A time for guarantees
How to get the most from your investments without the risk
A lot of people like to compare investing on Wall Street to a ride on a roller coaster.
But I disagree for one big reason – a roller coaster takes the same course every time it leaves the gate. Ride it enough times and you know exactly what to expect.
Wall Street is different. No matter how long you’ve been playing markets, you’re always in danger of being taken off guard. Do you think only rookies and careless investors lost their shirts in 2000 or in 2008 and here recently with the market’s latest dips? Of course not, even the most experienced, successful traders got burned.
Investing is more like taking a plane ride in stormy weather. Once you’re on board, you’re stuck for a certain period of time and there’s no telling when the turbulence is going to end or begin again. All you can do is buckle your seat belt, close your eyes and hope you arrive safely in the end.
That’s the problem with buying stocks… there are NEVER any guarantees. And when you’re putting your money at stake, isn’t that exactly what you want? A guarantee that you’re going to come out ahead when it’s all said and done?
Well, I’m going to reintroduce you to a long-forgotten solution that can offer the guarantee you are looking for. In fact, it is the very definition of a guarantee on your money.
Are you ready to hear what it is?
Okay, here you go.
It’s High Cash Value Whole life insurance.
Oh no… I can already tell you are disappointed with the answer. Whole life insurance isn’t nearly as sexy as crypto currencies, private equity funds, or flipping houses on eBay with other people’s money. But, I’ll bet that if I did tell you the answer you are looking for is something exotic like that, I’d have your attention, right?
Then why is it that when you hear of something as simple as whole life insurance that’s hundreds of years old and proven as a way to make money in all seasons guaranteed, your brain turns off? What automatic response is causing that reaction for you? And is it based on truth or just something you think is true about insurance or about some other alternative? You need to stop and ask yourself these questions and really think about the answers before you dismiss this option as a part of your overall financial solution.
In the next few minutes I believe I can show you why in the right situation good old fashion whole life insurance is a smarter, safer and all around better alternative to investing in stocks, 401k’s and mutual funds alone for several reasons. And when you design it the way we do to generate the maximum amount of growth so your cash value builds quickly, it can become one the best investments you can ever make.
So here’s the first reason I think you may want to dust off this old concept and give it a fresh look.
Guaranteed growth: As long as you live and continue to hold your insurance policy, that policy will grow in value every single year guaranteed. That’s regardless of what’s happening with the stock market, with the price of oil, housing prices… whatever. These policies are contractually obligated to go up every year, so by its very design your money is protected and guaranteed to grow. Consider that during the Great Depression that when over 10,000 banks failed, 99.9% of people’s savings that were inside life insurance policies remained safe and did not lose a cent.
Did you lose money back in 2008? Most people did. How did that make you feel? And more importantly, what are you doing differently today that will help keep that from happening again? That’s where return of your money can be as important as return on your money. Think about it if you haven’t done so lately. Sure, the cash value of your policy won’t have the 20% years the market sometimes does, but it won’t have the volatility either. Volatility is the reason people have heart attacks. Who needs it?
This guaranteed growth feature is the stability and the confidence people are looking for these days with their money (and not finding!). Their 401k’s, their IRA’s, their mutual funds, etc… are all slaves to Wall Street and the continuous random ebbs and flows of share prices. Insurance policies aren’t. And when you sign your name to a policy, you can know you’re being given a promise that you’ll make money as long as you continue to hold that policy. No company is ever going to do that when you buy their stock.
The second reason whole life insurance is something you may want to revisit is its ability to provide True savings and earnings: When people contribute to their 401k they usually feel like they’re saving for their retirement. Not true. They are investing in hopes of making enough to be able to retire someday. When that 401k manager takes your contribution and invests it, your money at risk and that risk extends to 100% of it. You could lose everything.
The difference with depositing your money into an insurance policy is that your money is 100% safe. And also 100% liquid. It’s not being put in play in the markets and you can access whenever you need or want to. Compare that to a 401k or IRA which penalizes you heavily if you try to withdraw money before a specified date.
Another example is a 529 College Savings plan. It will penalize you 10% of your earnings if you make an unqualified withdrawal (ie: not for college), whereas there’s no penalty for any kind of withdraw from a whole life policy. Plus, the assets in the 529 plan count as a student asset in the eyes of the college rather than a parent asset, like it does with the IRS. That only adds insult to injury when you need help the most!
It doesn’t matter if your roof collapses, a family member become ill or some other life altering event occurs. You can get to that money when it’s needed with virtually zero red tape and fees. And if applying for college financial aid is in your future, the cash value of your life insurance policy is completely off limits in the financial aid calculation.
In addition to their guaranteed annual growth, many policies will also pay out additional earnings on top of that in the form of dividends. In fact, one of the main whole life carriers that we work with hasn’t missed a dividend payment EVER. And they’ve been around since the mid 1800’s.
Another reason to consider adding whole life insurance to your mix is Tax free access: If your policy is structured properly, any monies you save inside of it AND the earnings made on top of that are NOT taxed as regular income. In a time when the tax man is pretty much the equivalent of the boogey man, you have to love this feature.
