#70 - Leveraging Life Insurance for Passive Income with Rod Zabriskie and Blake Brogan

[00:00:00] Welcome to Passive Income Pilots, where pilots upgrade their money. This is the definitive source for personal finance and investment tactics for aviators. We interview world-renowned experts and share these lessons with the blind community. So if you're ready for practical knowledge and insights, let's roll!

[00:00:29] Hey, welcome back to Passive Income Pilots, everyone. Tait Duryea here with my good buddy Ryan Gibson. What's going on, man? I'm excited to talk about another strategy to enhance your cash flow and something that actually provides a nice deathbed of it to your family in the future.

[00:00:44] So long-term, short-term and amazing leverage strategy that we're going to talk about today. Absolutely. Yeah, I've talked about this many times, that it took me seven years to figure out this strategy. I had a really great conversation with Rod and Blake.

[00:00:59] We have back on the show, back on episode number 47. If you want to check out that, that was a good version one. So if you're listening to this and you haven't gone back and listened to episode 47 yet with

[00:01:09] Rod and Christian, that was with Rod and Christian from their team, that gives you a good background on who they are, where they came from and sort of the strategy as whole. We're just really going to dive in today on how this stuff works.

[00:01:22] Why should you do this? Why it's a great tax move, a tax strategy. Why it's a great thing to have in place for your family and just kind of the numbers. Because it's something that when you first look at it, you go, I don't know, the fees are

[00:01:35] really high and how does that work? It feels like it's a lot of smoke and mirrors. At the end of the day, if you can break down the actual numbers on it, it does make a whole lot of sense and that's why UltraWells, you people are doing it.

[00:01:46] So without further ado, Rod and Blake, welcome to the show. Welcome back. Just glad to be here. I think what's interesting to kind of go through in this episode is making this very practical. Everybody knows they need life insurance and that provides a death benefit, but there

[00:02:02] is this extra gear that you can use where you can actually use it to go buy property or go make investments and really enhance your return. I know Rod, we talked before the show a little bit about how that works, but we've

[00:02:15] been taking pilots on a journey about how do you buy an Airbnb and how you can use that depreciation and really enhance that. But can you kind of layer on how maybe we haven't been talking about another

[00:02:24] strategy that would even further enhance somebody who's using a plan to buy a real property with it? Sure. Yeah, and in the previous conversation, we talked about our kind of theory around or our philosophy around what we call invest with benefits.

[00:02:38] Now, obviously tax optimization is a big piece of that and leverage just these different pieces, but in my mind, what it does is it improves the IRR on your investing. So you take the exact same internal rate of return or just think of it as rate of return.

[00:02:52] So in your Airbnb, you build out a pro forma, you buy it because you think, oh, hey, I'm going to be able to make such and such return coming back on it. But then like you said, when you layer on the bonus depreciation and the tax

[00:03:05] benefits that come with that, well, that immediately increases the return. Right? So what we're doing here with what we call the investment optimizer is we're doing the exact same thing just coming at it from a different angle.

[00:03:19] And really what it comes down to is the way that you flow your money in and out of your deals matters. There are inefficient ways to do it, and there are more efficient ways to do it.

[00:03:29] And when we meet up with people in most cases, they're just building that we call the opportunity fund, the place where you kind of store your cash before you go and invest. Most people just doing that in a bank account or maybe a money market account, right?

[00:03:41] Because it's safe and it's liquid. But it's inefficient from the standpoint. It's not really growing anything for you. You don't gain any tax of benefits or things like that. With the investment optimizer, we're investing the exact same things,

[00:03:55] flowing the money, the exact same way as you would have through the bank account, but instead we're substituting in this highly specialized life insurance policy. And we do that because you get the same safety and liquidity, but you get predictable growth, you get tax benefits.

[00:04:11] You gain efficiencies in the way that it flows in and out. And we'll talk a little more about some of these things in more detail. But the point is that it's another way to increase the rate of return on the investing that you're already doing.

[00:04:24] You said investment optimizer for those that maybe have listened to 47 and can't remember what that is. Can you run through that name that you guys have? Sure. Yeah. So basically, we work with a lot of people who invest in all kinds of

[00:04:38] different things, business owners, real estate investors, you know, debt funds, crypto, all kinds of different things. We generally in the alternative space, right? Any of those kinds of things. And there's something unique to the way that you flow money

[00:04:54] in and out of deals when you're investing on in that world. Right. And if done correctly, then we can optimize, right? We're kind of picking that word specifically. We're optimizing the flow of that money in and out to just again

[00:05:10] create additional benefits, additional value that you don't get if you're just using the regular savings account. Makes a lot of sense. So there are fees involved in this. But I think what sometimes people forget is that that's because there's a death benefit component.

[00:05:24] So can you very quickly, because we went through it on the last episode, but I want to touch on it again, because the difference between term and whole life and IUL are very, very different. So quick overview on those two products. Real quick.

