Wealth Blog

  • [9 Major Factors] For Complete Financial Freedom

    In 2014, I began a journey to research how to obtain complete financial freedom. As a husband and father of 5, providing for my family short-term and long-term has always been a top priority. Being self-employed my whole life owning a granite counter-top company in Arizona, I had always been able to make sufficient money for our wants and needs. However, in 2014, I realized although I had made good money in my professional career, I had no retirement plan in place besides “work hard and grow my business.” Many small business owners and individuals fall into this mindset and arrive at 65 years old and realize they have no ability to retire. 

    Most people also believe their financial situation in the future will improve and will begin their retirement plan in the near future. Unfortunately, this “near future” never arrives for most and the last 20-30 years of someone’s life is full of stresses and worries stemming from financial insecurity. In order to avoid this for my own personal situation, I decided I was going to research how I could secure my future and become completely financial free in retirement. The following information is 4 years of research, data and development, working with actuaries, numerous financial professionals, lawyers, tax specialists, and other financial reports on how one can customize a retirement plan by maximizing current features in the financial sector to achieve the ultimate goal of Wealth Independence. Over 10,000 hours of cumulative research and study have gone into the following information and my desire is that every individual hat the opportunity to take advantage of the information below. Although retirement planning is a relatively stale topic, very few decisions in life can bring more happiness and security than the ability to have complete financial freedom.


    When one begins the path to retirement planning, most individuals hope to arrive having felt a sense of financial freedom both before and after retirement. Unfortunately, both the educational and financial institutions of our society are failing to provide the public with an understanding of what products and features are available to them to accomplish the ultimate goal of financial freedom and wealth independence. This failure has led to 40%+ poverty rate for retirees of whom are living on Social-Security alone ($25,200 annually) and the average income for all retirees being less than $32,000/year. The poor results that the financial sector has produced for its clients has led to added stress, anxiety, poor health, and a shorter life-expectancy for many retirees. After 4 years of specific research, I have discovered 9 major factors to consider in retirement planning. The following will explain the 9 major factors and how to maximize each, which will result in a retirement of THRIVING, not surviving. By maximizing the 9 factors of retirement, an individual can have a substantial income at retirement, basking in complete financial freedom.


    - Cash Accumulation
    - Time. Time. Time.
    - Rate of Return: Rule of 72
    - Risk Management: Stock Market Volatility vs. Guarantees
    - Longevity of Income: 4% Income Rule
    - Increasing / Decreasing Fees
    - Withdraw vs. Loan Income
    - Deferred Tax vs. Tax-Free
    - Inheritance Planning: Life Insurance/ Living Benefits

    Cash Accumulation


    Most people believe “Cash Accumulation” is synonymous with “Retirement Income.” This is not accurate. There are many other factors that come into play when maximizing a retirement plan. Cash accumulation is a very important part of retirement planning, although it is not the only factor. Obviously, one must contribute funds to an account in order for it to grow with compound interest. The more cash contributed to an account, the more money it can make. Therefore, a traditional advisor will usually advise in a method of savings that produces the most cash accumulation, because that is how an adviser gets paid--a percentage of the total accumulated cash value. The traditional IRA/ 401k is the perfect vehicle for a financial advisor to promote, as its primary feature is to accumulate cash as quickly as possible. With his 1-1.5% annual fee coming off the accumulated value, one can understand why many financial advisors push cash accumulation as their #1 priority rather than retirement income potential for the individual. Despite this reality, cash accumulation is still an important factor in retirement income. For this reason, a capable individual should contribute as much money as reasonably possible into their retirement account for as long as possible. One should consider annual contributions between 5-20% depending on retirement goals and amount of time available to contribute.

    Time For Planning Retirement


    Time is possibly the most important factor in planning for retirement. Most retirement plans need at least 25+ years to mature. Over the 25+ years, a small amount of money combined with interest can produce amazing results. Tragically, most Americans begin focused retirement planning in their 50’s. By starting so late in life, they forfeit the effect that time could have produced for their retirement plan. According to the theory of compound interest, money will double after so many years (depending on the achieved interest rate, which will be discussed later). Albert Einstein accurately dubbed compound interest “the greatest mathematical discovery of all time,” and “the most powerful financial force in the whole universe.” The reason compound interest is so powerful is because your money can grow with minimal effort, i.e., utilizing time. When earning money during the working years, an individual has the power to make a lot of money quickly. 

