The Versatility of Indexed Universal Life (IUL) Insurance

In this episode of the Reliable Wealth Financial Hour podcast,  Bob and Cole Falter with the Reliable Wealth Financial Group focus their discussion on Indexed Universal Life (IUL) policies.

Learn how IULs might function as part of a comprehensive financial plan and what makes them different from traditional insurance policies.

Transcript

SPEAKER_02 0:01

This is the Reliable Wealth Financial Hour with Robert and Cole Falter, their family, and they're a team helping you navigate your retirement journey. Over the next hour, tips to optimize your savings.

SPEAKER_04 0:13

What if that savings is in risky investments and the market crashes? Right. That's a huge thing to think now instead of dollar cost averaging your dollar loss averaging.

SPEAKER_02 0:21

Strategies to protect what you've earned. Is that gonna last you all the way through retirement? And ideas to help keep your retirement assets on track. So let's get started. Here are Robert and Cole Falter and the Reliable Wealth Financial Hour.

SPEAKER_01 0:37

This is the Reliable Wealth Financial Hour. I'm Cheryl White. Thank you so much for joining us today. Along with me, of course, are Bob and Cole Falter. So, Bob, I hope you've had a great week.

SPEAKER_03 0:49

I had a fantastic week. Last week was really a great week, and then the weekend was awesome. We got a lot done over at that new place in LaRay that we're getting ready to open. Uh speak easy. It's going to be interesting when it's done in July or August, whenever it opens. But then we uh spent yesterday morning, Sunday morning in church and had a great time there. It's been a fantastic weekend, and the weather's been beautiful. You know? Well, how about you, Cole?

SPEAKER_05 1:15

Yeah, my weekend's been great. Thank you guys for tuning in this morning. This weekend, I went out to the Outer Banks for a weekend. That was a lot of fun.

SPEAKER_03 1:23

And Tammy and I got to watch the baby. She did. We spent two days with Ellie, the nine-month-old, a woman. Overnighters. Overnighter.

SPEAKER_05 1:31

I think this was her first overnighter with someone other than mommy. Wow. So that's exciting. Yeah.

SPEAKER_03 1:37

I didn't realize that. Oh, yeah. I think so. And you know, and Cheryl and listeners, you know what Tammy said to me when I saw her? Because I stayed home with the dogs because I had to get up early and be in LaRay the next day. So I went back over and she said, I know why they God gave us children when we were young. Because she woke up at 12, she woke up at 3, she woke up at 5. Welcome to my life.

SPEAKER_05 2:00

I know.

SPEAKER_01 2:03

Well, that sounds like a great time.

SPEAKER_05 2:05

It was good. It was great.

SPEAKER_01 2:07

Well, speaking of kids, I have a question for the both of you.

SPEAKER_05 2:10

All right.

SPEAKER_01 2:11

So when you were kids, a little more recent memory for you, Cole, but did your parents ever give you one of those Swiss Army knives?

SPEAKER_05 2:20

Yeah. I think, Dad. Yeah. When did you buy me my first Swiss Army knife? That was probably when you were nine or ten years old. Yeah. Because I think I was doing Boy Scouts. Yes. And that coincided with the purchase of a new Swiss Army knife.

SPEAKER_03 2:35

That's right. And you had to have a knife to go out there in the woods and go camping. That's it. And so I gave you one on the weekend right before you went camping. Tell them a little bit about the Swiss Army knife.

SPEAKER_05 2:45

Oh my gosh. So there was one time, I can't remember what I was doing with it, but it wasn't very smart as a nine-year-old or a 13-year-old. I was stabbing the knife blade point first into a piece of wood. Well, the way that those blades work is they kind of fold out so they can fold in if you're not careful. And so I was pushing really hard and it folded in onto my pinky finger. Oh my gosh. It didn't do too much damage, but scared me. Yeah.

SPEAKER_01 3:16

I'm squirming. That's so scary.

SPEAKER_03 3:20

That does sound painful. But all the other little tools that were on there, I mean, when you opened it up at Christmas. Oh my gosh. Yeah. It was just painful. It had everything.

SPEAKER_05 3:26

It had the little scissors, the saw blade. I could carve stuff and bottom open stuff and screw stuff and all kinds of stuff.

SPEAKER_03 3:36

At 10, 11 years old, you could pop open your first beer at the campfire. No, I'm only kidding.