[00:05:39] So just to term and IUL and all that stuff to me, I think what the heck is that? So when you sign up at like Delta, like when you come in the front door, they hand you a life insurance policy and they basically say,

[00:05:51] you get this if you die, you get a captain three times the captain salary on a triple, you know, whatever whatever the highest frame is, right? And you might be listening to this episode and say, oh, I've already got life insurance. I already have a plan.

[00:06:04] What one is that? Yeah. So that would be term insurance. So basically, you know, for the term that you're either employed or however the contract is stated, if you pass away during that time, your family's going

[00:06:16] to get, you know, the three X salary or whatever the case may be. You know, term insurance, think of it as is basically just like any other type of insurance that you're buying homeowners insurance or auto insurance,

[00:06:25] right? Where during the year that you have that, that you've paid the premium, if something were to happen to that asset, you would be replaced with that income essentially. And so that's the same thing that's happening with term life insurance.

[00:06:37] Where you're paying a very low amount of premium for a big death benefit, if something were to happen unexpectedly. Now, when we're talking about life insurance designed for this investment optimizer strategy, there's actually ways that we're using

[00:06:52] in either whole life or you mentioned IUL, Tate, that would be indexed universal life insurance. So whole life and IUL are two popular versions of permanent life insurance that stays with you for your whole life. And you're exactly right when you talk about high fees and certainly

[00:07:08] the way that you design the policy is huge. So most times if you went to the guy on the corner at State Farm or whatever and said, hey, I want a million dollars of whole life insurance, they're basically going to say, OK, that's going to cost 10,000

[00:07:21] or 50,000 dollars a year, whatever it is for your age. And you're just getting that million dollars of permanent insurance. When we're talking about the investment optimizer, we're actually trying to minimize the death benefit as much as possible.

[00:07:33] So we don't start with, hey, how much insurance do you want? It's more of how much cash can I put into this policy and build up what's called cash value. So that cash value is what Rod was talking about.

[00:07:43] That's your safe, liquid opportunity fund that you're going to then go out and invest. So if we use an example of you wanted to go buy an Airbnb, we're not starting with how much death benefit you want.

[00:07:54] How much money do you want to put into this strategy that's going to build this cash value that you can then turn around right away, lever against it. And again, we can get into more details and go buy that property 30 days after you set up this plan.

[00:08:06] So when we design policies in this way, we're trying to minimize the amount of insurance as much as we can. And that's going to minimize the fee. So certainly there's going to be some upfront fees to getting the policy set up, but we really can overcome those within

[00:08:20] the first couple years of the policy. So they're certainly there, but we design it to have the absolute minimum amount. And again, we have people turning around and using the funds that they put in there after 30 days.

[00:08:31] So I'm going to disclose my personal policy right here on the show. So I put one of these in effect about six months ago, five grand a month. And I'm going to tell you right now on the show what my fees have been.

[00:08:44] I'm looking at my account statement as we speak. So I put 5000 a month in the paid up additional riders or 4100. That means that about $4100 of cash is going into this, you know, investment pool that I can pull from. And the premium payment is 926 per month.

[00:09:03] So so far I've pumped $30,000 into the account. I've got $21,580. So 21 five call it of net cash surrender value and a death benefit of 1.366 million. Blake, can you break down what I just said and make that make sense to everybody? Yeah, exactly.

[00:09:23] So the two main components of whole life insurance, which is, you know, the asset that we're using for the strategy is base premium. That's the second piece that you mentioned. And then on top of that, you have what's called the paid up additions rider.

[00:09:36] So there's two pieces of that. The base premium, that's buying a lot of the insurance. So, you know, it sounds like 20% or so of the money that you're putting into this plan is going into that that base premium over the long term.

[00:09:49] And you haven't even gotten to the end of the first year of this policy yet, but you're going to start earning a lot of dividends from the money that you're putting into base premium. So that will grow cash value. It'll just take a couple years.

[00:10:00] So the 21,000 that you have in your policy right now, that's primarily come from the paid up additions rider, or we would call it overfunding. So you're not required to put that money in each year or each month in your example. It's totally optional.

[00:10:15] So that is just an extra rider that you can dump cash into that's going to build that cash value. So to kind of, you know, put a bow on this, that 21,000, that's your, you know, the amount of equity, essentially,

[00:10:27] that you have in your death benefit right now that at any point if you called the life insurance company and said, hey, send me some money, send me up to $21,000, they'll send you that money that you could go and turn around and put it into an investment.

[00:10:41] And that that's just going to continue to grow and compound over time as well as you continue to fund it. And the key difference here in my understanding is that unlike if I was having to liquidate stock from a

[00:10:53] stock account and lock in that price, whatever it is, potentially pay taxes if there was a capital gain and then go and take that money out. Not only am I locking in the price right there, I'm missing out on the growth in the market.

[00:11:09] Right. And this is why we could get on an episode later and talk about doing borrowing against a stock account outside of your four on K, right? If you just had a regular stock portfolio, you could borrow against it rather than liquidating the assets inside of it.

