All right, so I just got done doing an article uh saying stay away from these folks uh with a guy who's, hawking index universal life insurance, and just this it's just ugly. What these guys are doing so uh a friend of mine jill, had emailed me this right here, which I can read to you, and she said I could use it for an article.
I'm, not gonna the names will go up. We won't, say the names, but anyway so uh. She's on Facebook. Oh here's. What i'll, tell you what she says to me: she goes hey. Josh uh! I'm on a facebook retirement group.
It's kind of interesting at times, but there's, one guy on here as a know-it-all, and it was he's, always touting permanent life insurance for everyone. Even if you don't need it even have anyone depending on you.
If you're single and then he posted this and i'll, read to you what he posted and she goes. This doesn't make sense to me. What am I missing here? So let's, read what uh this guy says. So this guy says uh.
We have a 63-year-old client. Now jill is about 59. I think a 63-year-old client who puts in 101 k some over four years. Okay, put that in the back of your head there um. If she needs it uh she can have access to the death benefit.
What's called an accelerated death benefit. The death pep is 1.37 million uh for long-term care, so she could have access to it for long-term care. If she can & # 39, t do two of the six activities of daily living.
If she doesn't need it, she uh can access the cash value, tax-free uh, for example, in year 10. If she wants, she could take in a rot, erotic, exotic trip or something, and she could get a nice chunk over 600 000.
yeah uh. This is clearly for retirement planning. If she wants to, she can take it. She can start taking 28 000 a year tax-free at age 69, which increases with inflation for life. If, for example, she makes it to 85 that withdrawal could be over 40 000 tax-free annually all living benefits, there are more, I'm, quite sure, no other tool out.
There can accomplish this um anyway uh he said questions welcome. Perhaps I was wrong about your mindset i.e. Perhaps I didn't realize you're gonna ask me all these hard questions. All right so then gives an illustration uh.
We're, putting not a hundred one thousand. In total, we're, putting a hundred one thousand a year for four years all right, so he did not make that clear at all. He said 101 000 in some it's, not a hundred one thousand, something it's, 101, 000 times 4.
, all right, so we put in uh 400 let's just say 400, 000 for simplicity, and by the time This lady is 68. She has 436 000 of uh of surrender value all right, so she put 400 000 in over the course of 64, 65, 66, 67, 68 of the course of five years uh.
That 400 000 has grown to 436 000. interesting. So I just take my trusty calculator and I say: okay 36 divided by 400, that's uh. He she's, made all of nine percent total over those five years, not annually total.
So that's. What one and a half percent a year even then, all right, so that's, not good uh, so yeah she has 436 of surrender value. The cash value is 455 000. So if she were to surrender this policy uh, she would get hit with a 20 000 surrender charge.
Remember he said she can take out 38 000 or what is it? 28 000 a year guaranteed tax-free and inflated as well? So we take our trusted calculator. We say: okay, 20 000, divided by her cash value; 436, that's; a 6.
4 percent distribution rate uh six points: four percent for a 68-year-old is pretty good: that's, that's decent for sixty-one. That's, not as superior as decent uh, but saying that's, adjusted for inflation and is tax-free is just as silly.
You're, not gonna get. This goes look at a spear right now and see. If you can find anything that pays you 6.4, with inflation adjustment, there's, nothing out there, nothing so to insinuate that that could do that without saying explicitly is most likely, not is just bad sales practice and again the life insurance business stay full Of people just like this all right so then he said when the time this lady is uh.
By the time she's. Uh, 85. She's taking 40 000 years uh tax-free. The whole thing is not so basic. What's happening here? Is she's, no longer putting premiums in all right? So by the time she's 73 years old? If she did not take any money out, she only has 623 000 of the cash value in there.
She's of surrender value. So, by the time she's, ten years have gone by she put in four hundred thousand dollars. We'll. Take my trusty calculator, we put it for we & # 39, ll, say uh. Let's for simplicity.
Four hundred thousand I don't know why I wanna do this. We're, gonna, say a hundred thousand dollars and we're gonna make four payments payment for, and I don't know how to do with my calculator to figure out what her total return would be either Way she put in 400 000 bucks.
She has 623 thousand dollars to show for it. How do you do that for four years and they only get, but you got 10. I'm, not sure I'll tell them that I can't. Remember that's, not a great rate of return.
Let's just put that one and how we know it. We say: okay, let's, just put 100 000 in for simplicity year. One ten years later we're, just gonna, say seven percent rate of return uh. Well, we know what that'd, be that'd, be 200 000 bucks right.
