08: High Risk with High Early Cash Value
008 High Risk with High Early Cash Value
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[00:00:00]
What to know about high early cash value
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John Perrings: Are you being lured by the promise of high early cash value? Whole life insurance policies by advisors on social media? What if I told you that these super high early cash value designs have significant trade-offs that aren't often known or disclosed and could cost you hundreds of thousands, even millions of dollars over the long term?
Today I've put a couple comparisons through the Excel spreadsheet ringer, and I'm going to show you the charts that prove that high early cash value whole life insurance is most times suboptimal at best and catastrophic at worst.
This is Stacked Life, the podcast that teaches you everything you need to know about The Infinite Banking Concept, whole life insurance, and the strategies that make it all work.
And I'm John Perrings, an authorized Infinite Banking practitioner. I've implemented IBC for hundreds of my clients and educated thousands more with original content from my podcast articles and courses at StackedLife.com.
By the end of this episode, you'll understand the real trade-offs [00:01:00] of high early cash value designs. Why the biggest cash value accumulation often comes from policies that seem less efficient in the first few years, and why the order of operations really matters with building massive cash value, whole life insurance policies.
Today we're gonna get into some nitty gritty about cash value. We'll talk about the definition of high early cash value to kick things off. The understandable desire to have high early cash value, the three ways to create high early cash value policies and their hidden downsides. We'll look at direct data comparisons between short pay policies and long-term designs.
Why the precedents order and IBCs to pay premiums first with rate of return and efficiency second. How building a system for longevity beats maximizing early efficiency. And lastly, why Thinking long range is the most important principle for implementing IBC. So let's get into this.
All right, as we start this here, I [00:02:00] think the, obviously we need to start with the definition of "high early cash value." What does that actually mean? And if watch social media and some of the YouTube channels out there, sometimes high, early cash values referred to as a "90/10" policy.
And to understand this, there are. Three main components to a whole life insurance premium, especially when designed for cash value or The Infinite Banking Concept. You have your base, whole life insurance premium. Which if you just bought a straight whole life insurance policy, the entire premium would just be base whole life.
The other component is a PUA rider, which stands for Paid Up Additions, and that's what does a lot of the heavy lifting in building the cash value in the early years.
And then the third component is often, but not always, a term insurance rider. That's a little bit of term insurance, sometimes a lot of bit of term insurance folded into the whole life insurance policy to raise the death benefit, which allows us to stay within the IRS rules, which I'll talk about here in a [00:03:00] second, so that we can buy more paid up life insurance and build more cash value in the early years, especially of the policy.
The Paid Up Additions, Rider, as I mentioned. It really does all the heavy lifting for building cash value. In the early years. If you didn't have that on there, you'd likely have zero cash value in year one and maybe even year two. And often people want to maximize this and get as much of their premium building cash value as possible.
And so that "90/10" thing that I mentioned stands for 90%, 10%. And it's looked at in a couple of different ways. It's either 90% of your premium goes to Paid Up Additions or 90% of what you pay in premium is available as cash value in the first year.
And so for example, in a $10,000 premium, either $9,000 goes to the PUA rider, or $9,000 would be available in cash value. And those are not the [00:04:00] same thing necessarily. PUA doesn't just equal cash. But it has a lot to do with building cash value. You can check out episode five of the StackedLife podcast and I break down some of the, minutiae of cash value and how it's being built.
If you wanna check that out.
The other, the other thing that to get into is the desire to have high, early cash value. So before we get into the, again, nitty gritty of all this stuff I wanna say that this isn't an admonition of anybody that wants it, or, hey, dummy, you shouldn't be looking at this because it's understandable, right?
All things equal. Of course, we would want as much cash value available in our policy as quickly as possible. I'd like a hundred percent of it available or why not 200% right? But I've said it in probably all the episodes so far, there are no deals in the insurance business. The life insurance business especially, everything's a trade off between cost and risk.
