All Forum Posts by: Yoochul C.

 Only a variable life policy will have "investment choices". This would not be a good solution for a real estate investor for two reasons:

1. Cash value volatility with changes in the value of the securities component.

2. Loan to value is much lower on variable life due to the volatility of the cash value serving as collateral.

You may also be confusing the true cost of a policy loan with the "net" cost. Policy loans are indexed to the Moody's Corporate Bond yield. Most companies are at least 4-4.5% right now. Some companies quote a "0% rate" but what is actually happening is that they are charging you 4% interest while the cash value is credited with 4%. This makes the NET cost zero.  That is deceitful marketing if you ask me.

When you are leveraging a life insurance policy for real estate investing, you are more concerned with the actual interest rate charged. You want your policy growing at 5-6% and be able to invest the 5% policy loan proceeds in an investment making 10%, for example. This creates an additional 5% on top of what the cash value earns.

I should have expected that someone would get wrapped up in the details rather than look at the big picture. These are reasonable assumptions. They are not going to fit EVERYONE's case. The model still works, just try swapping out the numbers in my example. It shouldn't take more than 2 minutes. Less time than it took to respond with your unique situation which doesn't fit anyone else.

I go through these numbers several times every single week with new prospective clients. No one has ever complained that the numbers are unreasonable. The numbers can always be adjusted to fit the unique circumstances of each client.

1. Mass Mutual pays a 6% dividend. Penn Mutual is 5.75%. Most IULs should perform at least at 6%.

2. You can use whatever tax rate you want, it still works. I picked a number out of the air to represent ordinary income tax rates as a hybrid of state and federal. You need to look at your marginal tax bracket, not your average tax rate. But the higher the tax rate, the greater the tax advantage of this concept.

3. Use whatever investment rate you want. It still works. Again, I'd hate for someone to fixate on just the number I used rather than the concept.

4. Dividend rates are at historic lows because interest rates in the bond markets were at historically low levels until last year. If rates stay high, you'll see dividend rates begin to rise as well. Dividend rates track interest rates in the bond markets. That's where insurance companies invest their reserves.

You can expect a net long term IRR, after all fee, commission, etc of 3-5% with a properly set up whole life insurance and 5-8% with an Index Universal Life Insurance.

They are not terrific product regarding their return, but you don't have negative years like in the stock market, and they are tax free. They are also asset protected against creditor. And during retirement you can expect getting a 8% per year draw compared to the 3-4% recommended for IRA/401k as you are not withdrawing the money but borrowing it while the full cash value continues to grow uninterrupted. Also compared to retirement accounts you don't have to wait until you are older to get money out of it, you don't have required minimum distributions, and when you die you heirs are getting the death benefit tax free and don't have a set amount of time to use it.

Last, your rant about life insurance agents are bias and crooked because they get commission is old and hypocrite. You are a mortgage broker and getting commission on the mortgages you sell. So you are obviously biased and lying to you client when you recommend a mortgage. Real estate agent are getting commission so they are biased and lying to people when they recommend a house. Financials advisers are getting commissions when they recommend financial products so they are biased and lying to people when they sell.

Every profession has crooks. But every profession has respectful individuals who are doing right for their customers. Crooks usually don't stay long in business. That is the same with life insurance agent.

Yes some real unbiased source are recommending permanent life insurance as a way to diversify your asset. It is not for everyone as it is a complex product that needs a good execution. Same as real estate is not for everyone, nor stock market, nor options trading, nor commodities, nor futures, nor bonds, nor annuities, nor notes, ... But because a certain class of asset does not fit YOUR investment profile, it does not mean that it is bad or unfit for others. So stop denigrating a product that has plethora of advantages and educate yourself to understand it.