All Forum Posts by: Matt Ruttenberg

A few things on this:

1). It looks like the policy was set up properly to enhance the cash value growth.  Curious why you weren't able to use the cash value in it though?

2). I wouldn't do a direct comparison with your 401k.  The 401k is the investment that you'll most likely hold (or keep invested) for the long haul. The WL policy isn't the investment, but the catalyst to allow you to invest at scale. Yes, it earns some interest, but that's not the "final investment"... the real estate is. And we all know the power or REI is that someone else is paying down your mortgage + the capital growth of the property. So the WL policy allows you to scale that.

3). When using these policies, the idea is to use it as a form of lending, just like a fix and flip, private money, etc. The loan rate should be set up as a "wash loan", meaning the money is still invested even though be loaned against. But you should pay it off with a long term refi just like any other short term loan and pay off the loan. Wash, rinse, repeat. This allows you to scale your REI, which most likely excel beyond the 401k plan in the long haul. This is a very long term strategy.

4). I'm just noticing that this was a post from 2 years ago and curious what you ended up doing with it?

@Sterling Pompey

It’s a good long term strategy to fund deals. I think it’s important to think of this not as an alternative to investing, but as a viable way to pull funds for other investments.

The concept is to design a policy where the death benefit is “squashed” as low as possible, to promote cash value growth, and over fund it to certain maximum limits.

Once you have the cash built up, you can loan against your own policy to fund deals as cash… mostly small amounts in the beginning and larger amounts as the funds grow. Then refi out the investment property like any other private or hard money loan into a long term loan, and pay off the insurance policy loan. Wash, rinse, repeat.

In the long run, you’ll also have a tax-free retirement supplant to utilize if your diligent in paying off the policy loans.

@Jeffrey K. That shouldn’t be the case. If you want to be able to reuse the policy over and over, it’s better to.

If you don’t pay back the loan, you’ll need to make sure the policy won’t lapse down the road. An in-force illustration would help with that.

 Completely agree!  These strategies should be only used for investment purposes with buying an appreciating asset.  Thats why the dividend or rate you earn within the policy shouldn't be the primary deciding factor... the outside investment is the sole goal.

It's a great concept and if designed properly, can be very beneficial.  There two schools of thought with either a Whole Life Policy or an Indexed Universal Life policy... I'm a fan of the IUL personally because of the flexibility and a much easier design.  You can use it like a Fix n' Flip then refi out to pay off the loan... rinse, repeat.

It's a good strategy for the right person.  When designed properly and implemented properly throughout the years, it could really be beneficial.

The idea is to keep the death benefit as low as possible to keep the internal costs of insurance down.  If it's used for funding RE, it's designed differently than if needed for death benefit.

Wanted to touch on the taxable interest part... it's only taxable if it becomes a MEC (modified endowment contract).  Meaning, the IRS sees it becoming an investment, basically just like an annuity.  It would also be taxed if the cash value is simply withdrawn instead of loaned against regardless if it's a MEC or not.

The design of these is a balance between the death benefit and the contribution amount, and not allowing it to become a MEC.  The goal is to "squash" the death benefit while maintaining the tax benefits.

I'd be happy to show you a design where it's completely optimized and show you the difference in commissions when designed properly versus not.  3x less in some cases. 

@Alex Xu The difference between the two, is more of a personal choice.  WL is a more steady growth where the IUL has more fluctuation in the returns.  The IUL has more flexibility once the policy is in force where WL is more set with the original plan design.

The goal is "squash" the death benefit down as much as possible in the design.  The internal costs (and commissions) are related to the death benefit amount.  Both types of policies are done in different ways.  Many will say it only benefits the person selling the policy, this is far from the truth when designed properly.  When compared to term commissions, the ratio is higher per premium payment in a term versus WL or IUL when designed properly.

As an administrator of 401k plans, defined benefit plans etc, these aren't to replace a retirement plan or other investment, it's to stack on top of those vehicles.  I wouldn't use these as your first and only contribution vehicle.

The real investment using these policies is what you're investing OUTSIDE of the policy... the real estate.

And finally, these are long term policies.  When designing these for short term access, it hurts the policy long term actually.  The concept is to use these in the short term as the down payment on the properties, or a portion of.  Then, as it grows, use them like a "fix and flip" loan where you pay off the loan with a long term mortgage, just like any other private or hard money loan.  Then, rinse and repeat.

When designed and implemented properly, you should be able to purchase multiple properties over the years, and still have a way to supplement your retirement in the end with the cash value.

Feel free to reach out with any follow up questions.

@Will Fraser infinite banking is actually using life insurance as an asset to lend against when over funded.

@Richard Hadley I’d be happy to discuss if you like to see what could work. Feel free to reach out.