And what's not [00:05:00] typically understood are what the trade-offs are when you get this high, early cash value. And I can tell you that when I explain it to people and people actually know what the trade-offs are, they never really want the high early cash value. There could be a couple of exceptions to this, which you know, we can get into in a different episode.
And so I'm not saying a hundred percent of the time, high early cash value is bad, but probably 99% of the time or 90% of the time. It depends on who you're working with. But when I explain the trade offs to people, no one chooses the high early cash value design. And there are a couple reasons for that.
And the, the little teaser is you can actually get better performance. Than a higher early cash value design. When you take a more reasonable approach to it, you can actually get the same or even better effect if you have a more reasonable approach to your design or a more balanced approach is how I'm gonna refer to it in this episode.
The, but the thing is, it all gets back to [00:06:00] fomo. Fear of missing out, people understandably want to put their cash value to work. We're doing IBC, The Infinite Banking Concept, so we wanna start, you know, "IBC-ing", right? So it's a normal thing. People want to get that feeling that they're doing something meaningful and impactful in their financial life, which is, I get it, it's totally understandable, but I want to
put it out there. That building capital, capitalizing having liquidity, that is meaningful in and of itself. If you think about building a house, we don't build a house to live in just for the sake of building a house. We build a house so that we can enjoy spending time with our family and friends in the living room, or, outside in the backyard or maybe the swimming pool.
We build it for that enjoyment. But. You can't build a house by starting with the landscaping, right? If you know that landscaping is all the, things we enjoy about the house, but like if you start with that, [00:07:00] it all gets torn up anyway when all the equipment and people roll in to pour the actual foundation of the house.
And this is kind of a decent analogy for what a lot of people do in their financial lives where they just, try to get the. Try to get that feeling first, and then if one thing goes wrong, the whole thing blows up anyway. So we have to start by building the foundation and the structure of our financial lives first.
And, last point on this piece here. I'm not all about just being boring. I'm not trying to say, Hey, be boring and have a boring life. That's not what I'm saying. There is no question that if you can have a little bit of patience and take the time to build the structure, all of the exciting stuff will happen almost on autopilot.
You like, won't believe how easy it becomes to get the exciting stuff happening in your life as opposed to, trying to start with that first. There's no question if you take the time to do this right, you will come out miles ahead [00:08:00] over the long term by setting up your structure of capital first.
As far as like why this high early cash value has become a thing, you know, I'll just be super direct presenting a client with a high, early cash value policy. It's easier to sell than not, right? It's like you can say, Hey, look, this number that I got in the first year of this policy is higher than the number you looked at over here.
And it's like a client's oh yeah, that, that is nice. So it's easier to sell, but I think it's a lowest common denominator, race to the bottom approach to selling life insurance. And I think it's doing clients a disservice because again, they're never, in my experience, informed of the trade-offs that come along with getting high, early cash value. They're just a, they're just shown this high early cash value and it's like, yeah, duh, obviously this is better, but it's not necessarily better and they're, the trade-offs are significant and it's really not a good thing for clients [00:09:00] to go into this not knowing what the trade-offs are. And
believe it or not, policies with more base premium are better more often than those with less base premium.
And I know at this point you may not believe me, but stick with me and watch the rest of this episode and I think I'll be able to show you with the math and charts that what I'm saying is true.
The three ways to get high early cash value
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John Perrings: I wanna say a few things before we get into those charts though. There's a lot of nuance to policy design, and so I'm really just gonna show a couple of examples. There are, there's a lot of in-between on this, but I'm really picking like the extreme versions and I'm being very gracious to both sides, so I'm not like cherry picking the data, but
someone could probably be like, oh, he's doing this with this design, he's doing that. Maybe, I don't know. But it, that's where it really gets to become important to work with an advisor that you like and trust. I always recommend going to InfiniteBanking.Org, the Nelson Nash Institute, and finding an [00:10:00] authorized IBC practitioner.
But I want you to just look at the high level principles that I'm talking about here. Not get caught up in worrying about what I'm doing with the design.
IRS rules are why policy design is even a thing
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John Perrings: Another thing I want to say is the only reason we're talking about this is because of the IRS rules around life insurance.
