why are costs so high in the early years of an IL policy well in this episode get ready I'm going to explain that a a property structured MX funded iul is probably one of the most least cost least expensive financial instruments you could ever choose for long range goals you don't want to get confused between uh uh choosing short-term investment for long range goals or long-term Investments for short range goals so get ready I think you'll gain insights into why I is one of my favorite Financial Vehicles because it ends up being the least expensive vehicle for most people so I'm Doug Andrew I've been a financial strategist and retirement planning specialist now for five decades helping thousands of Americans optimize their assets minimize taxes and Empower what I call their authentic wealth my favorite Financial vehicle without question if you've watched very many of my episodes on this channel is a properly structured maxf funded indexed universal life insurance contract and if it's structured correctly and funded properly it is deemed a laser fund which is the title of my most recent bestselling 300 Page book which I will gift you a copy of this at the end of this episode you don't have to pay 20 bucks for it on Amazon I'll gift you a copy free so stay with me here so uh people often times get concerned they look at the I will proposal the illustrations and they go hey why are the costs so high during the early years of an iul policy because they will see that if you put in you know the maximum amount Allowed by the IRS for an older person because uh probably The Sweet Spot of people that we have helped for years are those that are age 55 to ag75 that are preparing for retirement and they don't want to outlive their money money and they're doing strategic rollouts out of their IRAs in 401ks because they realize they're not going to be in a lower tax bracket and they're going to put the money into a property structured IL so they may deposit let's say a hundred grand a year for 5 years a total of $500,000 that's the guideline single premium and with $500,000 you could get a ton of life insurance death benefit uh but that's not the objective when you're using iul for living benefits which is what it was designed for in the first place that's your primary objective you're usually taking the least amount of insurance you can get away with under IRS rules and you're putting in the most money the IRS allows as fast as they allow now it's designed for long-term goals now when I say long-term I'm usually talking about a goal a financial goal that's going to be five years or longer down the road so let me start off answering this question by telling you the biggest mistake I see most Americans making when they're saving and investing money they are making the mistake of choosing uh long-term Investments for short range goals okay in other words a short range goal might be saving for a baby or a a house or uh to buy a piano here in a year or two or whatever uh you generally do not take out an ilul policy a long-term investment or Mutual fund or something like that uh for a short range goal okay that that should be a bank or credit union probably okay but a lot of people they they use short-term Investments for long range goals or the opposite uh they use short-term Investments like a bank or Credit Union uh for long range goals such as Retirement don't mix those two up you should be using longterm Investments for long range goals now a a Max funded indexed universal life is for long term long range goals those are usually five years or longer down the road can you dip into it sooner than that of course but you're designing it for for income tax-free accumulation and tax-free income uh that will last you for several years U all through the rest of your life for retirement is what most of my clients do so first of all you've got to look at it that way you're looking at it as a long-term investment quit looking at it during the early year so uh this is why I usually recommend or say to people you choose Investments um uh based upon the ones that will generate the most at the time in life you're going to be needing or using that money the most okay and so if you're taking out an ilul policy as an alternative to an IRA or 401K uh then that's a long range goal and so you're going to choose which one is better and if you compare to mutual funds or or uh annuities or IRAs in 401ks you look at an ilul and it will act actually knock the socks off of those alternatives for long range goals because of what it generates it generates the most at the time in life you're going to be needing the money the most if you structure it correctly so for example if I set aside uh $500,000 into an IL policy in accordance with IRS guidelines I'm talking about the the Tamara uh tax citation so I might only be able to put in a 100 Grand a year $100,000 the first day of the first year $ 100,000 the first day of the second year so in four years and one day into the fifth year I've got my 500,000 the maximum amount allowed into that policy now that 500,000 for most of my clients uh have been averaging about 99.62% ever since 1980 when when universal life was first entered introduced by EF Hutton for living benefits and so that half a million at 99.6% divided into the rule of 72 will double to a million bucks in s and A2 years so 7 and a half years on