108: The Value of IBC in Every Stage of Life

108 IBC In Every Stage of Life

Speaker: [00:00:00] Hello, everyone. I'm John Montoya, and I'm John Perrings.

We're authorized Infinite Banking Practitioners and hosts of the Strategic Whole Life Podcast.

John Perrings: Episode 108, The Benefits of IBC at Every Stage in Life. Hello, everyone. Welcome to the Strategic Whole Life Podcast. John Perrings here with John Montoya. And we thought we'd have a little conversation today about a life cycle of infinite banking and whole life insurance. And so the question Comes up, why is it even called whole life insurance?

So that's something to think about. And the answer is because it's with you your whole life, as opposed to term insurance some of the other types of insurance that we'll talk about. Whole life insurance is a, is an insurance policy that will. Last your whole life and will pay out at the end of your life [00:01:00] when you die, not if you die.

And because of that guaranteed future cashflow, there are a lot of things that happen all along the way, your whole life, while you're still alive. And, we were just thinking about this the other day and. Really every stage, there's a benefit that is created at every stage of your life.

So we're going to talk about this really from your first job. And then the next stage is starting a family.

And then as that's happening, you're in your accumulation phase in life. And then right around retirement, there's a pre retirement and a just retired phase that you got to think about. And then during your retirement, of course, and then happens after that when you die and the legacy transfer that happens.

And then the last stage of this is we'll talk about why is it possible? Why can all, why? Why does all of this [00:02:00] happen? How is it possible that it can happen? And that really gets down to the unique traits of whole life insurance. So let's kick this off with with our first job. So here we are just getting out into the workforce, getting our first paycheck.

You probably look at your pay stub and you're, Wondering who FICA is and getting that first shock of what happens with the money that comes out of your paycheck. All those things, but it's good. You're earning money, you're on your way. And from a life insurance perspective, you're young and healthy.

And so what better time to qualify for life insurance than when You're the youngest you'll ever be from that point forward. And you might be in the best health you'll ever be in at that point forward. So what a great time to buy life insurance. And when you're in your first job, I remember my first job, just in like the corporate world and this could [00:03:00] apply. Anywhere really you walk in and the HR person will give you this big packet of information. And in that packet will be the 401k that you're now automatically signed up for.

You have to opt out if you want to not do it. You're automatically signed up for a 401k now and your money, before it even hits your checking account, a portion of it is rerouted into. The highest risk least amount of control tier of assets that you can possibly ever own. It's the worst thing out there in the, from those factors.

And So those are some things that a lot of people in their first job, I think they get, they don't know any better. And so the first thing they do is they start locking their money away for 20, 30, 40 years. So with whole life insurance, it's the cheapest it'll ever be. And you've got this incredible liquid place to store cash as [00:04:00] you get started in the working world. What do you think Montoya?

John Montoya: I think all that is true. And I think when it comes to getting out in the world and starting your first job and the ability to save money, I think the first thing that people hopefully will come to learn, especially if they read Nelson's book is. How to think properly about savings and the conundrum with the 401k offering is it's not really, I mean, it's savings, but it's, it's actually investing.

And when you're talking about establishing a foundation for your future self, really for all stages of your life, you start with savings. And. Then, unfortunately, our school systems do a very poor job of teaching us about money at best. They're going to teach you, there might be a class on investing but they don't separate [00:05:00] out the difference between saving and investing.

And one of the Things about Nelson's book and what Nelson would always preach to everyone is you've got to think, decades ahead generations ahead and having a whole life policy automatically allows you to do that. And, It really helps to get you out of what I think of as a fiat mindset where, the government saying, Hey, we got this 401k account that we created.

This is a good thing. And you're going to defer taxes on it to an unknown date. And we won't tell you when, what taxes will be at that future date, but trust us and, put it in here for, three, four decades. And, um, when you could. Allocate even just a small portion of your overall, call it savings or investing budget, whatever you want to call it.

But we talk about building a foundation and 401k is not a foundation. It's a plan for retirement a whole life policy. It is the foundation [00:06:00] for every stage of your life. And that's what we're talking about here. What do you start with? You start with savings first, not investing. You start with the foundation, right?