If this were the eighties, we wouldn't even have to have this conversation. But a lot of the design stuff, all the people talking about "correctly-designed" policies, et cetera, that's all because of an effort to comply with the, what are called the Modified Endowment Contract rules or the seven pay test, where if you pay too much premium and it doesn't support enough death benefit, which means you've gone too hard trying to build cash value, the IRS will consider the policy no longer a life insurance policy and they'll consider it a Modified Endowment Contract or "MEC.".
And so that's really where a lot of this stuff comes from, is we're trying to build significant cash value without [00:11:00] going too far with it and making the policy a MEC because it, once it becomes a MEC, it becomes taxable, similar to how an IRA is taxable and which is not the end of the world by the way, but if we can avoid it, it's usually a good thing.
Cash value is derived from the death benefit not separate from it
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John Perrings: Lastly, just to set the tone and mindset of this whole conversation, it really needs to be understood that all of the value of a whole life insurance policy, including the cash value is derived from the death benefit. It's cash value and death benefit are not a separate thing. Cash value is just the net present value of that future death benefit, less any future premium payments.
So a lot of people learn about cash value as if it's this separate thing. It's all one thing. So I want to ingrain that in your head before we move on with this next thing. Base premium is not a bad thing and base premium, believe it or not, does a really good job of building cash value, especially after the first few years of the policy.
More death benefit = more possible cash value
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John Perrings: [00:12:00] Now understanding that and understanding what we just said about the Modified Endowment Contract rules, it makes sense that the more death benefit you have, the more cash value you _*can*_ have. And that is a piece that is really missing from a lot of the conversations and a lot of what clients are learning about whole life insurance.
1. "Short-Pay" Policies
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John Perrings: Okay, so let's now get into the three ways you can get high early cash value in your, with a whole life insurance policy. The number one way and the probably the most common way is to create what's sometimes called a short pay policy, and that just means you can only pay premiums for a short amount of time relative to how long you could pay a premium with a whole life policy.
Remember, these whole life policies go to age 121, so these things are usually inforce for decades. And what happens is people want to get that high early cash value, so they buy a policy where you can only pay a premium for five, maybe 10 years. [00:13:00] In this episode, we're gonna talk about "7-pays", which would be a policy where you pay a premium seven times over a period of seven years.
So every year for seven years, you pay your premium. It can be paid monthly, but it's a considered a seven pay. Here's a question for you though. If you had a place to put money that was liquid, got very respectable tax deferred growth, but you could get to it tax free through the policy loan provision, which also gives you the ability to leverage that cash value, it came along with a big ol' death benefit that protects your family, and that also provided disability, chronic and terminal illness, pro protection, so that even if you didn't have a family, you could protect against some of those health risks later on in life.
Would you want to be able to put money there only for as little amount of time as possible, or for as long as you could, and I asked that question to a lot of people, and literally no one says for as little amount of time as possible. And it seems pretty obvious. But that's exactly what's [00:14:00] happening with these short pay policies.
As you overcome all those initial early costs of a whole life insurance policy, which happened over the first few years, right? As you get to the point where the policy's firing on all cylinders and you've overcome all the costs, you can't pay any more premium. And so what sometimes people are told is that, okay, yeah, you can no longer pay premium into this policy, but this is when you start your second policy and then your third policy.
And people who have read Becoming Your Own Banker, which is the source material for all things Infinite Banking by Nelson Nash. Nelson Nash had a, like 40 policies and so they think that this is how you get all those policies and it. It is true you, you can have multiple policies on yourself, but I don't think it's a good thing to plan for to say, Hey, I'm gonna start this policy and then I'm gonna start my next policy in seven years.
Because here's the thing, all things are [00:15:00] not equal. This is a life insurance policy that you have to qualify for. We don't know if you'll even be able to get another life insurance policy in seven years because your health may disqualify you for it. Your health also could, even if you qualify, you could be in a lower risk class, meaning the cost of insurance is more expensive. But not to create unnecessary fear, uncertainty and doubt.