    However, he or she can lose that money just as quickly, as working-money often comes with an additional layer of risk. Therefore, working money should be considered independent of retirement planning. As working money is earned, a % of that should be carved off immediately and put towards their retirement planning. When money can grow on its own, and then double over X amount of years, it has the potential to produce the greatest results over a longer period of time. For example: a single penny doubled 30 times produces $5,300,000. Obviously, no one will live long enough to see their money double 30 times, but even doubling your money three, four, or five times over the life of a retirement plan can produce a huge amount of accumulated cash in comparison to the amount actually contributed. This is why it is so important to start a retirement plan as soon as possible. The ideal age for retirement planning is literally as soon as possible…as soon as an individual has secured his first job in high school, or during childhood if parents are willing and able to fund such an account.

    Increasing vs Decreasing Fees


    Increasing Fees is a detrimental feature of most retirement plans. “Increasing fees”, in this instance, refers to fees based off the accumulated value of the retirement account. In traditional 401K and other common IRA plans, advisors and mutual-fund fees are usually based on the accumulated value. In the early years of an account, a financial advisors fees will be reasonably low. But as the account grows, the fees of the account will also increase. For example, if you had $100,000 in an account and your financial advisor has a fee of 1.5%, his fee would only be around $1,500. Thirty years later, that same account could feasibly have $1,000,000 in accumulated value. At this point, your advisor fee would be $15,000 a year. Since the financial world-standard suggests withdrawing only 4% (to be discussed later), the account value could maintain around $1,000,000 or more for the remainder of your life. As a result, a consistent $15,000+ a year from your account will benefit your financial advisor. Over the life of your retirement plan, you will pay $100,000’s for someone else to manage your money. As mentioned before, this is one of the prime reasons for why financial advisors’ #1 goal is cash accumulation.

    Decreasing Fees, also known as frontloaded fees, get a bad rap and are grossly misunderstood. Numerous financial advisors talk poorly about decreasing-fee-type plans because their system is not set up with this feature for long-term benefits. Decreasing fees means that the majority of fees is paid in the first 10-15 years of your plan, and then drop off. For example, these fees can include issuance fees, management fees, and insurance costs. These costs can be around 10%+ of annual contributed value at the beginning of your retirement plan. Think of it in terms of a Costco membership: a frontloaded program to get benefits on the back-side. Insurance products (Indexed Universal Life specifically), are frontloaded. The financial world often sees this as a negative. 

    However, the math tells us differently. With the increasing fee of the 401K, an individual can end up paying $100,000’s over the life of a retirement plan. However, with the decreasing option, most fees are paid by year 15, and the plan has nearly no costs thereafter. The fees of an Indexed Universal Life (IUL) are a small fraction of the fees paid for by a 401k or other IRA and are paid while the policy is a smaller cash value. Once the accumulated value is largest and still growing, it compounds at an ever-quickening rate from years 15-30 and further on into retirement. For short-term plans, frontloading would obviously be a horrible idea, but since retirement planning is typically over a period of 20 years or longer, frontloading can have a huge benefit and effect on retirement longevity and income potential. The basic math shows decreasing fee type products produce a better result in retirement income.

    Another goal of the fee schedule for a retirement plan is cutting the fees as low as possible. In the investing world, there are two major options available when investing money into the stock market. One is through use of a money manager or financial advisor. The other is to use of an indexed fund. Traditionally, individuals use financial advisors. This advisor trades stocks, moving your money around. This service typically costs between 1- 1.5% of your total savings, on average. The problem with this traditional service is that a fee is charged to you whether the financial advisor does well for you or not. As stated by Warren Buffett, “A very low-cost index is going to beat a majority of the amateur-managed money or professionally managed money… The gross performance may be reasonably decent, but the fees will eat up a significant percentage of the returns. You’ll pay lots of fees to people who do well, and lots of fees to people who do not do so well". 

    When Warren Buffett refers to a low-cost index, this is a strategy that does not require a financial advisor all the time. Indexing means putting your money into the stock market without purchasing individual stocks. Indexing is putting your trust on the collective, rather than the individual. For example, in the S&P500, the collective 500 companies can produce a return of around 8-9%. Some years, the average return between all the companies will be 15%. Other years it may be 5%. Some years even yield negative returns. But in an index account, an individual will get what the collective does as an average. This might sound very conservative and one might lose out on some potential gains from the use of a financial advisor, but the data shows us that an index beats financial advisors over 90% of the time after a plan matures to 10 years or longer. Recently, Warren Buffett and Protégé Partners made a $1mm wager on if a money managed account (active trading financial advisor) or an Index would perform better over a 10-year cycle. 

