We’ve talked about the living benefits of using life insurance for infinite banking, such as saving, investing, and more. But what’s the part that many ignore that also allows you to spend more money while you’re alive, yet still pass on wealth from generation to generation? Find out how Chris Miles was able to show one of his non-married clients how she could increase your cash flow by nearly $100,000 a year!
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The Unpopular Benefit Of Life Insurance
Welcome to our show. It’s for you that work so hard for your money, and you want your money to start working harder for you right now. You want that freedom in cashflow today, not 30 or 40 years from now. You want to be able to live that life that you love with those you love. Most importantly, it’s not just about getting rich but about living a rich life because as you are blessed financially, you have a greater capacity to bless the lives of others.
Thank you for allowing me to create a ripple effect by you not just tuning in and bingeing, but acting upon the things that you are learning today to change your life. Thank you so much for doing that because as you create a difference in your life, that blesses the lives around you and impacts them too. It influences them as well. Thank you so much for doing that and for sharing our message as well.
As a reminder, go to our website, MoneyRipples.com if you’re looking to learn more about anything. It could be anything from investments. We even got an infinite banking section just like the topic of today. We even got a section on that as well. Be sure to go check that out now. How amazing would it be if you could create monthly cashflow passive income from making at least double-digit returns on your money? It’s only $1,000 or more that you need to invest.
That’s exactly what Secured Investment Corp does. They do short-term lending to real estate investors that are backed by real estate that you can return double-digit returns on. That means 10% or better. It’s also IRA-friendly. If you even re-invest those monthly distributions, you create compound interest on your money too. If you want to learn more about that, go check out SecuredInvestmentCorp.com.
I want to talk about the benefit of infinite banking that I often don’t teach. It’s unpopular not because people don’t like it but because we don’t put a big emphasis on it. If you don’t know what infinite banking is, it’s about using life insurance, specifically whole life insurance that we can build cash value, which is like their tax-free savings account inside of it. We can use that money to be able to invest and earn money in two places at the same time. You can earn interest inside the policy, and also because you can get a line of credit against it, invest it as well and earn interest outside, making money in two places at that same time.
This benefit here is one that I was taught originally with infinite bankers, those that didn’t like building up the cash value quickly as we do. We guarantee every time that we’re going to beat everybody’s numbers when it comes to creating the biggest amount of cash value quickly. What we always do is try to make sure we get the lowest cost coming out of that policy so you get the maximum returns possible as the cash value grows faster. We often do that because we don’t do much with the death benefit. Regardless of the cash value, can having the death benefit alone increase your cashflow? Could it increase your rates of return?
I want to share a story with you. This is a client I had several years ago. This woman is great. It’s a great example because sometimes I’ll get people that will ask, “I’m single or I don’t have any children. Why do I need life insurance?” It’s not a bad question to ask. You probably don’t have a big insurance need as someone would say. That doesn’t mean you won’t have that need down the road. Who knows if you don’t have the health later down the road to be able to get that insurance when you need it? The truth is that the best type of rate of return you’re going to get on your life insurance policy is right now because every year you get older, even if it’s just by 100% or so, it affects it.
Do know that every year that you do get older, that rate of return gradually starts decreasing bit by bit so right now is the best time. It’s a good question to ask, “What if I’m single? What if I don’t have kids?” If you’re building wealth, this is a necessity. I’ll have somebody who will be interviewing here soon who talks about how his grandfather owned a bank and bought lots of these policies already as a way for them to invest, a way to store money in their bank investment accounts, and things like that. I’m going to talk about that here. I’m going to talk more to you, one-on-one, about this personal type of policy.
This woman was 65 years old, single, and had no children. She had a niece and a nephew. That was pretty much it. We started talking about this infinite banking concept with her. She got all excited about it, and she got a policy. A month later, I got a notification that says she canceled it. She was somebody who was also working with us as a client. Her situation is she’s 65 years old, still working, and wanted to work as long as she was allowed to work. She was a chiropractor. She had $2 million in IRAs that she inherited from her father.
She had more than enough money coming in from her chiropractic practice to be able to pay her bills. She didn’t need any more money. She knew that still she needed to have those streams of income coming in just in case. That IRA was that safety net in case she did decide to stop working in her practice. She has great health and is an amazing woman. She was only putting in about $13,000 a year which she’s paying on the premium. She was only paying the minimum premium. She wasn’t over-funding this as we talked about. She was paying the minimum insurance premium of $13,000 a year.
After she got it, she said, “Wait a minute. What am I doing? I’m single. I don’t have any heirs. I don’t need to worry about money. Why do I need this?” For her and more than anybody else I’ve talked to, I would say she had a good argument. Even some of you that are single, many of you might have debt and other situations. She was debt-free. She did exactly everything that any financial advisor or even a Dave Ramsey advocate would say, which is, “You’re self-insured. You don’t need insurance anymore. Drop that term.”