[00:11:24] So it's similar to that, right? Where we're borrowing against the policy, but the principle is still in there and it's still growing at a compounding rate. Is that correct? Yeah, that's absolutely right. And so that's a really good example.

[00:11:38] Using that type of an account, people often will compare it to like a HELOC, right? You have the property, it stays there, it continues to do whatever it's going to do, appreciate and depreciate whatever it is, right? It's going to do its thing.

[00:11:51] But in the meantime, you've levered against it and you're using that cash to go out and do something else with it. So same thing with this one. We're established an asset. The asset stays there and continues to grow. We're taking a loan against it.

[00:12:03] That's the money we're out using. So let's break this down. So you're telling me that I could pump a hundred grand into this plan. I could get a death benefit in excess of a million dollars. So worst case scenario, I die and I get millions of dollars

[00:12:17] or maybe over a million dollars in case it's, you know, 1.1 million or something like that. Then I could just immediately leverage against that money that I hand the life insurance company and I can go buy a rental property with seven. How much can we leverage? 75%? Yeah, good question.

[00:12:33] The costs are somewhat front-end loaded. So in that first year, again, going off of your hundred thousand dollar example, you're going to be able to access about 70 to 75% of that as the loan. OK, year two. You say you put another hundred thousand and you're going to be

[00:12:47] able to access 80, 85,000 of it. 85% not thousand because now you've got 200,000 in the plan. Right? Yeah, exactly. OK, yep. Good point. So I was going off of the next hundred thousand going in, but yeah, that's a percentage. But from year three onward, it's basically dollar for dollar.

[00:13:02] The costs have come down considerably and now you have compounding growth happening in the underlying account so that if you look at just one year or two years, people would say, Rajya, crazy, why would I take, you know, whatever 30% hit just to

[00:13:16] do this? And the answer is because in the long run, you're going to create a lot more value by doing this. And there's a switchover point, right? Like there's a cut over to where initially you're paying those fees out of pocket, but because the cost of the insurance

[00:13:32] never goes away, it's just that it's covered by the compound growth of the dividends that are coming off the policy. Right? If I understand that correctly, because you're overfunding it, you have that growth in the market. The passive income, the income that's coming off of the policy

[00:13:47] itself is it start paying for itself. How long does that take from from the beginning of when you start funding it to when that switchover occurs? I know that probably depends on how much you're putting in and what the policy is structured like.

[00:14:00] But on a, you know, for a typical policy that you'd set up for someone like me or Ryan, when would that cut over occur? Yeah, if you're looking at the policy and just by itself, it's

[00:14:11] usually around year six or so where you see that now I have as much in the cash value as what I've put in. Right? Right. That's realistic. And it starts taking off from there. Can you talk about how these are used in estate planning?

[00:14:25] Because I've seen some very good explanations in terms of using these as a way to pass legacy wealth down to the next generation tax free. Can you talk about that component? Yeah, for sure. And that goes to often we'll describe this to people and

[00:14:42] they'll say like, OK, great. Now I have all this this value built up inside of a life insurance policy. But then what? Right? What am I going to do with that? Right? What good is it going to do me?

[00:14:51] And there are a couple of options that you could access it as part of tax free income and retirement or paying for kids college or any kind of purpose. So that's possible while you're still living. And then to your point, when I die and that insurance pays

[00:15:07] out, it pays out income tax free. This large lump sum lands into my estate or depending on what kind of planning I've done, it could even land outside of my estate inside of like a trust or something. And now that becomes a liquid asset to my heirs.

[00:15:23] So in other words, to the extent that I've built my net worth, there might be an estate tax that's due. Right? And I don't want to have my kids have to start selling off my properties or a part of the business or whatever these illiquid assets are.

[00:15:36] I want to have a chunk of liquid asset there that they can use to take care of that. And likewise, for the expenses that are involved with those assets, I want them to have liquid cash that goes with that. And so that's where the death benefit comes in

[00:15:51] in this. That's one way to think about it. The second way I think about it is if I believe in what I'm doing in the way that I invest, the way that I'd flow my money through the investment optimizer, etc.

[00:16:04] And I'm going to teach my kids the same thing and they're going to continue on and be doing that. Well, if you think about the like prototypical compound curve, right? The slope gets steeper and steeper as you get further to the right of the graph.

[00:16:18] But what if you had that compound curve, but you also had spikes, right? In other words, when I die and that death benefit pays out, the cash value I was using while I was living, again, maybe I'm 85 years old and then my cash value grew to be whatever

[00:16:33] five million. But the death benefit that pays out is eight million. Now all of a sudden there's this to what was to me a five million dollar asset immediately becomes eight million to my kids. The spike in the curve, they turn around and

[00:16:46] use that to fund new policies on themselves and their kids. And the pattern just continues. Right? So it's this generational building of wealth, again, with these spikes because of the insurance part of it. And those death benefits pay out tax free.

[00:17:02] I just want to put a pin in that, right? Because if I was to start this policy yesterday and I died today, then entire one point three six six million would pay out tax free because the government does not take any sort of tax on that death

[00:17:16] benefit payout. Correct? Income tax free. That's right. Who doesn't benefit from this? I mean, this seems like something too good to be true. Yeah, it's huge. I mean, you're getting your death benefit. You can leverage against it. It grows while you're leveraging against it.

