In this episode, I dive into the big question: is whole life insurance a good investment?
I cover common debates around “buy term and invest the difference” versus whole life insurance, breaking down why whole life insurance isn’t actually an investment, but a savings vehicle with guarantees and a death benefit. I explain the upfront costs, which whole life insurance may or may not be best for, and compare traditional whole life policies to the max ROI-focused policies I advocate for.
I also discuss how, if structured correctly, whole-life policies can be used to access cash for investing in other assets like real estate.
You’ll see how these policies work over time, how they can provide tax advantages, and why they can actually outperform other investment strategies in some cases.
I provide clear examples and real numbers to help you understand when and how whole life insurance might be beneficial, especially if you’re looking for a way to grow wealth while keeping money accessible.
Stick around as I dispel myths about whole life insurance and clarify when it truly makes sense.
TRANSCRIPTS
Speaker 1 (00:00):
So is whole life insurance a really good investment or should we be doing by term invested difference? Or better yet, should we be doing something that’s like a third option that can actually give you the best of both worlds? That’s what I’m going to talk about here today, so be sure hang to the end because I’m going to give you three different options and show you which ones actually work versus what’s just sales gimmicky stuff that people are trying to sell you. Hello, my fellow Ripples. This is Chris Miles, your cashflow expert and anti financianal advisor. This show is for you, those that work so hard for your money and you’re now ready for your money to start working harder for you this time. So you used to work so hard for it. You want that freedom, you want that cashflow right now. You want it today, not 30, 40 now, but you want it today so you can live that life that you love doing what you love.
(00:59)
More importantly, guys, I know if you’re a person of good quality, you’re not just about trying to get rich for yourself and live a comfortable life, you can just live with your family and be quiet, although that’s a perk too, but it’s more importantly it’s about how you can bless the lives of others as you are blessed financially. That is what I’m here to teach you guys today and appreciate you allowing me to create that ripple effect through you. Remember, you haven’t done so already. If you really like what we talk about here, be sure and give us a shout out on Apple, apple Podcasts rate and review us. Love to be able to have that. We definitely need some more love from you guys because Apple’s awesome and we’d love to have you guys be able to share that too, especially if this has created value for you in your life.
(01:41)
So please do so now. Alright, so I’m going to talk about this question. Is whole life insurance a good investment? And this is actually coming from my team. My team had posted this little short video that I want to share with you guys right now to kind of share with what it is. Now I’m going to say this, if you’re listening to the audio version right now, maybe you are all on Apple Podcast, maybe you’re on Spotify or something like that and you’re listening to this right now, you may want to also check this out on YouTube. Feel free to listen to this too, of course. But you’ll also want to go to our Money Ripples podcast channel on YouTube to ensure that you can see this video because I am going to be showing you some stuff, showing the numbers and what’s interesting, this woman, very much she’ll tell very much by term vest the difference, but I’m going to share with you something that’s a little bit different angle that she hasn’t been considering, nor has all the other people that she’s comparing to consider it either.
Speaker 2 (02:30):
Some people are pedaling whole life insurance like it’s a good investment for everybody, but you know better because you follow me, Vivian, your rich, BFF, your favorite Wall Street girly who can break it down, there are two main types of insurance term life you’re probably familiar with. You pay money so when you eat, your family gets a little something, something whole life also has this death benefit but also has an investment component that allows its value to grow over time. And a lot of scammers on social media are selling whole life insurance. I ls, NPIs, whatever they want to call ’em as a good investment for everyone. But in reality, these are only good investments for high net worth folks because the upfront fees are so high. In fact, MetLife determined that a 30-year-old male could pay $672 a year for 20 years of term life insurance and $8,320 a year for whole life insurance for the average person, the upfront cost of whole life insurance would be better invested in the stock market. You’d see meaningfully higher returns and for all the times that whole life was touted as this amazing investment. They miss one big caveat. It only makes sense if you already have a lot of money.
Speaker 1 (03:29):
Alright, so I’m going to break this down bit by bit from her video. Vivian, our BFF, right? She’s awesome. She does a great job laying this out. But I want to break this down step by step or bit by bit here to talk about this. First and foremost talking about this question right here. Is life insurance a good investment? I mentioned this whole life a good investment from a standpoint of investing. Whole life insurance is not an investment. I repeat it is not an investment. So whole life has never been an investment. It’s never supposed to be an investment. It’s illegal to call an investment because it isn’t. Investments have a big degree of risk. Whole life insurance does not. Whole life is guaranteed. It’s not tied to stock markets, things like that. The great thing is lately it’s been tied to interest rates which have been going up steadily higher in the last few years, which just means you’re also getting paid more on these as well, and that’s a whole nother story there. But let’s talk about she’s really talking about buy term and invest the difference, right? Buy cheap term, invest the rest in the stock market versus just doing whole life. And this is a very big debate. I mean even whole life and she talks about MPI bank on yourself. I mean all these people, she talks about all these different things. IOLs, IOLs talk about having the upside, but none of the downside of the market
Speaker 2 (04:44):
Are two main types of insurance term life you’re probably familiar with. You pay money so when your family gets a little something, something whole life also has this death benefit but also has an investment component that allows its value to grow over time. And a lot of scammers on social media are selling whole life insurance, IOLs, NPIs, whatever they want to call ’em as a good investment for everyone.