SPEAKER_01 3:43

But you know what? My dad made sure that all of us had one of those too. He thought we should learn how to use it and be prepared. And just in case you needed it, you had your tools right there with you. It was just such a fun, cool little thing to have. But it kind of relates to what we're talking about in terms of having all your tools in one place for retirement. Trevor Burrus, Jr.

SPEAKER_03 4:06

Because it was so versatile. You could use it for so many different things. And some of the items, Cheryl, in our life insurance and our financial portfolio have changed. And well, one in particular, and it's become very much like that Swiss Army knife. So this we're talking about today is like the Swiss Army knife of financial planning, isn't it? That sounds useful. Yeah. And so it's a financial tool that works for many of our clients in many, many different ways. Most of our listeners out there own some kind of life insurance. I'm sure you do too. You know, and Cole does. I do. Tammy and both my girls have life insurance. And way back when I started, and my dad and I, Cole is a third generation advisor. My dad and I were advisors and insurance agents way back in the 70s. So that's how many years I've been in business. You know, it's almost 40 years now.

SPEAKER_01 5:00

I bet things have changed since then.

SPEAKER_03 5:02

Oh my goodness, this is not my father's insurance company anymore, you know? So this is a whole new look. So back when dad and I worked for Prudential and Trans America, we sold basically term insurance and whole life insurance for Prudential and Trans America. And life insurance was for the beneficiary. In other words, if something happened to the primary insured, the dad or the mom, the beneficiaries got the benefit. But that was about it. That's all you could use it for. But in today's insurance and investment market, there have been so many changes. You know, but today we're talking about a life insurance policy that really has gone through a lot of changes, so much so that you almost should consider an upgrade.

SPEAKER_01 5:51

So, Bob, let's talk a little bit more about those tools in the toolbox. Let's talk about how life insurance has changed.

SPEAKER_03 5:59

So today, the policy we're talking about, in particular, the tool, the financial Swiss Army knife, is called the Indexed Universal Life Policy. Indexed Universal Life. And we shorten that, we just refer to it as an IUL, don't we call it?

SPEAKER_05 6:14

Yep. Yeah. So if you hear us talking about IULs, IUL policies, that's what that stands for. Indexed universal life.

SPEAKER_03 6:22

First, I'd like to, just for our listeners out there, thank you all again for listening this weekend. I know you have a lot of stuff to do on Saturdays and Sundays, but we thank you for tuning in because today's going to be a really, really interesting show that you're going to want to take notes on. And just like the Swiss Army Knife had like five or six blades, this IUL has five or six different features. And let me just go over those on a list. We're going to talk about each one independently. But it starts out with death benefit protection. Almost all life insurance has death benefit protection. But this has a death benefit that can actually increase over time as needs grow. And of course, death benefits in life insurance have always been tax free, right? That's right. Yeah. So what does that mean? If the client's got a $250,000 policy and he passes away, the wife gets a check for $250,000. And they don't have to include it in income. It's all tax-free. So that's the first blade. The second, it has a much much stronger cash value growth. And then third blade is the tax-advantaged accumulation. Cash values grow tax deferred. That's a huge thing because it can put a lot of money into those and it can turn into a whole lot of money, like the seed and the harvest, and it's all tax-deferred and tax-free. Then the fourth blade, the long-term care benefits that you can get today from life insurance that you couldn't back in the 70s and 80s. And then we also have the fifth blade, which is market downside protection. Because indexing, and Cole's going to take a minute and explain what indexing is, you have indexing features that are included in the cash value. And then of course the other sixth blade, let's say, is legislative diversification. The insurance contract offers a different legal framework than IRAs or Roth IRAs, which you know preclude or which go around the tax rules. You know, the legislation is not going to change an IUL, you know, where legislation could conceivably change an IRA. So we'll talk about all of those in just a minute.

SPEAKER_01 8:38

So I thought maybe we could start, Bob, by digging into the long-term care portion of this. And let's take it down to Medicaid, because I think that a lot of people believe that Medicare will take care of nursing home coverage. That's not necessarily the case. And then if you're relying on Medicaid, there are some rules and things you need to know.