[00:17:30] It sounds like an incredible advantage. A lot of tax advantages who might not be the ideal person to take out a plan like this. If you're someone who's just primarily setting money aside and you're just going to let it grow in a 401k or something,

[00:17:44] you know, for 40 years and there's no flow of money in your life coming in and out of investments, it may not make sense to try to get the investment optimizer involved with a buy and hold for 40 years type of thing. So, you know, you'll hear people who will

[00:17:59] who will poo poo this type of strategy or whole life insurance in general. Maybe a lot of times they don't know all the details of it. But really oftentimes they're they're using this as like, hey, if you just put your money in here, you could have

[00:18:11] done better in an Airbnb or in the market or something like that. And really the whole idea is you're not using this. This is not your investment. Right? This is the place where you put the money first before you go out and invest.

[00:18:24] So again, once you start to figure out the math behind just, you know, how you can earn more interest than what you're paying on the loan side, it makes total sense to flow your capital through here before you go out and do invest in cash flowing assets.

[00:18:37] Now, again, to answer your question specifically, Ryan, if you're not ever going to buy cash flowing assets or anything like that, you could make the argument you'd be better off doing something else. But that's kind of why it becomes a no brainer once you figure it out.

[00:18:48] That leads me to my next question, which is if you have this plan, should you always be leveraging it? Okay. So I'll hit on that one. And my answer to that is yes, the only exception to that would be if you have so much cash flow coming

[00:19:03] to you that you have money building up in the account more than you can put in. So like with Tate's example earlier, he's limited on how much he can put in every year. Right? If he has an extra whatever hundred grand that comes into his life,

[00:19:15] he's like, I want to get that into my policy. Insurance company says too bad, you already overfunded as much as you can. Right? So if that's my case and I have cash building up in my savings account, well, I'd rather use that than then lever against the policy.

[00:19:29] But what happens is it's very common for people to end up with multiple policies. Right. So again, just use Tate's as an example. Let's say he's max funding it as much as he can. But now he's consistently having extra cash buildup that he can't fit into the policy.

[00:19:43] Great. Let's set up another one. You keep the original one and we stack another one on top of that to increase your funding capacity because as whatever your income is getting better and or the returns that you're getting in the investments as that all continues

[00:19:56] to improve over time, pretty common for people to end up with multiple policies because of that. And I want to make some clarifying statements on that because that's actually something I was going to mention is I'm planning on taking out another policy at some point as my

[00:20:09] income increases and I have more cash to put away and then recycle into the syndication deals that I'm going into. I want to be funneling more and more and more money. But again, I'm putting five thousand a month in. So you're telling me I cannot put

[00:20:24] five thousand and one right. But the insurance component is nine hundred twenty six dollars and seventy three cents. So I could put in as little as that and not let the policy labs but I can only go up to five thousand.

[00:20:38] So if I now have, you know, an additional ten thousand a month of income it's time to take out another policy and possibly another one. And then your spouse could take out one and now you have all of this life insurance cash value growing and you borrow against

[00:20:52] it to go and buy rental properties and invest in syndications and debt funds and all these other things. Right. That's that's the strategy. That's the overall. Yeah. Again, this is the problem with the policy that I walked away from. I walked away from multiple five

[00:21:05] figures seven years ago because it was structured as a pension. And as you said, this isn't the investment like I looked at it and I'm like I can do way better in real estate. So why am I pumping money into this plan that I can't borrow

[00:21:16] against? And it just didn't make sense. So it's really important to understand this is to be coupled with an overall alternative investment strategy. This isn't the investment by itself. That's that's so important. What if I have a plan now and I don't like my provider

[00:21:38] and I want to switch to Blake and Rod's plan, you know, go with money insights and use the optimizer and work with your team. How does that work to transfer a plan? Can you transfer a plan? Yeah, you can transfer a plan. So in real estate, you know,

[00:21:52] there's 1031 exchanges in the life insurance world. It's called a 1035 exchange. So it's very similar. So basically what you can do is use the cash value and exchange it for a like asset. So you can just take cash value from one policy and

[00:22:07] dump it to kind of, you know, boost up another policy that you open up. And sometimes that can make sense. And other times it doesn't. So again, because there's some fees upfront to getting the policies up and going, depending on where you are in

[00:22:20] the policy. And so when you're working with us, what we'll just do is just basically a side by side comparison to say, hey, you know, if you use this 1035 exchange, dump it into a new policy and we design it properly to, you know, accumulate cash value as

[00:22:32] quickly as possible. Here's what's going to look like. And if you have cash value sitting out there that's in it in a policy that's not really designed to generate cash quickly. Sometimes that can be a really good thing to do. And let's talk about when

[00:22:45] to do this. Our show is primarily airline pilots and there's pilots that are listening to this and they're going through their private pilot training right now. You know, maybe they're 17, 18 years old. And there's pilots that are about to retire or maybe they've already retired at age 65.

