All Forum Posts by: Svetlana Kleinhenz

Such horrible advice you are getting.    A financial advisor from Northwestern will sell you what you already have-just a lot more.........................hahahahaha.

@Svetlana Ivanova

Listen to "The Money Show" podcast #54...fast forward to the 43 minute mark. He talks about how you can borrow from your life insurance policy tax free (cant do this with term). He did this to fund one of his first deals. Just so happened I listened to this podcast today, and it might definitely help you out.

First let me say It seems very few people here really understand how Whole Life Insurance works. Aside from that i highly advise against ever EVER getting rid of medical insurance. What happens if next year your kids or yourself are diagnosed with a illness, even something as simple as bronchitis? Or, worse, someone is in a car accident and requires multiple surgeries. I had brain surgery when i was 18 from a car accident and after rehab, and a months stay in the hospital the total bill was 1.8million. You know what we paid? 5k. 

Now with whole life insurance i think EVERY INVESTOR HERE SHOULD HAVE IT. Here's why. CASH VALUE. This is the only financial vehicle that a person can use dollar for dollar as collateral for a loan. Now, i get saving cash is attractive in the short term, but in the long term you should be doing both. Not just for the practical reason like, only 1-2% of term policies pay out...where is the wasted money now? But also you can use yourself as a bank as you can borrow from your whole life policy, STILL receive the 6% back on cash value, AND use that money to invest. It's a double whammy. Find a good financial advisor, i recommend Northwestern Mutual or Mass Mutual as they have the best returns in cash value in the market, and ask them how you can use life insurance to invest in real estate 

 IUL's (Indexed Universal Life Policies) when funded correctly are an excellent way to supplement your retirement.

Pro's

Tax free money (based on the interest earned)

0% floor rate (You can't lose money)

Yearly returns are based on a major index, but your money isn't in the stock market

This is an insurance product, so it pays out a death benefit to your beneficiary

Con's

Your profits are capped so if the stock market makes 20% one year, you'll be capped at the pre-determined amount your policy was set up for. Typically, 9% to 14%

High surrender charges the first 7 to 10 years (IUL’s need to be a long-term play)

This is based off your age and health (Get one as early in age as possible because you'll probably be healthier)

No pretax benefit for tax purposes (like a 401k for example)

These are the major points of IUL's and here is a real-life scenario I wrote a couple of years ago.

37-year-old female, nonsmoker and excellent health with a rising death benefit.

She pays $507.50 per month and here are her numbers at 67, 72 and 77

67 she would have paid $182,700.00 and her cash value would be $384,459 based on an average of 6.48% return yearly. If she wanted to start taking monies at this age and stop paying the $507.50, she would have $201,759 of tax-free money at her disposal. So, she could take out 20K per year to supplement her income and wouldn't have to report it to Uncle Sam. At this age her Death benefit is $457,506. If she did take out 20K a year her death benefit would decrease 20K per year. Also, if she took the entire 201K the remainder would be taxable. The $182,700 to be exact.

72 she would have paid $213,150.00 and her cash value would be $556,564 based on the same percentage and yearly average return. Her death benefit would be $628,918. At 70 1/2 RMD's (Required Minimum Distributions) kick in and since this is an IUL it bypasses that requirement. She would have $343, 414 tax free money if she decided to stop paying the $507.50 per month.

77 This is where you really see the power of compounded interest which was quoted by Albert Einstein as the 8th wonder of the world. And the money again is tax free which makes this such a strong product. She would have paid $243,600 and her cash value would be $791,130 and her death benefit would be $830,686

You can clearly see the power of the IUL when funded correctly. Just make sure that you understand this isn't a short-term game. It's at least 7 years and depending on how much you're putting in per month it could take some time to see results. But like I always say the only thing better than tax free money is free money.

Free money being a match on your 401K. Most people are overpaying into their 401K and that extra 50, 100, 200 etc. could be used monthly on an IUL. Just put in what your employer matches and if they don't match IUL's are a great alternative. It's worth noting that Roth IRA's also provide tax free money but penalties before the age of 59 1/2 will hurt you if you draw before then.

This client of mine also has a RE portfolio that is paying for this IUL, so she gets it regarding multiple streams of smart income.

Another avenue is annuities, fixed indexed annuities to be exact. These are also long-term plays because the surrender chargers are high. Also, if you draw more than the specified amount yearly. Typically, more than 10% of the balance you will be taxed and penalized in most cases.

Based on the rule of 72 your money will double every 8 to 12 years which makes annuities so attractive.

Annuities also have major tax benefits based on Exclusion ratios. It's also the only product that will pay you monthly for your natural life if you choose this option which isn't for everyone.

Annuities are much more complicated so I will start a blog on this in the coming weeks to give everyone more insight. Please do your due diligence as well and don't just take my word for it.

I hope this all helps everyone.

BP, I'm just giving real life scenarios and information on different investing avenues.  I'm not soliciting.  Thank you.

@Svetlana Ivanova

Move to Canada lol.

@Svetlana Ivanova I'm sure it's been covered by another already. You start receiving the medical insurance benefits from day 1, even with a high deductible plan. With insurance you get discounted rates, which should show up on your bill as a negotiated rate even if you have not met your deductible. Giving rough numbers, my bill, before meeting my deductible is about 60% of what the medical provider normally charges without insurance. With that large of a family, especially with young ones I highly suggest you not stop medical, maybe adjust to an even higher deductible plan if possible. You know how kids can be daring and dangerous.

I would view stopping medical insurance the same as a buying your first real estate deal on a whim, sight unseen. Sure, nothing can go wrong and you'll make some money, but the chances are slim and it only takes one unforeseen problem to bankrupt you. As you build a portfolio and your children get older (older than 21), the risk of losing or dropping insurance comes down.

I view medical insurance as a sunk cost of having a family. Read Set For Life- Scott Trench if you need suggestions on saving money for real estate. More than likely there are better, safer ways to cut costs.

Not any more.  There was a fine for not having it,  but they removed it.  Of course the law might change again but there would have to be a grace period to allow people to get it again.

@Svetlana Ivanova I can't speak to life insurance as I don't know much about it.

As for medical insurance, you pretty much have to have it as an American. Our system is so screwed up that a single major health issue can ruin you financially for the rest of your life. In fact, 2/3 of bankruptcies are due to medical issues (https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-file-for-bankruptcy.html).

It does feel like you aren't getting much for your money. In a day to day sense that's true. You'll likely have a high deductible and have to pay a good deal out of pocket. The key is that basic insurance isn't meant to protect you much against this stuff. It's for the big, catastrophic occurrences. Surgery, cancer, broken bones, diseases. The stuff that can ruin you financially.

So, I'd say it's really not optional. It's a bummer, but the cost benefit is heavily weighted in favor of keeping it.