We've said, I think frequently enough on the most recent episodes that, you don't start with the roof, you start with the foundation. And that's what this policy is. And like you put in the notes here, John, it is a liquid place to store cash. How many times in your life are you going to have a need for cash?

For access to cash every single stage of your life. You might as well get started now in preparing for that, because if you don't prepare for it, you're going to you're going to be leaning on your 401k administrator or your credit cards or a family member. You're not going to be self sovereign.

You're not going to be able to have total financial control over your life. And that's something that a whole life policy. We'll start to provide [00:07:00] once you realize you have all these very real benefits starting Really from day one of this whole life policy. And yeah, you're locking in your health.

And that's a great point too, because health is not something to be taken for granted. And I know when you're young, you feel invincible. I certainly did. But then, if you're fortunate enough to meet the one and get married and have kids health takes a back seat.

I know when I was in my twenties had three kids my neighbor called them Irish triplets cause we had them back to back. And I think my weight. I put on 30 pounds in a short time frame. Thinking about health, I was more preoccupied about kids and diapers. And it's you take your health for granted for too long, it's not going to be there anymore.

And so the earlier that you can lock in A permanent legacy a permanent guaranteed fixed premium that's locked in for your entire life, the better off you're going to be financially. I talk [00:08:00] a lot about about how a whole life policy is somewhat similar. To a 30 year fixed mortgage, where, if you buy a house and you shop for your mortgage and you compare the different offerings out there, you can choose between a 30 year fix, just to keep things simple, 30 year fixed and a one year adjustable rate mortgage.

I'll ask people, why did you choose a 30 year fix? And the number one answer is because they wanted stability. They wanted the comfort and peace of mind of knowing that they're Mortgage payment is never going to adjust ever during the life of the mortgage. And that's the same peace of mind that comes with a whole life policy.

So the younger you are, when you get started, the lower your cost of insurance is going to be. And it's going to be fixed, locked in, guaranteed that the life insurance company can never increase it on you for the rest of your life. And that's a powerful foundation to build everything else on. So first job, yeah, absolutely.

You should be looking at a [00:09:00] whole life policy, locking in your insurability and thinking about, and not just thinking about it, but aligning your actions with your mentality and how you think and savings becomes, savings comes before investing.

John Perrings: Yeah. And you mentioned, um, worrying about kids and diapers and not being able to, focus on your health. And that's just one example of your financial life is not, Always about the numbers and the math, life is life. And the more control and flexibility you have to, make decisions that are right for you at the right time, the better off you'll be.

And, diverting a bunch of money into an account you can't touch for 40 years, doesn't seem like a smart way to um, get started because the other side of it is, [00:10:00] going back to Nelson's book, Becoming Your Own Banker, he talks about the need, your need for financing throughout the course of your life will likely be greater than your need for death benefit.

And I don't want to get that confused. We still want. The death benefit, but that need for finance over the course of your entire life because we don't know yet if you'll get married. We don't know yet if you'll have kids and a family, but you'll definitely need financing. And so this just, it's another example of why you shouldn't wait until you have dependents to buy permanent life insurance.

It's something that can be a huge benefit to you, whether or not. Your family starts off or not. So speaking of families, that's our next one. That's the next phase, starting a family. And so what does whole life insurance do for us in this stage? It does quite a bit. The number, the first one is.

[00:11:00] Obviously, that death benefit piece of it, we now have people we care about that we need to protect financially if anything were happen, if anything were to happen to us, where our income is lost to our family in the event of premature death or disability we need to protect against the loss of that income.

That's the first, that's the protection piece of it that, People start caring about a little bit when they, finally get married, have kids, those types of things. Um, We also remember our, we, since we started early, we've built up a decent amount of cash value and what could that cash value be used for?

It could be used to, for a down payment on our first house. Maybe you need a, maybe, you just had twins and you need a minivan. I don't know. There's all kinds of things that could come up that having cash would be a good thing. And because you started early when you got your first job, you actually probably have a nice [00:12:00] little base built up, a foundation built up that you can, even outside of the protection side of things, you can Really start to, to use that.

