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Shifting Bank Accounts Into a Life Insurance Policy designed for Privatized Banking - YouTube
Channel: Banking Truths
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When it comes to redeploying existing assets into a
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PLI program,
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I like to use this very technical
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demonstration of how the mechanics can work.
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And you're going to see here in just a moment -
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okay, it's not that technical,
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it's a pair of pants but I think this works best for you to understand
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the point.
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And really what I want you to take away from this is when you move
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money from existing assets into a PLI program,
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it really is just like moving money from one pocket to another
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pocket.
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And here's what I mean by that - let's just say for a moment
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that somebody has one hundred thousand dollars sitting in a money
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market and I know everybody's situation is different
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but just for the sake of simplicity
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and using round numbers let's use one hundred grand.
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And let's also say that this money market is a great one
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and it pays a full 1 percent annual interest
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on whatever's in the money market.
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So if that were to happen,
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what you'd have here is you'd have an inflow
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of a thousand dollars of interest
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which would be great for something that's guaranteed FDIC
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insured and all that.
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However you don't get to keep this full 1 percent because
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this type of account is in a fully taxable environment at
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your ordinary rate each and every year.
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We're going to have to pay some tax on that.
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So if we just use a round number let's say after paying state
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and federal tax let's just use three hundred
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and fifty dollars here.
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Now after we pay our tax of three hundred fifty.
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Well what are we left with? Well we're left
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with six hundred and fifty dollars.
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However, if we combine this
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with another strategy that a lot of my clients have when they come to me
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and also include some term insurance,
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and let's even just say for a second that this term insurance only
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costs them seven hundred dollars a year.
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Well you can see now also
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and by doing this we're at negative 50.
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Our positive 1000 actually went to negative
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50 so we actually have a negative
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return on these combined strategies.
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All that said, one of the things that you can do
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is simply by moving this money from one
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pocket to another pocket, and again you can't do it all at once
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without losing some key tax advantages.
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But let's just say we did this over the course of five years.
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Move this hundred thousand dollars over
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and let's just say we did it at a clip of twenty thousand a year.
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Right? Times five years.
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And at the end of this trial at the end of the five year period
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or sometime close to it,
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our full one hundred thousand was there.
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Maybe it actually was more than that, it picked up some friends along the way.
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Maybe it was a little less.
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What I can tell you you can expect from this is,
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it might be a little more or a little less after about five years
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but we find on average there's a break even around the five year period.
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Everybody situation is going to be different.
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We can't guarantee it. But again when we go
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and look at numbers, we'll find that we're going to hit this break even period
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somewhere between year three and year seven.
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So let's just say for a moment the full hundred thousand there.
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Well let's see what other benefits we picked up simply
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for moving money from one pocket to another pocket.
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Well one is we now have the opportunity to
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earn a better rate of return each
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and every year. And if we choose the type of policy that gives you
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a guaranteed floor of zero,
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well, some years you might earn zero.
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Some years you may earn double digit rates of return - which can be very
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nice.
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And also so if it was over
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in this other pocket on that growth we'd have to pay
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some tax.
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We also may not have to pay for term insurance
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or as much term insurance, so simply by moving money
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from one pocket to another pocket.
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Well we get to do is we get to cut out some of these eroding
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factors the model.
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And so when you look at the strategy as a whole,
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if you can accept for the first five years (three to seven years),
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it's going to be about a break even strategy.
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But thereafter you have a much better opportunity to pick up some growth.
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You get to cut out the tax man on that growth
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and you also get to cut out some of those term insurance costs.
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A lot of my clients really enjoy this.
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