Speaker 1 (05:04):
Now this is true. I want to address this because you’ve heard me probably say this many times that just like when we talked about mortgages, using your life insurance, pay off your mortgage and things like that, especially when it’s using that in place of a mortgage, like buying houses and things like that using your whole life. I actually like using the bank so when they tute it’s for everybody and that you should be doing this or that. Strategy wise. I do also agree with her on this that there’s a lot of people TAing this stuff. mpi I has been. I know that that’s another one that’s out there that has also been ridiculed and scrutinized quite a bit. You’ll see infinite banking, hey, we talk about that, don’t we? Or the infinite banking concept by the Nelson National Institute. Great group out there. But yeah, you’ve got a lot of these people and I wouldn’t say all these people are saying it’s good for everybody. I think vast majority of people would agree that’s not what they’re saying on social media because they’re very short little burst of clips just like she’s doing right here. They make it seem like it’s for everyone, but that’s just not the case. There is time actually, I believe term insurance is the best case for people. Now let’s just keep continuing. She makes good points here and I do agree that when they try to blanket statement that everybody should be doing this, that’s just not true.
Speaker 2 (06:16):
But in reality, these are only good investments for high net worth folks because the upfront fees are so high.
Speaker 1 (06:22):
Now, I’ve heard this one as well. I struggle with this one because I would think this, I’m a high net worth person and I would say this from my own perspective, I have a more of an investor perspective. So maybe it’s different than the saver perspective, but to me it doesn’t matter how much money you have, if it’s a waste of money, don’t do it. Okay? So when she said, because these upfront fees, that’s why only high net worth people should be doing it. I just don’t see that as being a valid reason personally, I think the truth is is that if you’re a high net worth person, you’re a high net worth because you made good decisions along the way or you just make a lot of money. But even then, that’s not the reason insurance, first and foremost, it does give you a death benefit, which is tax free to you and your family and your heirs, your estate that could actually be paying off the taxes you may or may not have to pay in the future.
(07:11)
Again, that’s a debatable one, right? About how much or if you’re going to pay taxes, but at least it keeps you from selling off assets. So there’s a death benefit part, but the other part that I see that she’s talking about here is that you have to be high net worth to afford those fees. So here’s one of the things I’ll say. Here’s who this is not for. Even when I’m talking about doing whole life insurance, especially this max ROI, infinite banking concept that we use. One, if you’re paycheck to paycheck, this goes to her point. If you’re paycheck to paycheck, don’t do it. If you’re literally you do not have money to save, I believe you should save at least 5,000 to 10,000 a year. If you do not have at least that much, don’t do this strategy, okay? You’d be better off buying a convertible term life insurance that could be converted to whole life later without you having to re-qualify your health.
(07:57)
So even if something happens health-wise, you’re still guaranteed to get that health rating, whatever you qualify that when you first got that term insurance. That’s my recommendation there. Secondly, if you’re over the age of 70, this becomes a harder strategy to use. You’d be better off just getting something for estate planning purposes. You probably wouldn’t get term at this point. You probably would get permanent policy, but it could be a universal life policy, it could be whole life. Third thing, if you’re in bad health, if you’re in bad health, same thing if this may not be a good cost effective way of doing it, but I have had clients say, I’m not insurable. I just had one get denied recently. So he’s kind of putting more money towards his wife’s policy instead because she has a better health rating and therefore gets a better return and this makes more sense.
(08:42)
Now, he might still get term life insurance. Well whenever he can become insurable again, but right now he’s not insurable. So that’s a moot point, but that’s where I say if you don’t have any money to save, don’t do this Infinite banking strategy I talk about if you’re over the age of 70, not so much and then definitely if you’re in poor health, maybe a smoker or all the above, then you might want to do this on someone else. Okay, so let’s talk about that as being the general ground rules for when it’s good versus when it’s not good for everybody, but it is good for some, especially with the scenario she’s using here.
Speaker 2 (09:18):
In fact, MetLife determined that a 30-year-old male could pay $672 a year for 20 years of term life insurance and $8,320 a year for whole life insurance.
Speaker 1 (09:28):
I’ll pause here too. So 6 72 a year for 20 year term insurance for 30-year-old male, 8,300 for whole life. I’m guessing this is a million dollar death benefit just based on the numbers. I can see MetLife is not the best one to quote, but I appreciate that she founded a MetLife quote, you’ll pay too much for MetLife and State Farm and those kinds of things. Again, they’re not horrible, they’re just not great either and then paying 83 20 a year for whole life insurance. So she’s right. You pay much more for whole life insurance than you do for term life insurance. I’m going to kind of come back to this, but I’m going to use this as kind of the bearing. The example, let me just kind of keep hitting play here.