John Montoya: Yeah. And the thing about starting early and building that base is that no matter what, this is going to get better each and every year for the rest of your life. And that's an idea that people have a really hard time wrapping their brain around. The fact that you can put money someplace and it's going to get better because

At some level, everyone is risk averse. No one wants to, no one enjoys losing money. And when you invest, it's that there's always going to be a trade off with risk. But when you have a whole life policy, you have a guaranteed increase in cash value every day. single year, you have a step up each and every year.

And you see this in the [00:13:00] blueprint that gets provided. You have the guaranteed ledger, and then the non guaranteed dividends will reflect in the non guaranteed portion of the illustration that you see. And that's all. Really bonus money but there's a track record there of over a hundred years with all the companies that we work with that they have they've hit their worst case projected earnings.

They have a surplus and can pay out a dividend. And so that just adds to the growing cash value and death benefit each and every year, but wrap your, try to wrap your brain around the fact that this gets better without any luck, skill, or guesswork. And with a growing family, that's only going to put you.

In the driver's seat for everything that comes along with that growing family including eventually, hopefully having the ability to pay for your kids to not only go to college, but to go [00:14:00] to the college of their choice. And that's something that I'm currently working on. Living through now I mentioned my quote unquote, Irish triplets.

My middle child is graduating from college in a couple of weeks and it's the big debate in the family to either send her to a UC school or out of state The school that she wants to go to is a private college out of state and it's more expensive. And how do we cover that?

It's a good thing that each of the kids have their own whole life policies and I've been saving premium into them each and every year. And now the option is the financial option doesn't have to come down to taking federal loans. And she does have that option where when it comes to deciding between you got a school that is in state tuition, lower cost, but not her ideal choice, or out of state, higher [00:15:00] cost, but the money's there so that she can make a choice that that, will make her happy and pursue a path that will, ultimately, I think, just, what life is all about it's not about working for 40 years and having a 10 figure balance sheet.

It's about happiness. And I think just real simply being able to save in a whole life policy for my kids now, especially with my daughter, with the choice that she has to make with college, we've given her an option to say, yes, you can pursue. The college that you want to go to. And so that, that's a very powerful thing that doesn't show up in any balance sheet anywhere.

John Perrings: And the, again, because you started early, the capitalization phase is already done. So you've taken your early years and you've kept, you've fully capitalized a life insurance policy. And what that means is the cash value It's a positive growth [00:16:00] factor on the cash value. So Montoya just mentioned how it always gets, it only gets better from here.

And now you're at a point where you have a, at least one policy that is now just hitting its stride basically. And every dollar you put into it in the form of paying a premium creates more than one new dollar of cash value. So that's a good point.

John Montoya: There's another point I want to share too. And this relates to 529 accounts because. If you choose to open a 529 account for your child, that is basically a spend down account. It's an asset that colleges are aware of, and they're always happy to see, because that means that you've put aside money specifically for college, so it's going to count against you in financial aid formulas, unlike a whole life policy.

And, What's going to happen is that 529 account, it's going to be spent down to pay for college to basically nothing. [00:17:00] And the huge difference there with a whole life policy is that we're going to take policy loans. And because I am teaching her how these policies work and the idea behind being an honest banker, she's going to repay these loans over her time frame, but she's never going to have to start from zero.

The six figures that I've been able to accumulate in her whole life policy. They the compounding is not going to be interrupted to go to college. We're going to take policy loans each year for her for her tuition. But that interest on the loans, while they're going to capitalize while she's in college, she's going to pay them back.

And what's going to happen is she's going to recapitalize the policy, but she's never going to interrupt. And I'm just going to be talking about the compounding effect of that growth on that now six figure balance sheet within that policy. So instead [00:18:00] of destroying that wealth that took, 15, 16, 17 years plus to create, I'm It's always going to be working for her and she's going to recapitalize and be able to have the ability to take future loans to maybe start her business or, do whatever she wants to do, but she has that compounding effect.

For all stages of our life that wouldn't exist with a 529 account.

