet here that I use to keep track of my infinite banking.
And, when money goes out alone, it comes back. But this is meant to be a CRA school for a lot of you folks. We see a lot of familiar faces. A lot of folks who’ve joined us recently and the infinite banking is new to them. Even some people who have policies on the line today it’s always good to review a little bit. But I would say we’ll knock this out in under an hour’s presentation, but we’ll have time for plenty of questions.
But just a little bit of background on myself. I grew up in Hawaii. Seattle’s 2003 to 2017. I Have a wife, a child, a dog and a Ford Raptor are the things that I have these days, no longer an engineer and then real estate. I started with that first rental in 2009, and then I got up to 11 rentals in 2015.
But since then, as the investor group has grown 1.2 billion to assets on their ownership, 8,500 units, 55 projects, and about 95, 90, 95 people in our family office group. That’s our inner circle mastermind group. And also joining me Tyler Fuka. Why don’t you introduce yourself a bit, Tyler?
Yeah. Hi, I’m Tyler Fuka. I am also married, have two boys. I do have a dog. I forgot to update that. I grew up in Hilo, Hawaii. Then I went off to the University of Washington to study engineering. I was there on a ROTC scholarship. So when I graduated, I got commissioned as a Naval officer stationed out at Mayport, Florida in Jacksonville, went to grad school in Monterey, California, and then moved here to wahoo where I’ve been since 2006 came here as active duty.
As an engineering duty officer transitioned out in 2009. To basically become a civil servant or DLD engineer did a lot of project management, construction management, a supervisor, and then eventually moved over to the department of veterans affairs. And he was a chief engineer there for a while.
Up until 2001, when I left, I decided to leave the W2 world. As far as real estate investing, I’ve been investing since 2002. My path then was single family rentals and doing what we call house hacking back then. I got up to, four single family rentals and basically got overloaded with work life and investing took a pause, started really looking at alternative investing in 2017 ish met lane in 2018 and just been totally doing syndications mainly from there on and where or lane really opened up our eyes as far as insurance wise always been interested in that.
I got introduced to the infinite banking concept. Probably about 10, 10 years ago. Didn’t really do anything with it. Although when I was in Lane’s group and other groups, I was with, I, we kept on hearing about infinite banking. So I eventually got my license in 2019 mainly to study and learn about the details of the industry, the different products available and then been helping lanes groups since then or licensed across the state.
So we basically can serve anywhere. Yeah. And a little bit more context of that, cuz it’s always fun for people to learn the story. I heard about this a while back ago. This infinite banking strategy, I would say since 2017 and I tasked Tyler with learning about this stuff, cuz I knew there were a lot of commissions in fees and it’s a strange product that, it’s not as straightforward as deals to me.
So I asked them to learn it more so to eventually do a policy for myself. So I wouldn’t get gouged with pricing and Tyler would be up front with how it all worked. I also, we also told you to go learn notes and what assisted living facilities are. Which those didn’t work out as, as well as this as most things don’t it’s funny, like those assisted living facilities, I haven’t really found anybody who does that halfway decent.
There was just like a house, like a few blocks away, like an illegal assisted living facility that got taken down by police recently. But it’s like this thing stuck. And we do this for a lot of the clients and the whole point is we crunch the commission and fees as low as they can go.
So in other words, if you guys have a policy, you’re looking at some other policies, probably beat him. But as I learned and what I’m happy about, Tyler kind of focusing it on full-time is that there’s this whole complex structure and we’ll maybe get into it a little bit, past the lowering the commissions as low as possible and past like the 90, 10 70 30 split, which we’ll talk about today, but there’s bunch of other ways that I don’t personally understand to customize it to what you guys want.
But yeah, this is, brief illustration. I think what a problem that most investors face, which is what the heck do I do with my short term liquidity, midterm liquidity, or my college savings before I put it into longer deals, right? Three years, seven year deals, that’s ideally where you wanna put your money, cuz that’s where you’re gonna make a higher rate of return.
Sure. Might be a little bit more risky, but it comes with a higher reward. You don’t really have 50 grand, a hundred grand ready to go all the time. The infinite banking, this is just one example of the many use cases. And I’ve created maybe about four or five use cases to use this very, a flexible kind of strategy, but it fits in my whole, 1, 2, 3 trifectas of simple passive cash list.
But if you’re new to simple passive cash flow, it’s first investing in good deals with honest people where you don’t get your money stolen, where you get higher returns than the retail stock market mutual funds, et cetera. And then number two, you, by getting all these passive losses through deals and other tax benefits, such as going from ordinary income to passive income you could unlock a lot of tax maneuvers and then obviously that creates more money for you to invest and then put more money into us. The third strategy, which is infinite banking here which is what we’re talking about.
This is something that we’ll get into, but this is basically a strategy. A lot of the wealthy will do. I dug up this video cuz I wanted to date how long we’ve been talking about this thing. Dug up this video from 2017 when I was a really shitty speaker back at Toastmasters, I was talking about this thing.
I was awkwardly taught to use my hands when I talk. We’ve been talking about this thing for quite some time and I didn’t really get a policy till much later than this and or it took me a long time to wrap my hands around. So if it’s confusing to you guys, sit back and, we can, we’ll open it up for questions at the end, but you it’s something that I think that it takes a while to understand like a lot of investors understanding the difference between ordinary income and passive income and how passive income can be offset by passive losses.
It’s a simple concept. And I think, we have a lot of engineers in our investor group and sometimes the engineers can over analyze this whole thing, in the banking I’m talking specifically about if that’s maybe taking a step back. It’s really not that difficult, but. It took me a little while to understand this whole thing.
Basically, getting rid of the middle man here we’ll talk a little bit about how big companies use these bank on life insurance, but to me of the main points about using these infinite banking policies is you’re making an interest rate and, , there’s a middle man here by with the bank is how normally it works.
But by using this life insurance policy, you cut out the bank in a way, and you make a little bit of that spread back. . Yeah. One, one of the main benefits is you’re recapturing your earning power or the opportunity costs. Cuz once your funds leave the bank that earning power for that dollar is lost.
Banks, they make their money basically off of how they have deposits come into them, they’re landing the money out. So whenever the money exits the bank it continues to earn funds. Similarly with the life insurance policy, we’re putting funds into the policy, we’re able to access those funds and not still have those dollars in the policy earning and not lose that opportunity to, for that dollar to continue to earn while you’re using that dollar somewhere else.
I’ll do it quickly, so yeah. So what is infinite banking? It truly is a concept of what I was mentioning before about recapturing those losses. You basically are utilizing an asset where you’re able to basically use that dollars, keep it in that asset, but obtain that dollars through alone.
And that there’s multiple ways of doing that. And now you’re able to have your funds work in two different places. So the original asset will be growing. And then the dollars that you access, you can do what you want and you could use it for expenses. You could use it for investing. You could use it for college planning or retirement planning, but that’s the overall concept.
The vehicle of choice that we choose to use for various reasons is dividend paying whole life insurance. And there’s multiple benefits with whole life insurance. And there are other products out there, but whole life specifically, there’s a level premium. So that’s one of the main benefits. The insurance costs and fees are pretty set as at, in regards to the insurance premiums themselves.
There’s guaranteed growth. And it’s right now, tho those ranges around two or 3% guaranteed seems small, but when we’re talking long term wise, this is uninterrupted compounded growth, and that steady growth can then help you plan, for long term. You can be used for multiple things, investing education.
So five, it could, this could replace your five to nine. Your 401k IRA you could use as your own bank to use it for lending instead of car loans, mortgages, and then it also is a safe place to store your capital. That’s where I personally keep my reserves also. There’s of course we’re not designing it for the death benefit, but there is, there is a death benefit component to it that helps with legacy planning or will transfer to different generations.
You are accessing the growth of the policies tax free. There’s no capital gains. There’s no income tax because the way you’re utilizing it is via loans. It follows what you may hear as the buy borrow die strategy, where you’re really purchasing this asset. It grows and you’re borrowing as the asset grows, you’re borrowing from it.
And that way you’re eliminating capital gains along with income taxes. And the policy isn’t designed in a way where you don’t have to pay for your entire life. So traditional whole life you, that you may have, there’s a premium due usually to age 95, 99, or a hundred. We design it where there is a cutoff at some point.
And even though you’re no longer contributing, the policy continues to earn dividends and that dividends then helps to boost up the value of your policy in the form of death benefit along with cash value. So this is a, there’s a handful on this slide. And again I’m gonna go over this in my, in a different way, cuz I think people learn in very different ways.
And although I do think that the most effective way of learning this is talking to somebody who just went through the process with Tyler and it’s fresh in their head and they’re, they’re using the loans or taking loans from themselves, funding the policy and then using it in their whole investment strategy.
Although, we obviously can’t recreate that on a virtual seminar, but that’s why we do the retreats. That’s why I tell people to come out to Napa, come out to Huntsville, meet other investors. So you can talk about, how you’re using this type of stuff. Just speaking from my own personal experience what I do is I, I max fund my policies and I store a cash value in there.
And Tyler mentioned the word asset, right? What’s the asset, right? In this case, I think a lot of people. The way to think about it is, think about it exactly like a HELOC right. You have a house and that was your asset, right? You might be paying it off or you have equity in there, but you use a HELOC to tap that equity, taking loans against that and paying the interest to that loan.
But you can use that loan to a lot of you guys will, who are new or using that HELOC to invest in your first few, several deals, same thing here, except instead of house being the asset is this paper, whole life policy, which is probably one of the most secures pieces of assets out there because the underlying that the asset is backed by these insurance companies that have been paying out dividends since the civil war much more secure than your average bank out there.
But, as Tyler mentioned, there’s a lot of benefits to doing it. I’ll highlight the guaranteed cash value growth. So when, just like how you HELOC your money’s in your asset, which is the house in this case your money is in the asset, which is the whole life policy.
It continues to grow just like the house does. So that’s where that guaranteed cash value comes from. The, and then the tax leave loans and withdrawals, that’s part of how I use it, right? So when my money’s in here, it grows with that. And. At that point, it’s considered tax free per the IRS.
And this is an important thing. We’ll get to later designing the policy. So you don’t go over that minimum threshold. Certainly you don’t wanna overfund it too much, cuz we’ll talk about fees, commissions and try to lower that as much as possible. By having it in this life insurance policy it’s the tax loophole to have this thing grow tax free.
And then when you take withdrawals or you take loans from your policy to go in and invest it or do whatever you need to do with the money. Lot times if you’re smart, you can have that be a business expense and has it have it be tax deductible. But we’ll hammer a lot of this stuff multiple times here.
Other ideas, doctors and high net worth investors like to use this as the asset protection component. And then, I’ve personally cond this with Ivo trust for simplicity of the use. I can talk about that at the end with another use case. But again, lot of stuff here, but basically it’s like a HELOC where you can take loans from it and then pay it back and have this be a constant source of capital.
That’s also grow. But it’s much better than a HELOC for three reasons. First, the banks can pull your HELOC at any point, right? They can freeze credit lines. They can’t do this with your infinite banking. And this is the whole where the whole term comes from family vault and people call this a family vault, but, or being your own bank, you own this policy, this asset is yours. The second big thing on, why this is better than the using your own HELOC you have the asset protection when your money is in under this policy, it’s protected, just like how, a lot of people will think they’re retirement accounts, the 401k are protected from creditors and litigators.
And then, the, my biggest thing, why I don’t like the helos is, they’re great to get started, but you can’t use the HELOC to tap all the equity. A lot of times your banks are gonna play games with you on your appraisals and then lower your loan to value on that loan with the bank.
None of that nonsense games, when you’re doing your own infinite banking policy, you can pretty much always, it’s not like you have, you can’t touch a certain amount of equity in the policy. If you’re using your HELOC now to go into deals. Cool. But eventually what most people will do is they’ll transition the equity into an infinite banking policy for the mentioned reasons.
Real quick. Okay. There, there are some questions being type. So if people have questions yeah. I think we want them, they can type it in during the presentation, we’ll probably cover some of those. And then at the end we’ll make sure to go over all of those. Is that yeah. Yeah. And put it into the question and answer box, cuz it allows us to check it off once we’ve answered it.
But if something is pertaining to the slide we’ll try and get to it for sure. Just all the random questions. Maybe hold to the end, cause we’ll probably answer it like Tyler said. But if you guys have been paying attention, we met, we uttered the words, whole life insurance and typically the whole life insurance is quite the scam.
I’ll be the first one to tell you, right? This is the one where your long loss acquaintance from college or high school, or maybe grade school hits you up on LinkedIn or Facebook or Instagram or for some of the younger people TikTok or whatnot. And they say, you wanna go to lunch and they sell you this like garbage whole life policy that was configured with high amounts of insurance, where is basically where all the commissions and fees come from, which again, what we cranked down to the minimums for you guys in our.
And, it’s just not a very good policy. And this is where Dave Ramsey and those guys say, yeah, just do term life. Whole life is a scam. So I just wanted to just, mention, yes, we are using whole life, but it’s configured in a very different way, but this is actually something that like my spouse got suckered on.
