![]() That’s more than the insurance, so from this point on, the insurance can stay ahead of it by five percentage points. Based on historical rates of return, that 500,000 can grow to $1 million within seven to 10 years, and in another seven to 10 years, it can grow to $2 million. ![]() To explain, let’s say you put $500,000 into your IUL policy, and the amount of insurance required for it to be tax-free for a 60-year-old is 1,250,000. With the IUL structuring strategies I recommend, most people are self-insured within 10 to 15 years, meaning the cash inside the insurance policy is within 5% of the death benefit within 15 years–so the cost of the insurance is next to nothing. But with the anticipated changes, that’s all changing.Īs this evolves, you’re going to want to stay abreast of things to see how you can benefit yourself and understand how properly structured, maximum-funded Indexed Universal Life (what I call The IUL LASER Fund) is by far the best vehicle for accumulating tax-free capital. That said, there are a lot of people out there who tout Whole Life as better than IUL, and they usually quote the guarantees. If all you want is death benefit, Whole Life’s a pretty good product (however, Universal Life can do well on death benefits, too). What’s more, if you’re using life insurance for infinite banking, Indexed Universal Life can top what Whole Life Insurance can do. Here’s where the good news comes in: I can prove to you that Indexed Universal Life can knock the socks off Whole Life when it comes to historical rates of return. Whole Life Insurance is going to have to perform based upon dividends and interest. So the guarantees inside of Whole Life are not going to mean that much anymore. Well, the low-interest environment was putting insurance companies into a bind, and that’s why at the very end of the 2020, as part of that big stimulus legislation, Congress passed changes to Section 7702 of the Internal Revenue Code.īasically, that legislation will likely take Whole Life’s guarantee down to 2%. You might wonder how insurance companies could continue to cover Whole Life policyholders for 4% when they’re not able to earn 4%. Whole Life has its merits, because it’s structured to be able to give those guarantees, but in a low interest environment like we experienced during the pandemic, the Fed and U.S. Whole Life also includes guarantees–since the 1980s, Whole Life was built on a chassis that was based upon a 4% guaranteed fixed interest rate. The higher premiums build your policy’s cash value, and that cash value basically covers you for your “whole life.” Your cash value is earning interest inside the Whole Life policy, which allows you to pay a level premium your entire life. Whole Life insurance basically lays it out like this: If you pay a higher premium in the early years, you may be overpaying early on, but that will allow you to underpay later on. They realized that when they’re 60, 70, 80 years-old, they may not be able to afford Term’s increasing premiums. Essentially, people wanted to have insurance protection for their “whole life,” but they didn’t want to keep paying higher premiums every year. Whole Life insurance developed as an alternative to the rising-as-you-age costs of Term insurance. ![]() However, Term Insurance gets more expensive as you get older. When you pass away, the policy pays out a death benefit, making Term insurance an inexpensive way to insure yourself and provide for your beneficiaries. Typically, Term insurance does not accumulate cash, and so the only way to “win” with Term insurance is to die. ![]() Their premium is based on the mortality table, taking into consideration their age, health, etc. To explain, let’s start with a little background on life insurance, beginning with Term insurance (where policyholders simply pay for the pure cost of the insurance). But here’s a newsflash: IUL insurance dwarfs Whole Life when it comes to this concept. When financial strategists use the term infinite banking, they are often referring to what you can do by leveraging either Whole Life or Indexed Universal Life insurance. What is infinite banking–and how can this concept make a difference in your financial future? ![]()
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