You most likely will be able to qualify. But the one thing that's true is we're never younger than we are today. And that's just gonna be true no matter what. At the very best, you're gonna be seven years older by the time you buy that next policy.
And that's where some of the inefficiencies start to creep into some of these strategies. I usually like to tell people, buy your next whole life policy like it's the last whole life policy you can ever get, and if it's the last whole life policy you can ever get, wouldn't you want to be able to pay a premium for as long as possible?
2. Big, long-dated term riders
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John Perrings: The second way to create high early cash value is using a gigantic [00:16:00] long dated term rider.
And so this would be like a 20 or 30 year term rider, but it's a lot of term, right? When you do this, it creates enough death benefit that you can keep paying a premium. But what happens is, the term component on a term rider, on a whole life insurance policy is a true cost. It's only there to increase the death benefit so that you can pay more PUA.
Now, by the way, there's nothing wrong with increasing the death benefit. If you want that, that, that could be a very logical reason to have a term rider. But if we're talking about cash value here, that term rider's really only there to build cash value and after the first few years, the term insurance puts a major drag on that policy and it starts to perform really suboptimally compared to almost any other policy design.
And just to be clear here, I'm not saying long dated term riders are bad. It's more about the amount of term insurance that really starts to create a drag on the policy.
3. Non-guaranteed policy elements
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John Perrings: So that's the second way [00:17:00] and the third way. Is by introducing non-guaranteed policy elements into the policy. This is the worst way to do it.
It, it attempts to solve the two problems we just talked about, and this usually comes in the form of using what's called a blended term PUA rider. And what that does is it uses some of the value annually of the policy to pay off the term insurance. But the term insurance is what's called annually renewing term insurance, or one year renewing term insurance.
And the key word here is "renewing." The early years of the term insurance have a very low cost, but that cost goes up every year, and because it renews, we don't know what the cost will be. The insurance company will renew that at the cost that they determine every year.
And so it starts to look more like an IUL. Because those costs are unknown. And you could get a letter in the mail stating that. Hey, you have to pay this much extra [00:18:00] premium in order to keep this policy on track, and if not, it'll start eating into your death benefit, your cash value, may even lapse the policy.
Now, here's the tricky part with this one. There are some insurance companies that have a blended term/PUA rider, and it does use increasing cost term insurance, but it's the increases are actually on a schedule and guaranteed. And in, in those instances, I don't think that's bad because you're never gonna get a letter in the mail saying you need to pay more premium.
So it's a little bit of a tricky conversation on this one. You really have to look at your illustration to make sure you're not going to have future additional premium payments due in order to support that policy. And again, this is where you really need to talk to an advisor that you like and trust that understands some of these nuances.
50 year comparison: Short-Pays vs. Long-Pay
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John Perrings: All right, now we're gonna get into the, the details of some of the data and start looking at some charts here. By the way, if you're listening to this in your car feel free to give this another listen on YouTube at [00:19:00] StackedLife, my StackedLife YouTube channel. Or you can watch it on Spotify, which also has a video.
I'll do my best to talk about this in a way that I think will still make sense for you, even if you're only able to listen to the audio version. Since the trade-offs of the last two things that we talked about the blended term PUA writer introducing risk, and then
the long dated big term riders introducing a drag on the policy. Those are pretty self-explanatory. What's harder to see on it from a trade-offs perspective is if you actually did do that thing where you buy short pay policies every, call it in this, say in this instance, we're gonna do it every seven years.
If you buy a short pay policy every seven years, how does that stack up to just buying one policy where you can pay a premium every year for a long period of time? That's what we're gonna compare today. So we're taking the best case scenario for the, buying the short pays to get the high early cash value.
And then we're taking a look at how [00:20:00] that compares to a more balanced, what I would call long pay policy. It's not really a term, but that's what I'll just call it here. And what we're gonna do. We're going to show two scenarios for a 40-year-old funding, $20,000 a year. And when I say funding, I mean paying a premium every year for 35 years, and that premium is $20,000.