And then, what Tyler can also do is if you have a whole life policy, there are things that you can transfer and he can talk to you about that. But you can dissect current whole life and you can break down what percentage of it was insurance and paid up additions.
And then, most times my spouse’s case, she was, she got taken for one of these, but, she didn’t really the way the financial planning world works. They get a bunch of young salesmen to suck at their friends and family into these types of arrangements. What we did is we just cashed in her policy is what we did, but sometimes it might make sense.
Tyler can work with you guys to exchange it or whatnot. And I’ll say it a little bit differently. I think. Insurance has its purpose. And the purpose of life insurance is to protect your human life value. So I think that there is a purpose there, but as an investment or what we’re doing is totally opposite of that.
We’re utilizing it for the cash value component not the protection part of it. If it is purely the protection part, it is considered could be expensive. I’ll use a gentler word then a scam or something then lane. But yeah, I think it is traditional whole life is expensive.
There is a cheap coverage, which is term, but again, those, rarely ever pay out, but again, it’s there to protect your life or the what ifs. And this is a total different strategy. So that’s where people may get confused if they hear it. And I think we have someone on here or a later slide going over, maybe some of the chatter people may hear about whole life in general.
Yeah. And when I talk to some of you guys have made me talked to your whole life, financial planner, people, and most financial planners or people who make these things, they don’t get it. They don’t get us as investors. What do we want? We want liquidity so we can take the money out and invest it in much better deals.
But these other guys, they say we wanna give you. Higher returns. And we want the bigger death payout, that’s in their head, what they think life insurance should do, but we’re using this, we’re using life insurance. Yes. But really what I’m using it for is to get that tax loop pulse.
So I have to pay my taxes on it and I wanna get the liquidity. I wanna maximize liquidity and I’m willing to give up the death payout and the returns on the policy because it’s small. Anyway, it’s different than 5% to 5.5% returns on this stuff where, what I really want is the liquidity.
So I can go put it in something making 10, 15, 20%. And that’s the idea of a sophisticated investor. And that’s where these other guys, they just don’t get us. How we do things with our money and how we invest it in alternative assets.
Yeah. And this slide just kind of highlights. Lane touched on bank on life insurance. So life insurance, is a asset that a lot of corporations use including banks. So specifically it’s called a bully or bank home life insurance. But if you were to look on the bank’s assets, the list of assets you’ll see life insurance.
I think chat is able to pull this up and you’ll see highlighted down there, life insurance, but. Bank banks clearly understand life insurance, the risks associated with that. And they hold a lot of their assets in that also. That kind of was the proof in the pudding as far as how safe it is.
They’re also willing to lend against that. We’ll touch about a cash value line of credit. So you could take your policy to a bank, not all banks, there’s banks out there that will specifically give you a line of credit based on your cash value. And that to me is similar to a real estate.
They understand the asset and, but unlike real estate or HELOC where, your loan to value is more in the seven or 80% loan to value the banks will lend you 95 to a hundred percent loan to value on your cash value. That kind of says how secure and safe banks consider whole life insurance.
Yeah. It, and again, this goes back to, lot of my discoveries and like what the wealthy do, investing in alternative assets, getting off of wall street and putting their money into these life insurance products. You follow what the wealthy do, and they’re quietly doing something a little bit different as the same goals money talks, but 📍 wealth whispers, you.
Another example is like Walmart, Walmart will buy insurance policies and their top dogs and store it on their balance sheet, as they’re safe semi-liquid stores. What I tell a lot of people is I follow what the wealthy do, but also what the banks and what the big companies do.
And you take a hint from what they’re doing. This is a strategy that they’re employing and if you own a business it’s not a bad way of doing things. So different use cases again.
Yeah. It’s more than just the type of asset. So I think that one of the biggest key factors on the performance or the utilization of the strategy is the policy design. We’re using, we’re independent where we can write with multiple companies. We choose, certain companies, some for their flexibility and then also just how we can design it.
The product is the product. And, most people can utilize and design it the same way we just choose to design it. The most cash value efficient and flexible because that’s what appeals to us as investors. And our design is really caters towards investors because we are investors first and that’s how we want to utilize this strategy.
There’s other designs out there and it has its pros and cons or the different levers. So we, our main focus is cash value and flexibility. Yeah. And this is the portion of the show where Tyler’s gonna spearhead this next few slides, because this is somewhere, this is a time where I realized the strategy and started to employ it myself.
But then I realized how like more technical it gets and that’s where it required a engineer like Tyler to really learn this on behalf of you guys. If you guys look back in the coaching calls, which we keep in the members site, and we arrange everything, everyone from lower net worth to over, accredited beyond, we do, we talk about implementation speed and, maybe you wanna put 200 grand every year in this stuff or 50 grand a year.
You can see some of those examples. We can probably do that at the end. If there’s time here, but. This is some something where I had the self realization that I didn’t have the bandwidth to keep up on this stuff constantly. And, I need to focus on deals and finding, deal relationships out there.
I’ll vouch for Tyler. Tyler gets on flights, he goes to these infinite banking industry mastermind, again, events, and I forced them to do it because, I said, you gotta like really, you gotta get involved in this stuff, just like how I did with this other stuff.
And really transcend your average, keyboard, jockey insurance provider, who just happens to have a license or worse social media influencer. That’s, this stuff is a technical stuff and it needs to be tailor to each person. These are the ways we’ll get into designing the policy the right way.
Yeah. And touched about this In the previous slide, but the, as, in order to maintain the taxable treatment from the, in the IRS’s minds, there are some tax laws and unfortunately, the IRS got involved in the eighties, so they created something called a me limit.
Some people may hear that, or it’s a modified endowment contract, which really prevents pre 1980s people ready to dump in a whole bunch of money into a policy lump sum, very little insurance and really capitalize on the power of insurance. IRS has stepped in, in the eighties, they created a limit basically where it says, Hey, in order for this to the taxable the taxable treatment only will apply if it’s insurance and it, you really need to purchase a certain amount of insurance in relation to the amount that you’re stuffing in.
We maximize, we, we take that to the limit and so we’re able to stuff as much funds into the policy have as much cash value early on with also long-term growth, but with the flexibility while maintaining within those IRS rules and, these rules have changed and tightened over some time.
So that’s. , it, it is, we’ve had to stay on top of things. BA basically in the beginning of 2021 or the end of 2021 was when the new law took into effect also. So they’re changing and updating things, every couple years or so. But that’s where the design is really crucial in order to maximize those things.
Yeah. And this stuff isn’t getting any better. So like the best time to get a policy was yesterday, just like how it was to go into deals, the deals in 2018 kind of cashed out, that’s the best time to do it was yesterday. And it reminds me a lot of like real estate professional status, just like the way lavage changed.
There’s a great tax loophole. If you wanna use that word. guess for the real estate professional status, I think 10 years ago, a lot of what a lot of doctors were doing that were making, 500, $600,000, a million dollars a year was getting a little whimsical rental property.
And then now getting rep status and now using all the passive losses from their deals to drain their income down to, 300 or zero and not pay any taxes. And then the IRS is wait a minute, guys, this doesn’t seem right. So they implemented all these like rules for getting real estate professional status.
It’s the same thing. Tyler mentioned here for the life insurance before you could just write all this stuff off and all the returns would be tax free and, people would put like a dollar, the life insurance, and then the Iris was like, wait a minute, guys, there’s a limit to this. Like you can’t just put $1 and have the whole thing be tax free.
Cuz you can imagine if you guys are like, financial hackers like us, where that goes, put a gazillion dollar policy and put $1 in life insurance, whole thing tax free. So there’s a certain limit to that and where we get into this 90 10, this 10% insurance thing. That’s a little bit more historical context on we always try and stay one step ahead of, the latest, the, where the tax laws are and always be tax compliant.
Of course.
Yeah, so the, that meth limit that is a IRS limit there’s two main, large limits. It’s usually it’s the IRS limit or this meth limit. And the second one is just company limits. So that’s internal limits a company puts on and some constraints they put on. Again the choice of company is almost as important, but as far as the me limit that really, that, that limit is defined by your age, gender along with your health rating status.
So when when you go through the underwriting process, you get approved for a certain amount of death benefit based on your age, gender. And you’re given a health rating and of a better health rating will, will drive your death benefit up a little bit more. So then your me limit will also be slightly higher.
But yeah, the main factor is for a me limit is the amount you wanna stuff into a policy a year. And then the factors are your age, gender and health rating. And then the second limit is basically company limits. There’s various company limit. The big one that we focus on is the paid up additions or POA limitations.
Because the POAs are so beneficial for the cash value companies limit basically how much you can put in per year based in relation usually to your base premium. So that’s the cost and you can think of base premiums. The cost of insurance paid up additions as truly, the cash dump or the cash value addition and internal companies put internal limits as far as how we can design these.
And you might hear three times POAs, five times, POAs, 10 times POAs. The companies we use have 10 times POAs and that’s really beneficial as far as cash value growth. And, I think again, maybe in the back of your head you’re sharing, you know what Dave Ramsey said?
We all know Dave Ramsey, great guy. And I think he does a great job for teaching those, people, most people out there, 90, 95% of people who are in debt don’t make too much money. I think he means well, he’s said whole life insurance is a rip off and it’s cuz we mentioned at the top, it’s all how you configure.
I was watching some YouTube videos of the stuff last night and, trying to see the bad thing about a lot of this financial world is a lot of people, they just don’t really dig into it. And the secret isn’t how you create it and how you structure the whole encompassing strategy, where infinite banking is just one of ’em, this particular YouTube video the caller set mentioned a few things here, which I’ll highlight.
They said the break even point for his policy was year seven. Yeah, when you’re configuring this stuff with higher insurance, which you don’t, which where the commissions and fees come from, you’re gonna have a higher break even point. I don’t know, like some of the last policies you’ve been doing Tyler, but I’m pretty sure it’s a lot less than that.
And then he also mentioned the one thing I will agree with Dave on is he said, and I quote, when you work for the certified financial planners, the CFPs is he called them, they work for the Northwestern mutual guys, he just laughing and he says, those are the guys that just screw people every day.
So it wasn’t me who said it, anybody gets offended and mad at Northwestern mutual, any XYZ mutual company. He that’s what Dave Ramsey said. But again, we’re configuring this a little a lot differently with lot less insurance, which is where the fees and commissions come from. Again, I think this is where most people, and this is what kind of gets me with a lot of things.
Most people will just only read the headlines of videos or news clips. But when you actually read the damn article, the story is very different.
Yeah. And I think Dave Ramsey is also El alluding to that whole life is expensive. And I think traditional whole life, the way it’s designed it is very, it is expensive in relation to possibly O other things out there to protect your life such as term. But again, we’re doing it differently.
And the design, so this slide represents a little insight on as far as the design traditional whole life. So this is a 50 50 split. Traditional whole life would be more, hundred percent premium. So all of that would go to, the death benefit cost a 50, 50 design or 50% is the expense or death benefit or base premium 50% is paid up additions.
That paid up additions as mentioned earlier, really has reduced fees compared to the base premium. So in relation that $500 going to base premium. maybe a few dollars of that will show up as cash value. Whereas for POAs, 500 goes into POAs. There is a fee slight fee in there, but I would say 4 75 will actually show up in cash value.
So much, much drastic change. And that’s why we wanna really minimize our goal is to minimize the base premium and maximize the POAs. The next slide shows a 10 90 split. You may hear a 90, 10, 10 90. I think that’s all the same a lot of times. Some people put the PAA portion first in this slide, it has the base premium.
First I personally call it the 10 90 split where 10% goes to base premium. And a lot of times that is also a company limit. In relation to, the factor, you can put a hundred dollars in as base premium, again, maybe $1 or so of that will show up as cash value and then putting $900 into UAS and your cash value, would be 850 or so not quite 900, but drastically different.
So out pocket from, as the client, it’s the same thousand dollars coin out of your pocket, how it performs or where that money is going. Is very different based on the design. Again, same thousand dollars going out. If it was a traditional whole life, you probably have $0 cash value that 50, 50 you might have about $400 for four 50 cash value.
And then a 10 90 would you’d have, 800 or so cash value. It’s all just purely the design. And then that impacts your cash value portion. Yeah. So some people might say, oh, we’re already doing the infinite banking thing, but they could be in this format where they’re paying five times as much fees and commissions, and they’re getting five times less cash value than they should be getting with this 10 90 split.
Not all policies, still again, it’s do you read the headlines or you actually analyze what’s in the content here and how, or in this case, how it’s designed, right? You may be implementing I B C banking from yourself. But if again, like we, we kind of urge people if you’re already doing this strategy.
Just check out what the split was on the premiums versus the paid up editions. This is typically. What most people will do. Some people in our mastermind group they’ll do 70, 30 or 30, 70 splits. So like like a mix between the 50 50, which I don’t think you ever wanna do that. There’s some other advantages to doing it that way, I’d say, the first thing is like lowering the commissions and fees for you guys, which I’m sure the question comes up.