Speaker 2 (10:11):
For the average person, the upfront cost of whole life insurance would be better invested in the stock market. You’d see meaningfully higher returns and for all the times that whole life was touted as this amazing investment. They miss one big caveat. It only makes sense if you already have a lot of money.
Speaker 1 (10:26):
Okay, so let’s stop there and let’s really just dig into the numbers of what she’s talking about here. Okay? Alright, so let’s talk about term life insurance. Now, I ran numbers of the company. I put this at the second highest health rating. I’m guessing they probably put it at a higher health rating anyways, but I just put it the second highest just to make it a little bit more believable. If you’ve got the highest health rating, the same term insurance policy that’s convertible to whole life, it could be less than $400 a year if you’re in Gray Health, just so you know, there’s things like standard rating, there’s select Preferred, preferred plus or some variation of that Preferred Elite. I mean there’s different companies have different stuff. The highest is usually like a preferred elite, a preferred plus. This one I ran at just preferred.
(11:09)
So the second highest rating, and just so you’re aware too, I get as a 47-year-old, I get preferred plus ratings all the time, so I always get preferred. Plus a 30-year-old male getting preferred plus is not hard at all unless they haven’t been nice to their bodies in their first 30 years of life. So it’s possible or some other medical conditions could be coming up that could hinder that, but just so you know, it’s very possible to get even cheaper term life. So I wanted to show this one. I said, okay, let’s show the $536 a month I’ll even use for 630 some odd dollars a year or whatever it was. Sorry, that’s not month, that’s 536 a year for that term life that we would do and that’s that second highest health rating, but let’s even use the 600 a year, right? Because she’ll say by term, that’s the difference.
(11:54)
If he got, and I even ran numbers two, I ran whole life, I couldn’t come up with that 8,100 scenario if it was a million dollar death benefit. Like I said, I don’t know if it was three quarters of a million, a million, I just guessed because I couldn’t find that exact article, but I ran a million dollar scenario. The minimum premium is 11,600 a year. So I just figure, okay, great, well I’ll rand up in her favor. I’ll say, what if you did buy term and invest the difference for that without money? That 11,600 now comes down to 11,000 a year that she can invest. She bought term to go with it. That’s like 600 bucks a year. Okay, so now I’m showing you the calculation here, just going with her thing, right? So I showed the first part, the first 20 years, so age 30 to 50, those 20 years because remember you’re doing a term life policy and I dunno if you noticed, if you go back to, if you rewind this video and go back a little bit, you’ll notice that it was over 500 year, but then did you notice the next after year 21, it jumped up over $10,000 for that year’s premium.
(12:55)
I dunno if you notice that or not. This is the thing that with term life that most people won’t tell you is that if you buy term life once that term is over, the premium skyrocket. In fact, if you really tally it up every time, every time I’ve seen this by your late seventies before you’re 80 years old, you’ll pay for your entire death benefit if you keep renewing that term. Like life insurance companies in general, all life insurance companies literally bank on the fact that you are going to cancel your term insurance. In fact, some companies have even come out saying, because we know that people are going to cancel the term insurance, we actually encourage it. That’s why we make the premium so high so that we don’t have to pay out because life insurance companies are still in business to make money.
(13:36)
So that’s why they’ll tell you, hey, it’s cheap upfront, but then they don’t tell you if you can’t give insurance again and you want to keep it in place, they’re going to make you reapply and if you reapply and you’re in bad health, you’re not going to get it. Just like that client I mentioned, if I would’ve gone back five years or so ago, five, 10 years ago, he probably wouldn’t have been rejected for life insurance. But because he was well into his fifties actually he was about 50, about 50 years old. He was in a place where due to some of his military history plus some of the conditions that came out of that from his service there, he’s no longer insurable. Okay, so there’s that issue that comes up. Life insurance companies literally bank on you getting to a point where you can no longer buy life insurance on yourself, and this is why about 99% of insurance policies never pay out with term life insurance.
(14:24)
This is also why they don’t always really push whole life, whole life. There’s a segment of us that like whole life, but for the most part, most of these companies love pitching term because it’s cheap, it’s easy for people, it’s an easy sale for people for the insurance company and then two, it’s easy for them because there’s so few policies that pay out. That’s why your premiums are so cheap. And so I ran this scenario, I ran this 20 years, but then I said, okay, you got 543,000 if you invest $11,000 for 20 years at 8%, again, I’m being generous with the 8%. Any of you who’ve watched this podcast know I’ve already talked about this, that most likely we should probably be talking to seven to eight at most, but I’m going to push it to 8%. You’re going to have 543,000. So I said, well, let’s see if we invest it for another 20 years, which will get it up to almost $3 million.