SPEAKER_03 9:03

Right, exactly. So, Cole, we did a show not too long ago, a couple months ago. It's on the podcast on Spotify. And if they wanted to go on there, just go to your favorite podcast and type in either RWF hour or Reliable Wealth Financial Hour. You'll find us on a podcast. But Cole, when that show uh aired a few months ago, uh we were talking about the costs of long-term care and the staggering costs of health care today. What do you think a someone would pay for health care today?

SPEAKER_05 9:34

Well, it seems like every year it goes up, right? Yeah, it does. Yeah, it does. So, I mean, this year we've actually seen this firsthand of clients or prospects that come into the office and they have concerns about health care for a loved one or for themselves. And it seems to us right now between seven and thirteen thousand dollars a month.

SPEAKER_03 9:57

Seven to thirteen thousand a month? A month. That's not a year. That's a month. No, that's per month. Yep. So if I take seven thousand a month times twelve months, I'm at ninety some hundred thousand dollars. Yeah, pretty, pretty much.

SPEAKER_05 10:09

I mean, you could probably find some places, depending on what policies you have in force and things like that, that might take you for less. But in order to get a decent home and get the care that you deserve, it's gonna cost straight around there.

SPEAKER_03 10:23

Wow, yeah. And so um that being that that's a staggering cost, have we seen some of our clients that have actually used the IULs to defer those costs?

SPEAKER_05 10:34

Yeah, there's one in particular last year that um unfortunately needed the uh death benefit for living benefits. Right. Right. For long-term care type care.

SPEAKER_03 10:44

Yeah.

SPEAKER_05 10:45

And um it worked out really well, you know. You had sold this policy what? 13 years ago. 13 years ago. 14 years ago? Yep. So 13 years of I believe it was a term policy, wasn't it? No, it was a permanent policy. It was a permanent IUL. Okay. Yeah. But 13 years of paying into this thing, never receiving any money out of it until he got dementia. Got sick.

SPEAKER_03 11:07

Yeah. And he got dementia over a period of a year and a half. And within a year and a half, Cheryl and listeners, he went from very, very healthy, and he was a very active guy, to sitting in his recliner and he couldn't perform he could only perform one activity of the daily activities we're going to talk about. You know, I mean, his uh wife had to take care of him in the shower, she had to feed him, she had to take care of, you know, the only thing he could do was transfer to the bed and she had to help him with that. Yeah.

SPEAKER_05 11:36

Well, and and that's where, you know, we got that phone call from her saying, Can you come over and take a look at Dennis? I don't know what kind of insurance is we have in force, but I'd like you to at least come over and talk about what we can do. What are our options? And so I remember going over there with a few of our colleagues here at RWF and just having a conversation about what she had available to her. Right. That turned into needing long-term care, right? Annual long-term care.

SPEAKER_03 12:04

Yeah. Because she was still working. And when she was still working, she couldn't stay home and take care of him. She had two choices. One, pay for a nurse to come in, and she had some money put aside, but she was using her funds to do that. Or two, put him in a facility. And so she determined and found a very nice facility. Uh and we accelerated the first check because he couldn't perform two of the activities of daily living. And just so you know, those activities of daily living, you want to list them for him?

SPEAKER_05 12:34

Sure. Yeah. So it's you can't dress yourself, you can't bathe yourself, you can't feed yourself, or give yourself your meds. Any of those four, um, along with cognitive impairment, transitioning from the bed to the bathroom or going to the bathroom by yourself.

SPEAKER_03 12:50

Yeah, that's it. Yeah. So if you can't perform two of those, then you send in a notice to the insurance company that has those on it, has those critical benefits, those accelerated death benefits on the policy, and they sent him a check within two weeks. Within two weeks. And it was twenty-four percent of the face amount. Yeah. Which is a big chunk of money. It was a big chunk of money. And she needed it right then. And within a week or two, she went ahead and took the money and put him in a facility. Unfortunately, he passed away within two weeks, but then she got a refund from the nursing care place, you know. But uh that was something that she had available that if she didn't have that, she would have had to use her own funds.

SPEAKER_05 13:31

Yeah. Well, and let's talk about that in l in a little more detail because I think um I think it's it's valuable to really understand how that worked. So when she needed help, she called us, we came in. Within two weeks, she got a check of 24%. She was able to use that money while he needed care until he passed away, and then she received the rest of the death benefit tax-free. And so it's almost it was kind of the perfect scenario because they didn't use all of the money for nursing care, but they needed nursing care and they got it very quickly and were able to use it almost immediately.

