Good morning, this is the Kim and Jim show with Money Management. Hey, have we got a quickie, but it’s going to be good. You know, I hear all this junk about you never use life insurance as an investment. You know, who says that, people that don’t know. Where are they getting it from? Well, the main thing they say, well it’s too expensive compared to what? I’ve got proof that that is a total 100% lie. The people that say that prove it prove it.
Okay, prove it. I just want to show you a couple of things real quick here. In the video, a chart is shown and the video was zoomed in, it is about comparing growing money in the stock market versus Indexed Universal Life. In this chart, we compared an IUL and a mutual fund. Now you’re going to say oh well, probably what you did was you let the mutual fund grow at less than the IUL no, that’s not true as the other way around; I’ll prove it to you in a minute.
We started the computation with a $100,000 and it did a 10 percent increase at the end of the 1st year so it will be worth $110,000 so it is a ten percent increase. So the mutual fund will also increase 10% so they will be the same which is 110,000. Next year you had a 15 percent reduction so guess what happened? The mutual fund went down from $110,000 to $93,500. What did the life insurance policy state?
IUL stays the same; it remains at $110,000 because it never goes down. Now the next year you had a 5% gain. All right, five percent of $110,000 now in the IUL we got $115,500, while with the mutual fund you will gain a 5% with the $93,500 so it will be $98,175. So in three years, the IUL has outperformed the mutual fund by 17.6%.
Now, let’s look over here. This is where I want to prove to you. We did the life insurance computation. By the way, this has to be approved by my compliance department. They did the computation and not me and they are comprised of attorneys and CPAs which means these numbers are right. They are not wrong.
Now we use the interest rate for the IUL at 6.9% and we will assume that the mutual fund is going to earn 8 percent, hmm are we being fair? What now? When this person who is 45 years old puts in $25,000 a year to either plan, we’re going to assume he does it to both plans. What’s it going to look like?
Well, when he starts taking money out at age 65 he’s going to be able to take out $62,412 tax-free from the IUL. On the mutual fund, he can’t, he’s got to take out more because of the tax but the most he can net is $40,141 and it goes broke when he is 90 years old.
So if he still alive at 90 there’s no more money left. We stopped our computation at around 120 years old, I don’t think anybody’s going to live past that so what did he take out, a total of $1,622,712 on the IUL and a total of $1,033,666 on the mutual fund, and it shows that the IUL is roughly 55% more than the mutual fund. Now people that don’t like life insurance and they think it is a lousy investment because the costs are so high. The costs are too high compared to what? This is an honest comparison; the total expenses in the IUL will be $155,157. I think we did that at age 100 and we only could do the mutual fund for age 90 and the total expenses will be $316,353.
So if you can see on the table, on the IUL, you will only pay half the expenses and you will have 55% more money in return but, still, some people say that life insurance is a lousy investment. I would agree, assuming you don’t know what you’re doing with the person that sells it to you. You can design this thing in a way that there is a maximum return to the client or maximum return to the person selling it.
If you’ve got an interest in it and you would like to see how it works for you. Make sure to give us a call at 601-990-2102 or you can email us at jim.mckennon@gmail.com or you can text us at 601-757-6488. Hey, make this a great week! Thank you.
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