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What's up Military Millionaires! I'm your host, David Pere and today we have Will Duffy on the podcast and Will and I got connected so actually didn't know that I got connected to Will about six months ago my good friend Chris Griffith handed me a book about interest rates and mortgages and understanding the difference between 15 year and 30 year notes. And it was Will's book. And I actually loved it. I actually texted Chris and was like, Dude, I had never thought about the difference here in this way on 15 year versus 30 year and my first property, or my second property, I did a 16 year note instead of a 30 thinking I was being clever, and realize like, I realized ultimately that that wasn't the case. But in his book, it talks about a whole bunch of other reasons why that's not the case. And I found it very insightful. I really liked the way that he approached it. And then a few weeks later, I made a post saying that I would love to. Well, I made a post trying to be somewhat aggressive. But the point was, I wanted to discuss life insurance with somebody who understands life insurance and show some of the upsides and downsides to some of the popular things that are being showcased as you know, the right way to utilize life insurance. And Chris was like, well, you should talk to Will. And I was like, Well, I really liked Will's book. So we should do that. So we jumped on a call and realized that we actually see eye to eye on a lot of this stuff and wanted to bring him on the show. This is the first time I think we've ever had anyone who deals with life insurance on the podcast, because this is a I don't wanna say trending conversation topic, but it's it I guess it's fairly trendy right now to talk about life insurance. But I also feel like it's often misunderstood. And so this is gonna be fun. This is gonna be posed more as an educational David's gonna learn a lot from Will's conversation and we're gonna have some fun.
Welcome to the Military Millionaire podcast where we teach service members, veterans and their families how to build wealth through personal finance, entrepreneurship and real estate investing. I'm your host, David Pere. And together with my co host, Alex Felice. We're here to be your no BS Guides along the most important mission you'll ever embark on your finances.
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Will, welcome to the show, buddy!
Yeah. Thanks, David. Glad to be here. Really looking forward to the discussion.
You want to give a quick five minute background on Will?
Yeah, so Will Duffy here. I currently live in Puerto Rico, originally from Colorado, still spend quite a bit of time in Colorado, and have quite an extensive history with life insurance, which we will dive into. That really helps me, you know, get to where I am today, but also helps people understand the ins and the outs of life insurance.
My practice today is really focused on tax planning and tax strategies. That's what we're known for. You can't get too far down researching tax planning and tax strategies without running across life insurance. And so it's an important piece there as well. But I'm really looking forward to hopefully demystifying certain things with life insurance, and most importantly, giving people education so that they at least feel like they have the knowledge base to make a decision for themselves.
Yeah, I mean, that sounds great for me, because I know that I definitely have some misconceptions on life insurance. But I also well, as we talked about, before the recording, I think a lot of that comes from the fact that as a guy who hosts a big Facebook group, I see a whole bunch of pitches, and a lot of those pitches seem to be like, Oh, well, the other guys are all wrong. It's like well, if everybody says that the other guys are all wrong, then I don't know what to believe anymore. So I'm just gonna assume that you're all knuckleheads. Which is not true, because I guess I'll start off with my theory of what I've come up with and put me in the right, wrong direction, whatever. I've kind of decided over my research that in a lot of cases, the way that life insurance is talked about, it makes sense for people who have the capital to over fund it. And it doesn't always make sense if you're not in that position.
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But I also realized that that's a little short sighted because people build wealth with age. So if you start earlier and build into it, I guess that's kind of where the extent of my knowledge is. I personally have a term life and I invest the rest. But I'm also open to acknowledging that I probably do need to look into a whole life strategy here soon as well.
Let me dive in here. So first thing I'd like to say is that I've learned from experience, and that's a nice way of saying I've learned from mistakes. So I try to tell people that if you can learn from other people's mistakes that's superior to learning from your own.
So number one, I would say this most life insurance that people own today, and most life insurance policies that people are being, quote unquote, pitched, I probably would not do them personally. So keep that in mind.
You know, you mentioned David a term policy, I'm actually not even a fan of term insurance. I think if that's all you can afford, you should do it. But I think if we're going to look at money, and we're going to look at, you know, trying to factor everything in in that financial decision, as opposed to just looking at it, maybe in a silo, I think we might come to the conclusion, that term might actually be too expensive.
So number one, let's start here. Because again, I think most insurance policies that people have, I wouldn't own and most insurance policies that people are being shown as something they should buy, I wouldn't own. So I'm going to start with a term called Infinite Banking. And I'm going to say that I am adamantly opposed to infinite banking. This is going to get a lot of people riled up, excited, interested, intrigued? Before I explain why, let's talk about some other terms, because you might hear different things you might wonder, well, is that what infinite banking is? Is that what Will was talking about? So infinite banking, bank on yourself, becoming your own banker, these terms are all really describing the same thing, which is this infinite banking concept.