SPEAKER_03 14:08

So, yeah, and and that all worked out, and we're gonna dig into that a little bit more and explain how all that works with those accelerated death benefits, because that's the thing that we've found. One of the things that we do, Cheryl, here is a complementary life insurance review with all of our clients. You know, many times when we find a client, they meet us at a seminar or from the radio show, they have looked at their portfolio, and their other advisor is looking at their portfolio, and that's really all they look at is the money they have invested in the market. And when we start talking about life insurance, it's like, well, I have some policies, but they're put away in a metal box and they've been there for 15 or 20 years. They sometimes don't even know what they have, right? Yeah, most of the time, actually. And what we do is a complementary review of all those policies to see if they need to be upgraded. You may have those old, old life insurance policies. Cheryl, you probably have a few, and I'm sure our listeners out there have a few, right?

SPEAKER_01 15:08

I'm sure they do. And you know, you you'd get that policy and you put it in a safe place, and there it sits.

SPEAKER_03 15:14

There it sits. It sits there so long sometimes. I've actually gone out to houses back when I used to do this a long time ago, when my dad and I used to visit and go out to houses together because we sold insurance together for years. And we would go out and sit down with Mr. and Mrs. Johnson and say, Can I review your life insurance? Because you requested an additional amount to pay off the loan on the mortgage that you just took out. And they would say, Well, we have life insurance, but we have no idea where it is. And if they can't find it for an insurance agent, how in the world are their kids going to find it if something happens to either one of them?

SPEAKER_01 15:47

Could easily just be tossed out.

SPEAKER_03 15:49

Oh, yeah, yeah. And their kids would have to dig through the checkbook and dig, you know, so what we do is we get all that stuff out, and sometimes when you pull those policies out, we've talked about this before, that the plastic binder that they're in it's been hot in that box, and and it's just all the black ink is stuck to the plastic binder. I know. When you pull it out, it just hits a blank piece of paper almost because they've been in there so long. So what we do is we open those up, we call the companies, we review everything that you have so you know exactly what you have in place before we ever start putting another insurance policy in there. That's right. Because if you've got if you've got the foundation of a house, there's no sense in me coming in and tearing out all the old foundation and rebuilding a new house. We might as well try to use the foundation that's in place and save you hundreds and hundreds of dollars. Yeah.

SPEAKER_05 16:42

And we've seen at times, you know, when we do that complementary review of your current policies, we've seen a bunch of different types of policies. But sometimes they've paid so much in they don't have to make payments anymore. Right. And they keep the same coverage. Right. Sometimes, you know, they haven't been paying for a while, and you can move it, the cash value that they've paid in over to a new policy, get the brand new benefits, more coverage for no additional payments. Like it's really crazy what we found. But I I will say most of the time, that critical question of does this policy have living benefits? Does this policy have accelerated death benefits? Because if something happens to where you need those long-term care benefits, most life insurance doesn't have any coverage for that.

SPEAKER_01 17:30

When we talk about retirement planning, putting together a financial plan, there are so many tools available, but you can't use them if you don't know about them.

SPEAKER_03 17:39

And I think that's really what we're talking about. That was like a toolbox in your pocket. And so this is like a toolbox in your metal box that you have down there that works so many different ways. So we talked about six blades or seven blades that a Swiss Army knife had. And when we did that, we also compared it to this financial planning tool. And it has five or six different points, and I covered those pretty quickly. So let me go back over them one more time because we're going to talk about those, and then we're going to get into the Medicare spend down and explain it. But the first that we talked about, the first blade of the IUL Index Universal Life Policy is the death benefit protection. And death benefit is traditionally and always has been tax-free. And that's the same with old life insurance and with new life insurance. But the new life insurance IUL has a death benefit that can increase over, let's say you had a hundred thousand dollar policy. The cash values are growing so much stronger. And I told Cole he has an index UL.

SPEAKER_05 18:46

I'm going to tell you exactly what it did this last period. Yeah.