    After the end of 10 years, The Indexed averaged 7.1% and the professional money managed investors averaged 2.2%. The rates of return for the financial advising company were so low due to fees and underperformance by trying to guess which stocks were best. The risk and knowledge it takes to pick the hot stock of the day and trade it before it dips is a skill very few financial advisors possess, and they miss the mark more often than most of them want to admit. So rather than putting your money in the hands of a well-intentioned but imperfect person, an Index allows for a more conservative approach by investing your money into the average of all the companies available within the stock market. Because the money is not moved around as often, the cost to Index can be up to 1% less than the fees you would pay to the financial advisor. 

    This 1% can equate to $100,000’s in retirement-accumulated cash over 30 years. In the end, because retirement planning typically takes over 20 years, it makes financial sense to use a low cost Indexed account rather than an active financial advisor for retirement planning. Unfortunately for most financial advisors, the Index will most likely outperform them during your retirement planning. The bottom line? For maximum retirement income, one should NOT use a financial advisor if you have at least 10+ years to allow your money grow at the lowest possible costs with the least amount of risk. The vehicle that allows for the best results at the lowest costs is an Indexed option.

     Rate-Of-Return In Retirement


    The rate-of-return in retirement will dramatically affect the cash accumulation and retirement income. The cash accumulation, as mentioned before, is a major contributing factor in the amount of retirement income an individual will have access to. The Rule of 72 is a mathematical formula that projects the full returns of compounding interest. This rule explains that your money will double after a certain amount of time. To calculate how long it takes to double, one must take 72 and divide it by the interest rate. For example, if someone is gaining 8% interest, it will take 9 years for their money to double (72/8= 9 Years). A 10% interest rate would take 7.2 years to double. This rule is important to consider in retirement planning because the more money contributed combined with the number of times that money can double produces the best results. 

    Many retirement plans including Whole Life, Annuities, Bonds and other secure or “guarantee-returns” plans are always based off of a low-interest return. Because of this low interest, compounding interest has little effect on the overall results. For example, if a guaranteed-type product produces 4%, it will take 18 years for the money to double (72/4). This is not good retirement planning. Effective retirement planning needs time, a good rate-of-return, and low costs, which is more important than low-rate guarantees. After 100 years of stock market results, we know that any 30-year period will average over 8%+. Some years are down, and other years are up, but because retirement planning typically exceeds 20+ years, we can be confident that the stock market will return at a rate of 8% or more. This means that money contributed will double, on average, every 9 years; or around 3.5 times during the span of a 30-year period. This means that $100,000 will grow to nearly $1,000,000 (minus the fees) in only 30 years, with very little effort due to the magic of compound interest at a rate of 8%. 

    For retirement planning, it is essential to find a plan that can produce a rate of return at least between 7-9% NET over 30 years. Anything less than this will not produce enough cash accumulation to provide the income required for full financial freedom. Any plan that guarantees a rate-of-return is not the plan you need for retirement planning. These plans have tremendous fees and costs associated with these guarantees. With 100 years of stock market data, we can be confident in retirement planning with systems such as the S&P500. Indexing in the S&P500 produces the results a retirement plan needs to thrive at the lowest possible cost as long as an individual has 20-30 years to allow the account to grow. Many other methods, including traditional stocks, will produce the 8%+ one needs for a good retirement plan.

    One unfortunate but necessary practice in retirement planning is the curve of risk tolerance. As a common practice, younger individuals who have more time to plan and grow, typically use investments and other aggressive stock options to gain maximum returns. They can manage this more aggressive behavior because they have time to recover in down years. However, as time goes on, it is prudent to step back into more moderate stocks and investments. By the time someone is in their late 50’s or closer to retirement age, it becomes more common to use bonds to secure a relatively fixed income in retirement. Bonds provide a much lower interest rate of return (3-5%) but are considered much safer and secure for an individual’s retirement plan. When someone is in their 60’s or 70’s and considering retirement, they do not have the luxury of time to take a hit such as the -39% in 2008 and have time to let it recover. If one is withdrawing income from the retirement plan while simultaneously taking a huge hit on their account value due to poor stock market performance, the plan will deplete very rapidly. For this reason, common industry standards would be to covert riskier, higher returns type stocks into safety lower return type bonds.