(15:13)
Now that puts you at age 70. You may not want to wait that long, even if you said, you know what, I only want to go to age 60. Cool, well, I scroll down here, age 60 would be your 10. You have $1.3 million, not bad. Now, you also notice too, I’m only having you spend 9,000 a year because if you get another term life policy for another 20 years, that’s why I run this 20 years out. If you get another 20 year one, I don’t know what the premium is going to be like with MetLife, but I was running my own numbers. It’s going to be at least $2,000 a year at least depending on your health rating and yada yada. Some could be cheaper, some can be more expensive for that same million dollar death benefit for 20 years from age 50 to 70, it’s right around 2000 bucks.
(15:53)
So I just took off another 2000 bucks, made it $9,000. You’re investing on top of it still 8% for another 20 years. So yeah, it’s 3 million. If you wait till you’re 70, you wait until you’re 60, you’ll have about 1.3 million. Now here’s the difference. If you go to age 70, I think you’re definitely going to see here you’re going to win because if you’re at 70 years old now it’s possible you could live 30 more years. I would probably be a little bit more comfortable, not completely, but a little bit more comfortable living on the 4% guideline that some people have out there because you may not live that 30 years. You may not live to a hundred, you might, but you might not. If you’re 30 years old today, you still have a decent chance, but 4% a year on that $3 million, almost 3 million, it’s about 119,000 a year.
(16:39)
Now you haven’t paid taxes on that money yet. Now if you pay taxes along the way, you have a lot less, but let’s just presume this is in IRA’s, 401k, something like that. You haven’t paid taxes 119,000 a year, say a quarter that gets lost to taxes, you’re going to be left with roughly about maybe 79,000, right? Something like that. Or no, sorry, $89,000 a year. Still pretty good even after paying taxes, if you’re assuming tax rates don’t go up from where they are now, you might still have almost 90,000 year to live on. Now that’s good. Now if you try to do it at age 60, a 10 year, 10 now I would say because you could potentially have 40 years to be alive, I’d probably say the 3% rule is more realistic and that’s where you pull out just under 40,000 a year and then you pay taxes on that.
(17:24)
So you’re now left. You might be left with about $30,000 a year. It’s not going to be that exciting, better than what you saved, but not that exciting still. Now, how would that compare to whole life? I’m going to show you two different types of whole life. I’m going to show you the traditional whole life, even the ones that I was taught when I first started learning about Nelson Nash becoming your own banker, all this stuff with, it’s just a premium whole life policy and I ran it at a million dollar death benefit. So let me show you what that looks like. Alright, so here we are. We got this one, 11,600 a year. So now we’re just talking about the buy term vest difference. Put it together. So where she was saving 11,000 a year for 20 years, I’m going to do 11,600. Now I do this for 40 years and we could still compare that to age 70.
(18:10)
I’m going to prepare it to age 70 as well. Notice this is the thing that’s always what gets people that first year you’re paying 11,600, you’ve got zero second year, 150. I don’t often show this on to you guys because I’m not a big fan of doing this straight premium whole life, which is like what I was sold. This is the thing that got me so angry at the insurance agent. I was putting in almost this much per year, by the way, for a million dollar policy, I was doing like 12,000 a year even. So this is actually cheaper than what I bought as a 28-year-old buying a policy, but I was spending 12,000 a year and it looked a lot like this except year two I had zero. So I didn’t even have 150 bucks. This is still better. Year three is when I lost it because of the recession and everything else.
(18:53)
I paid in almost 25 grand by that point, had nothing to show for it lost my policy. So I’m not a fan of this kind of policy because it’s it’s high premiums and you have to pay that 11,600. That’s something she didn’t really mention is that at least with the stock market, it’s optional, right? You could always stop investing. Now, it throws off the numbers of course, but if you stop here, if you don’t have at least 11,600 in your cash, which you really don’t have until you’re four in this example, you’re screwed. There’s nothing you can do. You’ve got to pay that money. If you don’t pay the money, you lose the policy. I know it happened to me, okay? So that’s a big, big issue. That’s why I vowed back in 2008 when I started learning I could do it better. That’s why I vowed to find ways to do it better.
(19:39)
But even then I’m just going with it. It’s good. Now, let’s say go out 20 years. 20 years, you got 347,000 bucks in here and this is in this tax-free cash account. Now remember after 20 years in her example was 543,000 significantly more. Even if you factor in taxes and whatnot, even if you might have a 10% penalty too. If you have IRAs or 4 0 1 ks and you’re trying to access it when you’re 50 years old where this money, you don’t have 10% penalties, you don’t have taxes at all, you don’t have those issues, it gets closer, but still you’re at a point where it’s kind of a wash because of how much you could be pulling out versus what you pull out from hers. So shorter term, this one still kind of works out and get this, you got a $1.3 million death benefit, so it’s not even a million dollars.