John Perrings: Yeah, and, you just said it right there. Imagine, saving for 18 years and only to just spend all that money On college, and then it's just gone forever. And that's a big problem in general with the typical mindset around finance these days. It's a save up, spend down mentality.

Across the board, we all focus on just trying to save as, accumulate as much as we can. No one saves these days. So they all, they [00:19:00] invest everything and they try to grow a big retirement account. And then they hope they can, they hope they save up and invest enough and accumulate enough that they can spend it down in retirement.

And then that money has to go, has to do all these different jobs. But in this scenario, we're talking about college. Imagine being able to save up and then never lose the growth on that and giving your child the opportunity to learn about, Hey, if you use the capital in this quote unquote bank, you've got to pay that back with interest.

And they're now getting their first lesson of, paying maybe it's not their first lesson. Maybe they've been doing it before, but they're paying that back with interest and they're becoming their own banker and they have skin in the game. So it's a pretty powerful lesson and that, that takes us to the accumulation phase.

So while all of this is happening, we're in the [00:20:00] accumulation phase and we want to get away from that save up, spend down mentality. Where every generation just starts off at the same place, basically, that the previous generation did. We want to create a scenario where we can accumulate and then also get some strategic leverage over the accumulations that we've, that we're building along the way.

And so at this stage, we've got a family, we're well into our working years. Shouldn't say we're well into our working years. We're in our working years and we're accumulating right now. And we now have cash value that we can leverage. To buy other assets all along the way during our working years.

And one of the common objections to whole life insurance is the quote unquote rate of return, which, Of course, we want to look at interest rates and we want to look at growth rates, but whole life insurance is a cash asset. So comparing it to [00:21:00] investments is incorrect and improper. However, because we have safe guaranteed leverage on that cash value, we can still buy all the investments that we want to all along the way. That's why it's sometimes whole life is sometimes called the and asset because you can buy whole life insurance and you can buy. Whatever investment you want it to buy.

Now, I would say we want to try to focus on income generating assets. And that way we're snowballing our income and we can just, we can make that we can make that happen at a, to a greater scale over the years. But right now we're in that accumulation stage and what better way to do it than, Then to have already strategically capitalized.

And now we have some safe leverage that's under our control, under our terms, that we can go out there and buy even more assets to get the growth factor that most people try to get right out of the gates and they miss the capitalization [00:22:00] piece. So if anything goes wrong, the whole thing blows up. In our scenario, if anything goes wrong, you get a mulligan because you have this, because you have the safe leverage and no payback terms and you're in control.

John Montoya: Yeah, I think of it, this accumulation phase as going from an emergency fund to an opportunity fund. And I hinted in the first job phase about why you want to save before you invest in I didn't add that first things first, you need an emergency account. You need to have a rainy day fund.

But here in the accumulation phase, you're what started out as your emergency account, perhaps, when you started the whole life policy. And that's something that you definitely need to have. Every household should have an emergency account. But now, because of the nature of this policy, it gets better Each and every single year, no luck, skill, or guesswork required.

Now [00:23:00] it's become an opportunity fund and all the points you just hit on John are perfect because you have this advantage and it's basically you've put yourself in a better position. To take advantage of whatever investment opportunity comes your way because you have access to cash on your own terms, it's not locked up or, whether it's in a locked up in a 401k or it's locked up in some other asset that you have to liquidate, your whole life policy is a cash asset that gives you the freedom to acquire more wealth building assets.

And that's where the AND asset really comes into play. And when you're able to leverage such an incredibly strong foundation you're able to really multiply your net worth so much faster. And that just can't happen when all your money is tied up in investments. You can't leverage to create more wealth.

[00:24:00] You just don't have that ability really with unlike the ability with a whole life policy because of the nature of being able to collateralize and take tax free policy loans against your growing cash value.

John Perrings: And in Becoming Your Own Banker, Nelson talks about creating a tailwind throughout your financial life and by, taking over the banking function. We're allowing interest rates to work in our, on our behalf, as opposed to, letting interest rates work for somebody else's financial system.