Like, why the heck would you and Tyler lower the fees and commissions, I guess I have my reasons which is then you put more money into deals and you actually have more money than paying out in fees and you invest more and you tell more of your friends about this type of stuff. But to me, it’s like most of our clients are doing really big policies.
So the commissions and fees are there for us that kind of keeps the lights on, but it’s, I’ve always thought of this as like an added service for our investors in our investor group. Certainly staying away from this 50 50 split. Yeah. And to not get into too much technical detail, but the design also enables a lot of flexibility.
So on a 10 90 split that a hundred dollars, even though your target amount in this case would be a thousand dollars. What you have to put in every year is really only the a hundred dollars that, that additional $900 in this case is flexible and optional. And that’s where, that’s how the design also plays into the flexibility.
So not only the company allows, the insurance company allows you that flexibility, but the design then again, allows you to put in capital as you have it, throughout the policy year versus having to save up and have that thousand dollars or in the 50, 50 design case $500, available on your premium anniversary.
That’s a, that also plays a big factor. For me personally, just having my, since I have most of my capital working, I don’t wanna sit around and, bank up the large payment and have that only be able to put in once a year. I like to spread it out over the year and dump it in.
We had a question here from Hillary. Does the me limit include the amount of premiums you pay a year or is the me limit the amount of additional PUA you can add to the policy? Yeah. Good question. Yeah, it’s it is a cumulative amount. So that me limit is the total amount of funds you can dump into your policy.
So that would include your, the premiums for that year.
So one unique way, a lot, some people, he struggle to hear how the PWAs really added add value to the policy. We came up with this scenario where it’s similar to a house cause most of us are investors. So think of the base premium as your debt servicing on your mortgage, right?
You’re, it’s something you have to pay in order to keep that asset yours very little value added if we’re talking the debt servicing portion of your mortgage, but that’s what you have to pay paid up. Additions would be more like if you were to do a renovation to your house, there’s some expenses to it.
But a lot of times it increases the value of her house, to the more than what are equal to, or more than what you put in as far as repairs. So paid up additions would be similar, like a renovation blue seeing the value of that house, which later then you have you, you boosted up your equity.
So you can have access to that. Or when you sell that you make more of a profit base premium equals the debt, servicing on a mortgage, very something you have to pay very little value add to, to, to the asset. And we had a question from Luke here. So if you take a loan against your infinite banking policy, as it grows, can the growth pay back to the loan?
Yeah. So paying back the loan, you can, you, you could either pay that out of pocket or as you mentioned the policy grows, it’ll just, it’ll take it from the cash value component or, it’ll take it from your policy to pay that debt servicing if you didn’t pay it that year. Yeah. So I guess the kind of the similar thing is again, think about it like a HELOC right.
You can take loans from your HELOC. But I think where a lot of people, they get it mixed up or they have this false sense of needing to pay off that debt. And we get this question a lot, right? I have a hundred
thousand dollars, I took a hundred thousand dollars outta my HELOC to go into this deal.
I’m paying 5%, I think what is that $5,000 a year on that? And they think most of us on the call today, we all pay off our credit card, we pay off our debts, but it’s not like you have to really pay it off. Just like your Helo, right? Yes you do. But then again, if you’re making 10, 15, 20% on this.
Then just let that 5% roll. And that’s what the big companies do. That’s what businesses do. If they’re making money somewhere else where it’s just an arbitrage game and in a HELOC, that’s where you would just let that line of credit revolve and in, in an infinite banking, same situation there.
And answer Luke’s question, just like in the HELOC you’re taking a policy, your HELOC loan from it. Your house is gonna continue go up in value the asset and in this infinite banking world, same thing same kind of phenomenon is happening. But again, like the HELOC is cool, cuz it gets people started and it’s easy to tap that equity.
But at some point you draw the limits of that policy because the banks always play these BS games, which you guys on sandbagging you on the appraisals and giving you worse loan, the values, especially if you’re here in Hawaii, you get these teaser rates and then goes up after that. And then the banks can always pull your helos on you where the infinite banking it’s yours, that’s why the term comes banking from yourself. But you also get the added asset protection, the being life insurance, which you don’t really get with the, he. If you’re one of those high income earners or like a high liability profession, like a doctor, that kind of means a lot to you guys.
All right. Yeah. And I do see a lot of questions about the policy loans. So I’ll try to cover that on this slide, but the, there, there is a way of, so how you access the cash value is through a loan and we’ll touch a policy loan. And then we’ll briefly touch what a cash value line of credit.
So those are the two main ways. So a policy loan, literally there’s no what you’re putting up as collateral is really your death benefit. So going through a policy loan the insurance company knows that you have the death benefit. They know at some point you will die. So what they’re doing is they’re, collateralizing your death benefit.
So your death benefit overall stays the same, but your net death benefit which would mean if you pass away, if you had any outstanding loans the outstanding loan will get subtracted from your death benefit, and then the net death, the net would get transferred to your beneficiary.
There’s really no approval process. As long as you have that cash value in your policy. It’s usually about a two business day process where you go online and you request it. California residents, they do need to print it out, what, sign it and email it in. So it’s a little bit more difficult, but again, very simple same time turnaround as, as far as two business days.
But in, in some companies and they show it slightly different cash value. Norm technically stays the same. Your net cash value may go down or in this case, your available cash value. But for one, for one company we use a lot is guardian. So on guardian, whenever you take a loan out on the portal, you’ll see your cash value actually just remain the same, your net your death benefit.
You’ll see, go down because that’s your net death benefit in regards to how much that can you access. So we like to tell people, if you see your cash value, you can access 95% of that via policy loan. The company, the, your basically paying up front, the ins interest owed till your next policy anniversary date.
So they’re precalculating that based on your loan size. And then they’re holding some reserves to cover that, that one year of debt servicing. You don’t have access to a hundred percent of your cash value especially if you’re doing it early on in your policy or as you get closer to your next anniversary because there’s less.
Reserve required you’ll have access to greater than 95%. But we just use that as a guideline 95% of your cash value. There is another question from Dave about, what happens in the end if you keep if you only ended up with a 10% year after year, because you keep kept on pulling out, but basically 90% of the loan.
When you do take a policy loan, similar to a HELOC versus on a house, the policy continues to grow the whole amount. Once you put your funds in there, it continues to grow that the growth rate might be slightly affected based on the company. And if it’s direct or non-direct recognition, but the policy continues to grow similar to your house.
The, your house continues to grow, whether you have a mortgage or HELOC out on in, and that helps to offset the debt servicing costs. But the main benefit for us as investors accessing the funds is, we’re gonna go put it into a asset or an investment. And a lot of times the, that asset cash flows is what helps to pit on that debt servicing while your policy as a whole continues to grow.
Yeah. And. And, it is sometimes conceptually hard to see that. Get with us, we can do what we call illustrations, where we simulate, Hey, what if I take a loan out every year and either not pay the interest or pay the interest out of pocket or have the policy pay the interest. But we can show the illustrations to project and see, Hey, how will this perform?
What if scenarios or, just for planning purposes. Yeah. And that’s all, I’ll tell you, go talk to Tyler about that stuff. Like the direct recognition. I still don’t understand that stuff. And I think that’s where you partner with Tyler and then, he’s the guy you call when you have those kinds of questions or, if you did pass away, that sad event where you’re worth more to your spouse, then you are, cuz that’s pay out somebody to call, who’s a real life person. Who’s your in between the big life insurance company. I think that’s the value that Tyler provides, but getting a little bit more and we’re illustrating what this whole policy, what this infinite banking thing.
This is a screenshot of a video I did for folks. And a lot of this is in the e-course did you guys go to. Members that simple passive cash flow.com. You guys should have all access to the eCourse, which goes into a lot more in depth that what we talked about, what we’re talking about today, but there’s this video in here where I’m balancing, you can get multiple policies, you can layer them on top of each other, which is a strategy that I recommend.
So you implement at different speeds, but this is a little tracker sheet that I personally made to keep track of. Here I have little policies, right? Where they’re from. The CV is cash value, right? This is how much I money to tap into. And then I might have some loans out at a certain percentage.
So this is my little dashboard just a simple spreadsheet of how one might keep track of this stuff. And then, your future payments that you’ve gotta make in the future. We’ll get into this a little bit later, but like when you configure this with a 90, 10 split only have to do 10% of the commitment money.
And this is the game changer folks, right? If it was 50% then, so you got to put in five times as much money. So if money gets short and you don’t have to really fund this, the policy can won’t collapse or cave in like a black hole. Especially when you could figure what that 90 10, like how we.
But, I use this to keep track of my, 20, 22, 20 23 premiums and PUA paid up additions. That’s what that means here. But the way I’m using this as an investor, this is more, the practical usage of this thing is all right. I’m going into deals, right? I’m gonna put a hundred grand in this deal, a hundred grand in that deal.
And I’m looking for more deals based on here. I’ve got several hundred thousand dollars to tap for some deals, or maybe I wanna put in some hard money and then maybe I get the hard money back and I gotta replenish my infinite banking so I can keep making my return there. This is how one might use this.
This the end game of probably using this product. And, for a lot of people getting a million or $2 million in here and just socking it away might be a good end game strategy. But it’s just really nice to know that you have a large sum cash that you can get at an emerging, especially for you business owners.
This is where I keep a lot of my cash stores. So when deals, if a deal were to struggle, I pull out a big sum of money and put it in there because I’m, I’m not gonna have a capital call. I’m gonna make every like personal thing I can do to make, prevent that from happening for you guys.
But this is where the money is coming from. it’s coming from my infinite banking. So I’ll just call up. Actually I’m old still. So I call up the insurance company and do my loans whenever I want to. But as Tyler said, you can just get on your computer dashboard and have it direct deposited.
One funny thing that I learned is if you, at some point you start to get policies and your spouse, cuz if you’re married to a female, they typically live longer. So the pricing is a little bit better for them, but it gave me a hard time. can I get a policy loan from my spouse’s policy?
Probably because 50% of people get divorced and they maybe they raid their spouse’s in front of banking policy. That’s just opening up the whole idea of not only getting the policies on you, but your spouse. And so people will also get on their kids too. But there’s a lot more of this content in the e-course and then when you become a client additional material gets unlocked, but we wanted to keep that separate from you guys coming in.
It’s not in your guys’ portals now, but we thought it might just confuse people, but there’s a lot of these other techniques that people, in the film are doing and investors that, really comes alive when you start to come to the retreat and you start to mix it up with other accredited investors.
These guys come with all kinds of stuff. Yeah. And one thing we didn’t highlight, so policy loans you are totally in control of that. There’s no monthly statement that comes in says, Hey, you owe this much interest that is truly up to you. As far as if for when you pay that back.
We always recommend paying the debt servicing what happens is, we, they, precalculate the debt of interest owed up to your policy anniversary date. If you don’t make that interest payment, the interest will then get tapped onto your loan principle at the, on your policy anniversary. So prior to that, it’s calculated simple interest.
We like to keep it simple interest. So we pay the debt servicing prior to your policy anniversary date while your policy continues to grow compounding. So that’s also some of the magic there. Yeah. I personally don’t really, I try and keep it stupid for myself or keep it simple, stupid for myself, the kiss format.
I just, once you get past the first year, you’ve paid your 10%, which is all you really need to fund this thing without it collapsing your caving in which is again, why the 10% insurance Is a game changer compared to how most people will configure this with 30% or 50% where you have to put a lot more of money into it.
So it doesn’t collapse. So I don’t really freak out whether it’s, I’m not paying I’m Def like, like Tyler said, like I don’t really pay the policies down unless I don’t have the money and I don’t really worry about, paying off the interest. I just let the cash value pay it automatically.
So I don’t really, I don’t really worry about it, but that’s just how I use my I C everybody’s a little bit different. This is an example of, you have a hundred thousand dollars cash value. What you have available for a loan would be about 95% of that. But in this sense we’re taking a lower loan to value.
So 60,000 simple interest loan, when you take that 60,000 loan, the a hundred thousand continues to earn, and, there’s various dividend rates. And whenever you hear any company announced their dividend rate, that’s a gross dividend rate. What historically what we’re seeing is about four or 5% IRR.
In this lower interest environment, we might see more three and a half to four and a half percent IRR. But in this case I think it’s illustrated showing a 4% IRR. So that hundred thousand dollars policy would grow by about 4,000 that’s $60,000 loan. You have four or five five 6% loan. And again, that’s te technically on the higher side would be $3,000 in debt servicing.
You can, you’re able to take that 60,000 then invested in a asset that asset, even if it’s 6% cash flowing asset cash flows 3,600 a year, that by itself would be enough to pay for the debt servicing. So you have some positive cash flow from the asset, along with the policy still growing. And that’s the beauty combined, it’s better off than just doing one of the assets by itself.
And I wanna emphasize, we were talking a lot about the design and the whole life product. That’s just one aspect, right? The whole banking system is the flow of money. So it really is accessing that cash value to have it work outside of the policy also. So that in, at the end, you have your policy grow.