(20:25)
It’s grown by more than that. This is one thing you’ll hear, it’s a skeptical kind of skepticism about whole life. Is he Dave Ramsey saying, well, if you die, you don’t get that cash value. Well, remember I started with a million bucks and still, yeah, there’s 3 24 in this example, it’s different. With mine it’s better, but this one, it’s almost the same. Yeah, it’s about 23,000 less. So no, you don’t get the full amount. You get the 1 million, really you’re getting like 977,000 plus the 3 47 that you get a death that’s still not too bad. After 20 years, you still have roughly that million dollar death benefit and the cash that you can use while you’re alive and there’s no early withdrawal penalties if you’re not 59 and a half, nothing like that. So you can’t access that money. You can access about 95% of this money at any time.
(21:14)
So even there, not bad, not best, but not bad. Now, let’s go out another 20 years, right? Remember I showed you with hers it was like 2.9 million here. It’s about 1.4 million that it gets up to and yeah, you got a freaking large $2 million plus death benefit at this point. Now let’s start pulling off income. Remember I told you with the one that with that 2.9 million could pull off 119,000, you have to pay taxes. You might walk away with about 89,000 give or take, depending on tax rates at that time here, 73,000, almost 74,000 tax free forever. And then even at the end of that, you still got a little bit of cash in there and you’ve got about 400,000 of your death benefit back. So if your whole goal was I don’t give a crap about my family, I don’t care about leaving behind money.
(22:00)
I just want to have a good life, and if there’s anything left over, great, I can give it to them. Here you go. You can actually still at age 100, a lot of insurance policies by the way, mature at age 100, just like in Monopoly. Get that card with the old man, old, I forgot his name now he’s not pennyworth or whatever, but I know he has got a different name. But the guy, the old guy from Monopoly, he has this long beard in a cane that says your life insurance matures, collect a hundred bucks. Same thing here. Your life insurance can mature after age 100. You get the 424,000 may or may not be taxable just depending on the rules, but for the most part everything’s tax free at this point. So if you die, it is tax free to your family and yeah, you were able to pull out that money.
(22:41)
So the cool thing is yes, you’ve pulled out a significant amount of money. It’s not quite what hers was. So that’s the truth is she’s right. If you buy term, invest the difference, you could come out ahead assuming of course you get at least that 8% rate of return. Now if it’s 7%, all of a sudden you’ll probably see that the whole life insurance will do better when it comes to income that you can pull out and you still have a death benefit, at least a little one left over. So that’s the one thing I want to share with a traditional whole life plan. So when people talk about buy term invested difference, it’s really come a moot point in some ways because yeah, it could work. It might be better in the stock market, it might not be. It just depends on your timing, it depends on everything, at least the whole life insurance, it’s guaranteed you’re never going to lose money.
(23:27)
But at the end of the day, if you’re trying to do this from a retirement standpoint, cash flowing standpoint at retirement, okay, well these things are pretty close even in the scenario, but you guys know me, I wouldn’t do the scenario either. Here’s what I would look at from an investor’s perspective. I would do this differently. By the way, let me add this little thing just in defense of this one, even though I’m not a fan of this kind of policy, this kind of design, the one thing you could say about the death benefits, the same thing I told one of my clients, she had no kids, she wasn’t married. She did have some nieces and niece and nephew, but she told me, she’s like, Chris, I got $2 million. This would go to this woman’s point, our favorite rich BFF, going to her point where she says, if you have a lot of money, high net worth maybe, well, this woman wasn’t necessarily making a lot of money, but she inherited $2 million from her dad.
(24:18)
She was 65 years old. She could just live on the interest and barely make it, but if there’s ever inflation, which there was since then, now inflation’s doubled this and I warned her of this. I said, you could do that, but eventually you could run out of money if inflation starts kicking up a little bit. So you got to be careful. Plus where the money invested wasn’t returning very much anyways, she was trying to keep it safe and not gamble in the stock market to where you could lose money to and then you lose money faster. So anyways, I was running these scenarios. I said, well, you can live on 60,000 a year with this 2000003% rule and probably live forever. She was in Gray health. I said, or you could buy a life insurance policy that was like about a million dollar death benefit for about 13,000 a year.
(24:59)
And just so you know, that 13,000 a year, I said, this million dollar death benefit will give you a permission to slip and spend money and this was going to be set up. The way she set up was actually the old way. This is 15 plus years ago. This was actually 15 years ago. So I was trying to more do a better method where you have cash in the beginning, but I said, Hey, you do this 13,000 a year, now you’ve got money to spend now you can do user money differently. Now you know there’s going to be a million dollars paying out at the end. Well, a month or so later, she lost sight of that fact cancel her policy, and I said, okay, well fine. We have to go back to traditional financial planning, which means you’ve got the 3% you can pull off.