SPEAKER_03 18:50

Uh when we get there, but we're not so it has a death benefit protection, it has a much, much stronger cash value, it has tax advantaged accumulation. In other words, everything that goes in there that accumulates and is deferred goes in and is tax-free when it comes out or when the benefits are paid. So moving your money to a tax-free, it kind of acts like a Roth, but it's much, much bigger than a Roth IRA. And it has many more advantages than a Roth IRA. And then the fourth blade on it was long-term care benefits, and we started there, started talking about those. But the other two market downside protection and cold during this section, we're going to explain that one because that's where you explain the process of indexing. And then finally, the sixth blade was legislative diversification. The insurance contract in an IUL offers a different legal tax framework than both IRAs and Ross. And it adds diversification if the tax rules change on IRAs, because they've changed the tax rules on IRAs and RMDs several times. Congress can come in and change those anytime they want. So let's get back into this. And we were talking about and we shared a story in that first segment. If you're just tuning in, you're you're tuned into the Reliable Wealth Financial Hour, and we talked about a client of ours that needed the long-term care benefit. And then we talked about the other option that they would have had had he gone into the nursing home, they might have had to go through what's called a lot of people think that Medicare or Medicaid will help them pay for long-term care. And it really won't. In order for Medicaid to step in and help you pay for that, you have to go through what's called a Medicaid spend down. Cheryl, when your mom had that happen, did you guys have to go through the Medicaid spend down?

SPEAKER_01 20:47

Well, we did, and we made a mistake, but we didn't realize it was a mistake at the time. And so we actually ended up selling her home and thinking that that would be used toward her care.

SPEAKER_02 21:00

Right.

SPEAKER_01 21:01

And the proceeds were used for her care. Um, but they do require you to spend down, and then there is a five-year look back. Now that's something, Bob, that I think is very important for you to explain how that works and why that can be something to pay attention to and not ignore.

SPEAKER_03 21:18

The spend down refers to the process of reducing your countable assets to or below Virginia's Medicaid asset limit for long-term care eligibility. In other words, you've got to get down to their level in order to qualify. Virginia's Medicaid program, known as DMAS, Department of Medical Assistance Services, sets these limits under federal guidelines. Now, listen to this. For a single individual, like Tammy's mom, Grandma Sally, that we've talked about a number of times on a show, she is now 93 in August this year. For a single individual applying for long term care medical benefits, the general asset limit is approximately 2,000. In countable resources. In other words, if she has more money in her bank accounts, if she has an IRA sitting there, Medicaid's going to take it. For married couples, where one spouse is entering a nursing facility and one remains in the community, or the community spouse remains in the house, it can be higher. It's called the community spouse resource allowance, C S R A. And they can keep up to $157,000 in that house benefit. Approximately $160,000. And it changes every year, goes up a little bit. But there are countable assets and exempt assets. So as you go through this spend down, you have to look at all of your assets, bank and savings accounts, whatever's in the bank and savings accounts, investments, brokerage accounts, stocks, bonds, mutual funds, IRAs, real property other than your primary residence, additional vehicles other than one vehicle. If you have three or four cars, some of them gotta go. And I remember talking to a good friend of mine, Bill, that went to Sunday school with me, and you know, his wife was in a nursing home and he had to actually go through that Medicaid spend down and get his, you know, all the way down to the very, you know, even cash value life insurance is considered in that Medicaid spend down. And then of course there are exempt assets, the primary residence, one vehicle, household goods, you know, prepaid funeral expenses, and term life insurance. But let's talk for a minute about that five-year look back. Because a lot of people think, Tammy thought, and so did Grandma Sally, we can transfer the house out of Sally's name over into Tammy's name. And that will get rid of that house and the value, and then it'll be under Tammy's name, but they kept Grandma Sally's name on the deed. Well, then it's still an asset in her name. And even if you do transfer it and then she goes in for that spend down within three or four years, it's a five-year look back. Explain kind of how that worked, Cheryl, in your case.

SPEAKER_01 24:08

Well, they'll just look back and make sure that you didn't try to liquidate an asset or hide assets by selling them during that five-year period. So you have to be very careful that you don't appear to have done that, even if if you did it with the best of intentions, if it falls within that five-year period, it still counts.

SPEAKER_03 24:30

They give an example here, but I liked your example too, because you and your brother had to cough up some money to medicate.

SPEAKER_01 24:35

Sure did. Yep, we sure did. Because we had sold mom's house and there was no chance she was coming home. So, yeah, we we ended up having to pay the difference, and it was a lot.

SPEAKER_03 24:47

Yeah. And so they give an example here. If you gave away $100,000 to your children 18 months before the average nursing facility, and the average nursing home cost is $10,000, Medicaid can impose a 10-month penalty on you. And that means it won't pay your nursing bill for 10 months after you otherwise qualify. So during that penalty period, you're going to need to pay for that nursing home privately for 10 months.

