All Forum Posts by: Tom Jensen

@John Perrings

Gotcha, so through premiums, dividends, interest, etc. the cash value grows to the DB amount.

Thanks John.

@Jenning Yu

It sounds like it's not 6-8% in WLI or +15% in REI. It's 6-8% in WLI AND 15% in REI. In the future you are still able to take out a HELOC loan out on the property and take another loan out from the WLI.

The property cash flow pays back your mortgage and the WLI loan - both of which grow in value over time (appreciation & WLI interest & dividends) - it’s literally a cash flow cycle that gives you two paths of leverage.

@John Perrings @Mike S. @Thomas Rutkowski

One clarification here - both the cash value & death benefit are yours. However, upon your death the DB goes to your heirs, but not your accumulated cash value, which the insurance company claims. Is that correct?

I would imagine that the DB is significantly higher than the cash value, however, if that is not the case is it not also possible to ask for the cash value rather than the DB in the policy?

I think You, Mike, and Thomas make a lot of great points about the benefits of WLI, just would like some clarification on this point.

@Cliff H.

I agree with your point that maxing out all other avenues first is a priority. My current plan should set me up to max out all other tax deferred options by the end of 2020 / early 2021 - which is when I would start to consider this alternative approach more seriously.

@Cherif Medawar

Thanks I really like your take on this!

@Linda Bar

Yes, but It would depend on how your policy is structured. I’ve heard 5% simple interest per year.

Ex. 100k cash value and take out 90k loan at 5% interest (per year) for a down payment on a multi-family. That 100k cash value makes 3-4% COMPOUND interest (it doesn’t drop to 10k bc you took out a loan) while the 90k is used to buy real estate and make 7-20% interest (or more). As you only owe 5% SIMPLE interest on the loan (interest on the initial loan amount not compounded over time) you can use the cash flow to pay down the mortgage and pay back the loan.

So while your cash value is building compounding interest AND you’ve bought a tangible asset to build your net worth I would say it’s okay that the insurance company profits for giving you that opportunity - everyone’s gotta eat.

@Pete Mathias

@Pete Mathias

Agreed it seems like the biggest risk is someone not fully understanding how the policy works, getting lazy/frustrated, and not following up with the laid out plan.

Most Americans are not financially literate or financially independent. As educated investors we can assume that we would be in the 33% to successfully navigate the complex trenches of WLI and take advantage of the liquidity offering.

@Cliff H.

Your argument doesn’t fundamentally negate the basis of WLI as it has been presented in this thread. It simply states a large majority of WLI policy holders default on their investments for purposes not defined.

Take a look at the stock market today - retail investors flock towards bankrupt companies because it is a “good deal” that sounds like someone who doesn’t understand the premise of intelligent investing in the stock market - similar to those who may not understand how to leverage the 2 for 1 capabilities of a WLI policy.

Leveraging WLI as a primary investment is a terrible idea as you can generate safe reliable returns elsewhere, without having to pay fees.

Leveraging WLI as a place to store excess cash, generating better returns/dividends than a savings account, AND taking a loan out for ANOTHER investment vehicle WHILE retaining your accounts interest/dividends seems like an advantageous setup for someone with the capital and discipline to do so.

@Pete Mathias @Mike S.

You guys are saying exactly what I am thinking. It’s not one vs. the other it’s one plus the other (at the same time)

@John Perrings

Agreed John. While the article does make some great points the author is coming at it from the wrong angle... and is a bit extreme in his beliefs (if you read the comments thread).

I certainly don’t view it as an investment, but a place to store cash that can be leveraged while still gaining interest. It’s basically a tax deferred savings account with some death benefits - of course the insurance company will profit on you, but if you are smart it won’t outweigh your gains.

I think another benefit in the real estate space is a scenario like COVID. If you have tenants who can’t pay rent, but have a WL policy with cash value, you can leverage it to pay your mortgage so you don’t have to sell the property in a down economy.

@Lane Kawaoka

Great point, thanks Lane!