(25:39)
I said, here’s the problem. You actually cost yourself tens of thousand dollars, even over a hundred thousand dollars a year of cashflow because you canceled this 13,000 a year policy. She’s like, well, what do you mean? I said, lemme show you. And so I showed her, I said, listen, you got $2 million here. The whole reason we can only pull out 3% because we don’t want to run out of money while you’re alive, but if you knew a million dollars was going to be there, you would spend your money differently, right? Especially when you pass away. Would you care about leaving bills behind? No. Would you care about leaving debt behind? No. I said, well, great, you’ve got a paid off house. Guess what we can do with this paid off house. Now you’re being 65 years old, what you can do reverse mortgage. You can actually get paid over $2,000 a month off the mortgage you have right now, and we ran the numbers for, so you can actually get about 2300 a month of cashflow.
(26:23)
By the way, 2300 a month is actually guys, that’s like 27,000 a year. That would more than pay for $13,000. So just by having mortgage and it wasn’t even the full amount, her death benefit was still bigger than that mortgage. It was like $300,000. But still you can have 2300 a month coming to you from this mortgage payment that’s coming to you as a payment, almost like for life, like a pension, and it would more than pay for your death benefit. But here’s the cool thing. It also allows you to spend down your $2 million because now you’re not worried about running out of money. Worst case, we go to this place your life insurance as a backup because even after 10, 15, 20 years, you’re going to have cash in here that you’ve already been using and you can actually start pulling out principal and interest for your mortgage.
(27:04)
So I showed her, you can actually pull out now it says 60,000 a year over 120,000 a year for the next 25 years. Because I said you’ll probably live into your nineties easily. I said, you can keep pulling that money out, pulling out principal and interest from your $2 million you inherited because you still have the death benefit to ensure that it’s still there and the cash value inside of it. In fact, you can me transfer the money over. Now for some of you, you might be thinking, okay, this is kind of abstract right now, Chris, you’re kind of losing me. Just know this. If you have a life insurance policy that not only has a death benefit but then also has this tax savings account inside of it, hey, she can actually be pulling from that money using it to fund her policy. Also getting cashflow from a reverse mortgage because she doesn’t care about leaving a mortgage behind because its policy could pay it off.
(27:47)
And actually the truth is you don’t even have to pay it off the policy. That’s only if her heirs, her niece and nephew want to keep it. But if they don’t, the bank just takes it over anyways so there’s no harm, no foul. They still get the million dollars split between them and of course, that’s the thing. If there’s medical bills or anything else unexpected, she doesn’t have to worry about running out of money, it’s there. That’s the difference. That’s why I told my dad, I said, dad, if you ever question about whether you’re going to keep your life insurance policy, tell me I’ll pay the premium because I know the death benefit is going to be even more. That tiny little premium you’ve got from your whole life policy back in the sixties, it’s like 50 bucks a month. I’m like, please, I’ll take that.
(28:25)
If it means we get at least a $50,000 death benefit, I’ll pay that all day long. So don’t cancel it. Same thing. That’s just based on the traditional thing, that permission slip to spend money that’s just being based on this traditional plan. Now remember, this is the difference. Here’s what we do differently. Now, you’ll see here first year it’s not zero, it’s 9500, 9500, year two, 150 bucks, 10,000 bucks. So we make it cheaper. Now the death benefit is as big. Notice the death benefit starts around three 72,000. It grows. It does eventually hit a million. Guess what? Before year 20, which is when the term would run out anyways for the other one. But I start with a smaller death benefit. Make it cheaper, allow you to have more cash from day one. Here’s the other difference. We’re not going to use the money you’re going to invest.
(29:14)
In fact, what we’re going to use instead is ideally you should have an emergency fund If you don’t have at least a good six months of expenses for emergency fund, that’s got to be a first step. Some people will actually build it inside of here at the same time because they’re trying to build it up. Others already have that emergency fund. A lot of our clients already do for those first two years where there’s really a net cost, guess what? We actually use the emergency fund to transfer it over. Because imagine this, you had two years, you paid in 23,200 bucks, right? That’s what it shows here. But you have $23,000 in there. You still have a 20,000 emergency fund, and you probably still have some money in your bank too, right? That’s the difference is that I’m not using the investment money. So even to her point, this is how you can do both.
(29:55)
This is the third option. To her point, you could still invest 11,600 a year because for these first two years, we’re not taking that money. So you could still put it in the market or like we talked about in the show, do something more along the lines of real estate investing, which generates better cashflow for you. Start to do that. Now, yes, you might say, well, eventually I’m not going to have that savings anymore. Well, yeah, you’re right. You don’t. So now you have it from here, but in here in year three, notice that it grows by almost 11,600 in year three. There’s ways we can do it in different ways that could even be higher year four, that it’s grown by $1,200 more than what you’ve paid into it net. So see, by the time you get to year three and four, the way we design it, it’s already paying for itself and then some, it’s actually earning more in interest.