This is another living benefit that comes with a whole life insurance plan that is really not available on a comparable basis anywhere else. Plus, if the stock market does drop 50% like it did back in 2000 and 2008, you can take some of your money out (since it wasn’t affected by the market crash) and let it grow while the economy recovers. Then a couple of years later, you can sell your stocks and put the money back in your policy.
I don’t believe in market timing, but when we have big selloffs like we did in the last two bear markets, this is a responsible way to become a better investor. And it’s only possible if you have money outside of the market BEFORE it drops. Otherwise, you just have to listen to your investment advisor keep telling you to hold on and be patient as more money disappears from your account. And then your patience is really tested in the 4-5 years it takes to make it back. Use the high cash value in a whole life policy to hedge the downside and turbo charge your growth on the upside when the opportunity comes to do so.
We’ve talked a lot about living benefits, and they’re wonderful, let me also mention something quickly about the policy’s permanent death benefit. All insurance proceeds from the policies we use for our clients are received income and estate tax free - both during their life and at their death. Having a tax-free retirement income stream in retirement is an ENORMOUS benefit to have as a part of your plan. So is providing tax free money your family can use to replace your income should you die prematurely. The death benefit on your plan can also pay the taxes on your retirement accounts so all of the money you worked so hard to save stays in the family instead of going to Uncle Sam. He gets enough from you as it is…
Personalized Tax Control At Your Finger Tips
Virtually everyone in American thinks that tax rates are going to increase in the future and they’re probably right. If you’ve never visited www.USdebtclock.org, I encourage you to do so. It calculates how much our national debt is compared to what we produce as a country and breakdown the various components to show how much of it is in government bonds, social security, etc. Just the interest on the national debt is overwhelming, so it’s probably only a matter of time before the government has to do something drastic!
With this tax free pool of money in place within your policy, you have more control over your tax bill now and in retirement. You can also throttle taxable income up or down depending on your needs and resources with a whole life insurance policy at your disposal. It can even help you qualify for tax free benefits on your Social Security!
Use your money for what you want!
Just because someone is purchasing an insurance policy doesn’t mean they have to wait for something awful to happen for them to access the savings inside it. This is a huge misconception.
Whole life insurance is actually the easier, safer and smarter retirement plan. It’s an account that can be accessed tax free and without any fees when the time comes to leave the work force. Or even before that…
The founder of The Pampered Chef kitchen tool company, Doris Christopher, launched her company with a life insurance loan. J. C. Penny saved his fleet of stores during the Great Depression doing the same thing. Unable to secure a large enough bank loan, Walt Disney borrowed against the cash value from his life insurance policy to help finance the creation of his new theme park, Disneyland. When Ray Kroc of McDonald's fame bought out his partners (the McDonald brothers) he used cash value from his two life insurance policies to cover the salaries of key employees. He also used the funds to pay for the marketing campaign for his new mascot, Ronald McDonald. And John McCain launched his 2008 Presidential campaign using his $3 million policy as collateral.
Just like it was for these famous people, the money inside your policy is available when you need it, no matter what the situation. You are not pigeonholed into only being able to access it for any one particular situation. And, when times are tough, you don’t have to qualify for anything to tap into it. Try that at your friendly bank!
The Safety Net That Pays
Most people don’t know about the powerful results using whole life insurance as a savings tool can provide because they assume that traditional investment funds or “buy and hold” stock trading is the only way to make money for college, retirement etc… And that’s a product of the power of Wall Street’s marketing, not their proven results.
Think about it. Which mutual fund, which retirement plan, or which Wall Street broker can offer the same sort of safety and guaranteed return on their money that’s available in a whole life insurance policy?
The answer is easy (and uncomfortable for those whose entire life savings is parked in investment vehicles like those) – none of them can match the benefits a whole life policy can offer.
The Bottom Line Very few people are confident about investing any more, especially after the big run we’ve had in the markets these last 8 or 9 years. And yet people’s desire to grow their savings and increase their income keeps bringing them back. Whole life insurance provides a proven and flexible way out. It’s a prudent alternative to the same old same old risk and return game people feel forced to play with their life’s savings. And when there are more people withdrawing money in retirement than contributing, which will definitely be the case in the not too distant future, the cash value of your life plan will still keep growing independent of any downturns in the market.
If you simply want experience a cheap thrill with your money, ride in a driverless Uber car or bungee jump off a bridge. Just don’t throw your entire life savings into the stock market without carefully thinking through your decision. In most cases, when you win, it’s almost never that big. And when you lose, your losses can take years to recover.
Fortunately, safety and profitability are no longer mutually exclusive. You can protect and grow your money at the same time. It just takes a different way of thinking to make it possible. Balancing your stock and bond investments with a healthy dose of high cash value whole life insurance can create a situation that protects you. It can provide for your needs now and in the future and provide the peace of mind that comes through financial security. After all, isn’t that really what’s most important in your financial plan?