    This action does bring some security to income projections but simultaneously slashes the rate of return forcing an individual to be bound to an industry wide “4% rule”. The “4% rule”, is a rule of thumb used to determine the amount of money one can withdraw from their nest-egg annually without depleting their account value within 30 years. The only way to overcome the 4% rule is to maintain your accounts in more aggressive/ riskier stocks or indexing achieving the 7-9% rates of return. Below is a graph that shows what typically happens inside of a retirement plan with different levels of withdrawn income. As one can see, even 5% of account value causes a plan to run out of money is as little as 23 years. This is to say if someone had $500,000 in their retirement account, they should prudently only withdraw $20,000 a year or risk of depletion. This rule is the #1 reason why most retirement plans cannot produce sufficient income for an individual’s needs. This is the handcuff the financial sector cannot get by without incurring too much risk for an individual or diversify in multiple avenues of income.

    Inheritance Planning


    Stock Market Volatility is a topic often misunderstood by consumers. There are two considerations to volatility and security; both need to be understood in order to increase security while maximizing returns:

     Stock Market Volatility vs. Guarantees

    Many individuals are misled into believing that risk-management is the most important factor in retirement planning. Although very important, its importance becomes more prevalent as one approaches retirement. Guarantees are less-important during the early years of retirement planning because the rate-of-return and cash accumulation outweigh short-term security. Putting money into a system that guarantees a rate of return of 3-5% and avoids all risk does not make for good cash accumulation and provides an even worse retirement income. Within the stock market, ups and downs naturally occur day to day and year to year. As long as an individual has time to wait out the “dips,” the stock market has historically always rebounded. 

    This rebound typically “breaks even” within a 3-5-year period. Over any 30- year segment of the stock market over the last 100 years, data shows us that it will produce 8%, or better, on average. It is therefore pivotal for retirement investors under 50 not to fall for the promise of 3-5% guaranteed returns based on fear of ‘what the stock market could do’. There are additional methods of minimizing risk while still achieving high rewards. One should always focus long-term retirement planning on the best returns at the lowest risk. One problem with traditional IRA’s and 401K’s is the stress and anxiety that retirement can cause when one is dependent on the stock market. For this reason, as mentioned above, as people arrive at retirement age, they elect to leave high interest earning accounts for more secure bonds or other forms of security. 

    For example, if someone retired in 2007 with $1,000,000 in their account and maintained high interest earning stocks, when the recession of 2008 hit, their account value would have dipped to under $600,000. At that point in time, the individual would have had two options: 1. Wait for the market to regain the loss over the next 4-5 years while the market rebounded without taking out income, or 2. Go back to work for the next 4-5 years and wait for the account to recuperate. By staying in the aggressive stocks,4-5 years later they would be able to retire at higher than 4% but with additional risk for the remainder of their life. Both options created a tremendous amount of stress and anxiety for millions of individuals in retirement. Because they cannot take this risk later on in life, most people elect to take their money in the stock market at retirement and transfer it over to a more secure bond or annuity account in order to eliminate the risk of stock market dips. The problem with this allotment of funds, although it creates guaranteed income for life, is that this income is discounted, solidifying the 4% (or less) income rule for life. By moving the money into a fixed/guaranteed account, the rate of return is now 3-5% rather than the average 8% that the market typically provides. This produces less interest each year on the money from which it returns, often producing a lower-than-desired amount available to withdraw as income.

    There is only one product that has the potential to provide the best of both worlds: The Indexed Universal Life (IUL). An Indexed Universal Life is a life insurance policy that allows a dual purpose on an individual’s financial health: Retirement Income planning through indexing and life insurance protection. When designed properly (an estimated 80% of insurance products are not designed for optimal retirement planning and will be discussed in FACTOR 9 below), the IUL creates a unique opportunity for an individual to accomplish great security along with an optimal retirement plan through the rates of returns of an Indexed account. The most important feature inside of the IUL is a feature called a 0% Floor Guarantee. No feature in any retirement plan has a more dramatic effect on retirement income then the 0% Floor Guarantee. Inside the IUL there are contractual guarantees to never lose principal in your Indexed account due to stock market dips. Due to this feature, an individual can maintain a rate of return of around 7-9% for life. This feature provides two major benefits to an individual who qualifies for this plan (typically, qualifying individuals must have a certain health rating for the insurance side.) The first major benefit with the 0% floor guarantee is that there is no stress or worry concerning WHEN an individual wants to retire. With an IUL, an individual who retired in 2007 did not have to worry or stress about their income in 2008 and on. 