So $20,000 a year for 35 years. One where he pays premiums on a high early cash value "7-Pay" policy. On the eighth year, he can no longer pay premiums to that original policy. So he starts a new policy. At that time, he's gonna be 47 and then he's gonna pay for seven years on that one.
And then he starts his third policy. He's gonna do this five times, 5 x 7 years is 35 years. And every year he's only paying $20,000. It's just moving over to new policies every time he runs out a room on the previous policy. The other one is paying [00:21:00] premium on what I would call a more balanced policy that's going to have more base premium, but it's the same policy.
It's one policy being where $20,000 a year of premium is being paid for 35 years on the same policy. Both scenarios have base premium. Both scenarios have a PUA rider, and both scenarios have a term writer. The long dated policy or the long pay will have more base premium. So again, comparing these two scenarios we're paying premium for 35 years from age 40 to age 75, and then we're gonna continue to track the policy for another 15 years to age 90.
I'm just kind of going to like a conservative mortality age. And that's gonna be a total of 50 years that we're looking at here. And I think you'll, I think you'll be able to see what the trends are as we go through this.
Alright, so here's our first chart. We're gonna zoom out to the 50 year [00:22:00] total period that we're analyzing these two things.
And I'm smirking if you can see my video here, but the reason for that is we can see there's really not much difference. The cumulative seven pays are in the orange bars and the 1 35 year long pay is in the, are on the green bars.
And for the beginning part of this chart, the. Short pays are performing slightly better than the long pay. And then for the rest of the chart, the long pay policy is performing slightly better than the short pays. And it's kind of like, when you look at it this way, you're like, wow, we have hundreds of videos on YouTube out there, probably and podcast episodes that are, talking about policy design and high early cash value, this, that, and the other thing.
And this is the result. Just by comparing. Apples to apples. This is the result we get, which is really not much difference at all. But don't worry, we're gonna, we're gonna go further into this and we're gonna show you where we can make a significant change. And so [00:23:00] what I wanna do is I'm now, I'm zooming in on the first 10 years and um, first thing I wanna say that X axis down there is supposed to be years, not dollars.
I don't know what happened to my spreadsheet here or my chart, but got a little something wrong there. We see that the short pays from a total cash value perspective are slightly better than the long pay policy. Um, But it, it's really not that much. You know, If I'm looking at this the first year, I mean, it's really not that big of a deal on a $20,000 premium.
It's a couple, few grand maybe. And then if we zoom out, zoom back out and look at the death benefit value, what the additional base premium and term insurance bought you was a much higher death benefit in the early years. So we see that the long pay policy has a significantly higher death benefit for about the first 15 years.
So that. Is, I think, beneficial for, protecting your family. But then things even out and they're they're hanging right together for the [00:24:00] remainder of the 50 years. And there's, again, not a huge difference. But I do think there's value in having that higher death benefit for the first 15 years.
And that's the trade off you're getting. You're getting a higher death benefit. Slightly lower cash value, and that's what you're, that's what's going on with this apples to apples comparison. Now, I've changed the chart here and what I'm now showing is the. Total new cash value created each year.
So every time you pay a premium, how much new cash value is being created. This isn't the total cash value, it's the new cash value. And we see in the, first three years, the short pays create, you know, it's fairly significantly more cash value each year than the long pay. But what we see is when we get to year eight, when the short pays have to start their new policy, start those costs all over again, and they're now seven years older, we see that the long pay [00:25:00] creates more new cash value.
That next premium that you pay in year eight creates more cash value. Than the two short pay policies because now they're on their second policy. So another way of saying that is in year eight, if they had the long pay policy, they could have paid their $20,000 premium and created $26,000 of new cash value.
But instead they have. To start these new costs. They paid $20,000 in premium and they, the first policy is still growing, so it's not negative, but the second policy is putting a drag on it and they were only able to create maybe 23, $24,000 in new premium. So it's a less efficient system at this point.