So if you had 400 000 dollars, you put in over the course of 10 years uh, and if you got seven percent rate of return. Just in ten years that seven percent on a hundred thousand would be worth two hundred thousand, so this isn't a great rate of return at all, and the reason for that is weighed down by fees there's no other way Around that the fees are extraordinary and if she's pulling money out of this, no, this sucker is not long for the world.
That's for sure. I can tell you that right now, um anyway, so I said to joe, I said: oh, that's weird, I said okay, so I said he has you put in a hundred thousand each year for the first four years and supposedly you have 636 000, a year uh at the year, 10 or so - and this is a guaranteed return.
Uh, ask them. So are you guaranteeing these numbers? Are you guaranteeing those numbers because that's, not a guarantee that's, but when you have life insurance components, you have uh the guaranteed amount, you have current costs and you have high costs and basically, that 636 are you guaranteeing that Their big guy um and I said so ask him if he's, guaranteeing that the answer, of course, is no?
Secondly, a year 69 she can draw 28 uh k a year with inflation eh, and I told you about that's. Uh, that's, a six and a half percent return rate. No one's, getting that on the speed with inflation adjustment at all uh.
You know why, because you'd, be destroying the cash value without question and destroying the cash value. What's happening? Is your cash flow is getting depleted each and every year because you're, pulling money out and the fees and in 10 short years there's, no cash value left to support the policy.
So if you want to have this policy intact, you're, going to have to freak, put some serious money into that, or else not only will the policy expire you're gonna have some tax bill because if the Policy expires before you do, and you had outstanding loans against it, that's, tax-free man and that's taxable, and that's.
A tax attack bomb waiting to happen and the fact that this guy doesn't say that it doesn't shock me. This is the issue. When you hear these guys, they're, saying: oh, you can take 28. Take 40 000 tax-free bubbas, you're borrowing against a policy.
You're, not taking distributions. You're borrowing against the policy and if the cash value starts to sink each and every year, because you're, taking more than it's, putting back in from investment returns, which it will because you'Re taking, in that case, six out six percent a year out, plus there are fees on top that there's, no way that policy can stay solvent and if it doesn't and it dies before you do.
You have to pay tax on that on that accumulated gain that you did not pay tax on, because you were borrowing tax-free, but it doesn't work. If you, if the policy expires before you do. Oh man, anyway, you know what happens to your tax-free money.
Then you pay tax. What the hell I say, and so anyway, um jill said I figured there are a few catches, even in the 28k per year of 475 000 cash value. Are you saying it's not really for life, like my pensions, not for life no way are you saying would be get deducted each year from the cash value and be gone with 10 years.
It could be absolutely if you do not have the money to keep the policy flow. I.E there's, not enough cash to cover the cost of insurance uh. That policy will expire and look. I've. Seen this a million times, because people get awful aggressive on the front of the illustration and the back end when the policy is just sucking wind, they're, like you got to put money into there and the sad thing.
A lot of these people have already spent that money. They don't, have the money to put into it, and guess what the policy expires and they get hit with a big tax bill. It's, ugly man, ugly um, and so here she says I get 25 000 a year per pension of 415 000 lump sum immediately at 56 and hers is for life, though not tax, free and no inflation adjustment.
That's. 13 extra years, and then she says, no need for life insurance. He hasn't convinced me at all. Finally, then she says uh, and then she says it's. Funny, because when I asked him the questions went.
This is jill. She said when I asked him the questions that I told her to ask. He never got back to her interesting so that's. What I'm, saying these guys are preying on your ignorance, on your hope on your desire that there is a better method than what you know and there can't.
Be there's, just not there's, no better method. Man, especially it comes to insurance. Their fees are through the roof on these products, and if you're older, the cost of insurance is through the roof.
Do you really think the insurance company is going to make it cheap for you or if they have to come up with a 1.37 million dollars of a death benefit or accelerated deathbed for a long-term care policy, and you've only put 400 000 In there you don't think they're freaking funding that, with some serious cost of insurance, see why they are guaranteed right now and they got paid commissions these guys to spout this crap commissions?
You used to be 65 percent of the first year premium, but no idea what it is anymore, the first-year premium in this case it's. 100 000 bucks that's. 65 000. The insurance company isn't, giving away that for free.
That's. Why? There's a surrender value that's, much less than the cash value or the cap, yeah uh surrender value, because if you were to surrender that policy they got, they got basically make back their commissions that they paid it's, bad stuff, man and the sad thing is there is a place for permanent life insurance.
But the way these guys are doing no stay away.