    long term retirement planning

    Although their account did not gain any interest that year and incurred some costs due to insurance charges, their indexed account mathematically maintained its value. IUL’s lost 0% in 2008 when most stock market returns were as devastating as -39%. The second major factor, and the most influential for maximum RETIREMENT INCOME, is that an individual can maintain their account inside of the Index Fund for life, which means that they can continue growing their fund on an aggressive 7-9% returns. In short, inside an IUL there is never a need to move your money into more conservative bonds yielding a much lower return. The IUL achieves the highest amount of income potential for the life of the policy. Through maintaining the full rates of return through the Indexed account, the individual now has an 8% income rule (double the traditional 4% IRA). The 8% income rule through an IUL shows that one can reasonably have a tax-free income of 8% of cash value without risk of depleting cash value in 30 years or less. That 8% can only be maintained through life because of the 0% floor guarantee and full rates of return through the Index. The 0% Floor guarantee alleviates the risk of financial fluctuation and loss. To reiterate, the 0% Floor Guarantee is the single most influential part of a retirement plan to maximize income for the individual.

    The 0% Floor Guarantee also provides even a greater opportunity than the lifelong aggressive rate of return. With a 0% floor guarantee, an individual has a rare opportunity to double or even triple the income yet again. Through an IUL, one has the ability to leverage the cash account inside of the Index to increase the returns without incurring additional risk. In the world of business and finance, no single theory has ever produced more results and wealth than the art of leveraging your assets in order to grow them. This process produces additional money on your money (called margin or arbitrage). In other words, your money is making additional money instead of you trying to contribute more money. Quoting Richie Norton, “When we leverage, we aggregate and organize existing resources to achieve success.” The richest and most successful people on earth can attribute their success on their ability to leverage their assets in order to grow. 

    However, with this leveraging of assets comes a substantial amount of risk. The 2008 market crash in the banking and real estate sector happened, in part, due to over-leveraging. Banks and real estate institutions used their assets to leverage even more assets in order to create more wealth. When the great dip in the market arrived, the additional money gained through leveraging did not outweigh the losses experienced through the market dip. As a result, many banks required a “bailout” and the real estate market saw a massive spike in short-sales and foreclosures. But unlike the bank or real estate institutions, an individual with an IUL has the opportunity to leverage their assets and increase their returns without the traditional risk of leveraging. The process of leveraging and maximizing the results of a retirement plan is called MAXIMUM PREMIUM INDEXING (MPI)

    This leveraging opportunity accomplished through an MPI retirement plan is so impactful that an individual’s retirement income can increase up to 15% of accumulated value. In other words, by leveraging your assets and gaining additional arbitrage, one can produce up to 4x the retirement income of a traditional 401K with less risk than a 401K. Because the IRA and 401K are bound by the 4% rule, a well-designed IUL with is bound by the 8% income rule, a properly structured MPI retirement plan can yield up to 15% income for life of accumulated value. To illustrate, $1,000,000 in a retirement account can yield up to $40,000/year in a 401K (4% rule), up to $80,000/year in a low cost IUL insurance product (8%), and up to $150,000/year using MPI and maximizing its results through leveraging with a 0% floor (15%). No other system available in the world allows for safe and secure leveraging to double the returns, which is what makes this process so special and part of The Science of Retirement. This MPI process is currently patent-pending and completes a holistic system of leveraging for maximum results while minimizing risk. MPI is the only system to provide these type of long-term results, maximizing retirement income up to 15% of accumulated value, or 4 times better than any current 401K plan on the market.

    Longevity of Income


    As mentioned before, a traditional IRA can only produce retirement income of 4% of accumulated value without risk of depletion. With the withdraw feature, increasing fees, and lowering risk tolerance later in life, the results of an individual’s retirement plan are rarely sufficient for their needs. The financial sector cannot get passed the 4% rule (without incurring tremendous risk for the client) and therefore they will always be bound to this low withdrawal rate. An individual can do everything right, save large portions of their paycheck religiously year after year, and still have very little retirement income because of that 4% rule. However, a retirement plan that counters the negative features of a traditional IRA, has a loan feature, decreasing fees, maintaining aggressive earned interest in the Index, can provide a healthy person with a retirement plan producing up to 15% of cash value that can last for the rest of his life. This can provide up to 4x the retirement income from the exact same amount of money contributed and accumulated within an IRA. These results differ solely based on product features most Americans aren’t aware of.

