Life insurance can provide you with the protection you need to secure your legacy while also creating a sound retirement plan. In this episode of Money Script Monday, Luke presents how financing an Indexed Universal Life policy can help elevate your current retirement strategy.

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Video transcription

Hello, and welcome to another episode of Money Script Monday. My name is Luke Geller.

Today, we're going to be talking about using leverage to jumpstart your retirement.

First, I want to start with a little bit of a personal story about me. Growing up I used to play every sport under the sun.

I found out pretty early that football was actually going to be the sport that I went with, just my dad pushed me towards it, and I excelled a little bit at that.

Fast forward to high school, I get there, and I actually played a position called offensive line, where these are the biggest guys on the team going up against the defensive line, in the trenches, battling every day.

And in high school, I was actually one of the smaller players on that offensive line on my team.

Really early on, my coach helped me understand that in order to play, in order to even participate on the team, I needed to maximize my footwork and my technique.

I needed to be able to utilize the skills that I had available to me at the time in order to get any playing time. And I actually didn't start till I was a senior in high school on varsity.

Most players, if they know early on that they're going to be going to college and doing this, they're playing as a freshman on varsity and starting and doing all this.

No, I had to work hard. I had to build my technique and my footwork in order to get any playing time.

My senior year I played really well it was up and down, but I played well. I ended up going and playing at a junior college and learning more and getting better as well.

And then finally I got a scholarship to a four-year college, division two, in Colorado.

Funny thing is I get there, and I look around and I went from being one of the smallest players on the offense line in high school and even in junior college I was probably average.

And then at my four-year, I was one of the biggest players on the offensive line.

I still had that same technique, I still had my same footwork that got me to where I was, but now I had that added growth that added ability of being bigger than the opposition and bigger than the other players on my team, too.

It turns out it worked out really well. I ended up being two-time all-conference and having a great career at my four-year and meeting some of the best friends ever and it was an awesome experience.

So, I tell that to you today because I want to talk about the power of leverage.

The definition of leverage is taking something and maximizing it to its ability.

Now, there's different types of leverage as well. So not only maximizing something to its ability, but in the investment world, borrowing money, reinvesting that money, and earning more than what you're paying on that money already, that's leverage as well.

That's using the leverage in the form of investment, but also maximizing something to its ability.

What do you expect from retirement?

Let's look at what do you expect from your retirement.

If you're a 50-year-old male and you're earning about $200,000 in salary, then you should have saved $1.24 million in your retirement account.

You need to save, have $1.24 million in your retirement account. But really you probably want even more than that because if you're making about $200,000 a year, more than $200,000 a year, most likely you're above average.

And so, you don't want your retirement account to be average. You want to be above average as well.

If you're not there yet, if you're behind the eight ball on that, how can you catch up?

When you're looking at retirement accounts, indexed universal life is a great account for that, is a great retirement account.

You're utilizing tax efficiency. You're growing money tax-deferred, and then you're taking money out in the form of loans tax-free.

You're protecting yourself from stock market volatility using annual reset, having that 0% floor.

You're also protecting yourself from longevity risk because of that power of the IUL and having income that doesn't run out.

Utilizing that as a retirement tool is a great option for you.

But if you think about it, again, we're trying to jumpstart your retirement, we're trying to get you back on track and catch up if you're not at that $1.24 million mark, or if you need even more than that.

You want to be above average. How can we get there?

Well, if you have, in this example, it's going to be $53,000 a year, and we put that into an account for five years, what can we put that in?

You can't really put that into a 401(k), you can't really put that in an IRA, you can't put that in a Roth, there's limits to what you can put that into.

You could put that into a managed account or an IUL. Those are two viable options that you can do to help build that retirement.

Let's take a look at that, at those two options.

Retirement Options

In this example, we're taking $53,000 a year. We're putting that in over five years.

It comes out to about $270,000 in total out-of-pocket expenses for a client. That account value at age 65, at that retirement age, is about $536,000.

Now, but if you're in a managed account, there's taxes associated with it, there's some fees associated with it.

So, when all is said and done, if we want that money to last until you're age 90, if you want to draw down that account to age 90, the most income you would get is $33,715, and then at age 90, that account would be at 0.

Now let's take a look that same premium going in and putting it into an IUL. We're going to put that $269,250 over five years into an IUL policy.

We're going to have an account value at age 65 of $467,000, but that's all tax-deferred, and the money you get from that is tax-free in the form of loans, and you have a death benefit on top of it.

You would be able to take out $38,000 a year until age 90 and still have a death benefit for you and money left over.

You don't have to worry about taxes on that, you have more money than you would if you put it in that managed account, and you have a death benefit on top of it.

That's a powerful strategy for retirement.

But remember, again, we're trying to jumpstart this.

We're trying to ignite that retirement to catch up to where you might need to be, or even increase where you currently are.

And a way to do that is using financing or leverage, the power of leverage, combined with the power of an IUL to get those results.

In this next scenario, we're going to look at a financed IUL, where the client is still putting in that same about $270,000 over five years out of pocket, but in this scenario, what we're going to do is we're also going to use other people's money.

We're going to borrow money from a bank to add on top of that, about $750,000 in total premiums on top of the $270,000 the client's already paying.

For years one through five, the client's putting in about $53,000. The bank is also putting in about $50,000 for five years.

Then, the bank's putting in $100,000, years 6 through 10.

Then the client will pay back that bank using leverage, earning more on the money than they borrowed, and paying it off in about 15 years, having an account value after that of $675,000.

So, we went from having an account value of $467,000 to having about $200,000 more, because we used that power of leverage for that same amount of premium going into it.

Now on top of that, and this is where it really accelerates it, is in that income phase.

You can take out $85,000 of tax-free income by financing that premium from age 66 to 90 instead of just $38,000.

We're more than doubling the amount of income for the same premium outlay that you're putting into this policy by using the power of leverage.

To take it back to that original story, you're utilizing that technique, you're utilizing that footwork, you are utilizing the advantages of an IUL.

But you're supercharging it, you're making it you’re increasing its size four-fold and making it one of the biggest kids on the block, and you're able to take out almost double or more than double the amount of income for retirement.

Now with this strategy, not everyone can qualify for it. There are some income limits, there's some estate limits.

You need to talk to a financial professional about what qualifies you.

How can you qualify to be able to use this financed IUL and take advantage of that leverage and go from being the smallest kid to one of the biggest kids on the team?

Being that all-conference player, taking that almost double the amount of retirement income from it.

I hope you learned a little bit today about how to use leverage to jump-start your retirement. Until next time.