SPEAKER_01 25:14

Yeah, we were on the hook for eight months.

SPEAKER_03 25:16

Wow.

SPEAKER_01 25:16

Goodness.

SPEAKER_03 25:18

So then this is how that IUL, and we talked about this earlier, but it has a tool just to avoid that Medicaid spend down because we've seen this several times with several of our clients that have brought in their older Northwestern mutual policies and their older prudential policies. And, you know, they have a really nice cash value of $50,000, $60,000, $100,000 built up in that policy. But when we call the company and ask them, they bought this 15, 18 years ago, their policy they have in place does not have any accelerated death benefits, right, Cole? And so if they don't have accelerated death benefits, their only option is somebody passes away for them to get the benefit. And when they pass away and they get the benefit, all that $60 or $80,000 that's in that cash value, you don't get the death benefit and the cash value. Cash value gets sucked up into the death benefit and they pay you back your own money. So and that's where we can take them, kind of explain how we did it with that last client. So he took some of their money from that insurance company, rolled it over into a new IUL, and they were very healthy. And so they qualified for additional death benefits, and they didn't have to make any payments.

SPEAKER_05 26:31

Yeah. So um, and this is kind of getting into the idea of using life insurance as an investment vehicle. Now, this is something that has been around for a long time, but it seems like recently people are starting to talk about it. I have never seen this on my Instagram until recently, and now almost every other pop-up. Now, granted, it's probably my algorithm. They know I'm looking at this stuff, but I'm seeing all of these ads for using life insurance as a tax-free investment vehicle, and everybody's talking about it now. And uh, and it really is. And so with indexed universal life, the rates of return on IUL policies are much greater than your typical whole life policy. Yeah.

SPEAKER_03 27:14

Why is that? Back when I sold Prudential, the typical whole life insurance policy paid three, four percent max. I think they still do, most of them. Yeah. I mean, some of them you might get a five percent.

SPEAKER_05 27:25

You might see a five. But it's rare. Rare, yeah.

SPEAKER_03 27:28

And what are we seeing now on these index ULs?

SPEAKER_05 27:31

Yeah, so uh during this time, I'm actually gonna pull up mine.

SPEAKER_03 27:35

I'm gonna pull up my active life insurance policy. And the reason Cole has one is because back when he was 13 or 14, Cheryl, this was such a good product that I knew he was gonna need one, and I wanted to buy one policy. I don't want to buy a 10 and then another 20 and then a so I bought him a really nice $450,000 life insurance IUL because it was cheap. He was 13. And then I started putting money in it because I could afford to do so. And I looked at how much we've paid in and how much we have in cash value, and he's getting really good index credits right now on that cash value that's in there.

SPEAKER_05 28:10

Yeah, I'm gonna pull up my current active IUL policy, and we're gonna talk about how it works just for a couple minutes.

SPEAKER_03 28:17

And kind of explain the concept of indexing, because that might be a new word for some of our listeners out there. What is indexing? And this is remember, this is just one blade of that IUL, the indexing and the tax deferred and the tax-free. And now we're gonna explain how the indexing credits can grow your cash value so much better. That's right.

SPEAKER_05 28:39

Yep. So back in 2013. Is that when you started this, Dad? Uh yeah, this last one was 2013. 2013. Um, my dad took an IUL policy out on me. So typically with life insurance, you do have to qualify health-wise if you're over a certain age. Right. Younger listeners out there, it may be as easy as applying and you're approved. Right. But for older listeners, you may have to go to the normally underrated. Yeah. Right. Yep. Okay. So he took this out back in 2013. It was worth $400,000 of death benefit. Now, what does that mean? That means a couple things. Number one, if I pass away, my beneficiaries receive $400,000 completely tax-free. And so it doesn't replace me, but it helps. Yeah. $400,000 completely tax-free. What that also means is this $400,000, if I were to get sick and I need nursing care. And this is defined in three ways. We kind of talked about it earlier. But the chronic illness, I can't perform two out of five activities of daily living, a critical illness, like a heart attack, stroke, cancer, or terminal. Car accident. You know? Car accident, yeah. Anything. Severe medical uh issue. Yeah. I can accelerate up to 24% of that $400,000. So in this case, pretty close to $100,000 for medical problems. Right. Okay. On top of that, how much are you paying for this monthly? Uh now I'm boosted it up to $200 a month and I'm paying into it. But that's not the minimum to keep it in force. No, it's probably about $85 a month. $85 a month. So if you're a listener out there and you're around my age in your 20s, or maybe you just got into, you know, a legitimate career job and you're starting to make good money. Or they just got married and they want to protect their family and their kids and their mortgage. And they're building their retirement assets, it's it's attainable for you too. Yeah. Because the entry cost, it's not like some of these other big investment vehicles in retirement that take chunks of money. This could be a monthly payment that consistently you pay.

