Have you ever made an appointment with an investment advisor only to have him or her ask you, “What are you trying to accomplish with your investments?”
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Of course you respond with, “I don’t want any guarantees! I want to take a lot of risk, I want a low rate of return, I want my money locked up where I can’t get to it if I need it, I want to pay a lot of taxes on my gains (if I have any), and I want to pay high fees to you whether you make me money or not. I don’t ever plan on dying, getting sick, or going into a nursing home, so we don’t even need to discuss those issues.”
Sorry for the sarcasm, but I am offended at that question. I believe the only reason it is asked to begin with is to somehow validate that the advisor is going to bring some “value” to the table.
I was a Senior Vice-President for a major Wall Street firm for many years. The most disappointing aspect to working in that arena was the industry’s lack of knowledge on how to mitigate risk for their clients. My clients were always at risk, and I didn’t like that.
Let’s face it, when it comes to investing our hard earned money, WE ALL WANT THE SAME THING!
I have put together a list of qualities that ALL investors would love to have when it comes to their investments:
- Safe/Low Risk/Guaranteed
- High Returns
- Tax-Free Growth
- Tax-Free Withdrawals
- Low Fees
- Unlimited/Flexible Contributions
- Tax-Free Passage to Heirs upon Death
- Leveraged Benefits
- Protection from Creditors
Wouldn’t you agree? Wouldn’t you love to have an investment that would consist of all the above attributes? Well, there is one and I’m going to explain it to you after I explain the mistakes that most Americans are making.
When it comes to investing, most Americans are exposed. They have been brainwashed by Wall Street that in order to achieve high rates of returns, they must take on higher degrees of risk. This is not true! Most Americans have way too much exposure to the stock market either through their 401(K) plan or by way of their individual brokerage accounts.
I am convinced that most people take on these risks because they are not aware of what else is available when it comes to investments. Therefore, their brokers or investment advisors recommend that in order to get higher returns to accomplish their goals, they are going to need to invest in the stock market. Let me ask you this question. When you’re in the market, who is taking the risk—you or the brokerage firm? You are! And if you lose money, do you still have to pay fees? Of course! And if you have gains, do you have to pay Uncle Sam? Absolutely! I have never understood why more people haven’t challenged this system more. Americans have lost trillions of dollars over the years in stock market losses yet they continue to trust in that way of investing.
I am writing to inform you that there is a better vehicle to invest your money. It’s called maximum funded, properly structured, indexed universal life insurance. The key words being “maximum funded” and “properly structured.” It is extremely important you work with an expert in this field when structuring a contract for yourself or family member.
How does equity indexed universal life insurance work?
Equity indexed universal life insurance (EIUL) is a great alternative for people who are interested in participating in market returns, but do not want any downside risk. So, how does it work?
Generally, an EIUL policy has 3 primary components: a cap rate, a participation rate, and a minimum guaranteed rate.
All of the equity indexed universal life insurance policies our firm offers has a 100% participation rate with a cap ranging from 12 to 14% and a minimum guaranteed rate of 0 to 3%.
For example, if an equity indexed universal life insurance policy has a cap rate of 14%, and the S&P 500 Index has a return of 22%, then the maximum the policy would be credited is 14%. Now, you may be thinking this is unfair, but this is where the minimum guaranteed rate comes into play. Under the same scenario, assuming the S&P 500 Index had a return of -22%, then the contract would be credited the minimum guaranteed rate, between 0 to 3%.
One other very important note is an EIUL policy will lock-in your gains every year and the value can never go below those locked-in gains.
The most amazing quality to Indexed Universal Life is that the cash can be withdrawn tax-free. Most individuals are unaware of a little-known tax code that's available to all investors regardless of their income or net worth. The internal code section for this tax break is IRC 7702. One of its components refers to the tax-advantaged growth of the cash value inside of a life insurance policy. If properly structured, an individual has the opportunity to both grow their investment money and access their money without ever paying taxes on the gains.
The other great advantages to these policies are the benefits. As I always tell my clients, LIFE HAPPENS! This means that there are a variety of things that can go differently than you’ve planned. These policies offer a death benefit and living benefits. The living benefits are there in case you ever become ill. Let’s assume you had a policy that had a $1,000,000 death benefit and you were diagnosed with terminal cancer. The policy would allow you to access a portion or all of your death benefit, while you’re living, to use in any way you so desire.
So you be the judge. Do you want to be fully exposed to the stock market with NO safety net and no additional benefits? Not me! I feel much more comfortable putting my own money and my client’s money into a vehicle that has upside potential to the market, up to 14%, with no downside risk and the gains locked in every year. Our money is accessible whenever we want it. Our money can be accessed tax free. And if we have the misfortune of either getting sick or dying prematurely, we have a leveraged pot of money that could be used for our family’s security.
Again, I caution you, it is extremely important you work with an expert in this field when structuring a contract for yourself. Most advisors are not aware of these strategies nor do they know how to properly structure these contracts for maximum efficiency.
Jeff Pickett, president and founder of Pickett Financial, has 25 years’ experience in economics, retirement planning, estate planning, and tax planning. As a retirement and financial specialist, Jeff has formulated wealth-building strategies that teach people how to maximize all their assets and build wealth in a safe and tax-efficient manner. His special commitment is to educate people on the nation’s mounting deficits and coming demographic shift and the impact it will have on their wealth. Able to take complex strategies and make them simple for others to understand, he speaks frequently on financial and retirement related matters. He challenges people to think for themselves instead of teaching them what to think. To reach Jeff, contact him at 614-961-0159 or go to www.PickettFinancial.net
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