[00:23:01] When and where and when does it make sense? Yeah, it's a great question. And really what it has to do with is whatever money you are wanting to set aside for investing, we're going to build a policy for that. So for the young pilots who are

[00:23:15] just getting started, but they're thinking, you know what, I'm not ready now to be investing, but the time will come when I will be. I want to get started. I want to I'm going to be setting aside money anyway. Well, let's build a policy. Let's start

[00:23:27] funding that and so you can start building that up. And it may take a few years before you've built up enough to where you're saying, yeah, now I'm ready to do this. But it's the right place to do it right as opposed to like we said earlier,

[00:23:37] just sucking in a checking account or something. But then on the on the flip side, we'd up with a lot of people who are already midstream. They already are out there investing in really cool things. And so we just build a plan to work within

[00:23:52] that, right? The money that they are continuing to set aside from their working income and or money that they're receiving off of investments and flowing that funneling it now through the policy. And then again, they keep accessing it and continuing on. And then people

[00:24:11] who are kind of later on in that cycle, for a lot of the people that we work with, they don't ever foresee themselves completely walking away from investing. So we have people you know, in their sixties who are starting new plans. And the comment we get most often

[00:24:27] is I mean, I wish I'd known about this 20 years ago, but you know, short of that, well, let's get started now. And again, the point is they start putting that money in and using it for the investing. And there will come a time within maybe even the

[00:24:40] next few years where they are carving off a portion of those, the cash flow from their investments to live off of. And so they're not flowing everything back into the plan. But to whatever extent they are flowing back in to continue investing in future

[00:24:53] things, then we would just build it to capture those. Makes sense. That's so excellent. Now if you're like wondering, hey, I want to I this sounds great. I think this is applicable to my investing strategy and things like that. I can schedule a call with one of

[00:25:10] you guys, right? And just kind of like walk through my situation and kind of learn a little bit more and kind of explore and have basically like a consultation about it. Yeah. Yeah, that's exactly right. And that's what we're doing every day. So we meet with

[00:25:23] a lot of people again who you know, may not know for sure that they want to do it, but they want to learn more because a lot of what we're talking about, we're kind of throwing numbers out here. Right. So, you know, what

[00:25:34] we like to do is at least on a first call is just get to know you and your situation, what you're doing on the investing side and then build out an actual illustration based upon your age and your health and your, you know, your

[00:25:45] gender and things like that. And we can actually show numbers so that you can kind of get a rough idea right away as to OK, you know, if I were to pursue this, here's what would cost me up front, but here's the long

[00:25:56] term benefits that I can get. And so that's typically, you know, how we're working with people because again, it is life insurance. There's a lot of variables. And so at least getting some numbers in front of you of, OK, I can see how

[00:26:08] this can fit in. That's those are the kind of conversations that Rod and I have not a daily basis. Well, these things can be very confusing. You know, I can attest to that. I've looked at a lot of them over the years and you guys do just an

[00:26:19] amazing job breaking it down and making it make sense to typical pilot. Yes. It's great. I want to piggyback on that. Our listeners have worked with you already and have had wild success. So, you know, our listeners have had countless conversations with you guys. That's why we brought

[00:26:37] you back onto the show. We want to make sure that we're working with some of the best people on the show. And there's a like you said it best earlier. You know, there's a lot of different people who do this and, you know, there's a

[00:26:48] lot of different options. But, you know, we want to have the best folks that that can set you up. And, you know, because we know this is kind of like a new it's new for me. It's new for Tate. Sony Tate opened his six months ago.

[00:27:00] And I think I opened mine about maybe eight months ago or six months ago. So we had the same thinking about the same time. And I'm really excited about getting this leveraged and in real estate working really hard for me. You know, I have two children

[00:27:12] and a wife. And so, you know, I want to make sure that I have a really great death benefit. Like, and I'm growing that while also being able to lever and be liquid, which is really cool. You know, really great, great strategy. Yeah. And we really do aim

[00:27:25] to make like great education around this because again, it's not the same as, you know, whatever like 401k. You know, you know, your brother has one, your best friend has one. The HR director tells you you should have whatever. Right? This is something that

[00:27:38] for a lot of people it is new. And so we have education material in those conversations. We'll get into whatever level of detail is helpful because we want to make sure that people not only they understand what it is, but that they understand how to truly

[00:27:53] optimize their investments. Right. So it's a plan. It's a process. And you nailed it. I think that is the major difference between some life insurance providers and what Money Insights provides for our listeners is sometimes you just throw it into the plan and that's it.

[00:28:09] And, you know, but you guys are actually helping with, Hey, here's some options. Here's some strategies. Here's some best practices, which is what I really love in the enhancement of what you guys provide. So very, very interesting. Well, I think even to that

[00:28:23] point, you know, a lot of people are just using life insurance as another asset in their toolbox, right? Where we're what we're doing is, you know, specialized to your investment strategy and then optimizing the flow of dollars in and out of there.