    Withdraw vs. Loan Income


    In previous paragraphs “loan feature” was mentioned. To explain, there are two methods of accessing retirement income. One is to withdraw from your account-value. The other is the taking a loan out against your account-value, using your cash-value as collateral. The two methods have significant differences that dramatically affect your retirement investment. Below are the explanations of the two methods of income distribution:

    Withdraw Feature: This feature is one of the more influential factors in retirement and why most retirement plans produce minimal income. The withdraw feature is the “internal flaw” of most retirement plans, and why even the best advisor cannot produce a substantial retirement income in comparison to the amount of money contributed. For Retirement Distributions, an IRA/401k account uses this withdraw feature. In other words, when you remove money from your account, you withdraw it, reducing the account value. For example, if you had $1,000,000 in your account and you withdrew 5% ($50,000), minus the 1-1.5% agent fee and mutual fund fees, the account would then have around $935,000 at the end of the year. Unfortunately, at this age and stage in retirement planning, it is common to put a client into more bonds, rather than aggressive stocks, where returns are much more secure but at rates between 3-5%. At 5% return on the money, the new balance would be $980,000 or less than the beginning of the retirement. If one was to do this same 5% withdraw each year inside a bond or annuities, the account would have a high probability of running out of money in less than 25 years. Because most of us don’t know when we will die, the financial sector has adopted the “4% income” rule. 

    This rule dictates that you can reasonably withdraw 4% ($40,000 of $1,000,000) of your accumulated value without ever depleting the account value. In other words, the amount of interest being earned is equal to or more than what is being withdrawn, which allows your retirement savings to last for as long as you live. This could be very good for you, but also very good for your financial advisor, as he gets paid off of your accumulated value. If the account never depletes, he will continue to make money from your account indefinitely. Refer to the chart above for additional questions about the 4% rule or online there are numerous articles explaining it. The withdraw feature and 4% income rule is a major contributor to why an IRA/ 401K can never produce good retirement income for an individual.

    LOAN FEATURE: This is one of the features that sets life-insurance products apart from traditional IRAs. Insurance companies can offer you a loan-option from the cash-value of an account. This is a feature unique to an insurance policy, as interest is gained from the accumulated value of the account, even if the actual cash value is less than the accumulated value. So in the same example used above, if an individual has $1,000,000 in their account on the first day of retirement and utilizes the funds, they will essentially be taking a loan out on the policy rather than withdrawing funds from the policy. In other words, they will take a loan against their cash value, which the insurance company will then put a hold on the policy for a specific annual amount. The insurance company will then give a separate loan to the individual. In other words, if the individual asks for a $40,000 loan (4% of cash value), the accumulated cash inside the account would stay at $1,000,000. The actual available cash in the account would be $960,000 plus $40,000 lien (not accessible), and if the gain of the market was 5% (or $50,000 minus any interest on the loan), the account would have an accumulated value of $1,048,000 and a cash value of $998,000 at the end of the first year of retirement. 

    In other words, one can remove funds and still watch their account maintain in retirement at 5% and last for all years of retirement. With the loan feature and the accumulated value maintaining full amounts and increasing due to full-interest gains on accumulated value, the loan feature is projected to allow for a 5% income into retirement. Additionally, the loaned income is tax-free--because it is a loan—it is not deemed income by tax codes. Being that the loan feature produces 1% more income of accumulated value and is tax-free, the loan feature alone has an influence up to 50% more income for life than a traditional 401k or IRA that has the withdraw feature. If the traditional 401K had a permanent-loan feature built inside of it, it could also produce similar results. However, 401K’s do not offer a permanent-loan option. Most 401K’s have a 5-year option, but with a stringent requirement to pay the loan back in full. By accessing the loan feature inside of an insurance product, the loan would never need to be paid back until the individual passed away. How? Because the cash inside the account is being used as collateral. If one wants the best retirement plan, one with the loan feature is the only way to produce sufficient income for an optimal retirement.

    Deferred Tax vs. Tax-Free Plans


    Deferred Tax is yet another example of something that does not benefit the individual but does serve to make more money for financial institutions and the government. A tax deferral is when the government allows you to contribute money, pre-taxed, and grow that pre-taxed money in a traditional IRA/401k. This is the most-suggested savings-plan in the financial sector for two reasons. Firstly, financial advisors get paid off of accumulated value. Since pre-tax money is around 25% more than post-tax, the advisor fee each year would be 25% higher. For this reason, deferred-tax plans are typically the suggested option for “business” reasons. The second reason is that the government wants to offer an incentive for deferred taxes, allowing individuals to write-off these expenses on their taxes, and provide write-off benefits to businesses. The government allows for this to occur so that they can tax the bulk of the retirement income rather than the “seed.” This is called “qualified-money” and is a large source of revenue for the government. When considering the 4% rule, this standard is inclusive of taxes so when an individual withdraws 4% of cash value, they then must pay income tax on the withdraw making the NET income between 2-3%. The write-off on taxes could have an early benefit to an individual but the long-term benefits to deferring the tax are impossible to determine as future tax rates could vary up or down.