(30:42)
So even though yes, there’s still insurance costs involved because of the dividends that are paying out in this policy, you can put in the 11,600 and pull out the 11 600 and go invest it because you are going to make more than what it’s coming out. Understand what I’m saying? Or in this case, see year four, 11,600, but from 31,000 to 44,000, that’s about 13,000 bucks. Even though we put 11,600, it grew by almost $13,000. So even if you pull out 11,600, you’re still going to make about a thousand bucks in interest. That’s the difference. And it gets better and better as time goes on, obviously as it compounds and grows. So even if you put the 11,600, you could still pull it back out and invest it wherever you want. And you don’t even have to put it in IRAs and 4 0 1 Ks because most of our clients don’t want to because they say, well, what if I didn’t have to wait till I’m 60 years old to finally pull off that 39,000 a year of income like we were showing you before that 1.3 million, 39,000 of income.
(31:40)
Well, what if I didn’t have to do that? What if instead, what if I instead can actually invest that right now to create cashflow right now? Now you’re not waiting for a day that you may never get to. I mean, heaven forbid that you die before age 60, right? Or whatever the age in the future you’re looking at. But we never know. There’s no guarantee, do we? But we can create cashflow right now. See, her answer is always invest in the stock market. Now you could argue say, well Chris, what if I didn’t put in the stock market? What if I just bought term invest in real estate? Which there are people that say that too, but remember, same thing applies that yes, you could do that, but why would I do that if I knew I can get both in best worlds? Because here’s the thing, I put most of my emergency fund in this policy and I don’t invest that part.
(32:24)
So let’s just say your emergency fund is $50,000. Well guess what you might spend the next three years putting that money in. You might put in about 35,000 to have now $31,000 and you still have 15,000 left in your savings account. Great. Split it up. This will almost be like your high yield savings account that now you’re earning tax free dividends. By the way, dividends are going up to 6% in 2025. That’s a huge difference. That’s 6% tax free. That does help rival. That’s why rivals the whole buy term, invest the difference because when you factor in taxes, you’re making 8%, but you lose a quarter of that. Guess what? Now you’re down to 6%. Now, yes, there are insurance costs coming out, but still, if you knew that insurance is going to pay for itself, why would I do term insurance that I may never die?
(33:11)
I’ll always pay out but never get paid back. But here I can pay into this. I still have a death benefit, but I can get that money back. And by the way, just so you look, 58,000 a year five, you have 58,000 in here, don’t you? So that’s awesome. You now have just as much in cash as you pay it into it. This is like having free insurance. I know it’s not free. There’s still cost involved because the returns inside the policy are now able to pay for those insurance costs much faster instead of waiting 11 years. Like that other example, if you go back here, it was year 11 I believe it was when you finally had more, you paid in 127,000 and you had 130,000, right? Good. You finally did a year 11 mine, year five, you have more than what you paid into it.
(33:55)
And then it just keeps going from there. Even by year 10, even year 11, remember that was 130,000. I have 158,000, I have 28,000 more in cash to play with. That’s more money to invest, more money to do stuff with. And yes, I still have a death benefit too. There’s still about three quarters million dollars even at that year 11 point. So understand, this is why I like this as an investor. I still have money that’s liquid available for emergencies. I can get to this whenever I need it. There’s no penalties or anything like that. And also I have this money to use where I can invest with it too. And here’s the thing that they don’t show you, they don’t talk about because most people don’t understand it. You can actually earn money in two places at once when you invested this money. If you borrow the money from the insurance company, you’re not pulling money out.
(34:36)
Say, here, right here, I have 104,000. If I borrow 50,000 from Life Insurance Company, my full 104,000 is still earning that 6% tax-free dividend. If the dividends are 6% of that time, it could be higher by that point. By the way, if interest rates stay higher, they might. So I’m still earning those tax free dividends on that full 104,000 because I borrowed the 50,000 from the insurance company. Yes, I pay them interest. Don’t let anybody fool you on Instagram or TikTok that you don’t pay interest. You do. But if you use that, that 50,000 to go and invest in a deal, let’s say it pays you 5,000 a year, use that 5,000 a year to pay back that line of credit. You have less and less being charged interest while you’re compounding interest. At the same time you beat the interest that you’ve been paying anyways on that money.
(35:19)
So you actually earn more. You actually earn money in two places at once, set of life insurance once outside of it too. And this is why I share, I shared this before on this. Now this is only showing 10 years, and this is a different scenario, right? I’m only doing this because it took me a couple hours to do these three scenarios. It took me a long time. So I was doing the same kind of thing of how about no buy term, you buy no insurance, which is this one right here. After 10 years of investing, you get to 112,000 a year of passive income. Awesome. Which by the way, that’s a lot of things we teach our clients to do with the passive income investments. Even if it’s at 10%, 112,010 years is not too unreasonable for some clients. Now, on the flip side, now, what if you did reinvest that money?