[00:28:36] So yes, at the end of the day, we are insurance people were life insurance people, but we're setting it up with a specific strategy to enhance investments where again, most people are probably just trained to just use this as a tool to kind of totally buy

[00:28:50] it and then set it aside for for decades. Yeah. Again, you know, this is what we're trying to do on the show is short circuit our listeners, you know, learning curve. First of all, like I said, it took me seven years to learn how

[00:29:01] to effectively put this strategy in place. Hopefully it can take you as little as a week if you're just listening to this now and you just tune in the show. We're also trying to expand your network, your team, you know, ultra wealthy people are surrounded with financial

[00:29:13] professionals that specialize in different areas. They're surrounded by amazing tax professionals and amazing, you know, guys like Blake and Rod of Money Insights, they're surrounded by amazing financial advisors. And we're trying to pad your bench with some of the best people that we can find

[00:29:30] because especially in the life insurance industry, there's a lot of smoke and mirrors, there's high fees and therefore it attracts all sorts of characters where, you know, it's it can be a lucrative business for in insurance. And so anyway, we would we're always just trying

[00:29:44] to put the best people in front of our listener group as we possibly can that are on the up and up. And on that note, I think a lot of times in podcasts, it's, you know, it's a great place to get educated. But if you're not

[00:29:55] taking action and engaging with with some of these people that are coming on the show, you're really leaving half your money on the table, right? You got to take action, put some of these strategies in place. So we are going to be holding a live webinar on

[00:30:11] Wednesday, August 7th at noon Pacific time with Rod and Blake to go through a little bit more of this strategy. We haven't done anything like this before. We felt like it would be a good opportunity to really expound on the strategy, give you an opportunity to sort of

[00:30:25] like, you know, if you're not ready for that introductory call, if you want to just check it out. We truly do think it can be a value add to you. And that's the only reason why we're bringing it to you. So Rod and Blake looking forward

[00:30:36] to seeing you on August 7th. We'll have the registration link in the show notes down below. Likewise, and we'll we'll get into a little more of the details, basically maybe mash the two podcast episodes together a little bit. But yeah, we'll the benefit of doing a

[00:30:50] webinar is we'll have the screen up, we'll be able to show some examples. We can maybe give a quick one here in a minute, but yeah, we can really put it up there so you can see the numbers and kind of how it plays out over time.

[00:31:02] Let's go through an example. Why don't you go ahead and Rod, I know we talked about an example before the show, but why don't you go ahead and walk us through kind of a quick case study and how somebody took out a plan, got the death benefit,

[00:31:12] levered against it and really benefited? Yeah, so the example we're using where we're just going to start with a really basic example. This is just a cash flowing investment. In this case, it's a $208,000 that goes into the investment and there's a seven year cash flow coming back.

[00:31:29] Really pretty basic. Okay. And when you look at the pro forma on this one, it shows an internal rate of returns IRR of 16.5% over the course of those seven years. Okay. So in other words, you put in the $208,000 and in that cash flow, you will have received back

[00:31:45] roughly $366,000 total cash back into your into your pocket. Okay. That's the plan. That's the investment by itself. Right? You just invest, that's what you get back. Can I break down what that investment is real quick? Because I know exactly what it is by the investment amount.

[00:32:02] Okay. And it's an ATM machine. It is. So this is you put because the minimum investment on those and I know the exact operator is 104,000. Your money goes to buy ATM machines and it's actually a great investment strategy. If you're open to these kind

[00:32:18] of things, it's a high cash flow. So you're getting something like 23% cash on cash every year for seven years. So when you look at the total return on investment, it's not that good. But if you look at the internal rate of return, which takes

[00:32:33] into account the timing of those cash flows, it actually is really good. It's more of like a 16% IR plus their tax benefits where you get the depreciation right off in year one. So when you look at the tax benefits that are associated, it actually ends up looking

[00:32:46] really good. Now you got to keep in mind that ROI is much different than IRR. Internal rate of return looks at when you receive those cash flows back. If you invest 208,000 or 104,000, that minimum investment into something that you don't see any cash for seven years

[00:33:03] and then you were to get 300 and if you were to invest 208,000 and you got nothing and then you gave me back 366 in seven years, I wouldn't be all that excited about that. But if you're giving me back that cash flow all the way through, that

[00:33:16] means I can take that cash and reinvest it at its present value. That's why the IRR is showing a higher number. So I just wanted to clarify that for the listeners. Yeah, and maybe to even think of it from a different angle,

[00:33:28] the way it works out is in a little bit less than four years, you've received your your initial investment back. Right. And then those additional three plus years is all just extra that you're getting. Right. Right. So to your point, you would then go and use that money

[00:33:42] to invest in something else. While in the meantime, you just keep getting the proceeds off of continuing cash flow precisely. OK, so what we did is we said just took that exact model the way the money flows. And we said, OK, well, what if

[00:33:55] I did the two hundred eight thousand dollars, but I was using the investment optimizer, I took a loan against my policy and those are the dollars that I was using to go out and put into this investment by the time you get to the end of the

[00:34:06] seven years instead of three hundred sixty six thousand being your total cash coming back, you would have an additional four hundred thirty thousand. OK, so when you now measure that against IRR, you turned your sixteen and a half percent return into twenty point eight percent. Right.