    Tax-free money is when an individual pays taxes on income “before” contribution or when income is taken out as a loan. An example of this is a Roth IRA or Indexed Universal Life. These plans allow one to withdraw or loan out money tax-free so the withdraw is true income. To persuade people to use deferred plans, the government has implemented stringent restrictions on post-tax plans, some of which are small contribution limits and income level restrictions, which minimizes the number of people who can contribute to a Roth IRA. For business and tax reasons, post-tax options are often not an option at all, even though they could produce more income for the individual later in life depending on tax rates (will they be higher or lower in 30 years?), income needs, and other factors. Either way, if a post-tax option is available, it is the best option for any client to secure their future with the unknown increases in tax rates and income status.

    Inheritance Planning


    An integral part of secure retirement planning is life insurance. Planning for the unthinkable is an unfortunate part of life. An unexpected death can happen and needs to be part of any financial plan owned by a spouse, parent, or anyone with potential beneficiaries. Many purchase term insurance for such protection, but this is not a long-term solution for inheritance planning. 401K’s and IRA’s provide no viable solution for inheritance planning via money leftover post death of the owner. With a traditional IRA, a beneficiary may experience losses in the form of estate and income tax. However, with the IUL and MPI system, the life insurance benefit is a permanent and tax-free inheritance to the beneficiary. If the owner of a 401K or IRA were to pass away in the early stages of retirement planning, the amount of money left to beneficiaries would be very little. Term-insurance also has huge flaws, resulting in the startling fact that a small % of all term-insurance ever gets paid out. Once a term policy expires, all inheritance or beneficiary planning is gone. Permanent insurance, if designed correctly, keeps costs as low as possible, provides a tremendous value and security into the retirement plan, and allows for the maximum amount of contribution to the index fund for use in retirement planning. Despite all the “perks,” however, there are two major design flaws regarding insurance costs and IUL plans:

    Level Death Benefit (referred to as Option A) vs Increasing Death Benefit (referred to as Option B)

    Level Death Benefit Option A plans are the plans which have given IUL and other insurance plans a “bad rap”. There are a lot of giant misconceptions in the insurance/retirement planning world regarding the death benefit types (Option A or Option B). Mainstream financial gurus and advisors often banter about the features of retirement through insurance products and how horrid they are. Because insurance products threaten their industry, and thus, their income, these financial kings or gurus typically only discuss the cons of LEVEL DEATH BENEFIT (Option A) insurance products and why one should never combine life insurance with retirement. They use the WORST CASE scenarios as a base data point for their argument, and as a result, insurance/retirement plans have gotten a “bad rap.” If worst-case-scenario was the case, their viewpoints would be justified. However, these gurus generally completely neglect to pinpoint the specifics of the designed insurance retirement plans they are referring to, as well as discussing all the options and the best case or even the most common scenarios associated with retirement plans through insurance. The Option A Level Death benefit is the option most financial advisors refer to in their critique of insurance products used for retirement planning. The level death benefit is a level amount paid for insurance over the life of the policy. In other words, one will pay the same amount of insurance costs at 35-years-old and as they pay at 80. 

    In theory, this might make sense for budgeting and assurance of costs; however, it is extremely dangerous for retirement planning. For example, if an individual is contributing $300 a month for insurance and retirement on a level death benefit (which is the average cost of insurance over the life of the policy), a large percentage of this $300 will be paying for the insurance. This means less money going into the Index account, meaning less growth through compound interest. Ultimately, this is a horrible retirement plan, and exactly why financial advisors speak of it so poorly. Additionally, in a level plan, one might save for 20 years and have $300,000 cash value and $400,000 of life insurance policy. And yet if they were to pass away, the beneficiary would only get the $400,000 of insurance and absolutely no cash value, which would go back to the insurance company. So basically you get one figure or the other…whichever is the larger of the two. This sounds terrible…and is! With a level death benefit plan, the insurance agent’s commission upon sale is around three times more than with increasing death benefit (option B) plan. It is detrimental to an individual’s retirement plan to do a level death benefit. The only scenario in which an individual should consider a level death benefit is if they are over the age of 50. At that point, averaging the cost typically could make mathematical sense.