SPEAKER_03 30:48

And you're leveraging. You're leveraging. Yep. Yeah. You're buying an $80 a month or a $60 or a $20 a month in some cases, and a lot of grandparents put it on their grandkids for that very reason. That's exactly right. Yeah. So they use it as a gift, and they can take some of their money from an RMD and stick it into a gift for the grandchild in a life in an IUL.

SPEAKER_05 31:10

And I will say, too, just to kind of you know throw out a few different examples. If you're young or if you're old and you use life insurance as a tax-free vehicle, and maybe I shouldn't say old. If you're you're seasoned.

SPEAKER_06 31:25

You're seasoned.

unknown 31:26

Okay.

SPEAKER_05 31:27

That's fine. If you're older and you're using this more as a retirement planning vehicle, we have some clients that use strategies similar to that of a Roth conversion to fund this for a period of time, and then they don't pay anything else. Right. So how you pay for this $400,000 of protection can be any which way, any different shape and size. But the idea is the money that you're going in here, and I'm going to talk about it here in just a minute, it's growing.

SPEAKER_03 31:57

Yes. It's indexing with the stock market. It's like a life insurance policy on steroids. You know, the cash value is on steroids now, and it's really growing. Yeah.

SPEAKER_05 32:05

You know? Because it's an indexing plan, I can gain a portion of the upside without taking any loss of the downside. And we kind of analogize that as to a rock climber going up, don't we?

SPEAKER_06 32:18

Mm-hmm.

SPEAKER_05 32:19

Yep. You ratchet up. Yeah. We talk about that a lot in our meetings. Where um the when you index with an insurance company, it's not like buying a fund in the market to where the risk is determined by the market. Right. This is you share in what the company does, and they guarantee that you take no risk. And so in this case, over the last year, it was 9.91%. But if you look at the average rate of return since my dad took this out back in 2013, it's averaged 5.5% annually. Yeah. Which is pretty good. Again, that's tax-free growth, and there's no market risk.

SPEAKER_03 32:58

And there's no market risk. That's the big thing. Your money's growing and it's increasing every year. Now it's a long-term growth product. You don't take it out like you buy sand disk stock or like you buy uh, you know, something like Dell stock today that's going up 20% in a month. This is a product that you buy for 20, 30, 40 years so that when coal is 70, 80, 65, 80, 90, he'll have a huge account value that can give him a tax-free retirement in addition to the other retirements that he has that are taxable. So all of those can be used, and that's a way that we can really grow your cash value. And that's why we take older policies that other clients have that are sitting in the drawer with 25 or 50 or 100,000 in them, and we roll those over into new policies that can average five, six, seven, ten, twelve percent.

SPEAKER_05 33:55

Because typically, most of those older policies that have cash value, they're typically whole life. Right. And they're growing. But, you know, like we said earlier, you know, there was a client that came in, we recently did this for one of our clients, and she had an older state farm policy. Right. And it was growing, it was it was doing good. She averaged 3.5 to 4%. But that was 3.5 to 4% for 40 some years. Yeah. And that compounding could have been a lot more had it been in a plan similar to this. And so we took the cash value, moved it over to the new plan. She didn't have to pay anything extra. Right. It actually bought her more coverage, it added the nursing benefits, and now it's growing at a rate that's much more reasonable to keep up with inflation.