[00:34:23] So right. And you use the word layering earlier, right? Layering on different things. So the sixteen after in twenty point eight when you layer the investment optimizer on and then just going back to your earlier point take when you can do the bonus appreciation, these

[00:34:37] other things you can layer that on and it turns into like a thirty percent even right now with the sixty percent bonus depreciation when it was a hundred percent bonus appreciation was like thirty seven or something. Right. So right. So again, that layering is important. Each of these

[00:34:51] different pieces allows you to create a better return, better wealth more long term, you know, than than you would if you didn't do these things and it just it steepens your exponential growth curve, right? So that's why we're trying to get in on these

[00:35:06] things early and often so that you can, you know, if you can pitch up by three degrees, you know, that exponential growth curve it's going to impact you massively decades down the road. So we have to apologize for not telling our listeners sooner about this strategy because

[00:35:23] in previous episodes, we talked with Toby Mathis about bonus appreciation and cost segregation and becoming a real estate professional. And then we brought on somebody to talk about how to buy an Airbnb and how that relates to taking depreciation. And then we brought on a cost

[00:35:37] segregation expert to talk about cost sag. Sorry, it took us this long to bring on Blake and Rod. So so now you've got like a four pronged approach or whatever it is now. So yeah, it all builds together. It's incredible. Well, I have a question.

[00:35:55] So you have these consultation. What's the most common thing that comes up? What's what's like the number one question you get asked? Or what's like an issue or something that is just reoccurring that you'd like to share that you have in those consultations?

[00:36:08] I think one thing that often comes up is people are asking, what am I getting myself into? Like I hear the word whole life. Am I committing to funding this policy for my whole life? And really, the way that we build it, the answer is definitely not.

[00:36:21] So we oftentimes will look at hey, what does it look like if we fund it for three years, five years, seven years, 25 years, 50 years, right? So there's a lot of flexibility in terms of how many years that you're funding. And then I'll take it back to your example.

[00:36:35] You know, when you said, hey, I'm putting in 5000 a month, you're certainly not required to put in 5000 a month, right? Or your requirement was like that $900 a month or something. So when we're building policies, we'll talk about this idea of a funding range, which just basically

[00:36:49] means, you know, in your example, you could fund anywhere between 12,000 and 60,000 a year. And most of the time people are starting with a number and then after a couple years they'll add on another policy once they see how it works and get more comfortable with it and

[00:37:01] all that. But you're really committing to that $12,000 number and you're only committing to it for, let's say four or five years, right? So oftentimes people want to know, you know, what's the flexibility of this and really what am I getting myself into? And that's just where the policy

[00:37:17] design and the way that we build it is so important. We're putting in so much more money than we need to for the insurance portion. A lot of people, you know, I've heard horror stories all my policy blew up or my grandpa had a policy and it

[00:37:29] didn't pay out because it, you know, he didn't have enough money in it, right? The way that we're building it, we're getting that thing funded so quickly that really that's that's not something that we need to worry about. I'm really glad you clarified the $5,000 thing because that's

[00:37:42] absolutely correct. Like you don't have to fund it that much. And you said something earlier too that probably makes people a little confused on the death benefit. You said we try to get the death benefit as low as possible, which is probably counterintuitive to somebody who

[00:37:56] doesn't understand these plans because wouldn't you want the death benefit to be as high as possible? So what's the kind of walk us through that a little bit? Yeah. So I mean, that's that's term insurance where we want low premium for the highest amount of

[00:38:10] death benefit, right? Or that's really how we buy all insurance. OK, I need coverage for X, Y, Z what's the lowest amount that I can pay? And that's, you know, you shop it around all the companies when we're using this strategy. What happened is, you

[00:38:23] know, back in the 80s, wealthy people were putting so much money in these life insurance policies because it was just really a tax haven. And they were just saying, hey, we don't even want any tax or any death benefit really, right? We just want to be able

[00:38:36] to grow our money tax free. Well, then the IRS stepped in and said, OK, you guys aren't using this for life insurance. So they said, you know, based upon your age and health and things like this and how much money you want to put in,

[00:38:47] there's a minimum amount of insurance that needs to be on this plan for it to be deemed life insurance and you to get all this growth and tax advantages that we're talking about. So the IRS came up with kind of this line. So when we're designing policies,

[00:39:00] again, maybe the death benefit is or isn't important to you. We're going to design it in a way that says, hey, for the money that you're putting in, how can we grow the cash value most effectively and to grow the cash value most effectively?