But you also have assets outside of the policy growing. So your net worth is combined is better than just putting it in the policy and just leaving there that still grows and works, but the true magic is accessing it and growing outside of the policy. So just wanna really highlight that cause that’s where a lot of people, are either debt, aver.
They don’t want to take on any debt, if you take on good strategic debt, then you can really maximize your growth. And that’s what this strategy really helps you to do. Yeah. And this is where most of the life insurance guys don’t really get it, they’re like don’t, you wanna make a higher, I can give you a higher return in this policy than the four, 5%.
But we give up the liquidity and as investors, we want liquidity. So we can take that liquidity and go invest it in an apartment deal or a fixed and Flatt or some other maybe venture capital, right? Whatever you guys like to do. Personally, I like to go put my money in stabilize real estate that I could make maybe a 15% return.
And there’s that Delta, right? 15 minus the 5% that I pay, that’s that Delta and that’s an arbitrage game, but I’m still having my underlying asset, which is the life insurance policy. Grow. So it’s there’s that this is the, where the whole idea of where you’re making money in two places or money is growing in two places.
Yeah. And I, or, sorry the other thing too is, you may hear people call it the, an asset or the dual asset. Cause it truly is that it’s not a, or a lot of people when they’re, when they talk to us, they’re saying I’m trying to do this deal. So I don’t have the funds to do a policy.
It really is a, it’s a compliment to each other. So you could do both, right? Granted you’re gonna lose some liquidity or one, but in the long run that’ll pay off. But it shouldn’t be looked at, you have to do one or the other, it really should be looked at, you can do both. So you would put the funds into the policy first and then access those funds to do the deal.
And the first year is obviously where all the expenses or most of the expenses are taken out of. And that’s where you’re gonna feel the biggest hit, but we’re able to design and tweak some things. So even from year two, definitely at year three, most people will see it as truly a deposit. So when they put that a hundred thousand into their policy, that would have access to a hundred thousand.
Year three, year four and even more as the policy ages. So that’s where, I mean takes some time to really see that benefit, but like any, anything, you need to capitalize it for a little while and then it’ll pay off in, in the long run. And in, in this case, we’re talking you’ll two to three years and then you’ll see the great benefits, down further down the line.
Yeah. And maybe it clicked for you at that point, you’re making money in two places and, so what some people will do, over a million dollar net worth, maybe they have a lot of money in their home equity, even half a million, that’s where maybe they might wanna do 200, $250,000 a year.
And then you can do strategies, maybe get with Tyler, like depending on where your birthday is, this is what I did to kickstart my per mine is I doubled up, like I was able to, back fund for the previous year and then the next year, all right away. So I could fund it, put my liquidity in there and then the next day, get it into the next several deals that came up.
That’s really what we’re talking about. That’s the strategy where we’re coning it with investing in real estate or other business furniture.
Alright. Just some, there was a lot of questions on policy loan rates. Again, this is, as there’s a lot of fluctuation, but for policy loan rates and if it’s fixed and it varies from company to company. And I’ll say guardian is one of the main companies we use. Guardian is a fixed interest rate.
What you’ll feel is a 4.76. So that could be that will be the fixed interest rate for the life of the policy. If it’s variable, then that, that variable interest rate is usually tied to the moody, triple a bond index, the corporate bond index rate. There usually is a floor. So a lot of companies now have a floor of 3% around.
But then that’ll it can vary. And what the company will do is they’ll announce it every year, what their variable rate is. And it’ll, it can’t fluctuate more than half a percent per year. So even though like right now, the interest rate shot. A lot of the variable interest rate company or for the companies that have variable interest rates, they’re only increasing it half a percent a year.
It has no limit on how much it drops. For me personally, I like the fixed rate because we’re utilizing the strategy for long term planning for the stability. I just I like that. I wouldn’t wanna have a variable and the unknowns down the line, but there are those options.
Now we’re not gonna go too much into this strategy, but this is just a, like a preview of, the different advanced strategies that some of our members will do with our policies. As Tyler mentioned, you can get a loan from your life insurance company, and that’s the easy way.
That’s what I do. It’s the easiest thing to call them up or, get a policy loan from them at their, what about 5% rate. But, as most of our financial hackers in our group, they always like to optimize things and they found that they can go to these third party banks that will give them loans on the cash value in their life insurance policy.
Around like the three and a half, 4% range. So they’re making an additional 1% doesn’t sound like a lot, but, they could be saving maybe 20% in interest. Of course like the bigger the policy. And this is what I tell my guys. It’s man, you guys to spend a lot of time on these trade line things, these little things that kind of, moved, it’s moved the needle slightly, but then again, thinking back to when, I was just barely in a greater investor, like this wealth building, journey, it’s all about a game of inches, like kinda like football, those are the things that are gonna get you that momentum forward and eventually push you to that hockey stick of growth where maybe I’m in that stage personally.
And I don’t really, I value my time more than money, if you’re somebody who’s still growing your net worth, these are the kinds of strategies that you could employ by even by getting a lower rate on your loans to increase that Delta between what you invested in and get and what you’re paying your policy loans at.
But again, a lot of this stuff will be in the E course unlock for clients. All right. This is just an example of a typical policy we would do. This is for a 50 year old male with a preferred non tobacco health rating, which is, or, sorry, this actually is a 45 year old male at a preferred non tobacco health rating. The guardian is, we are independent.
We mainly write for mass mutual and guardian. Most of the policies write for investors and including myself is with guardian and that’s because they offer the greatest P wave flexibility. So this specific design is a 50,000 target amount and a funding duration of seven years with this specific design and product the kind of the sweet spot would be between five and 15 years or so of funding duration.
And there’s various reasons why people would choose shorter funding period or longer funding period that, we would go over their goals during a call in this case. It’s a seven year funding period looking on the left of the annual premium breakdown. So this is where that $50,000 target amount, the base premium is really only 45, 46.
So that is what we would call the cost of insurance. Commissions are based off of that. So by shrinking down that number to the smallest we can, and this is basically the smallest number we can based on the 50,000, this is a company limit. That we we’re shrinking that down. We’re really shrinking down the expenses and commissions, therefore, really boosting up the cash value to you as a client, but that 45 46 buys a certain amount of whole life.
That’s $190,000 of whole life death benefit, but in order to stay within that me limits and the IRS limits that $50,000 target amount, you need $985,000 of death benefit. So because you only have 190 of whole life, the cheapest way to boost your death benefit up to that amount is the use of one year term.
So you’ll see this other number $478 and 86 cents. That’s the paid up additions rider scheduled. So that’s so that you can add UAS to the policy, but embedded in there is this $402 and 14 cents of O I T. And that’s one year term. So that one year term is buying an additional, $794,000. So combining that with the whole life death benefit, that’s how you’re getting up to that required death benefit and then allows you to stuff in 50,000 total.
So what would be due on your premium anniversary date or initially to put this in is the sum of 45 46. 478. So that’s, $5,025 is basically an or about 10% is what would be due. And that’s basically all ex insurance expenses and costs, but then that 44,975 that’s paid up additions, unscheduled. So that’s the cash dump.
That’s the flexible portion that you can put in as you please throughout the year. Now there’s a question out there. What if you don’t max fund it that year or the flexibility of it, especially with guardian, not only within the year, you can dump money in as you please up to your target amount or your me limit.
If you don’t reach that amount the remaining amount will roll over to the next year. So say 50,000 year one you dumped in 50,000 year two, you only dumped in 10,000, that extra 40,000 of space will roll over to year three. So year three, you would be able to catch up that missed 40,000. So you could dump in 40,000 in addition to the 50,000.
So you could then catch up a whole 90,000 in year three and make that policy whole. So you don’t really lose the ability to dump your POAs in as long as it’s within your funding duration. So within that seven years, as long as you make your catch up payments within that seven years, then you can do that as you please outside of that seven years guardian in this case, and all insurance companies will require you to go through additional underwriting to qualify again that, Hey, why are you dumping in this large amount?
It did some health. Did you get some health scare or something happen that you’re dumping a lot of this money into your policy? So that’s where the funding duration can come into play. And that’s why, longer funding durations allow greater flexibility. It does require more insurance products.
So there is slightly more expenses, but that’s where we, on our call, we can model out different scenarios. So you can see what best fits for you. Some of the key things that we, the metrics that we like to look at is how much cash value do you have early on and this design maximizes that cash value.
So you look at that column, the net cash value. So dumping in 50,000, year one, you would have $41,735 of cash value. That’s about, little over 83%. So when people ask us, what is the expense of, what is the cost of starting this policy? That is one cost. What I like to tell people you’re gonna lose about 20% liquidity, in year one.
You’re 50,000 you’ll have access to about 40,000 via policy loan. However, in year two, if you’re to dump in 50,000 you’ll see the cash value go up at the end of the year by about 49,000 and change. So still some hit, but way less of a hit as most of the expenses are front loaded.
And then you’re three, if you’re to dump in 50,000, that’s where a lot of people have that shift in mentality from, Hey, this is an expense or premium. I have to pay to more, truly a deposit where they’re putting in 50,000, what shows up in cash value is 50,000. And then every year after that, it just gets more and more, so that’s where also, the funding we can play around with the funding duration because in the later years, including myself, we start looking forward to when can I dump in more cash, more funds into the policy and boost up the cash value even more , that’s that one metric of cash value, then the break even point is another one.
So the break even point in the sense of the amount of cash value you have versus your total outlet when does that break even, and in this case is breaking even between years five and six. So you’ll see, at year five at the, you put in 250,000, you have 249,934. Again, these are projections based on the current dividend rate.
This is assuming, 5.65 gross dividend rate is what this illustration assumes. That dividend rate is not guaranteed. Dividends are pretty likely to happen. As lane mentioned, guardian specifically has been around for 162 years. They’ve paid a dividend for 162 years through, consistently the amount of dividends have fluctuated.
We are historically in a low interest and dividend environment, 5.65. But and we would expect it to possibly remain low interest rates are increasing. So possibly, we’ll see a rise in dividend rates, but this illustration assumes 5.65 gross dividend rate. Every year, there are some tweaks we can do with the design, that possibly pulls that a year ahead.
So breaking even maybe between years four and five, even that liquidity as far as 83% year one, there’s, it there’s some tweaks we could do based on your situation that maybe we can get that as high as 87, maybe 88% liquidity in year one. If you have capital available and able to jumpstart the policy, basically the, so my understanding of this sheet of numbers, and this is the, this is what’s called an illustration.
So this is what Tyler when you guys meet and you guys get illustration, this is what pops up and is given. I don’t really understand all these numbers, but I personally look at is, the net cash value as a percentage to what you put in, like Tyler said, you, when you configure like how we do, typically you’re running away with something better.
You’re losing less than 20% your first year. I know. My first policy I did who, who was taking a lot more in commissions before I found Tyler it was like, Double that or double the loss basically. That’s your little quick tip on comparing these policies. And then, another good exercise is that, it might be a loss of 20% here the first year, but then you start to recruit it by year three.
It might be half of that. 90, 92% is what you get. But then, like Tyler said, like the break even point is always a quick way to compare policies and ultimately how much fees cuz these life insurance policies, they’re commodities at the end of the day, they’re all underwritten and done by the same top tier companies.
Now I’ll mention there are other, some like lower tier companies that you wouldn’t even wanna mess with. In my opinion, you might get a little bit better, but I just don’t think it’s worth it when you know, the whole purpose of you doing this is security and asurity that’s that net cash value.
That’s how you evaluate the break even point. And again like that, most people doing these policies it’ll break even at year seven, you’re eight at best, but obviously, when you ran this number little after your five. Yeah. And you’ll see on that left the premiums go to zero.
So from year eight on, when we’re designing this for a seven year funding, you, we ex you’d exercise the option where at year eight, you’re converting this pre the policy to a paid up policy. So by, by doing so, no more premiums are due. That’s the good thing. The bad thing is then you can’t contribute, you can’t stuff in any more funds or POAs also.
Again the that’s where we can play around with the funding duration. Some knocks on the, this 10 90 design is that, Hey, we wanna fund this for long term. That’s where maybe we would choose a different company that has a different flexibility, but again you’ll be giving up some of that year to year.
Flexibility that guardian specifically is to me the benefit of that is not having to dump in 50,000 on your policy anniversary date, every year you have that flexibility throughout the year. It rolls over and things of that sort as lane mentioned other companies, and I think we cover that maybe in a later slides are all companies the same.
And we, I can go over some of the basic differences there. Did you get a next question? I think that was it right? Yeah. So we are independent. I would say ma the majority of the companies we use majority of the policies you write is for mass mutual or guardian.
Mass mutual has a different flexibility and that’s in the funding duration, but that’s where that the, that company the P way of flexibility is not as great. So the funding duration, they have a lot of flexibility in that. So we don’t have to necessarily determine the funding duration up front.