And that it's like flying from San Francisco to New York, as opposed to New York to San Francisco, where you're flying into a headwind. So we talked about accumulation and now we're in this stage where we're getting close to retirement. And the focus now starts to shift and what you'll see when people start getting in their fifties and then especially in their sixties, they really start to pay [00:25:00] attention to what's going to happen in the next phase of their life where a lot of people and myself included I didn't think about this stuff when I was young and it's normal not to, seems like forever away, but The day will come.

And so when people start getting in their fifties, they're like, Oh man, I guess I'm getting close, snuck up on me. And they're now looking at their finances in a different way. And there are a couple of things we want to make sure we have at that point. We want to make sure we have a really strong, Foundation and certainty assets that have guarantees and can never go down and have guarantees to only go up.

They may not have high rates of return, but they have that. We know they're always going to be there during retirement. And the reason we want that is because the, it protects all of our other investment. Assets, all of our growth assets, we can get more out of those growth assets. And we have a couple episodes about this on the [00:26:00] podcast to look out for those, but we can get more.

And the thing about it is once you get to this stage, putting money into investments for growth, you actually because you're getting close to starting to have to withdraw money what you'll find is it doesn't actually do a whole lot. for your accumulation because it doesn't have that much longer to go.

And so when we start thinking about retirement and then legacy transfer, this is where people start thinking about it. If they have whole life insurance or they want to, or they get whole life insurance at this stage you're actually creating a really big spread in terms of what you're creating for your family, because.

While the money you invest doesn't have a huge effect because it doesn't have that long to grow at this stage, every premium dollar you pay into a whole life insurance policy Instantly creates a multiple of every [00:27:00] dollar you put in there. It creates a multiple on the death benefit, which is an asset that can go to your family.

And if there, if your family has this asset that allows you to use and enjoy more of your assets all along the way, which we'll talk a little bit more about in the next phase.

John Montoya: Yeah, there's one word that comes to mind in this pre retirement phase, and I define pre retirement as a period of about at least five years, but it's more like I'd say 10 years. Before you actually plan or want to retire. But there, there's one word that comes to mind and it's efficacy. The rather, I don't know if it's a coincidence or it's ironic, but what happens with your 401k or IRAs when you reach age 50, the government gives you a bit of a carrot and says you've reached a certain age and now you can put it in a little bit more.

And the thing that most people miss. Is that [00:28:00] the efficacy of putting more when you're so close to retirement isn't all that great. It's not going to produce more income. Every additional dollar that you put into your 401k or IRA isn't going to spell out more income. And that's where the power of these whole life policies really comes in because you're increasing your efficacy the amount of future income.

That you're going to be able to create in retirement. And I want to end by actually contributing those dollars, those extra dollars to a whole life policy versus throwing it all in to your qualified retirement plan. And that's something that the average person doesn't know about and should know about.

And if you need to do a deep dive on it I think it's episode 95, where we have an interview with Walter Young and you should pick up his book, The Fifth Option. It's a quick read, but [00:29:00] Walter does a great job of spelling out the efficacy of these whole life policies and how much more in retirement income options you'll have.

Including more guaranteed income in retirement because you've learned about the power of whole life policies and just, the additional benefits you're going to get by taking those extra dollars. And instead of putting it all into a qualified retirement account, which is the kind of de facto conventional way of thinking.

But you start to relook at this whole life policy and realize it's not just for the death benefit. It's not just for the Opportunity Fund it actually can help beef up your retirement income. And it's a really powerful strategy and it's not just one strategy. There's multiple strategies that you can deploy by having a whole life policy as part of your retirement plan, but you need to.

You need to be aware of it. So you reach this pre retirement stage five to [00:30:00] 10 years before your planned retirement. You really want to kick this into gear sooner rather than later, cause you don't have a whole lot of time and you have to be as efficient as possible with every extra dollar you're going to save.

So that you can enjoy the retirement that you want to have. So that's what I'd want you to realize in this pre retirement phase with these whole life policies.