(36:05)
I did one with the blue ones more about what if you paid interest only on the loans for the insurance loans, you just paid the interest only and you didn’t pay the full amount of that 5,000 or whatever you’re borrowing per year. It’s almost the same. The thing where it wins is if you take all that money, the returns, the cashflow you have, rather than putting it in a savings account, put it back to paying back the line of credit, which just frees up more money than reinvest anyways. And watch this guys, you actually shave off almost another year out of that full decade. You’re about a year ahead of the example where there was no buy term invest difference. It was just invest with no life insurance. Here you get life insurance and you get the death benefit too, and you’re able to get there faster because why?
(36:44)
Because now instead of investing with a savings account that pays you nothing when you get rid of it, now you’re instead you’re paying using a whole life policy that you can now leverage, create arbitrage to be able to create and earn more an interest that they pay you versus what you pay them. You get that spread that you’re able to make, especially over time as those years go on, especially if it’s over five to 10 years, if you’re going beyond five years of investing, it starts to make more sense. Even this chart that I showed you here, it only catches up really about year nine and 10 when it finally really starts to beat it. So this is really what I want to bring this to. I love that she brought the video. Is life insurance a good investment? No, it’s not an investment at all.
(37:24)
It’s a savings account with a death benefit if you use whole life insurance, all those other things, IOLs, all those other things, she’s right. There’s a lot of stuff being pitched out there trying to really make it too good to be true. And people, you might be asking yourself saying, well, where’s your catch, Chris? Where’s the catch? The catch is those first couple of years, right? Those first few years was a net cost. That’s the catch. But remember, you’re buying an asset and this asset because it’s paying you a much higher return. Right now, they’re paying about 6% because they’re paying a higher return tax free. It ends up doing better than what you could do with just buy term invested difference. By the way, I didn’t take out the extra cost you’d be paying on that term insurance policy when you renew it at age 50, you’d be paying more.
(38:05)
And so you’d have less to invest. So the truth is you probably would actually have bigger income using this than the stock market possibly, depending on which end of the stock market you get in at and when you retire. And that’s always uncertain. We never know what’s better is still be able to have your cake and eat it too. You have the protection of the death benefit and you have this place to store your cash and let it grow tax free, and you can contribute a lot more than you can do to a Roth IRA because they don’t have the same kind of limitations. In fact, some of you may not even qualify to do Roth IRA. This might be your only tax-free vehicle you can use appropriately, and you could still use it to invest in other things and keep all the tax benefits like with real estate or oil and gas and business and things like that.
(38:49)
You get to keep all the tax benefits and do it the same. No, I don’t look at this as an investment. I look at this as a place to store a good lion’s share of my cash. I store most of my emergency reserves in here and anything above and beyond my emergency reserves, that’s the money that’s free, that’s free and clear to use. However, I want, and I’ll tell you right now, I’m not always investing it. I will invest my cash first, the cash in savings and checking, invest that first because I know I’m going to make more money over here. Anyways, that’s the difference. So anyways, guys, I’m not going to beat a dead horse here, but that is the real difference between these really three scenarios. I mean, there’s the two that Vivian brought up, which are great, and she gave a good overview, but remember, that’s not the rest of the story.
(39:35)
The rest of the story is how can you use it the right way? And the only way you can do that, guys, you got to find the right person. This is the only reason why we brought it in-house where we actually do design these policies is because I try to find people to do it for me, but they were never consistent in giving my clients the best results. Sure, if a client had hundreds of thousands, if not millions of dollars to dump in, they were all about giving ’em the best deal. But if I had a client that want to put in 10,000 a year, they would give them a so-So deal. I think, and this is our rule in our company, and this is true for anybody that works for me, there’s already a verbal warning if they do not do the best for the client each time they’re out.
(40:15)
Right? That’s just a hard firm rule that we got to stick to. So just remember, guys, it’s not so much just about the company, although the company helps, it’s really about how the agent will design it for you and do it the right way. You might be wondering if yours is designed the right way. Can I do some of those same things? Maybe, maybe not. It just depends on how it was set up. If you want assistance with that, feel free to reach out to us. Just go to money ripples.com. You can message us through there. We even have a whole infinite banking section anyways, but message us and just say, Hey, can you help me look at this of what I already have? Or I’m actually looking at options. Can you throw your hat in the ring and show me what you would do or maybe even do differently?
(40:53)
Yes, we would love to help you there. But at the end of the day, guys, just remember, life insurance is not an investment. It is a death benefit first and foremost, that also, if you get whole life insurance has a great tax-free savings account, fix to it, and if you design it the right way, that account can grow much bigger, much faster, saving you, if not hundreds of thousands of dollars, could be millions of dollars over the life of that policy. Guys, that’s essential for you and your family. Make sure you get the best deal every single time. Again, if he ever wants to help you out, reach out to us@moneyripples.com. But in the meantime, make it a wonderful and prosperous week. We’ll see you later.