So now, let's go out and we'll zoom out. All 50 years, and this is a chart showing 50 years of what it looks like each year of new cash value that gets created every time you pay your premium. [00:26:00] And we can kinda look in the beginning years and the, again, those short pays look significantly better. I mean it's not like twice as much or anything, but it's creating more
new cash value. But then we see once we get to years, between year eight and 10, the long pay policy starts to outperform this thing. Once they start that third policy things really start to take off for the long pay and the short pay can really never catch up.
Paying premium takes precedence in the order of operations
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John Perrings: This kind of, you know, again, I'm kind of chuckling because at the end of the day, there's not really a huge amount of difference.
And I might even be able to just say, there's probably a slight advantage to the long pay where it's creating slightly more cash value for a longer period of time than the short pay policy structures. But. You know, You may not care. Like That may not be enough information for you to really be swayed in either direction.
It's kind of like, in my opinion, a little bit of a wash, but the [00:27:00] story's not over. What most needs to be understood about paying whole life insurance premiums is there is a precedence in the order of operations.
Getting high early cash value is almost a rate of return discussion because it's like, what's the efficiency of the premium that I'm paying to building cash value?
So it's kind of a rate of return calculation, even though it's not described as that. But I'm here to tell you that. The efficiency of the policy is secondary when designing the policy to having the ability to pay a higher or more premium. Meaning in that same $20,000 if I can actually pay more than that $20,000, that is a better thing to prioritize than trying to just get the highest cash value out of that $20,000.
Of course we don't want zero cash value. We don't want it to be, that inefficient. But in the early years, we just don't want to get too focused on having the most cash value out of [00:28:00] that policy because you're not gonna be able to pay a premium for very long. And in addition to this, designing for high early cash value, no matter which way you cut it, typically caps the amount of premium you can pay to the amount that's scheduled.
So in, in this instance, $20,000. $20,000 is as much premium that can ever be paid in these, in this short pay system. Whereas when you design a policy that has a more balanced approach with more base premium, and certainly the term rider in this case is helping as well, but it's also the base you can pay even more into the policy over and above the $20,000 that's scheduled.
So what this means is, while the ratio of the cash value created to premium paid for the balanced policy is lower than the high early cash value policy design, during the early years only, because you can pay over and above the scheduled premium, the $20,000 in this [00:29:00] case, the amount of cash value that you can create is significantly higher.
One additional payment changes the entire story
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John Perrings: So let me show you what I mean by this. Let's go back to the new cash value created each year. This shows equal $20,000 premiums where the high early cash value design builds more cash value in the early years with the balance policy doing better over the long term. But since the balanced policy has more base premium and the, again, the term helps with this as well, but the, it's the base and term combined, I can add an additional lump sum premium payment going to PUA to the very first year of this policy, which changes the entire story.
Instead of only $20,000, I had the ability to pay a total of $55,000 of premium in year one. That's an additional $35,000 going to the PUA and this does not MEC the policy and it jumpstarts everything.
And you can see down [00:30:00] here the purple I'm essentially adding a third bar to my bar chart here. And now the purple bar chart is the exact same policy as that long 35 pay. But it just now has one additional lump sum, $35,000 PUA payment in the first year. And what we can see is that year two, year three, and year four the short pay policies create more cash value in those years than the long pay policy. But then from that point forward, the purple bars, which is the long pay with the additional $35,000 paid up outperforms in building new cash value. And it's significant this time significantly more cash value over the rest of the policy.
And then if we just go and review our total cash value, this is the total cash value in both of the scenarios. If we, we look at the original chart, not much difference at all in either direction, but now what we see with [00:31:00] just one additional. $35,000 lump sum premium payment. I now have more cash value in my one long pay policy.
And, And over, you know, starting, you know, 15 years in, I have significantly more. I have more cash value in my long pay than I do in all my short pay policies, which cannot accept any more cash value. I think this is a pretty telling story. And so what I'm getting at here is with base premium, I have the flexibility to create a better outcome, even over a high, early cash value design.