John Perrings: Yeah, that's a great way of putting it. The efficacy of every dollar, what's that dollar doing for anybody? Is it just adding another dollar to your retirement account or, could you be getting a multiple on that dollar? That would be going to your family that would allow you to enjoy more of all the other dollars that you put in there.

And so, and that takes us into the retirement phase. Now you're in retirement. And now because you have this certainty asset, you can the math, all the latest academic research shows that by having a certainty asset like whole life insurance allows [00:31:00] you to enjoy.

Twice as much or more of your other assets, meaning you can double your retirement income by having permanent life insurance in place alongside all your other investment or retirement assets. And. The easiest way to explain this is just the volatility buffer. Anytime the market goes down and you have to pull money out of your retirement accounts, you have to cannibalize the shares that you have to liquidate more shares to get the same amount of income that you need, which is a hard coded number a lot of times, and that kills off your account and because you have to.

Sell off all those shares, your account can never rebound and you can end up running out of money. It's called sequence of returns risk, and it's a big problem for a lot of retirees. But when you have a certainty asset and the market goes down, you can switch over to your life insurance cash value, for example, get the retirement income you need [00:32:00] for that year, and then let your account recover as the market comes back.

And. The data shows that if you even if you have even only two years of retirement buffer money, that can make a night and day difference and give you way more. Income, the ability to take away more income from those assets than what you're, typically, told you can get, like the 4 percent rule turns into more like the 8 percent rule and you can get a lot more money.

And then in addition to that, you have a lot of tax strategies. You have a, if you have a death benefit equal to the amount of assets that you own you can do some things like a charitable remainder trust where you could, donate. Say a house or a piece of real estate to a charity, you get a tax deduction on that sale.

You get a guaranteed income annuity on the full value of that house or close to it. Without taking the taxes out, I [00:33:00] guess is a better way of saying that. And then you get, and then that would offset the taxes on another asset, like your 401k or IRA pulling money out of there. That's just one example.

And then you get into all the estate planning stuff as well. I guess the the other thing in retirement, John, is the, that's the time we have to start thinking about, possible health issues as we get older. That's the, probably the riskiest time that we have that there could be some significant expenses due to health.

And we've seen what's happened with healthcare costs over the last 10 years. They've just skyrocketed and people. People could find themselves in a pretty bad situation if they don't have some some sort of protection against some of these healthcare costs and the accelerated death benefit riders of a whole life insurance policy provide access to the death benefit amount while you're still alive and under certain conditions like chronic or terminal illness.[00:34:00]

John Montoya: Yeah. My own personal life with my wife, we're living through that and the ability to have access to the death benefit, where, If needed, if, and this, what I'm referring to is the chronic illness rider that is, has become more common with the whole life products that are out there.

If you can't do two out of six activities a daily living. A doctor certifies that you'll, the IRS will allow up to 24 percent of that death benefit to be accessed in the form of a loan, but it gives you the ability to make health decisions that with the access to cash now that you otherwise maybe wouldn't having to choose between a, what the speaking from experience, what Western medicine dictates as their, um, their standard of care, which if you don't agree with it if you don't have access to capital you're stuck with [00:35:00] that doctor's standard of care and, whatever the outcomes are going to be from choosing that path having it chosen for you versus, Having access to a pool of money that opens up even more healthcare options, and you can't put a price on it.

I actually had a conversation yesterday with an architect client of mine who frankly admitted that he had a bit of IBC amnesia. That's actually a topic that we've had on the show. But his wife and business partner. Does all the accounting and all the math for the business. And so we do our annual reviews and she's up to speed, but the husband was not, he's more focused on what, his business as an architect.

And he admitted, John, I, pay these premiums and I don't keep track of the cash value or anything like that, and, just remind me again, why am I paying these premiums? And so I hit on, all the reasons why. And what was interesting is when I got to the [00:36:00] chronic illness benefit, he's wow, I really liked that one.

That, that gives me a lot of peace of mind because he's in his 60s now and, they they are aware that, we're not going to be in our current health forever current if you're in good health. It's a prized status and I realize even myself, the older we get it's we can't take it for granted.