[00:39:11] We want to reduce the cost as much as possible. So when you're setting up a life insurance policy, the cost is coming from the life insurance portion of the death benefit. And so when we're designing policies, you know, we'll sit down with someone, learn a

[00:39:23] little bit about your situation and run different companies and different designs and say, OK, for what you're wanting to put in, how can we grow the cash value most effectively and how can we get the least amount of insurance? And if that amount of insurance doesn't cover,

[00:39:36] you know, your human life value or what you would want your family to receive when you pass away, we can add term insurance on top of that. We're not anti term insurance. I own term insurance as well. But for these investment optimizer policies, we're really just focused on

[00:39:49] building that cash value as quickly as possible and lowering the death benefit is the way that we're able to do that. That makes sense. That's interesting. And Ryan and I are probably on opposite sides of the spectrum because, you know, if I croaked tomorrow, you know, I don't

[00:40:03] have kids. I could care less. I've got assets and, you know, my wonderful other half will would take those. And whether I have a death benefit or not, I don't really care. Ryan is much likely in a much different boat. You've got two kids.

[00:40:17] You get a family to take care of. And if you disappear, that would not be a good financial thing for your family. Right? So there's definitely different sides of the spectrum. But, you know, for me, why was 100 percent with you Blake? I'm, you know, I know that

[00:40:30] we were trying to get that death benefit down as low as possible because we didn't care about it. We just wanted to use it as an investment vehicle. So let's talk about, like, down the road. We'll talk to people who often title say, hey, I, I

[00:40:42] like this benefit, but I don't care about the death benefit at all. Well, you know, even in your situation, if you said, hey, I'm never going to have someone that I want to leave a death benefit to, by having that death benefit, what's going to happen is you'll

[00:40:55] build up, you know, you're putting in 60 grand a year for a couple of years, you're going to build up a couple million bucks of cash value whenever you decide to stop funding it. Well, there's going to be a time where maybe you're less active with the podcast or

[00:41:06] you're investing and you just want to, you know, use your assets and create cash flow. Well, that's where that death benefit is super valuable because you have this cash value built up that you can start loaning against that cash value and never repay the loan that you're taking.

[00:41:22] So when you loan the cash value out, you're taking that money out income tax free. So you're just, you know, getting a check of 50 grand or 100 grand, however much you want each year that's coming to you tax free. And you say, well, this

[00:41:34] is a loan. How does it get repaid? And the answer is it gets repaid with that death benefit. Right. So when you pass away, that death benefit is going to be used to pay off the couple million bucks loan that you took during your retirement

[00:41:46] income to just live off. So even if you're listening to this and you're saying, hey, I don't care about the death benefits like, well, you do because that's going to allow you to take all this money out tax free. Right. That's fantastic. What we start with that

[00:41:58] that's like the coolest thing ever heard. My mind blown. That is incredible benefit. I mean, that's amazing. Yeah. So you could just go buy toys with it in your in your eighties and then just die. Yeah. And nobody has to clean up the mess. Yeah. Speaking of

[00:42:14] cleaning up messes, that's kind of a sick joke, but you can take money out of your use your death benefit while you're still alive as well too to pay for medical expenses if you need it. Right. Yeah. Yeah. So the long term care insurance

[00:42:30] world was was in, you know, it's crumbling, you know, 20 plus years ago. And I thought it was a brilliant solution. What they did is they decided that they should just kind of paired up on life insurance policies. They just add a rider inside of a life

[00:42:44] insurance policy because in the end they know they're going to pay out either a death benefit or now in this case, if I get to a place where I need long term care, I don't want to pay for it out of pocket. I can accelerate they call it

[00:42:56] accelerate a portion of the death benefit while I'm living to pay for those expenses. And so it adds another layer of just potential benefit, right? Maybe I don't ever need that and if so then great the death benefit passes on. Right. But if if I do need

[00:43:10] it, then this is a great way to cover those kinds of needs. Unreal. Much better than the state of Washington state of California with their Mickey Mouse, you know, long term care programs that they're putting together and enforcing everybody to participate in. Yeah. Unfortunately, I live

[00:43:24] in Washington. So boy. Yep. Well, on that note, I'm certainly excited for the for the webinar, August 7th, noon Pacific. Come join us. Check it out. I really do think that this is one of those cool tools that's misunderstood. It can be difficult to wrap

[00:43:39] your head around it in the beginning. But if you're going to go out and invest in syndications or ATM funds or real estate, anything that that we really are big proponents of on the show, it's just an amazing adjunct. It's an amazing thing to

[00:43:52] pair up with that investment strategy. So I can't believe we didn't have you guys on sooner. So thanks for coming back. Thank you. Anything you want to leave the audience with before we sign off? Maybe just that we'll also put together a landing page with another webinar.

[00:44:07] So if you listen to this and you're like, August 7th can come fast enough, I want to dig in a little bit more right now, then you can go and again, we'll give it to you so you can put it in the show notes. Just a link.

[00:44:19] People can jump on and take a look at a webinar. And then if they want to meet with us, then they can schedule something on that page as well. Well, thanks guys. We really appreciate your time and look forward to seeing you on

[00:44:29] August 7th and on the landing page if you want to check that out sooner. We'll link to all that in show notes. Thanks everyone for listening.