And what you might be saying is well, yeah, but you had to pay more premium to get it. And that's true. But what I want, what I wanna show you is that. Even though I had to pay more premium to get to this, I actually matched the efficiency. We just talked about how being able to pay a premium takes precedence over the efficiency of the policy.
But actually by doing so, I matched the efficiency of the policy [00:32:00] in the first year where I'm getting 80% efficiency on my premium dollar to cash value. And so now. I just put $55,000 in and I have $44,000 of cash value, which is an 80% efficiency. And if I can get, if I'm willing to do the higher early cash value premium, and I can get that 80% efficiency, if I like that, why wouldn't I be willing to pay $55,000 in premium and get that same efficiency?
And now I'm just adding more cash value that I can go out and perform all the other economic activities that I want.
Expanding the system
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John Perrings: Now the last piece as I, as we start to wrap up here, not everyone can do a lump sum premium payment over and above the schedule premium. They may not have the, savings and liquidity to add that lump sum premium. So in that case, does it make sense to do this long pay? And I'll argue that I think it does, because again, we don't know what you can qualify for in the future.
So I'm always of the [00:33:00] opinion by your next whole life policy, like it's your last whole life policy. And by doing this you're creating a system that can scale along with your financial life. And if you think about it, even if we just look at like your salary. Most of the time it's going to increase over time, and if we just looked at a 4% cost of living increase, in 10 years, if you're saving $20,000 today and saving that in whole life insurance in 10 years, that $20,000 will have increased to $30,000 just with a 4% cost of living increase.
Where is that money going to go if you. Have no room to put it into your whole life insurance policies, right? And so by, by building a more balanced policy, we create extra room so that this policy can grow and scale with your financial life no matter what happens.
Think long range
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John Perrings: And so to wrap this up, at the end of the day most people are kind of stuck in this mindset [00:34:00] of only thinking in the now they're looking at things like, I want the maximum amount of, efficiency in the policy based on the premium I can pay today. I'm making decisions based on what the interest rates are today, making decisions based on what the loan rates are today.
All of those things change over time. Nelson Nash in his book Becoming Your Own Banker, again, the source material for IBC, he talked about his background in forestry and he, he mentioned that trees are grown on a, on 40 year rotations. If you think about it this way, venture capitalists here in Silicon Valley where I am, they work on a 10 year time horizon before expecting a return.
If you were to start a business tomorrow and fund it with $20,000, would you expect to get any of that startup capital back at the end of the first year, let alone, you know, half of it, right? So. It's important to understand that IBC is not a hack. It's not a shortcut. It's a strategy to set up the structure you need to finance all of your large [00:35:00] purchases and investments over the rest of your life.
What's crazy about this though is after everything gets rolling and you've capitalized your policies and they've become more mature and they're creating more than $1 of cash value for every dollar you've paid in premium, everything starts to feel like a hack. Even though I just said this is not a hack, it feels like it because everything becomes so much easier and your financial existence is so much more peaceful because you have so much control over what's going on.
But you have to honor the process and the time and effort it takes to create and set up that structure so that it's not just built on a house of cards.
Alright, thanks for listening. If any of this was resonating with you and you'd like to learn more about how some of these principles could apply in your life specifically, just head over to StackedLife.com.
You can book a free 30 minute consultation with me right there. Or if you're the type of person that wants to just keep learning as much as you can before talking to someone. I have a ton of resources on my [00:36:00] website at StackedLife.com. A couple that I would mention is my new free mini course, which you can get to at StackedLife.com/Supercharge where I dive pretty deep into some calculators and talk about how whole life insurance, creating that certainty side of your financial life, can actually supercharge the growth and the income you can get over the rest of your life.
And then a second one, if you like newsletters, you can access my free newsletter at Newsletter dot StackedLife.com where I. Publish weekly exclusive content where I analyze some of the current events out there in the personal finance space and the business finance space. That's not anywhere else in my ecosystem.
It's not on my podcast, website or blogs. Alright, thanks for listening and I'll see you on the next one.