We got her whole life, which also would make Dave Ramsey very upset. We got her the whole life policy, and then she dropped it. When I met with her the next time I said, “When we did this plan, we had the plan to be able to have you pull out a lot more money and use it for better use. Unfortunately, we’re going to have to change that plan.” Understand this time, I wasn’t teaching about the passive and income investing used in real estate and things like that. This was right about the time the recession had ended. This was about ten years ago. We weren’t teaching about that stuff back then.
I was coming more from a semi-traditional standpoint. I told her, “If we go from a traditional standpoint because you dropped this life insurance, you can only pull out 3% a year from your $2 million, which is $60,000 a year.” That’s roughly about what she needed or a little bit more every year to live. It was $60,000 a year or $5,000 a month. I said, “You’re stuck at 3%. That’s only $60,000 a year as long as inflation doesn’t go up.”
If she was to keep the same lifestyle as what she was talking about then, that would be at least double. She would be over $100,000 a year. She said, “What do you mean I ruined the plan?” I said, “You’re now stuck with 3% because before by having the life insurance, we were able to pull out a lot more money. We’re able to use it all up, yet never lose it.” She said, “I’m confused.” I said, “Let me show you.” I’m going to do the same thing. If you’re pulling out for retirement, the recommendation is don’t pull out more than 3% so you don’t run out of money, especially with inflation. That’s what she was doing with $60,000 a year so that she can keep going barely enough to meet her needs.
She had a $1 million death benefit. I said, “If you have life insurance, this means you can do two things.” One, you can spend down not just less than interest only in the beginning, but principle and interest. You can pull out more than what you need to do. I showed her this calculator. I said, “Here’s $2 million.” I’m using a mortgage calculator because it’s easy to figure out how to get principal and interest over 25 years. This would make her 90 years old. This is a 25-year plan to pull out from age 65 to 90. I said, “Just because you have the death benefit, you don’t have to worry about running out of money. We can pull it all out, principal and interest, out of your IRA.”If you have life insurance and death benefit, you can spend down not just less than interest in the beginning. You also have principle and interest to pull out more than what you need to do. Click To Tweet
If she does that, and let’s say her account is only earning 5% because we keep it more conservative or whatever, she’s able to pull out about $11,700 a month. Do the quick math on that. That means she’s pulling out $140,000 a year. Not too shabby. That’s if she does that. There’s one other place where she can make money too. She was debt-free. I said, “You have the death benefit, and you don’t have heirs that you’re worried about too much.” I have clients that don’t care about leaving much money to their kids anyways. The same thing applies to them. “You’ve got this death benefit, which means you have a permission slip to spend money now. Just like we’re doing with the IRA, you can spend down your other assets.”
She also had a home that was $500,000. That $500,000, if you do a reverse mortgage, remember we just had this episode on our show a few months back, we’re talking about doing reverse mortgages. She could do a reverse mortgage on her house and get paid just shy of $13,000 a year or almost just shy of $1,100 a month. Think about it. Her premium for life insurance was about $13,000 a year. That doesn’t include that she is still accumulating cash value and building savings there. That gives her access to tax-free income streams too.
She can take the money from her house, and use that to pay for her life insurance payment, which also builds cash value to take out now tax-free money versus her IRA, which is taxable money. That washes out the whole payment right there, which means instead of living on $60,000 a year, she’s now living on $140,000 a year. She’s got this cash value build up in her plan in her life insurance that could also give her temp tax-free income. Not even counting that, still, that’s $140,000 versus $60,000. Which would you rather have? You want $80,000 more than that. Especially if you had that option, you would take the one that pays you $80,000 more or almost $100,000 more a year. That’s a no-brainer.
The cool thing is the insurance had paid for it, and she still nets at least $80,000 from that. The cool thing if we can even go further is if you’re talking about that reverse mortgage, instead of just taking that monthly type of payment that’s coming out every month that the bank is paying you, you don’t pay for a mortgage payment, the bank pays you the mortgage payment until you’re debt, but you could also just take out a lump sum. If her house is worth $500,000, she can only take out 50% of that, that’s $250,000 you take as a lump sum. Could we be doing something with that $250,000? The answer is yes. We could take that if we earn 10%, it earns $25,000 a year.
Still, taking out the $13,000 for that insurance premium leads to $12,000 a year, another $1,000 a month. That’s now gaining her up to a net of over $150,000 a year versus just $60,000 a year. I hope that makes sense a little bit. What I’m saying is you can spend down that IRA money like I’m showing here and you can pull out any assets by leveraging debt too. The reason why you’re not worried about being debt free is because you’ve got the life insurance to pay it off. She had that $250,000 or more, depending on what the mortgage balance is, that $1 million death benefit will more than pay it off. She also gets to leave behind a nice little nest egg for her niece and nephew.
That’s what she decided to do and said, “I’m going to leave it to the estate for my niece and nephew because I got to put somebody’s name on it.” She put it to them. You could put a charity or whatever, but she chose them. She knows that the bills will get paid off. The reverse mortgage doesn’t even have to be paid off by the life insurance, they just give up the asset and the house or they can use that money to buy the house from her for her brother who is getting that money. Does that make sense?
