All Forum Posts by: Zachary Paschke

 I love you Joe. I’m not going to rebut your thinking. It’s just funny we’ve been on different sides of topics and you take each extreme. I’m glad you pay attention to your money. That puts you ahead of 80% of people. I have opinions, I’m just keeping them to myself. 

The high management fees, the downside potential, that’s why we recommend retirement in Indexed accounts that have lower fees and loss protection (but are rarely sold by FAs because there’s not as much money in it as AUM, read the lower fees). Again, this place is for real estate and nothing can touch that. It’s why we focus on these kinds of investments. We’re all here to make real estate returns. That’s what binds us regardless our other opinions. 

 Joe, you’re always entertaining! Keep trying, keep trying! 

If your goal is to offer group benefits and that’s how you’ll make money, you can simply market REIs and offer education about the topic in the community. Be there as a resource and build that portion of the business. Most REIs only own 1-2 properties, so I would distinguish yourself the way you want to earn your income. 

 Everything I stated is factual. Most of what you just posted was almost word for word in my post. 

I like IUL and current assumption UL.  My only point is when you get a product like that you need to watch it or have someone as talented as yourself to help you monitor the performance. I specifically pointed that out. You’re right people got statements that said, “minimum premium.” And paid it. Who’s fault is that? 

I am not making a case for Whole Life over UL products. Personally I prefer working with term - as you can tell from the name of my company. 

I never stated that “guarantees” are subject to interest rates. 

Unlike you I don’t limit myself to one product. I offer the product that’s right for the clients needs and risk tolerance. That’s not bad. I think it’s great you specialize in a specialty product. You likely know IUL better than I do. That’s fine it’s not a competition and you don’t have to bring me down to make yourself look good.

Next time I’d hope if you feel like being so critical of a post that you would actually read what I said and ask your self the following question before replying:

“Is this untrue, or do I dislike what I interpret as the implied sentiment?” 

If you simply dislike what you interpret as my implied sentiment… maybe don’t attack me professionally in a public setting. Thanks. 

 A few mistakes here:

1) I’ve never seen a whole life policy with $0 in cash values by year 5. The strategies they’re describing involve significant amounts of cash going into the cash value from day 1. Most whole life policies that are not overfunded do take a while to grow and are more expensive in the long run. That’s what we’re trying to avoid. 

2) The cost of insurance never goes up in a whole life policy. Most universal life policy reserve the right to up the cost of insurance, but there’s always a maximum. The difference is much like a fixed rate loan and variable rate loan. You’ll pay more for a fixed rate because they assume the worst. With a whole life policy the underlying contract is fixed. If you pay the level premium your cash value will never be lowered. As you stated the numbers are in the “guaranteed” column. A carrier can’t divert from that unless you stop paying premium. We’re talking about over funding policies, the point of that is to put enough cash value in the account that the premium is not necessary and the account will grow on its own. Because the underlying costs are fixed in whole life this is incredibly predictable. 

3) The problem you’re describing about the cost of premium going up is more so  associated with term insurance. I’m not saying that’s bad, term is an absolute necessity for everyone. I’m more than happy to offer it. That’s most of my business. The problem is people often want insurance to pay out for the rest of their lives. We’ll, not in their 30’s. Then they don’t care. They get mad when they hit 60 and realize between age, the 3 stents they picked up, and falling interest rates that the cost of insurance is significantly higher.

4) I’ve heard this story a lot! I can guess what happened here. Your idiot brother-in-law got his life insurance license, because … why not? Some marketer in the early 90’s / late 80’s told him that interest rates can never go down and the guarantees from whole life are for dumb people. He bought it and sold you a universal life policy that was built on the assumption that interest rates would stay high, cost of insurance would stay low, and Billy Ray Cyrus would live forever! He has a new product that is a ‘discount whole life policy’. “Take advantage of the discount bro! Don’t pay it off early,” he says. And, because you trust your idiot brother-in-law and can’t by yourself understand the pages of paperwork he pawned off on you (don’t feel bad, most can’t). Because he let his license lapse along with the rest of his life, you’re left alone with your policy and no one to turn to for help. That’s fine though, because he would never hurt you. After 30 years you get a notice in the mail saying that the cost of the coverage went up (since this UL is a variable product and not a whole life policy) but you never raised your premium in line with the increases. The increases weren’t even that bad at first, but since you didn’t pay them they escalated now and for the past 20 years they’ve taken money from the cash value to make up for the premium you didn’t pay. Now, not only do you owe the increased premium, but you owe more premium because The assumptions in the policy assume that you have more than a tootsie roll wrapper left in your cash value account. 