SPEAKER_03 34:45

So far, we have talked about as the Swiss Army knife, we compared it to, we've talked about the death benefit being tax free. We've talked about the much, much stronger cash value growth, where you have cash value growth that's almost on steroids, growing at anywhere from five to fifteen percent. We've talked about the tax advantage cumulation blade number three, how it grows and its tax advantage, it's tax-free. And we've talked about the long-term care benefits, and we even alluded to the market downside protection, explaining the concept of indexing. The big other the sixth blade that we talked about and referred to was legislative diversification. Uh the IRS has in many cases Cheryl, you probably remember there used to be and Cole, you may remember this, in the last 10 years, the IRS came out with the first required minimum distribution quite a while ago. But that RMD, the first one you had to take, was 70 and a half. Your age limit, you had to go and you attained the age of 70 and a half, you had to take a required minimum distribution. And then they had a concept out there called file and suspend so you could get your social security. Well, that was about the same time. Well, the file and suspend, the IRS said, Well, this is really going to work great. John can file for his Social Security, but then he doesn't have to take it, and he can suspend it, and his wife can get her Social Security, and it worked great, but the IRS figured out pretty quick that they were losing money. So they closed that loophole down. Then they had a couple other concepts, they closed those. Now they've talked about Roth IRAs. They can change IRAs and Roth IRAs anytime they want, because they're Congress and the IRS. And as long as we keep money in the insurance product, it can build up to be a huge tax-free savings and it and the legislative risk that changes in Congress, you get a new president, and it doesn't affect anything. The IRS changes the rules, it doesn't affect your index UL at all. So we've found in many, many cases that it's a much better choice to move money from an IRA if you're thinking about a Roth conversion and you're thinking I need to get some of this money out of my IRAs and into another product called a Roth or use an IUL because the IUL is much more flexible. If you miss a year in your Roth, you can't go back and make it up. If you miss a year in an IUL, you can go back and make it up and you can put in additional lumps that you want to. So it's much, much more flexible and it's much, much larger. And so we've seen it can be actually a better tool, and you're leveraging again. You might be putting in $100 or $200 a month, but you're getting back two or three hundred thousand dollars in death benefit. Our job is we're not one of those uh insurance salesmen that's trying to sell you something. We are trying to educate you. We are trying to help educate you on here's what you have in place, here's how it's going to work, and you want to make sure that you have a Swiss Army knife in your toolbox.

SPEAKER_01 37:55

And we should point out, too, that not every one of those tools in your toolbox is going to be appropriate for everyone, but you won't know what is or isn't unless you understand what is available.

SPEAKER_03 38:07

We thank you all for listening to the Reliable Wealth Financial Hour this morning and the Reliable Wealth Financial Group. And I know that we covered a lot of information that some of you may want to take advantage of.

SPEAKER_05 38:18

And I will say, just one more thought before we wrap this up. Um, for all of our listeners out there that have children or grandchildren, and you hear what we're talking about today, um, you know, some people might say, you know, I have enough in retirement. I'm self-insured. I don't need more protection. I don't need life insurance. But one of the best ways to get started in investing, in my opinion, is with life insurance because it's very inexpensive. You know, it's a monthly commitment that you're putting away money and growing that money over time. But also it comes with that leverage piece that traditional investing just doesn't have. Right. To where now you have a big lump sum of protection that you can use if you get sick.

SPEAKER_03 39:01

So thanks again for listening today to the Reliable Wealth Financial Hour. Thank you, Cheryl, for being here again and guiding us through the rocks of financial planning.

SPEAKER_01 39:10

My pleasure.

SPEAKER_03 39:11

Down our canoe trip down the financial river. It was a little bumpy, but I think we got there.

SPEAKER_02 39:18

To learn more about the Reliable Wealth team, be sure to visit our website, Reliable Wealthfinancial.com.

SPEAKER_00 39:28

Insurance products are offered through the insurance business of Reliable Wealth Financial Group LLC. Investment advisory services offered through Signal Advisors Wealth LLC, Signal Wealth and SEC registered investment advisor. Reliable Wealth Financial and Signal Wealth are unaffiliated companies. Signal Wealth does not offer insurance products. Registration with the SEC does not imply a certain level of skill or training. The insurance products offered by Reliable Wealth Financial Group LLC are not subject to investment advisor requirements. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Insurance and annuity guarantees are backed by the financial strength and claims paying ability of the issuing company. Past performance may not be used to predict or project future results. Neither the firm nor its agents or representatives are affiliated with or endorsed by any government agencies and do not give tax or legal advice. This material is for informational purposes only and should not be construed as a recommendation or advice for your particular situation. Consult with qualified financial tax and legal professionals for guidance before making financial decisions.