Retirement - Success Stories
Jake is a hard-working goal-oriented family man. He also clearly appreciates the value of money. Not that it is most important, that’s his wife, daughter and family. When we first began speaking about his goals, he talked about the importance of asset growth, maintaining minimal asset risk, not carrying debt, and being income tax smart.
Jake works full time as an analyst. He occasionally has opportunity to get overtime hours which he takes when available. His wife operates their small business from home. They sell vacation apparel and business is good and growing. They buy inventory for resale whenever pricing is favorable.
I introduced Jake to a powerful but somewhat misunderstood concept that goes by the heading “Infinite Banking” or “Bank on Yourself”.
The first step was to build a financial model to forecast policy performance. We ran through several different scenarios to determine best fit. As the financial instrument we use a specialized Whole Life insurance policy that pays both interest and dividends. The policy cash value grows income tax deferred and when planned properly, can be withdrawn or more technically, “loaned” to the owner as income tax free income.
Jake was about to turn 50 with about 15 years before planned retirement. He would have liked to have started earlier but that was not possible now. Fortunately, Jake was in position to max fund his policy with 15,000 premiums he expects to make for at least 10 years but more than likely 15 years. He has the option of adjusting the policy by reducing or eliminating premium payments in the future.
For the next 15 years, Jake plans to borrow from the policies cash value, loan it to their business so the business can buy inventory, and have the business repay him plus interest. Jake puts both the principal and the interest payment back into the policy. The business loan is documented with a promissory note on record. This way the business can classify the interest payments as a business expense.
Even if Jake decides to stop funding his policy after year 10, he can continue borrowing and loaning capital to his business. There is however an advantage if here continues to fund the policy. The longer he pays into the plan, the more cash will be available for the next phase of this strategy, taking supplemental retirement income.
When Jake chooses to, they can begin taking distributions in the form of loans from the policy and use the cash for anything they see fit. They do not have to repay the distributions which will provide them with supplemental income.
He bought the policy to protect his family’s lifestyle, more efficiently finance his business and when he enters retirement, he can use the policy to help with retirement income. Because this is life insurance, should the worst thing happen, his family will receive an immediate financial benefit.
Anthony a successful 50-year-old business owner whose current business is growing in leaps and bounds. Revenue and income are up and he can now afford to pay himself well. All with the blessing of his accountant. Years of hard work are paying off now.
He has invested many hours and much of his earnings back into this and prior businesses. As a result he has limited personal savings. Yes, his business will likely be a huge asset he can sell or keep and run passively in the future but as we all know, little is guaranteed, look at 2020 and asset diversity is important. This makes investing in a different asset class that can grow and provide income a wise balance.
In addition to asset diversity, Anthony wants to keep more of what he earns. The possibility of an increase in the corporate tax rate and individual tax rates are certainly a cause for concern.
Anthony chose to invest in a powerful strategy that both provides great opportunity to fund his retirement which he plans to enjoy for 25 plus years. The approach also has a catastrophic protection feature that will be of great benefit to his family. What’s unique about this approach is he will take advantage of a long-proven approach to financing major needs, leverage. Most of us already do so when buying a home or automobile.
Anthony is in a unique situation. He needed a specialized approach that offered a high tax advantaged return without having to absorb excess risk.
If Anthony’s situation sounds personally familiar, let me show you his numbers and put a plan together for you.
We are all different, we are in different situations and have different priorities and different resources. These examples are here to provide a general picture of the ways we help others protect their family and provide for their family over the long term. Insurance is forward looking and when applied properly, a very valuable tool.
We look forward to hearing your story and providing you with options that help you protect and prosper.