top of four years in one day many of my clients um they have U now doubled their money in the first 11 and a half years or more and let's say you have a million dollars and now you want to start taking out a income well if you study the YouTube videos on this channel and you read the book I'm going to gift you at the end you'll realize that every million bucks that you accumulate in a property structured Max funded iul can generate an 8 n 10% payout okay 100 Grand a year of tax-free income uh from age you know 65 age 70 age 75 all the way to age 120 uh without running out okay you compare that to most Investments like mutual funds annuities what have you many of them will not generate as much income or if they tried to generate the same amount of income they would Crash and Burn they would run out and so the second concept is you choose Investments based upon which ones generate the most the reason why I is so great is because I only you have to earn an average of 11% by diversifying and rebalancing every year which is what I've done okay H to net 10 so I can pull out 10% a year and I can do that to age 120 uh if I did that in a in a IRA or 41k invested in the market in a mutual fund I would have to be earning at least 15% before tax to net 10% in a 33% bracket uh in order to net uh a 100,000 Bucks i' have to be withdrawing 150,000 a year out of a million dollar net state to net 100,000 to buy gas and groceries uh that million doll Nest Egg even if it was earning 10% would run out be drained dry in 11 years if you only pulled out a 100,000 and you have to pay tax on it you're only netting maybe 67 or 70,000 and so you don't have as much net spendable income you're choosing which one's going to give you the most generate the most the ilul can generate 100,000 a year taxfree an IRA 401K earning the same rate of return would only net you maybe uh 60 7,000 instead of 100,000 are you getting it uh in other words 50% more 100 Grand is 50% more than 66 or 67,000 now you need to understand also that if you really are concerned about accessing money during the first few years of an ilul policy and you want the liquidity you want 100% access to the accumulation value okay uh the accumulation value is the amount that you put in there minus uh any fees and the interest that you're earning on that during the early years usually there is a difference between the accumulation value and what is called the surrender value which uh usually there's a surrender charge or fee uh during the first maybe 10 years of most ilul policies some even go 15 years before the surrender value equals the accumulation value the uh surrender value only comes into play if you're accessing money or you're going to cancel the policy if you're worried about accessing as much money as you can or you think oh man I I may have to cancel this policy uh in the early years well then you could actually have a waiver of of surrender uh where you can have uh 100% access to the accumulation value so you can do that to have uh liquidity so that the the costs are not so high in the early years however there is a sort of a hidden cost to that waiver of surrender and they spread it out over the life of the policy so there's always tradeoffs uh if if you want to have the best net internal rate of return over the life of the policy over 20 30 40 years clear until retirement and and to age 100 age 120 if you want to earn Within 1% of the gross rate of return so for uh ever since 1980 uh uh I have averaged 11.17 gross because I diversify and rebalance on an annual basis and so if you earn 11 I I can show you retroactive back to day one uh you'll net uh with within 1% of the gross rate of return you'll Net 10 that's why for every million dollars you can generate 100,000 a year of income if you're netting 10% cash on cash well that if you don't worry about the the cost in the first few years because it really comes back to you uh throughout the the the life of the policy if you chose a uh to have a a waiver of surrender uh fee Rider or what have you during the early years if you earned 11 over the long haul you might only net N9 n and a half instead of 10 so you're going to give up on the back in the trade-off is you're going to give up some of the internal rate of return if you want 100% liquidity uh during the early years most of my clients didn't care about that they were using this as a long-term uh vehicle okay so acquisition costs are are usually uh more in the early years when you first take one out because you've got underwriting expenses okay by the insurance company you have compensation which is paid out to the licensed agent now that compensation is is only paid out to a licensed agent uh on the new money that goes in all the money you make on an IL throughout the years uh the agent doesn't get compensated on that like an asset manager they keep charging you one or one and a half% on the assets they have under management every single year whether they made money for you or not and so remember that as I complete a little bit more here in a moment and so you have to recoup those acquisition costs that are incurred during the early years but it's usually only during the first you know 5 years if you're maximum funding that contract if you're putting in 100 Grand a year for 5 years then the licensed agent is getting compensated only on that money the new money that