Then you call me cursing out your brother-in-law asking me to fix it or offer you a term policy, whatever is cheaper and get mad when your new term policy is more than the permanent policy you couldn’t spend an extra $25/ month to keep cash flow positive. 

I’ve had this conversation a lot! It happens. It doesn’t make you a bad person, but it also doesn’t make you an insurance expert. That’s quite alright, but please don’t assume all professionals are at the same level and all products act like the one you (or your friend) got and didn’t keep up with. 

 1) There’s 0 incentive to sell a policy. Taking out any money (not including loans on a properly structured policy) generally is taxable. If you needed the money and no longer wanted the tax benefits you can surrender it to the company. There are often penalties doing this early on.

2) The loan and any outstanding interest is paid from the death benefit before your beneficiary is paid the balance. 

3) You would take a loan against the policy. At that point you can withdraw a safe amount.  The policy will continue to grow faster than your withdrawals and interest. Using life insurance for retirement has benefits no other retirement vehicle does. If you take money from a retirement account you still have to report it on your taxes at the end of the year. If you take it as a loan from your life insurance, there’s nothing to even report. 

You need to reach out to a few-only FA. They have talked about a few networks on the podcast, but I’d recommend you not reach out to a FA. They’re not trained on real estate. Depending on your goals you’re probably better off getting a consult with a tax planner. 

Financial Advisors make income by selling products unless you pay them a fee. That’s all they’re good for. You’re better off with a tax advisor. 

Yes. If you break the MEC rules all that happens is the contract becomes a Modified Endowment Contract. It loses the ability to have pre-death tax benefits, but the death benefit is still paid tax free. The times I’ve allowed the policies to MEC they were only being used for death benefit, not cash value maximization purposes. For example every Single Premium whole life policy (assuming there’s no 1035 exchange) will MEC. 

 Yes. I’ve never heard of a company that would not send a MEC warning. Carriers don’t like it when your policy becomes a MEC. I’ve written policies that MEC on purpose, but there was good reason for it.

The illustrations will also show if the policy is expected to MEC.

A few notes on this. 

1) The fees on this policy is low, it looks like it was set up the right way. You can know this because of the cash value the first year. Many things happen to the money that doesn’t end up as cash value. Part of it is payment of commissions. The agent that write this policy is doing fine, but it looks like they structured it to minimize their commissions and maximize your cash value. 

2) Whole Life is not an "investment vehicle". It is a stable, secure, insured place to park your money. If you invest in the market, IRA, 401k... there is no death benefit. The market has no "guaranteed interest" or guarantee your principal won't go down. This is about security of your money. Also, you can't borrow against stock growth.

3) You can’t guarantee the market will do better than your Whole Life policy, especially considering the tax benefits. 

4) Your Whole Life policy should be part of your strategy. It’s not stocks or WL, it can be both. You’re smarter to get this established first since the costs of the policy are lower at your age. 

5) you should be able to borrow your money, but I always recommend you wait 3 years minimum before you do so. Most carriers let you borrow current cash value less a premium payment or two.

6) you don’t have to pay on this policy forever  once you stop your done, but the cash value will continue to grow (including dividend) just not as quick as with the money. Your death benefit will drop a bit, but to be understood  your agent can illustrate what that looks like.

7) This is even more powerful for children. This is highly debated in circles, but I highly recommend designing these policies for children and funding them while they’re young. As an agent I don’t make as much off of them that way, but it’s what I do for my kids. 

Good luck!