Whereas with guardian, we’re saying, Hey, this is a seven year design or a 10 or a 15 year design with mass. You don’t have to set that. It could be a five year design, or it could be a 30 year design. However, it’s best suited that you have that 50,000 it’ll dump in every year on that policy anniversary date.
So not too conducive for investors in the sense where most of our capital, we don’t wanna have it tied up and building up and have to put in 50,000 on that, on, within a few weeks, every year early. So you can’t contribute, but that’s another option with mass mutual. Yeah. And just Tyler says, uses the word flexibility.
The way I look at that word is I have three policies, emeritus, pan, and guardian. So what I don’t like about my emeritus is exactly what Tyler’s talking about, which is the the flexibility. I gotta like fund that thing every single year or something like that on the policy. And I think at Penn, I have to do it every other year.
I’m probably butchering this, that’s what it means by flexibility. Whereas guardian, I don’t really have to do that. Tyler tell me, yeah, 10% like this design it’s the 5,000 a year is what you’ll be putting in for a $50,000 design. And the 45,000 is truly flexible and you won’t lose the ability to put in that 45,000 if say you skip two or three years it’ll just bank up and then you’ll be able to make that catch up at the very end.
Yeah. And going over Annette’s other question in this illustration is the policy paid up after seven years and no more premiums need to be put in. I can already tell Annette’s already doing something like this, like this is the, I think this is the downside of the 90 10 arrangement because the 90 10 is great for new people, stuffing a whole bunch of money in here, right?
There’s a deal. You’ve got two, 300 grand, you just throw it into the policy and then you take 180 200 grand and put it into the next deal. That’s ideally what, the 90 10 it’s kinda like the launch pad, the quick start plan. But what I, what I tell most folks is yeah, do the 90 10 get started, get. A hundred, few hundred thousand dollars of cash value loaded up in there and just get that. You might take the money out the next day and put it into deals and that’s great. That’s exactly what you should be doing, in the long run, as in, that’s looting to shoot, as you near end game, right?
And it’s not necessarily how old you are to me, it’s where your net worth is when your net worth starts to go around four, 5 million net worth or even two and a half. If you guys are more frugal out there, you start to be seeing this infinite banking policies as end game for you to where you can make 5% tax free with very little to no volatility.
Then you’re maybe looking for more of a long term place to just store money as deals, cash out. You don’t go into more deals. You just put it into your life insurance and have it grow under your umbrella. That’s I think where, some of the members who are already in that end game stage might be one to that 70, 30 split. Is that right? Tyler? That’s my understanding of it. Yeah. I’m a strong believer in the 10 90 for all situations. I outlet. There’s some questions on here about so main mentioned, there are no deals. In life insurance. That is a very true statement. I know we’re talking a lot about the different companies, maybe different products.
The statement, there are no deals in life insurance is. Yeah. If you look across the board through all the strong mutual companies the product themselves, I think will vary very little in actual performance. Now, illustrations is one thing, actual performance, historically, I think and we’re talking the four mutual, large mutual companies, which is like New York life, Northwestern, guardian, mass mutual, all of those have all fluctuated basically would be performed the same way in, in actual performance.
What I feel is the differences with the companies is some of the nuances, it might be the PWA flexibility or the funding duration, flexibility the portal use, the ability to just go in and do things online on the portal the ease of the portal I’ll throw Penn mutual in there also, cause I think that’s an up and coming company that has been you know, making a strong move historically though that the, the The actual performance hasn’t and there’s not a lot of transparency there from the company itself.
I think they are performing icy. So I think that’s one other company that may get added as far as a very strong mutual insurance company in the future. Some of the trade offs with the, do the 10 90 split or the 90 10 split for me the one downside is that for the way we’re doing it with guardian is the funding duration limitation.
This maxes out because you priest premium is so small there’s a racial on the amount of death benefit you can get towards this 45 46, or really in this case, 190,000 of death benefit. So I can’t, we can’t push the death benefit, say to two mil based off of this 190,000 of whole life death benefits.
So it ma it, it limits that part where you can’t do this, you’d start have to paying a little bit more premiums but it also limits you on, 15 years, 16 years max, maybe for 50,000 design that you would wanna fund this towards now, I personally view, 16, 15 or 16 years as a pretty long funding period.
The true IBC practitioners or Nelson Nash, you’ll hear that you wanna fund this thing forever. I personally feel well you would open up additional policies. As long as you have, you are insurable. If you’re not insurable someone within your family or within your business, you would have an insurable interest for.
So that’s the one major downside you may hear on the downside is the dividends are less because it gets, PUA gets treated different than base premiums and so forth. But from all of the case studies we’ve seen is that overall, even though your dividends may be less, your overall cash value is more.
And that’s really what we care about is the cash value component of it, of the way we’re designing it. We haven’t been able to find one where overall performance, as far as cash value wise is impacted versus say a 30, 70, or a 40 60 design. Because even though on those other designs, the dividends are higher.
The overall net cash value is AC is still less because of the added expenses built in there. Yeah. And I think we’re getting out the scope of the infinite banking today. I think a lot of the people are, that question is alluding to what do I do an end game in my opinion, end game, like IOLs and these putting a whole bunch of money in here, like we’re talking over a few million dollars in life.
Insurance is a little overkill to me. Yeah, you might not be in value, add real estate, but you’re at least in like triple nets and you’re still in real estate. And that’s why the way for most of the people listening here, you guys are sophisticated investors. You guys aren’t like the average, Joe, just throwing a whole bunch of money in life insurance in end game, you’re still making, doing better than 5% if you want 5% cool. If all you need is a hundred thousand dollars, a passive income a year. Cool. But I think most of us in a retirement and end game, we all want, $20,000 of cash flow every month. You’re getting a lot of money in life insurance.
So that’s why I, like with Tyler this kind of goes into more end game financial planning, this is maybe we’ll answer questions at the end of this, to me there’s other investment options other than what we’re talking about for.
That lower risk, lower return, like I said, triple nets, maybe going back into the traditional investment market. The kind of we gotta get through some of these last slides here whole life versus term life term life, the reason for that is to protect you against somebody prematurely dying, whether you it’s, your spouse and your family is left out.
That’s the purpose of term life. And I think everybody should have that at least to cover, at least a million or $2 million. But that’s cheap typically. And a lot of times that’s, in your employment, your employer will cover some portion of that already. So I think that’s two separate things, right?
Again, we’re just using this whole life product to get this infinite banking, building this asset, making money in two places at one time. But when you start to fund larger policies like a hundred grand a year, $250,000 a year, it’s a byproduct of the term life. So a lot of the clients just turn off their term life because they already have it at this point.
And then a, quick discussion on IOLs iOS is like the third portion here we don’t use. IOLs are typically for higher returns, but you give up the liquidity. And typically I would be careful everybody, anybody selling IOLs, they’re typically very high commission products and the it’s a very multi-level marketing kind of a program.
What I’ve seen out there, they get you to, they get everybody to sign up for these Training programs where you can sell life insurance to your friends and families and suckers. And, I would just stay away from the IUL. There is a certain tool for it in the end game, if you just wanted to make 6%, but to me, for the people listening to this webinar today, you guys can do better than that.
IUL is investing for the clueless, for it’s like when, you build up four, five, $10 million plus in your kids and your kids’ kids to take over that money. That’s what they invest in because they don’t have a clue. They don’t have a network of what to invest in.
So that’s, to me what the IUL tool is for, but Maybe Tyler, can you go over like the mutual insurance company, stock insurance company differences real quick. Sure. And I’ll just add a little bit about the IUL. I actually bought IUL. That was my very first policy. That’s what sent me down also this rabbit hole of researching because it didn’t really perform to what I wanted to do now, again, with IUL similar to whole life, there’s a lot of design features in there.
So it probably wasn’t the most or best design, but why I personally don’t like IOLs is the underlying product of IUL is term life is renewable term. Unlike the guarantees of whole life where, it’s a set premium those expenses can be managed with renewable term. Basically you’re buying a new insurance product every year.
And although the numbers and the returns may look great as you’re young, similar with like level term is cheap. When you’re younger, It’s ridiculous when you’re older. If in your seventies or eighties, if you’re having that premium renew every year that’s a large expense and a very unknown cost that I’m not personally willing to utilize this strategy for.
That’s my take on IOLs. There is a question. Can you convert it into an I B C there is something where with all insurance, you can do a 10 35 where you take the cash value of one policy, turn it into another PO or roll it into another policy. Sometimes that makes sense.
Not, I wouldn’t say it, blanketly, it, it always makes sense, but there’s times when we don’t recommend it, or we’re just trying to, would recommend people how to maximize what they already have and not roll it over because there are some expenses, you’re starting over, but there is something called a 10 35 where you’re rolling over the cash value to a new policy.
Are all companies the same? We touched a briefed on this, but what we particularly choose and what we recommend is a mutual insurance company. And, the mutual part is key because that’s where you, as a policy holder are basically owners of the company. There’s no stockholders or anything.
A stock insurance company say Prudential has stockholders. So their vested interests maybe split, right? It’s not purely about the policy holders. They have stockholders that they have to appease as a mutual insurance company with and participating mutual insurance company.
That’s where the company profits are returned to you in the form of dividends. So that’s where, you’ll be receiving dividends from the mutual insurance company. We like, the, we like to play with the large ones. Lane mentioned, there are some smaller ones, some of those limits that we talked about, maybe a lot.
Less restrictive on some of these smaller companies. There’s usually a reason for that, that they wanna, they’re trying to build up, they wanna attract people. So maybe that 10 times P limit maybe 15 or so, or it may be, you could do like a 90 or 5 95 split on a policy. But there’s high risk.
I think with, smaller companies, the unproven track records. I don’t, I wouldn’t wanna utilize a long term strategy with some of the smaller companies. That, that’s where again the strategy is more for stability and for long term planning and I prefer to use proven large companies.
Yeah. And trust me guys, I get approach of all kinds of stuff these days. And like insurance companies show Puerto Rico that supposedly can get you around some tax things and all that type of stuff. Like to me, like you’re not like this infinite banking thing is what, like everybody should do. Everybody should be flowing your money through your infinite policy.
So you can be growing that asset there and then taking out in an invest it right. And make way more money there. That’s the one, two step program to make a little bit more on the, on this banking side. Taking on a lot more risks is just not worth it guys like that’s, I don’t know. I don’t, I just don’t think that’s Wises.
Yeah. And this is another question we get asked a lot. Is, am I too old to, to start this? Or would this strategy benefit me? I’ve had, I have some 60 year old clients 70 year old, maybe pushing it, but again, we can we can run some scenarios and see if it makes sense. The, again, because we’re using insurance, I think the largest determining factor would be being able to qualify.
The age itself, isn’t really the factor. It’s health conditions. Even whether you’re 70 or 40, the health conditions usually is the factor on being able to utilize a strategy, if it makes sense. The biggest thing, a 20 year old versus a 60 year old, if you look at the illustration the biggest difference you’ll see is the amount of death benefit.
So say for that 40 thou $50,000 policy, it’s around $900,000 of death benefit for a 20 year old, it might be like 1.3 mil for a 60 year old. It might be 500,000 for that same $50,000 target. So that’s one obvious difference. Again, we’re not designing it for the death benefit, but that’s one obvious difference as far as the cash value performance.
Surprisingly, it’ll be pretty similar between the different ages. The biggest difference is when you look further down, because this is a long term strategy where, you know, compounding really is impacted later down the year or down the line a 20 year old has theoretically about 60 plus years of compounding a 60 year old or a 70 year old may only have 20 or 10 years of compounding.
And it’s on that back end when you really see these huge gains. So early on it’ll probably perform the same. It might, instead of breaking, even between years five and six, it might break even between years, six and seven for someone, a lot older. But it’s really what you lose out on the back end.
Compounding, at the end of the day, it’s not configured off, like we’re not doing it for the death payout guys. That’s what term life is for. This is just mainly to get an asset that grows in two places. If you can’t qualify. Maybe you’ve got younger kids, you can buy a policy on them.
We’ve had some people, people who are in their seventies buy it on their 30 year old kids who, that’s where you dump all your money to. And it sounds counterintuitive because you think you’re getting a life and policy on your LF, but then again, you aren’t right. You’re just buying an asset and stuffing money into it is what we’re doing here.
And then I’ll caveat this slide that we, we, you would definitely need to consult your tax professional. We’re not CPAs, but you’ve heard the term me and the modified endowment contract. So if you were to cause the insurance product to become a me, then anything you do from there on forward would be taxed.
So even a policy loan take out distribution a, any of that would be, will be taxed. So that’s why by far you, we wanna prevent that from becoming me. There is maybe a time down the line where you want it to me. If you intend not to touch any funds from it, and you just are planning on having it transferred to your, to the beneficiaries, but while you’re utilizing it, we definitely don’t wanna meet Cash out surrenders.
This does perform like a Roth RA in that sense where you’d be able to withdraw your contributions tax or penalty free at any time. You technically, there may be a time to do that also, and we can talk on specific strategies on that, but once you B take it out, then you’ve stopped the compounding on that.