you put in all the money you make through the years after that uh the agent does not make one dime so let me go back and uh and use a um an example or a metaphor an analogy to help you understand this let's say you were going to be buying a new home and you told the realtor hey um I I want a half a million dollar house so the realtor finds you one and the realtor says now you know that Realtor fees are 6% so 6% on a half million dollar house is $30,000 now most of us sort of accept that it's a standard realtor fee right and so uh that would be $30,000 on on a $500,000 house but what if the realtor said now in lie of of uh 6% one time you could pay me 1% on the value of that home every year uh the rest of your life uh that you own that home and if you uh you know you've got to own it this many years or else you got to you got to make up for this now if you really thought about it which one would you choose I'd rather pay the 6% once okay than 1% on the value of that home as that went up in value through the years why I'm comparing this to ilul sometimes uh agents other advisers say oh man the the commission the fees on those ILS are so expensive no it ends up being the least expensive vehicle for most Americans saving for retirement let's say you started out with $500,000 into an i policy well that agent might be compensated on that first 500,000 that goes in okay new money and it might be it's probably around that 6% $330,000 okay uh and so that's that's all there is and then that half a million if they earned a rate of return like I have and many of my clients have where that doubles about every seven and a half years a half a million doubles to a million and then a million would double to two million in another seven and a half years by the 15th year it doubles to uh uh 4 million uh by the 22nd and a half year doubles to 8 million by the 30th year many of my clients with I started out with a half a million and they now have $8 million I only got compensated on the original $500,000 okay now that was at one time uh you know 30,000 uh during when they first took it out now if if I was an asset manager I would have been charging them on that 500,000 1% or more every year now if they did the same thing and doubled that to a million then to 2 million then to 4 million then to 8 million over the same 30-year period that would be pretty awesome I I've seen very few asset managers do that but charging you 1% every year on those assets under management the fees would have been $980,000 nearly a million bucks compared to 30,000 so when people say why are the costs so high in the early years um well that's because of the acquisition and so forth but it's only on the new money that goes in and uh after that it's the least expensive because it actually gets cheaper as you get older so that retroactive back to day one if you were earning 11 you'll Net 10 cash on cash only 1% goes out for all costs the cost of the insurance risk if you die uh the cost of all um acquisition commissions whatever you want to say all of the policy fees the commissions the uh the acquisition the underwriting all of that ends up becoming minuscule only a very small amount when you look at the results uh that are achieved over the Long Haul does that make sense and so that's why I would rather you know incur a one-time you know fee of like 6% only on new money then to be charged 1% or more on the value of my investment uh every single year the rest of my life even if they didn't make me money that's how asset managers work I've never liked that model personally and so you have to rethink your thinking if you want to learn more about how to property structure a Max funded will and why you can see over the Long Haul is probably the least expensive because when you see all the illustrations you'll see all the fees and costs that are associated with that through the years and you'll see if it's structured correctly it actually gets cheaper as you get older so if you want to learn more the first thing to do would be to uh claim a free copy of my most recent 300 Page bestselling book the laser fund which is actually two books in one uh this side is for the left brain learn learner uh 200 Pages 14 chapters with all the charts and graphs and explanations if you're more of a right brain learner you learn more by stories and examples you flip it over to this one this is about 100 Pages 12 chapters with 62 Chicken Soup for the financial Soul stories if you want to use your left brain and your right brain you can read both but uh uh you simply go to laser fund.com or click on the link below you contribute a nominal amount towards the shipping and handling I'll cover the rest of that I'll pay for them the book I will fire out a hard copy of this book to you via priority mail now when you're in there claiming your free copy uh if you like to listen and learn or watch and learn check out those options but you can also schedule to attend uh a free educational webinar we do them on a regular basis you can even schedule an appointment to talk to a a professional certified I specialist to help you understand how to set one up correctly there's no cost or obligation but you can actually see how one is designed correctly so that the costs and fees are the cheapest over the long haul this is extremely critical you want to make sure it's done right from the word go [Music]