    Increasing Death benefit (or Option B) is the opposite of Level Death benefit. This option is designed specifically for cash accumulation and retirement planning. This option says that one will pay the lowest amount of insurance cost possible and let the insurance cost gradually increase over time as the customer ages. This allows for the majority of your money to be contributed to the Indexed fund. With the maximum amount of money being contributed to a system making 7-8% compound interest on average, the money gained outweighs the increase in insurance by a significant amount. Because the insurance portion is based on a one-year renewable term, the cost of that insurance increases minimally each year. This is a good thing in retirement planning because when an individual is a healthy 35-years-old, his life insurance cost is going to be very low. Therefore, if he starts his retirement account in his 20’s or 30’s when insurance costs are very low, the majority of the money he contributes is going into the Index fund and it will drastically outweigh the small incremental costs of one-year renewable terms

    financial planning

    With an increasing death benefit, the insurance costs are designed to be as low as possible, they increase over time, and the maximum amount of money is put into the Index fund. This method creates an extremely stable and profitable retirement plan. Even when an individual is in their 70’s and 80’s and insurance cost for a one-year renewable term are high, the amount of cash and interest gained over the past 30 years easily outweighs the cost of insurance because the Index was maximally funded in the early years of incubation. The math backs this statement with an increasing death benefit plan outperforming level death benefit plans by significant amounts of retirement income. An additional advantage of an increasing death benefit is that every dollar contributed to the Index is added together with the insurance to provide a NET death benefit to the beneficiary. For example, if someone had an increasing death benefit and got $150,000 of insurance, then 20 years later accumulated $300,000 in their index account, the NET death benefit for their beneficiary would be $450,000 = the combination of both life insurance and cash value.

    The MPI system is designed not only to provide an increasing death benefit, but also allows the lowest legal limit of insurance that one is required to buy in order to get maximum tax benefits. For example: If a 35-year-old wants to contribute $10,000 a year, the IRS has a tax code 7702A otherwise known as the Modified Endowment Contract (MEC) limit. This explains a 35-year-old contributing $10,000 a year needs to have around $300,000 of life insurance to qualify for all the tax-free benefits. With the MPI system, each plan is always written with an Increasing Death Benefit, keeping costs as low as possible, and with the individual purchasing the lowest legal limit (or MEC limit) of insurance, so that the maximum amount of contribution is going into their retirement account instead of to the insurance portion. By doing this, the MPI system provides insurance for the client at the lowest limits, maximizes the retirement account, allows maximum tax-free benefits, and it outperforms all traditional IRA’s by up to 400%. If the MEC limit of insurance for an individual is not enough for their current life-situation, it is best to buy a second term-policy to make up the difference, as we want the IUL system to have the lowest costs possible in order to maximize the Index account.

    Lastly, with insurance products, there are provisions called LIVING BENEFITS. Living benefits are benefits that do not exist with 401K or other IRA accounts. Living Benefits are benefits that allow an individual to advance on their retirement, at dollar for dollar or a small discount, if they are terminally ill or chronically ill. For example, if an individual has $1,000,000 in life insurance and then they are tragically diagnosed with terminal cancer or another life-threatening terminal disease, they have the option to advance on a percentage of their life insurance and receive an immediate check, in hand. This could then be used to acquire the best medicine or care, take a last vacation with the family, or for any other need, making the last few months or year of their life as comfortable as possible. This benefit also provides the family security from excess debt typically incurred from treatments and other procedures through terminally ill individuals. This living benefit is a huge perk to retirement planning through Insurance Products and assuredly allows the happiest and most secure future for any individual.

    In summary, The Science of Retirement, or MPI system, is revolutionary in its design, maximizing results while minimizing risk. Being based on the concept of pure financial freedom in every aspect of retirement, it assists every individual in their pursuit of security and happiness. Through years of research and mathematical discovery on how to maximize every aspect of retirement planning, the system of “Maximum Premium Indexing” was created. Through this MPI system, individuals can thrive during retirement; not just survive. The current financial model most of the world follows has made “retirement” synonymous with “downsizing.” This terrible misconception has been sold to the world because of the flawed systems available. Individuals who work hard and stay disciplined can have an income up to 4x more rewarding than their current IRA or 401K can offer. Thriving in retirement should be the norm, NOT the exception. Only through a system that maximizes all 9 Factors can an individual accomplish these results.

    I challenge every individual to actively educate themselves on retirement planning and financial security. Through study and education, everything presented above will be confirmed as accurate and objective. Knowledge is power and through good financial practices, an individual can experience financial freedom for the first time in their life, but it requires hard work, discipline, and vision to set goals and accomplish them. For more information on how The Science of Retirement works or other explanations, contact:

    Curtis Ray @ Curtis@SunCorFinancial.com
    Curtis Ray
    Apr 24, 2018
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