And that may not be wise, especially early on. As far as the other, any other time would be, if you were to just totally pull the policy out or surrender the policy in that sense where any gains above what you contributed could be, would be taxed at that point. But other than that, the death benefit at the upon death, the death benefit transfers tax free to your beneficiary.
It still falls under the state tax limits though. So be aware of that and there may be strategies to help with that. So we’re gonna get into some questions, that common questions that people will normally give us. The first one here is if I become ill what’s just AATE death benefit writer, caller.
Yeah. The good news. So the good thing is with a certain size policy, there’s an accelerated death benefit writer. That’s free of charge that gets tagged onto the policy. That in the event you develop a chronic illness or a terminal illness, you have early access to the death benefit. You always have access to the cash value regardless, but this, often the death benefit is much higher than the cash value.
And in the event, a chronic and that would be basically, you can’t do two of the six daily acts of living terminal illness would be that, two different physicians determine that you have less than 12 months to live. Both I think, bad situations, but the benefit of utilizing this asset again, we’re not doing it for that, but it does have this benefit where you’ll be able to draw higher amounts from it to help cover those expenses while you’re living versus just the death benefit.
And I’ll just mention it too, it’s a PSA. Like we had a guy, he had a, I, a heart attack or some kind of operation on his heart. And apparently he qualified for this. He’s fine today. Probably just can’t do, enter the CrossFit games or do Woff method and go swimming or anything like that.
But, he got a big payout. So if anything happens like that to you guys, talk to your insurance provider, cuz it might trigger getting.
Yeah, we tell the chronic terminal other writers, there are other writers that could get added to the policy. Again, we are utilizing this purely for the cash value component of it. If you wanted, these other writers oftentimes is better off having a separate policy specifically to address those needs. But if someone really wants to, we could add these on guaranteed insurability rider that’s an added cost that you have on your policy that, even in the event that you your current health rating changes that you’re able to purchase additional death benefit or insurance long-term care writer similar to that accelerated benefits writer, it’ll it just allows you to access some of the funds in the event for care.
Again, that one specifically, I think it’s better off to have it a separate policy or a separate life long term care insurance specifically to address that versus trying to tie it on. And then the waiver of premium writer again, also another Expense that in the event that you can’t make your premiums, it they can cover it for a certain amount, but for our design, because we’re minimizing that the PWA or the premium payments that really doesn’t benefit much, because it doesn’t really add much to the cash value since our premiums are so small to begin with there’s possibly, you could have a PUA premium rider, but that would be very expensive as well.
And usually once you one, if you’re able to make one or two years of full payment, max funding, that the growth of the policy, even if you are to just stop payments from there on out, and, we have the policy growth cover the premiums. That’s usually a better strategy than paying for the premium rider.
Yeah. To me, these are like, add-ons on a car, you buy the car to get from point a to point B, just like how you do this IBC to make money in two places and have a store of cash. So all these other things are just addons and other additional fees. I don’t know, depends talk to Tyler if it makes sense for you, but this is this is I think this opens the eye for a lot of people.
This is like a working example of people actually using this dang. And how it augments what you’re doing on the investment side. So maybe walk us through this Tyler. Sure. This was, if people heard me talk about, Hey, if you wanna get a hundred thousand of passive income a year, you literally would be investing a hundred thousand a year for years, 1, 2, 3, and four in syndications, and then year five, theoretically year one deals would be cashing out doubling if things went well.
So the a hundred thousand in year one turned into 200,000 in year two. And then it would you live off a hundred thousand, reinvest the other a hundred thousand and keep the machine going this strategy, this double dip just rolls insurance into that. The I B C into that year, it would require a little bit more upfront capital because of that loss of liquidity in year one.
But in this case, it would be a hundred thousand dollars target amount funding for 10 years. Your actual me limit would be 150,000. So that’s where you can actually year one stuff up to your me limit, but in this case, so this is that blue box. You max fund, you would fund 125,000 year one. You would have a hundred thousand available, in a form of a loan.
So you take that policy loan. Fund your two policy or two deals. $50,000 deals, year two, you have you fund a hundred thousand and your cash value at that point would be about 198,000. You could take out 90 or total. So it would go up about 98,000. So you could take out nine, 8,000, you’d have to supplement 2000 more.
And these are just rough numbers, but that would fund your next two deals. Year three, you fund your policy a hundred thousand. You would have access to that a hundred thousand and to fund your deals and year four, same thing you’d fund the a hundred thousand to your policy have access to a hundred thousand fund.
Your two deals in year five, when your deals pay out, instead of now having living off of a hundred thousand, you could take that a hundred thousand pay or your policy premiums or max fund it to a hundred thousand for that year, and then take that other a hundred thousand and fund your two deals and keep that machine going.
And then from there on, out from your five on technically, your deals are funding your premiums and you still have access to the cash value. On those later deals, you could then do the reduced, paid up at year eight, or because this was designed for a 10 year funding. You could continue funding at.
Most people at that stage when they’re seeing dumping in a hundred thousand and having more than a hundred thousand show up in cash value would wanna continue funded for as long as the design was for. And another concept that I look at this IPC is when you first do this, you gotta decide how much you’re gonna fund it every year for a five to 10 year range.
Basically what you’re doing is that’s your container side. And because we configure with 90 10, it’s pretty easy to hit your minimum contributions. You fund most of your first year, you’re done. You don’t really need to put anymore. So if you lose your job or something like that after you don’t really need to make your next year’s commitments.
And I think that’s a big game changer and it took me like four or five years to understand that myself. But the idea is creating this container to grow. You may not have the cash value inside, or cuz you’re taking the money out and growing it somewhere else as you should, because you’re gonna make a higher yield.
You should make a higher yield outside of this policy, but at some point, and this is the concept of end game or growing your net worth past two, 5 million, you wanna return the money back to this container and you’re gonna wish you had your container as large as could be. This could mean for a lot of you guys.
You. Maybe a million and a half, $2 million of potential cash value funding that you could hide money in there, asset protected and, tax free dividends there. That’s the concept of, this is more, this is a different diagram, which you guys can take a screenshot.
What, all this will be in the eCourse where you guys digest, this is, maybe partially, this you’re starting, you’re funding it like in toddlers standard plan. And then, you start to keep some cashier for unexpected life happenings college. There are a lot of different use cases where we’ll get to the end of the presentation here, but this is there’s a lot of different uses for the same thing.
And, like I said, this is how I use it in the growth mode, when you’re taking the money out, you’re investing in deals or whatnot. But yeah, just a lot of different use cases.
This is maybe a little another advanced strategy of the triple dip. The first thing you dump it into the cash value or the, you dump it into your policy. You leverage out, you can dump it into a brokerage account and then take a security back line of credit and then do the syndication.
So it’s just putting it in another asset that can be leveraged. Again, these are maybe more advanced and someone who you know, is comfortable with debt and strategic debt and maximizing that. But this is where, that same dollar could technically be working in three areas at the same time the limitations or policies. So again, be because it, it is insurance, there’s a maximum insurable amount. Your human life value is what the, what insurance companies are looking at. That’s generically tied to your annual income. And as you get older, because your earning years or less, that means you, you can qualify for less.
You could qualify for less and less. The rule of thumb is based on your annual income. There’s some flexibility with that and we can talk specifics on a private call. One major threshold is a $10 million death benefit or a cumulative death benefit. That’s where usually a third party verification would be required to validate your, the income look at possible tax returns.
And it becomes a lot more challenging once the death benefit crosses 10 mil health, your health obviously 📍 is a big factor on what health rating you get. Again, keep in mind that you’re being rated amongst the average American your age. So it’s it, some existing health conditions are expected.
The biggest thing is that it’s being monitored or are treated and there’s follow ups in that. One thing we normally recommend, if you, if there are, you would go to your primary care or someone to see what your records will look like, because the underwriting process does pull the records from your primary care provider.
And just see if there’s any notes in there or ask the doctor, if there’s anything in there that may impact your insurability. And if there is say, like there’s a recommended colonoscopy, but then you didn’t do it that it now would be the time to do it. So that there’s that follow up documentation in your record.
And now if you become uninsurable for whatever reason, then that’s where you could look at, a spouse who may be insurable some business partner, as long as you have an insurable interest, or why would you, why the need to be pulling a life insurance policy on someone else? That there’s possibilities of that.
So even though if you’re very old, maybe a working child, that they have a you have an insurable interest on, on, on their life that you maybe be able to fund a policy on a working child versus yourself. Yeah. So the 10 million cumulative death pay, or that, that cap at 10 million, most people won’t hit that in their first policy.
I think most people will get up to that in their second policy where they layer on top of that. But, $10 million, that’s like putting in quarter million dollars every single year for six or seven years, I would say most people will start off with maybe, a hundred, hundred $50,000 and that kind of segues into alright, we talked a lot about this stuff today.
What’s gimme a starter. What do people normally do? I did this video way back when my hair was a little longer, or if it didn’t stay down so here’s the use case. So like a million dollar net worth person, they’re able to save 60 to $80,000 a year. That’s the net, right?
Which you save. Most people in our group make, maybe make two or $300,000 a year and they spend most of it, but they have 60 to $80,000 left over. That’s like the net is what I’m calling. So what I normally will say is now take a third of that net. So a third of the 60 to 80 and use that as your base commitment every year for five to seven years.
So what that works its way out to is for most people here, at the very least do 30 to 50 grand a year. But then if you have a lot of like lazy equity, home equity, IRA money, then you may wanna layer up more on top of there. So in a, in addition to your 30 grand a year, Say another, another case somebody has 500 grand of lazy equity, which is very common.
Most of our investors, they come to me in their forties and they have half a million dollars, million dollars in their IRAs or, various places, at least half a million dollars in their home equity and they wanna get it working. And I think this is the use case of you’re supposed to put it in deals, you’re new, so you don’t really know where to put it. Or so the infinite banking is a great way where it is relatively zero risk in terms of like where these life insurance companies are gonna go. It’s a great place to just throw your cash from now, make a little bit of yield before you get your bearing, build your network, figure out where to put your money, who to trust for these deals.
So for this example, if you have half a million dollars of home equity or some other source of liquidity, what I would probably be doing is in addition to your 30,000 a year and in a hundred, cuz you funded in five years or, double up, put, a little bit more the first several years.
So I mean you could fund it anywhere from $130,000 a year to $250,000 per year again, because the way it’s configured with only 10% insurance, once you’ve funded, the 10% of it you’re done, which is typically in the first year or partial of the first year, If, and this is the game changer.
When people are configuring this with 30% or 50%, you may have to put in, another two, three years of payments so that the policy doesn’t cave in. So this is all the goal of this is to get your money into invest, but also increase the container size as much as possible. The 90 10 policies to me is the best tool for that job to overfund it and expand that container size as quick as possible, getting you the maximum amount of the cash value.
So you can go and take it out as a policy loan and invest it in deals or whatever you want and make our money elsewhere and still make money in two places. We, there was some discussion over what do I do after? That’s where I would say, maybe in year two to four, you get another policy on and layer on top of it.
Cuz at this point you’ve taken some policy loans. You get the you get it, you’re more comfortable with fields. So you layer on a bigger policy, big kid policy. And this is what I did. I started with, $50,000 in my first policy. I did that for a few years and I layered another one.
And then I layered another one where I hit my $10 million. And as an entrepreneur, it’s hard for me to verify my records because I don’t pay taxes cuz I don’t make income. That’s make all passive income. You drive it down to zero. One of the downsides is you can’t qualify for more than a $10 million insurance policy.
Or as Tyler tells me, it’s hard, it’s going to be hard. But I would argue, why do you need bigger than a 10 million policy where you can suck away one, 2 million of liquidity. At some point it becomes impractical. And to me like the way I look at money, even in end game, you should still be growing your money in maybe less value, add aggressive deals, but maybe more stabilized assets triple nets, things like that.
But I would say like the lesson learned that most people say is don’t wait and overanalyze. Like I think we got into some of the details a little bit, but is keep it simple folks, like just create a policy, fund it with a hundred grand a year, take it out, take a policy loan and invest it.
It’s simple, very simple. The interest rates and the way these policies they’re always changing and they’re never getting better. So the best time to do it was yesterday. And at the end, like your money is more safe than deals and banks. And that’s why. Tyler. And I will, we’ll talk about, new people coming in, and, I believe in the deals and I invested in myself, sometimes there’s very green investors that have a lot of money that they need to get it working.
I always can say with a clear conscience, I’m like, yeah, Tyler, just sign ’em up for a policy. And just at least make, they can make 5%, on that chunk of money. Because they’re new, they haven’t done this syndication E course or met other people and started to diversify into a multitude of different alternative investments.
But here’s some of the, if you guys wanna start to queue up your questions, we can get going through them after this slide. But here are the use cases that I’ve personally come up with. So starting at the top, or top left, comboing, this, we’ve talked about this quite a bit, investing in investments, alternative investments I’m coming out with a new pro fund where it’s just gonna be a straight 12 to 13% paid monthly.