That blew my mind. As a financial advisor, it made zero sense to me. Even if you’re trying to say, “I get what you’re saying, Chris, I’m adapting it, you may have to listen to us a few times. If you remember nothing else from this, just remember this one point. It is that the life insurance death benefit gives you a permission slip to spend money now. It gives you the ability to say, “I can now take my money and use it to make more money or I can use it to start consuming money right now, thus increasing my income and the cashflow that I can live on because I can disinherit my kids by spending down all that self-insured assets that I was talking about doing, and then still leave the life insurance behind.”
That is a tax-free death benefit by the way or a tax-free payout to your heirs. That money can go to pay back any bills you’ve left behind, whether it’s medical bills or even just debt, or whatever it might be. You can use that to replenish those monies. You can have your cake and still eat it too. That’s how this works. I didn’t even say anything about the cash value this time. We mentioned that in previous episodes already. There are lots of things you can do where you can get that double-dip effect by investing your money. We talked about that. The one thing I don’t often bring up is the ultimate purpose of life insurance, which is a death benefit. That’s the key thing.
Anyways, I know I went a little bit into the numbers and in the weeds here, but I wanted you to grasp this. There is a bigger reason for this. There is a much bigger reason, whether you’re single or you got married with children. If you’re married with children or even just married in general or you’re looking to get married someday, this is still an important thing. You do not want to leave them behind with something that you did not intend no matter how many assets you have. This is my perspective. The truth is you can take whatever you want.
I’m not saying you have to adopt my perspective, but for me, what I’ve noticed is that I want to make sure that even though I’ve got assets that I don’t have to have my family worry about liquidating my assets to pay off any tax bills, medical bill, or anything else. I want them to be able to know that they have more than enough cash, liquid cash that they get from the insurance companies to pay all those things, keep the assets growing and going, keep them cashflowing, keep them producing, and grow my estate. Ultimately, this is the most important benefit for me. Not just that permission slip to spend money, but most importantly leaving a legacy and leaving behind something that can be great.
I don’t just mean money. I want to leave behind those assets, especially as we teach our children little by little, line upon line, precept upon precept, helping them gain that understanding, knowing how to manage it, creating almost your own family-run family office, where family is the one that can help grow that estate, keep it growing bigger and bigger, learning so that they have a better chance at success than even we did or we learned it later in life. That’s the key. How do we keep this going from generation to generation? Not creating trust fund babies, but creating wise stewards of the money.
We’re leaving something behind that’s amazing, not letting something get in the way where your rich Uncle Sam can take all your money or life events, tragic events because we’re not protected properly. That, therefore, kills our assets. When someone says, “I don’t need life insurance. I’m self-insured. It’s fine, I got assets to cover whatever we need to put me in the ground,” understand that life insurance companies are the ones that taught you this. Why would a life insurance company teach that to their life insurance agents to then turn around and teach you? You never thought of that, have you?
I know because life insurance companies taught me. Life insurance companies teach it. Why would they want you to get rid of your insurance when you’re older? I think just by me saying that, you know the answer. It’s because they don’t want to pay out. They want you to cancel your life insurance before you die. They don’t want to pay out because that’s pure profit for them. You paid them while you’re insuring yourself in the meantime while you’re raising your children or whatever it might be, and then they tell you, “When you have enough assets, cancel that insurance. Get rid of it. When you retire at 65, cancel your insurance just by term. Let it lapse. Get rid of it.”
That was the insurance company teaching you that because they want more profit. Do you want to be able to make more profit off them? You’re right. It’s not just buying term insurance because that will rip you off eventually if you live long enough. You will spend more than your death benefit buying term. This is why we use whole life. Whole life is something that pays for itself. Especially the way we design it, it pays for itself. Usually, you have as much cash value as what you paid into it by the fifth year, and that death benefit’s always higher than the cash value. You get the cash value and the death benefit later on too.
I know some people would argue with that, but I’ll show you the numbers. Ask. I always love when people will challenge me like, “You’re a liar.” “I’ll prove it to you.” “No, you’re still a liar.” “You can just close your eyes and be blind all you want.” I canceled a guy off our email list because of that very reason. He was saying, “Your cashflow stuff doesn’t work.” I’m like, “Tell that to almost 1,000 people that have made it work for them.” He’s like, “You’re still a liar.” “Okay. Goodbye. You’re gone.” Anyways, I know you’re not that irrational. You’re tuning in to this because you’re learning, growing, and doing it.
That’s the big thing. I want to create a legacy for my family. I know you want the best for your family, not just pay bills and die. You want to create something amazing on this planet no matter how it works. Life insurance can be that critical component. It’s not necessary to become financially free, and it’s not even the necessary only thing in your plan that you need. It’s that little corner piece or that cornerstone that’s there to allow the rest of your money to work harder for you so you don’t have to work so hard for your money. If you have any questions on this, reach out to us at MoneyRipples.com. Contact us. Make it a wonderful prosperous week. We’ll see you later.