And for him, that chronic illness rider, just, it was like, yeah, that, that is a huge benefit. Over and beyond all the other great benefits, that was the one that he got really enthusiastic about and it's not to be dismissed.

John Perrings: It's huge. Just my health insurance premiums these days are just outlandish. And we had a little situation with our two year old a couple of weeks ago. And, you go into the ER and it's just the bill is outlandish these days. So, Really important [00:37:00] to have that protection, not only for your health, but also for your income.

The permanent life insurance goes from income protection to asset protection and health protection later in life. And so there's always a use, and that's why we're doing this episode. There's always a use for it. And so this kind of gets into the legacy transfer piece of it. When we die if your family is going to get that million dollars income tax free guaranteed from the death benefit, doesn't that give us a permission slip to spend the other million dollars because in, In normal times or, in normal circumstances, most people, they only have their retirement account.

That has to do so many jobs. It's gotta, it's gotta give them money to live on. It's gotta cover emergencies. And then it's gotta, it's gotta pass something along to the next generation. And whether or not you think passing something along to the next generation is important right now, if [00:38:00] you're young, I can guarantee you when you get older, it will become a priority.

 Trying to make your retirement account do all these jobs is really not, It's not fair to the retirement account. And it's not fair to you and your family. And so by having this death benefit you get the use and enjoyment of all your other assets and your family still gets the legacy transfer that, that you would like them to have.

John Perrings: And When it comes to estate planning, if you're in, if you're getting into the area where you might owe estate taxes when you die, there is no better way to pay for estate taxes and to cover that than life insurance. And what usually happens is when you get into your 60s and maybe even 70s, your estate planning attorney is going to recommend that you buy some life insurance to cover the estate taxes.

And by that time. If you even qualify for it, the premium price, you're well on the way up on the hockey stick graph of cost of insurance pricing. [00:39:00] And so the premiums are much, much higher. If you had just started this, when you were, when you got your first job, you would already have your estate plan.

You wouldn't need to. Go out there and, get crazy with the estate planning. It would already be covered because the death benefit is an amazing way to pay for estate taxes,

John Montoya: yeah. I would just finish off by saying hopefully it's your goal to leave the world a better place. And how can you do that? This is an easy way to do it. Whether you have loved ones you want to leave something to, or you have a charity, or even a college you want to, donate money to, alumni they're always willing to, accept your dollars.

But, you can dictate how that happens, and you can truly leave the world a better place, and specifically for your family. I firmly believe in helping your family with a leg up and leaving them in a better place and [00:40:00] life insurance accomplishes that better than any other financial tool. It was specifically, when you think about it, it the origination of these policies it's for widows and orphans.

And when you take care of your family it's the most thoughtful thing that you can possibly ever do.

John Perrings: I'm always a little bit astounded. I've heard it many times where people are like, yeah, I'm not leaving anything behind. It's okay. Like that. How do people get to that? That stage where they're just like, I'm taking everything with me or I'm spending it. I'm spending everything. That's did your life even matter at that point?

What were you even doing here? We didn't need you. You just lived for yourself. And it's a kind of a selfish mindset, to just not do anything to, make the next stage better for the people

John Montoya: yeah, and I was going to say too, it's, I think it's also a lack of imagination because you don't have to leave a lump sum [00:41:00] to a family member, to your named beneficiary. If you do your planning you set up a trust, you can designate to have a percentage of it. Each year or at a certain age when they become a more mature adult.

And there's different ways to do it. It's for those people thinking, I don't want to leave this large of, amount of estate in irresponsible hands. Okay that's good. So continue on that thought. How would you like to leave it? And that's where you, Work with an estate planning professional to make sure that there are clear instructions on how you want this transfer of wealth to be doled out in.

That's entirely up to you. But I think it's lazy thinking if, ah, if you're the type of person that's thinking that, you just. Don't want to leave anything to, to your loved ones because I would say maybe you were not [00:42:00] responsible enough to finalize the instructions to make sure that what you want to have happen will happen the way that you see fit.

It's your wealth. It's your money.