What better the combo with your 5% infinite banking? You can also combo it for like college savings. They’re at the top, right? This is the 5 29 plan killer. This is the ability to keep money for the short term. Maybe your kids are going off to college in five years or 10 years. Great place to put this money.
The bad thing about 5 29 plans. They’re like 401k plans, they’re investment vehicles for the clueless, and they’re bad because they you’re stuck with all these retail investment products with high fees. And they’re just investments for the masses where all you guys listening, you guys have been opened up to the world of alternative investments.
Sure. You have to grow your network and get comfortable with the people you work with. But as you can typically find better returns and a lot safer in more real assets than the stock market or those investment options. But, this is where, it’s a lot of people use this interchangeably with their college savings for their kids or their retirement.
Bottom left, the end game investor, the guys that are above two, $4 million net worth, they have, they’re totally fine living off of 10 to $20,000 a month. I probably put Tyler in here a little bit, maybe not all your money, but a good chunk of your money is just sitting here just churning at 5% and.
At this point, maybe like a 70, 30 split policy where you can continue to fund it longer term might be better. But that just an opportunity for you to have just, it’s simple, right? If you need some money, just take a loan from your cash value your life insurance company, it’s super easy and your money is there and secured more secure than banks.
And then the bottom, just general new investors, right? You come into the alternative investment space, you don’t know what to do. Some people call it, wow, I got all these options, right? Multifamily, self storage, hotels, right? All these private funds where you’re investing, when you know the people and you’ve come out to a retreat and you meet all these cool people.
And they’re all like, not paying off their houses using debt appropriately, but it’s, it takes a while to get into this world, right? Unless you wanna just start throwing a hundred thousand dollars in a couple dozen places, know this is a great place to put your money and let yourself season let that relationship seasons, let’s see that first round of deals go full cycle.
Before you start to invest larger and larger amounts, certainly get over 20 to 30% in your net worth into alternative investments. But the majority, I would feel comfortable telling people that putting into this stuff is probably more secure, much more than the stock market mutual funds, and probably more secure than just leaving it in your own bank.
Banks fail. But well capitalized in life insurance companies that put people through rigorous health underwriting is a lot more secure. And at some people, some people will do the Helo set first and they’ll feel uneasy about that monthly interest, same concept here, like instead of the HELOC, you’re using your IPC, but for the reasons that, the banks can’t pull your know asset protection.
And I think this’s also great for, a lot of the people on the call, you guys are the more sophisticated investors in your family, but maybe you have older parents or, younger kids that don’t really understand the whole syndication investing. You, if not, let us know, maybe we can give ’em access some e-courses to get a more educated, but, maybe that’s just all they want.
My parents, they’re never going to invest in deals. They’re just stuck in their ways, but maybe this is definitely better than what they’re doing. And I think it’s something that you can promote to them as and feel good that it is very secure. I, I don’t know if the term risk free, but it’s the closest thing to zero risks out there.
Any other use cases, Tyler? I think I missed, or no I think that 5 29 is a big thing for me per se. I don’t, I have a 12 and a nine year old. My don’t con instead of contributing to a 5 29, which I feel is trapped that I put it into a policy also with long term care because you’re growing cash value or you’re growing cash.
Instead of, having a long term care insurance policy, I intend to tap into my, the whole life policy in the event, for healthcare in the future a couple others. So doctors or just high net worth people in general, who are more concerned with legal liability, getting sued.
Like I’ve combo this with my irrevocable trust where irrevocable trust is not a revocable trust. It’s a lot more heavy duty. If you’re under four, 5 million, it’s probably not even worth it. People who are an end game or high liability, like doctors, you can make an irrevocable trust, get it off of it.
But the problem there is like getting your money in and out is difficult and cumbersome. So by leaving some of your money, your liquidity in this infinite banking policy, it’s life insurance, like we said, it is protected. It’s under the umbrella or in my visual representation. It’s like under the patio in a way that you have the simplicity of use and access, but it’s still protected and you can have maybe more or just a portion of your network in your irrevocable trust.
So that’s another way of, use case for this. And then, entrepreneurs out there, business owners, this, I think the biggest thing about businesses is, there’s always gonna be ups and downs. The people who survive the downs are the people who take over the competition that fails and dies off.
The people who are well capitalized are the kind of, businesses never failed. They just lose money or did they just run out of money to keep ’em. But this would be the place where you would put your liquidity for your payroll. In case of a rainy day now, for most of you and you folks listening who are just salary guys, I don’t really see a huge need for liquidity stores.
Most people, three, four months of, salaries more than enough. So this is more for the, on the business owners out there who may wanna keep a few hundred thousand dollars in there for their, their staff of a dozen people, payroll. And Jay brought up a good point, Keyman insurance for a succession team.
That, that is huge also. So a lot of corporations do utilize that it’s a way of having some incentives also for their key employees. A business will pull insurance on their key employees. Business continues to own it, but it serves as a potential retirement incentive or supplemental income for the employee.
Maybe at some point it become, they become vested and you could either transfer the ownership to them or just pay their retirement from the policy as a business. So that is a key thing. One more thing is just, is, generational wealth. I think we touched a little bit about that, but insurance and life insurance specifically plays a big part in that as far as potentially creating generational wealth and continuing that legacy for generations to come.
All right. So we’re gonna get into the questions as you guys are typing into the Q and a box, but if you have to go, you can sign up and get access to the ecourse@simplepassivecash.com slash banking. But if you’re already part of the club, this is the URL to get access to the e-course. So everything that we talked about today broken up into a lot more bite size pieces.
In the the eCourse format that you guys know and love from us and a lot other, cool little tips in there too. I would say, the next step is, just getting an illustration and just moving forward. But let’s let’s hit into these other questions. Let me maybe accept this overall one that stands out.
So I think mark, mark asked as a commission agent, why would you design a policy to minimize your commissions? Truly it’s the reason why I do it personally is because it’s a better product for the client. I’m really doing it for the client first. I am an investor first also, so commissions are nice, but that’s not my livelihood or why I’m personally doing it.
It really is to give back to lanes, community specifically, but other investors also and provide them the best product that I feel is out there. And, truly have the client benefit. I feel even as with the minimized commissions it’s still very good. I’m very willing to share what those commissions are on a call, but.
Minimizing the commissions it’s still pretty healthy the commissions which is somewhat appalling when you hear like a hundred percent, the standard whole life, those commissions are basically 10 times what I would be pulling on the same size policy. And I’ll also comment that if you look at all my business associates, like the one thing I don’t want at this point in my life is nonsense.
And that typically nonsense occurs from somebody who is not financially free and still working in scarcity mode. And, in the deal side, it’s nice to work with high net worth partners because when things go wrong, we just throw in a few hundred thousand bucks each, and get the problem solved and make it right for the clients.
But, business is tough and when you’re not an alignment for the clients and you’re more in alignment or, there’s a lot of people out there, real estate agents, insurance agents, lending brokers, all the people in this financial industry that are they need to pay their own bills, like financial planners. It’s just not people I wanna get into bed with personally. And I, and I mentioned that and they, I that’s just maybe. Life advice for people is when you can get to a point, why do we all do this to get financially favorable? Why well, to do what we want with whom we want when we want that, so that’s why work with people that are, have seen the investments work fi in, in a place in their life.
And it just makes things better for everyone, including myself. , and it’s not like we need to really make money with this life insurance thing either. It just helps augment everything else going on more, less fees, more money to invest. And then, the investments, we can take down better deals in the future.
But other questions here, what life insurance company do you use? We’re not, Tyler’s not captive, so he’s not forced to sell you like a certain company. He can go wherever. Currently I think I know this is where Tyler goes to all these like meetings and they hang out and they do their secret handshakes and they figure out which ones are like the best one based on the rates and the flexibility.
But I think they’re the cool kids are using guardian these days, but, that’ll change all the time. I’ve seen it change couple times these last five years. There’s a minimum amount of a suggested amount of life insurance.
I would say, look guys, like if you’re gonna do less than 10 grand a year it’s a waste of time for everybody guys. Most people are at minimum, I would say, are doing like what 50,000 a year? I don’t know. What’s your take on this one, Tyler? Yeah. The tech, the true answer is, you could do a, any size policy the, that enhanced accelerated benefits writer.
And this is specifically for guardian that gets tagged on for free. If you’re whole life death benefit is at least a hundred thousand. So in that 45 year example, with that 45 46 a year, he was buying 190,000. So in his case, he could go about half of that 25,000 a year, or maybe 27,000 a year would be the smallest policy that he gets that benefit from.
I’ve done, I’ve written policies for people, a th 10,000 a year. It’s. You can see it, but it’s not the, it’s a small policy where they’re not gonna be able to have access to percentage wise you’ll have access to the same amount of money. It’s just that it is relatively small in the sense of why we would be doing this.
Yeah. You guys are investing in private placements and syndication. I would think guys, and you all your networks are over a million dollars. So I would say, like use case, I would say average person, our group million and a half, they are able to save 50 to a hundred thousand dollars at least a year.
And they have a bunch of liquidity, maybe a hundred or a couple hundred thousand dollars a year for five to six years would be a good starting point. But sure, if if you’d like to get a health review twice, that’s what I did. I started with a $50,000 policy every year and then I wish I did more because then I figured out what it is.
And I think that’s where you talk to other investors. And until you get the hang of oh, we take a policy loan to go into a deal. You realize that 50 grand is hardly anything. And then, you start to understand, oh, I nine understand why every, why everybody’s doing a hundred, 200, $250,000 a.
Into this, they just put it in there and they drain it out.
Number three, I think. Yeah. So niece, wait, our question is we are older and don’t have any children. Can these policies be set up for any relatives like nieces or nephews and maintain all the same loan benefits? Yeah. So there’s three main components to the policy. There’s the owner, the insured and the beneficiary.
So in this case you could be the owner. We’ve had, I specifically having haven’t done nieces or nephews, but there could be a reason why we would do that. And there’s insurable interest. The key thing we need to establish is what is the insureds insurable interest to you? Or if you have insurable interest to the person you’re ensuring and nieces and nephews, if you don’t have children could be that something, some, some writeups we’ve had is that they intend the nieces and nephews will in take care of you as you age.
You guys have that agreement. So you have an interest if they were. Pass then you would use that proceeds to hire someone else or, have to care for that. Or the death benefit would be used to find someone else to care for you. So that’s a typical story we’ve presented multiple times, not specifically for nieces or nephews.
But I think that story plays will continue to, then again, we can talk specifics on a call and to get to know all the details. Question four here is infinite banking appropriate to start if I am over the age of 70.
Yeah. We touched about this on the earlier parts, but it depends typically at 70 you might have a working child or someone else that may make more sense starting on them. But again we could just run the different scenarios to see what makes sense. My oldest client is 68.
And it’s yeah, because normally older people have done it on their working children. Question five here, are there no deals? There are no deals in life insurance. And I would say, yes, this life insurance folks are commodities. You guys can go shop it around. It’s just a matter of how much your agent wants to take in commissions.
It’s all the same Dan thing from the same underlying insurance company. But the question is, can you address the downsides of the nine, 10 design or 90 10 design which again is, where you maximize the cash value you decrease the commissions. So once a policy is paid up, we’re not able to sync a big amount into it.
You wanna take that one? Tyler? Sure. Yeah, we I, we actually answered the first half of the question, I think on the, during the call, the the downsides mainly is, there’s some limitation on the funding duration for that target amount. At some point that’s one of the biggest downsides for a 10 90 or a 90 10 design.
But the other question, once you, once a policy is paid up, you won’t be able to send yes. So you once the policy is paid, it, we, you do an option to do a reduced paid up that makes the policy paid up. So you no longer can contribute any more funds to it out of pocket, the policy will continue to grow.
Cuz as you receive dividends, it goes to purchase additional, paid up insurance in that fashion. But the good side of that is that you no longer have to put anything in either and there the premiums are zeroed out. So they’re not taking out any premiums from your policy cash value.
Yeah. And I don’t comment more on that one. Like I think if you wanted to, do you wanted to fund your policy long, long term because you’re in that stage of life where you just don’t care anymore, you’re not taking coupons, or maybe you are, but you’re not like optimizing at this point in your life, right?
Imagine you got $20,000, $50,000, a monthly passive cash flow coming in every single month and maybe you don’t have kids. You just don’t really care, right? Your time is more valuable than money. You may just wanna put your money in somewhere and have it make a little bit money and be able to continue to grow it and fund it with more new, fresh cash instead of taking that cash and investing it, which I think most of the people on the call are going to do because they’re still in growth mode then maybe a 70, 30 policy where you can keep funding.
It might work. But again, I think that one is, maybe talk to Tyler on that one too. Alright, so more questions. Number one here, can you talk about the advantages of using I B C with your charitable giving
you or so, I don’t know about specifically charit beginning, but you could have the death benefit or a charity be a beneficiary of your policy. Or secondly, the, your death benefit could go to a trust and you could have that within your trust. Determine what to give. I don’t know if that’s the question or in regards to your annual charitable giving.
