Using Whole Life Insurance for Tax-free Income

Is Whole Life Insurance built as tax-free income vehicle, or as a tax-free asset?

What's the difference?

We are back to introduce the first type of Life Insurance in our series: Whole Life.

Whole Life Insurance is generally the most widely understood and acknowledged form of Cash Value Life Insurance. It is also the most common form of CVLI in the United States today.

So we are tackling this type of tax-free vehicle and discussing why someone might use Whole Life Insurance for tax-free retirement income.

Whole Life Insurance provides guarantees, highly rated carriers, and extremely low risk. When it comes to generating income, However, low IRR and unfavorable loan provisions make Whole Life more of a tax-free asset rather than tax-free income vehicle.

Chapters:
00:00 Introduction
00:24 Recap of Previous Videos
01:16 About Whole Life
01:52 Why Someone Would Use Whole Life
02:36 Guarantees of Whole Life Insurance
03:38 The Downside to Guarantees
05:40 Dividend Rate vs. Rate of Return
10:14 Actual Historical Performance and Rate of Return
14:58 Whole Life as Tax-free Income Source
16:30 How to Access Your Money from Whole Life Policies
17:06 Loan Provisions of Whole Life
17:40 Downside to Taking Loans on Whole Life Policies
19:04 Example of Whole Life Policy
23:27 The Reason Behind Low Whole Life Performance
24:47 Summary
25:28 How to Get a Policy Review

Cash Value Life Insurance has been and will be one of the best ways to generate maximum tax-free income for life, but it takes the right design to get you there.

We specialize in creating policies that are designed for Maximum Cash Growth and Income.

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[financialprotectionagencyi]

Absolutely hands down the most clear, concise, accurate and most importantly honest explanation of WL. Every agent should be required to watch, know and explain this in just this manner to anyone considering a WL policy. In fact agents should be required to show this to anyone before they can put them into a WL policy. Why WL agents always feel they have to go up against IUL’s especially when they are comparing apples to oranges is beyond me but everyone that offers WL needs to know and show this. The best video you have done Matt. And you have a lot of great ones! Keep up the amazing work.

[brianmasiello]

Not built for tax free income but as a tax free asset....nail on the head

[dennyoviedo]

Nice, easy to understand in the way that you are showing, good job Matt

[kriskris]

this is a great video, perfectly articulated, I agree with your opinion- WL policy is a tax free asset not tax free income stream.I hate the one size fits all dished out to people. You are doing a great job in educating people on their choices..

I have both Whole life and IUL policies, i purchased each of them for a specific goal..

Whole life- I bought this to park my cash as a storage vehicle instead of putting the excess funds in a bank so I can have access to 90-95% of the cash value through IBLOC, casvalue collateral loans and policy loans..the idea is to grow the money outside the policy, use it as my savings account with an IRR between 3.5-5%..pass on the funds to my kid when I am gone, I definitely don’t plan on using it for income during retirement.

IUL- Plan is to grow the funds at a much higher rate compared to Whole life, I would be happy to see a 5.5-7% return in the long run, during my working years, I plan on leveraging the cash in the policy for other investments and use IUL loans for positive arbitrage during Bull markets, during bear markets, i plan on taking loan from my whole life policy to payoff IUL loan or switch loan type from IUL loan to a fixed loan.

during my retirement..I plan on using funds in this policy to supplement my retirement income. If there are any funds left when i am gone, the balance will go to my spouse and kid in the form of death benefit..the idea is to pass on money to my kids tax free/in the most efficient manner..

[DiscovertourshawaiiLLC]

Great info!! I shared with over 10 people!!

[passiveinvesting_automation]

Leveraging it into other businesses, real estate etc is a must with both IUL & WL in my opinion.

[pablo]

Great analysis! One thing that could be worth mentioning is cash value life insurance lines of credit from third party banks—which currently have a loan rate of as low as 3%, using policy cash value as collateral. But even in this case, if their LOC rates go up to just 4%, you *still* might be paying more than the policy IRR. Thanks again, Matt!

[MiguelAVillasana]

I just subscribed. Love your channel.can you make a video on what books are best to have and cover tax codes

[wavebusiness]

Very good illustrations, I am contacting you for more questions for sure

[geraldscheinman]

Then you need to look at whether when take a policy loan is it:
Direct or In-direct recognition.
That makes a big difference in the net loan rate.

[ste]

Nice video but the 1.0475% IRR mentioned during the discussion starting at 23:27 is based off of non-guaranteed values, which is 4.00% not the 6% dividend rate he referenced. So, this IRR value is probably closer to 3.00%. It's very disappointing this was stated incorrectly.

[godessofyouguess]

U FOR EXPLAINING THIS IN THE MOST SIMPLEST FORM! GUD SHIT !!!

[adam]

Good video.. so safe to say, since dividends are historically low, most illustrated values and IRR's will increase over the years? Considering that dividends tend to follow interest rates. Also, the IRR has a lot to do with how the policy is designed, so curious on the policy designs of the policies on this chart.

[keyweereyes]

Hi.. first i am thanking you for giving us agents an additional information as well to the clients.
However, putting into clients mind or scaring clients that few or more agents are bad because of the commission interest, i definitely disagree because in the illustration it is base on your client wish before you create a premium.. there is a basis when to design their needs and that is financial needs analysis which mostly the agents are doing. I would accept for mis-look or human errors but it does not mean to accuse agents to be bad. we are license and we do have the CODE and ETHICS as part of the contract before becoming an agent. , Our goal is to help the people who needs it. So, the commission is part of our job. And most agents go through trainings, same what your doing now teaching us for free. Agents AS i KNOW are very diligent .. about MISSION FIRST BEFORE COMMISSION.
Thank for your free education but I dearly stand for all agents that sacrifices their time and effort to
get their licenses.

[AuroraAsadorian]

Is the annual outlay of -46, 123 after age 65 in this example taken out as a loan? Or is the cash value liquid and these withdrawals are taken out directly out of cash value?

[TheOpinionSports]

Is whole life more expensive than IUL? Someone on another channel says the opposite.

[benb]

If you were going to buy a vehicle would it make more sense to buy it with a policy loan or buy it cash? With negative actual irr, what would be the benefit, if any, of buying with a policy?

[aroldovillarreal]

I have 2 policies but both of them I am making making premium and paid up additions payments for the first 5 years and for the next 30 something years I am having to pay the base premium. Is that normal? Compared to the policy you explained on this video where They only paid for 7 years

[astroman]

The true IRR on cash value, after fees/commissions, is about 1.5%....garbage. Consumer Reports did this study years ago.

[kunalamin]

According to current market condition same thing is going to happen with IUL also, if market will not perform well for few yrs then IRR and actual RR will change. I belive 2022 returned must be 0% for iul.