John Perrings: Yeah, when people are worried about, creating a trust fund baby or something like that, um, That's a training issue or a, a child raising issue, not a money issue. And and it's a legal issue too like Montoya just said. You can structure everything to work the way you want it to.

And create something for the future rather than just save up, spend down. All right. So we're going to wrap this up with the final section here. Montoya had some great notes about how this can even happen. Like, how is it possible that whole life insurance can do all these things and be that be valid through every stage of our life?

How's that possible, John?

John Montoya: It's pretty simple. And I might've mentioned it in the very beginning, but you have a guaranteed premium that's fixed. [00:43:00] For all years of your life, from the date of issue on your contract, you have this guarantee that your base premium will never increase on you. And a whole life policy is the only type of permanent Cash value policy that, that has this guarantee of endowment where the cash value is guaranteed to equal the death benefit at a future point.

And what I'm specifically talking about are the other types of quote unquote permanent cash value policies. Which are known as universal policies. And the main problem with these policies are that the mortality expenses are never locked in. You're essentially buying a life insurance policy. In fact, let me rephrase that.

You're not buying a life insurance policy. You're never owning the death benefit, like [00:44:00] you own the death benefit in your whole life policy, because in a universal policy, you're actually leasing that death benefit. You're paying for the cost of insurance that increases every single year. And what happens when you get into the later stages of your life, ages 60 and beyond, those mortality expenses start to go up exponentially.

Which means it's going to eat into your cash values, and unless the mechanism within those universal policies can stay ahead of those increasing costs of insurance, your premiums, it's, the policy is going to lapse on you. So it's not truly a permanent policy. Unless you can afford to keep up with those premiums, only a whole life policy because it's locked in and guaranteed from the date of issue, do you have that peace of mind of knowing that the foundation is built [00:45:00] on granite, it's bedrock, and it's always going to be there.

Unlike a UL policy that, frankly, is just a disaster waiting to happen, and anyone, any advisor who is selling you on these policies you've really got to do your own research, be your own best advocate, because oftentimes these advisors, unfortunately, I'll give the benefit of the doubt they, they don't really understand what's going on.

The long term impact of the cost of insurance increasing the way it will happen. And it's a design flaw, unfortunately. And the fact of the matter is these policies have a very small likelihood of actually being there all the way through your whole life. And so it's not even a comparison in my mind.

And I know a lot of advisors out there, they'll want to compare a whole life to any flavor of [00:46:00] UL, VUL, IUL, which is the most popular version of of the universal chassis. And they'll tout all the cash value potential, and it's really a disservice to the life insurance industry. And I personally think it leaves a black mark on the industry because you're, uh, you're putting the future stake of that death benefit.

At risk unnecessarily. And, all the things that we've just hit on with this episode, all the benefits at every stage of life, it's not just the death benefit, but it's everything that, it happens in between too, all that is at risk and it's unnecessary risk. A whole life policy is the only type of permanent cash value contract.

That will be there for every stage of your life. And you don't even have to think about it, no luck, skill, or guesswork. And, I mentioned my architect client. That was the other thing that he was really happy about because, he had IBC amnesia and [00:47:00] had really forgotten everything about, all the benefits with this whole life policy.

But when I reminded him that it's okay because, This is working, every single year, even if you don't understand how, or you're not keeping track of it,

John Perrings: Even if you forgot about it.

John Montoya: Even if you forgot about it, it's a beautiful thing.

John Perrings: Nice. Great. I think this is a wrapping up this episode. Thanks for hanging in there with us a little bit of a longer episode today, which is good. Cause hopefully our lives are long and we, we're going to need, we're going to need information for the whole time. If any of this was resonating with you and you'd like to understand how this could apply in your life specifically, head over to StrategicWholeLife.com you can book a free 30 minute consultation with us right there, and we'll talk about you specifically. And then if you're like the type of person that I was, and you just want to keep reading and learning about as much as possible before talking to anyone, we have an online course just for you called IBC Mastery, and it's right there at the top of [00:48:00] StrategicWholeLife.com.

You can get access to it. All right. Montoya, good episode. Thanks a lot.

John Montoya: All right. Thanks, John. Take care, everyone. Thank you.