I know if yeah, I don’t know exactly where that question is going, but. I know you can assign, if you didn’t have any kids you could probably assign an I B C to whoever you want. Yeah. Maybe if whoever’s question that was maybe type it into the Q and a box and we can come back to it.
But question two in this example, and I think they’re referring to that illustration page, what is the max we could take a loan from, is it from the net cash value? Yeah, that’s correct. The net cash value column. And we conservatively say 95% of that is what would be available in a policy loan.
So in, in year one, 41,735, so 95% of that. Yeah. The way you guys should be doing this, or most people, if you put the money in, you have 41,000 in net cash value, but you take a $41,000 loan the next day and you go into some deals, right? That’s the way you do this. And then of course, the next year, when you have to make your next premium and paid up additions and you fund it and you get that, but.
At some point, the money rolls in and then you refund it up and then you use this as that liquidity source to slush money in and out of. And then now maybe you’re seeing the big picture on the usage of this whole thing. There, there is. So there is a slight delay because the, you can’t do it the very next day.
You, it would be 10, it would basically be 10 business days. If you’re using that same funds that you just deposited, cuz the insurance company will need it to clear. So they look typically wait 10 business days, then they’ll process your loan. You can go in and request it right away, but it normally won’t get processed till that 10th business day cuz they, they wanna see that the funds cleared.
There’s one way of getting it slightly sooner than that. And if we can provide a bank statement showing the funds, cleared your bank they’ll accept that and then release the funds. But typically that doesn’t come into play unless you’re taking it out right after. So yeah. Good point.
Good point. I definitely, I think that’s where you guys talk with either Bri or Chad or team at simple passive cash flow.com. If you guys. You guys are cutting the wire a little too close there, just, let us know. And we typically can accommodate people. We do this ourselves, so we know it’s the, it’s not like the day of, but it can take a week or so question four, what do you think is a good target of how much percent of one’s net worth should be atypical and best should put into IBC?
I don’t know if net worth is a good thing right off the bat, but I would say whatever excess liquidity you have should be is more of an indicator. And I would go back to my other RX slide on that. But as far as like net worth as a percentage, when you’re under half a million dollars net worth need every single dollar going to investments, not this stuff.
So I’m not I would say if your net worth is under half a million dollars, don’t waste your time on this stuff, go make more money or will save it, save more money and invest it. But I think once, for most investors million dollar net worth, we’ve got X is we’re not the greatest.
We’re not the most efficient with our liquidity. Meaning you got 10 grand here, you got 50 grand in this account, you got. Hundred $200,000 of liquidity or equity debt equity in your house. I think that’s most of us on the call here who are credit investors, I think at that point, it would make sense to start implementing this strategy.
But as your net worth rose, it’s hard to say, right? And I think this is where you mix it up with other accredited investors. You have these types of conversations to me. If we were on a consult, I would ask you what are, what is your long term goals? Do you wanna continue to ratchet up to five, 10 million, 20 million net worth and con continue to grow, or once you get to formula and you wanna just shut off the engines and live life as the 4% rule with 20 grand of passive income coming in every single month, it’s it really matters up to you.
But I, yeah, I don’t know how to answer that question. I know you wanna put in your 2 cents that yeah. I think you covered, the net worth is slightly different. The net worth can play a part as far as being able to qualify for more insurance based just on your annual income.
But I, I don’t it’s hard to say. What do typically the net worths of these guys and, the financial profiles, like what’s I think that’s what the question is asking, right? Like of all the sophisticated investors doing this, what do you see them doing? Think it’s more like people want a bucket size, a certain bucket size. And so say someone wants, a $2 million bucket at some point, but that could be funded differently, that could be a hundred thousand or 200,000 over 10 years. It could be 250,000 over eight years. Or it could be, 50,000 or 50,000 over what was that? 40 years. So it’s really the size bucket and that’s I’m talking like your cash value size at some point in life. That’s usually what people are trying to target of saying, oh yeah. Good point. I think for like most business owners having half a million or a million dollars to be able to get at an end game is cool.
Any more than that, it’s just a little excessive, right? You could have your money elsewhere. This is not a growth option. You should have your money elsewhere making at least five to 10% elsewhere. To have more than a million dollars is a little silly. So yeah, good point there, Tyler.
This I would look at it, not as a percentage of your net worth, but like what kind of liquidity slush bucket that you want to have? I would say at most investors, it’s at least a couple hundred thousand at least is what you want at some point question five what’s wrong or not so good about, they mentioned Northwest mutual, what are like, we’re talking about the flexibility and the rates, but like, why is it that the ones that, we’re rolling with now are the ones that we are well I think specifically Northwestern, we mentioned them as a, one of the strong mutual insurance companies from my understanding, those are all captive insurance agents where they have to be with Northwestern mutual exclusively.
I personally like being independent and being able to be a broker, shop around or see different companies versus stuck with one company. Yeah. Nor Northwest nation is definitely one of the, like the triple a rated ones which is what we’re looking for. But the word on the street is like, when you start to build these policies for liquidity, taking money. Their policies just aren’t set up for that. There’s certainly your cash values. Aren’t gonna be as high, which is the whole point of why we’re doing this, which most financial planners don’t under, really understand what a question here, would it be better to do two policies and keep one going rather than having it total paid after seven years?
So either way it doesn’t matter. I think, it’s like the whole ready fire aim kind of mentality, I think is the best approach here, especially because the stuff here, commodities, and it’s no risk essentially, these stuff is more secure than banks. So the ready fire aim mentality here might be good to just get one policy and you’ll right, size it on the second one a year or few years later. That’s again, that’s my personal, like I got one and then I got another one for myself and then I followed up with one for my spouse.
I hit that ideal bucket size where I will very soon. And then or comments on that. Yeah. So I. It depends, it, because there’s flexibility in how we can design it. So we’re not, even though we show the seven year funding duration you, if you, if the funding duration is an issue, we can design something for 15 years or so, or maybe even longer.
But from a financial efficiency standpoint, I think starting two policies. If it started, if it’s, if you start at the same time, then I think there’s no loss of efficiency. If you’re starting one, maybe a little bit further down the road then one there’s a risk of the insurability. Something may happen over the two years that makes you less insurable, but also even if it’s the same health rating, you’re, you may be two or three years older.
There is some cost to that. But again, that cost may be less than if you started off with a larger policy that you don’t always max fun. So it depends. And that’s where we can go back and forth with some designs to show you the what ifs or compare the different two scenarios.
Yeah. And then piggybacking on the last question question two here. End game. What amount of cash value would you think is too much, 5 million, 10 million. So the cash value is, again, that bucket, that source of slush fund that you I ideally want, I’d say for most people, it’s at least a quarter million to like a million or 2 million.
I think you gotta be careful that, sometimes the cash value bucket size is different than like the death payout, which we mentioned before, we mentioned 10 million, that’s the death payout. But as far as like rightsizing the bucket, which is the cash value portion, that’s up to you personally, just, just know that, your money could be making more money elsewhere, so you don’t wanna go overboard with it.
I don’t know, a million dollars is a nice, if you’re an end game, it’s nice to have the peace of mind that if something goes wrong, you’ve got a million dollars to just throw down. And bill somebody out bail yourself out at some point that might seem like a lot of money, but yeah, end game.
More security is what you’re looking for at that point. And I think the bucket size can be large, but you’re in control of how full it is. Most of, even though say my bucket is too mill at this stage, a lot of that cash value is out deployed. I can make a choice at some point to start filling that bucket back up by paying off the loans or continue having it deployed in investments.
But having a large bucket size is beneficial to me. How you utilize it. You can make the decision and it’s not one size fits all, or you can course correct. Or right now I have everything deployed at some point I may want it full and just live off that four or 5% dividends be happy and not have to have the funds deployed.
So I think, I don’t know for me personally, my goal would be five mill target. I’m not quite there as far as total bucket size.
I think when you’re getting to really end game. Now, you’re thinking about, you’re putting your life insurance in your irrevocable trust and that’s caught an eyelet, but for most people on the call, your guys net worth is not end 20 million plus. It doesn’t matter because you don’t hit those state and federal estate tax limits.
So doing that is really no benefit to you guys, but yeah, we always like to have a conversation over in person when you guys buy a nice bottle of wine, because your net worth is 20-50 million. Of course, if that’s the question you’re asking, but similar on those lines, maybe your net worth is not 20 million, but it’s five.
You may wanna be thinking about charitable giving and that’s this FI question here. So that kind of was a follow up to the last question. And they said your regular annual charitable giving instead of cash contribution, purchase a single pay life policy with no me concerns for a nonprofit on yourself as a major donor to the charity would have insurable interests on you with the charity as the owner and beneficiary, they can use the policy loans for whatever they would have used a cash donation for, and the death benefit to buy more single pay life, making it an infinite endowment. That actually sounds like a very interesting strategy. I personally haven’t looked or used it in that way, but this definitely sounds like Yeah, it sounds very possible to do this.
Yeah. There’s a lot of uses for this stuff. And I think we put a lot of these more advanced strategies in the client section. Because when you’re in the end game, you get a little bored and you’d look for these types of strategies. For now, I think we just wanted to keep it simple for folks, just get going with a policy, throw in 50 grand a year, a hundred grand, maybe a couple hundred thousand a year for now.
And then, get going down the road and make money in two places. The quicker you start doing this the quicker you can make money in places the quicker you can start to create the time space, the head space for you to ask these kinds of good questions and come up with these strategies. Also along the lines of the end game.
One last question came in here. If you still use this bucket for deals or whatever else you want while still compounding, why would you want to limit it? I think the big thing that I’ve personally found and what was a roadblock for myself is when you go over a $10 million death payout or policy.
Now the life insurance companies are gonna want to see a whole bunch of documentation proving that is how much you make per year. And that might be a little bit of a pain for you to do. And especially if you’re not making income at that point in life. So that, that, I think that is another reason why, if you guys are still working your day jobs, you gotta do this now because all these policies are based on your ability to make money.
That’s what life insurance is at the end of the day, you being able to make money, which is why, getting policies on your little kids is a waste of time, cuz they can’t really qualify for that much. Why? Because they don’t make money. They don’t have jobs. So you know, like a lot of it is based on how much you make at your business or how much you make at your day job, your salary.
So it’s one of those things where you set up a policy before you leave your day job or retire. But if you’re already at end game and you’re looking to just keep funding this thing to in turning, I think you’re gonna run up to the issue of them saying you’re not making any active, ordinary income where you don’t have an income source at that point, other than your passive investments, of course, but they’re gonna have a hard time qualifying.
For you, but I dunno, Tyler, any thoughts on that one? Yeah. I, what you’re seeing is I think right on, I think Mark’s specific comment is why stop using your bucket for deals when you, it still compounds, you can still have it out for deals and grow your wealth. And I personally feel that’s a, the backup plan is to fill back up the bucket, right?
And then you no longer have to chase any deals or expose yourself to risk. It may be de-leveraging risk at that point to just say, Hey, I just want that consistent 4%. I intend to have my money working, at some point maybe deals may be a lot harder to find or whatever it is. This can be a fallback plan to have that, four and a half percent.
Dividend returns and live off of that without having to, to deploy money at all for going forward. But there’s that, I think that’s what that, that alluded to the thing about children which we didn’t really touch about. There is a limitation on non, so you can pull on children or minors.
The limitation would be the death limit. The death benefit limit will be 50% of what the parents have as death benefit. So if you, as a parent, have 5 million, a death benefit, a child would only be able to qualify for two and a half million of that. And then the health rating is a general health rating, like what it would be for a group, like at work, when you get group term insurance, It’s just a generic health rating.
So that health rating is not as great. So oftentimes with all of that combined for a minor, you might be able to throw in, eight to 10,000 a year total that’s the maximum you could put in a year still. And because the health rating is not the best, it may not be the most efficient use of that 10,000 purely for financial reasons.
There’s other reasons you might wanna do it for a minor, for a child anyway, but if you’re looking purely financially that may not be the best use of that, that $10,000. Any other questions please type it into the box?
Oh, Luke, raise his hand or, yeah, type it into the box there guys, but I wanted to show you the E course. So you guys know how to navigate it, but we’ll put the replay of this up on here, the way we have this laid out is, the introduction and then we broke out all the little slides into individual sections here for you guys.
And then implementation. And then, once you become a client, get access to the more advanced content here. That’ll just keep things fun and interesting, but this is the e-course, but, they get access to this. You gotta go to simple, passive, casual.com/banking, put your information in there.
But for most people yeah. The only other thing too is that the, it definitely is customizable and it’s not a cookie cutter, one design fits are or meets people’s needs. So that’s where a lot of times it is some back and forth tweaking and that, so a lot of the information we’re provided today is general overall, guidance definitely feel free to reach out and we can talk about specifics cuz there are small tweaks and things to that. Maybe more beneficial for certain goals and than for others so definitely reach out.