The Infinite Banking concept, I believe, was created by a man named Nelson Nash. He's recently deceased, you know, three years ago, I think. And people put their own spin on it, and put their own name on it, but they're really packaging something that he created. Full disclosure many, many years ago, probably 15 years ago, I've lost track of time. Someone handed me Nelson Nash's book, it was this big, black paperback book. And I read it. And I was, I thought it was a good concept. The numbers in the book made sense. The theory made sense. And so I decided that was something that I wanted to do personally.
So some guy helped me get a policy and infinite banking policy. And he said, Here you go, you're ready to rock and roll. Well, it didn't work. It didn't work like it, like it said in the book. And so I am an analytical person. I love numbers. I love spreadsheets, I like to take things apart. I still remember when I was in grade school, I wanted to know why when you clicked a pen it stuck out and why when you clicked it, again, it stayed in. So I would take the pen apart. And I would say I need to understand this.
So I took the life insurance policy apart, and found all of the problems with infinite banking. And so I'm going to go over what those problems are. And I got to a point where I was so frustrated David, that I made this decision which was we had come up with something that actually solves the problems and actually works and I believe there is a solution that actually works.
The Infinite Banking concept is this idea that if you can run your life, your financial life through a life insurance policy, you will be better off financially. I'm still coming through clearly?
Can you still hear me?
Yeah, I got you.
10:00 - 15:00
Okay, great. I just got a little notice that my connection might be unstable. So I don't want to go to town and everybody misses it.
No, no, we're good. We're good.
So if people want to read these books they can but to save you some time, becoming your own banker book by Nelson Nash, who created this concept. He talks about in his book, buying groceries with a life insurance policy. He talks about buying vehicles, cars with a life insurance policy. He even talks about paying taxes with a life insurance policy. So I've heard it all. Whether it's groceries, whether it's a car, whether it's a vacation, people talk about buying plane tickets, upgrading to first class, using your life insurance policy, the list goes on. That is what I think does not work. Okay. And it doesn't work for a myriad of reasons. The things that I just mentioned are largely expenses. And so what kind of a bank account do we use for expenses, we use a checking account for expenses. And so if we really wanted to break it down, we'd say Infinite Banking says, Take your checking account, replace it with a life insurance policy, and you're gonna end up with more money, I don't think that's going to work. That's problem number one. I'll get into that more in a second.
Problem number two, which might be the biggest problem is human nature, okay, we can't avoid human nature, when we're thinking about building wealth, when we're thinking about investing. And when we're thinking about doing some sort of a complex strategy that's going to involve you and who you are. And so human nature comes into play here. And the amount of tracking and, and making sure you know, money's getting paid back and interest payments are being made, and in what money do you actually have, and what have you spent it on, is a full time job. And I've never found anybody that's able to actually do that with the so-called Infinite Banking concept. And so human nature gets in the way, you don't really track it, you don't really understand what's going on. Next thing, you know, you're upside down. And so that's the second problem.
The third problem is the biggest cost of life insurance is never, is never volunteered by the people selling life insurance, the greatest cost of life insurance. And so if people stick around, and they listen to this full podcast, you will hear most likely for the first time in your life, what the actual biggest cost is with a whole life insurance policy. And I will tell you what that is.
So if we combine the fact that you're supposed to have these expenses that you're now going to buy with a life insurance policy, with the fact that it's going to take more work and human nature makes that more difficult. That's why this doesn't work. When you borrow against a life insurance policy that has a cost, right that has an interest cost. And so you're not taking an expense, whether it's groceries or a car, and you're now adding interest to that expense, how are you going to end up better off adding interest to your expenses, because you have a life insurance policy, the reality is, you're not, the interest would have to be far less than what the policy is going to earn you. And if you look at most of these policies, that's not the case.
So huge problems with infinite banking, I tell people, please, whatever you do, don't do infinite banking, it's going to be an exercise that you're going to one day regret, it's going to frustrate you, you're going to lose money. So if I can catch people early enough to have them not do it, great. If I catch people that have already started, we can fix it. If you want, we can fix it with something called a 1035 exchange. I'm guessing your audience is very familiar with 1031 exchanges. This is just four sections in the tax code away from each other. They're very similar, but you can exchange one life insurance policy for another. It's not a taxable event, you don't even need a QI and you can fix a policy that you currently have. So those are the big, the big pieces on why Infinite Banking doesn't work. I'm gonna mention one other thing.
The type of life insurance company that you use is crucial. And this is not. This is not really explained very well, in my opinion on the front end. And sadly, most people that are pitching life insurance, only sell one company and they only sell one company usually because they're known as what's a captive agent.
Captive agents work for one insurance company, they only sell that one insurance company and they have special contracts and special agreements with that insurance company to only sell their product. And that is a conflict of interest that I believe is that merits taking a look at, you can't avoid all conflicts of interest in life. And so that's not the point. But there are going to be conflicts of interest that you should be aware of that should be disclosed on the front end. And that doesn't happen here.
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So let's talk quickly, high level, about the different types of life insurance companies, and then I'll get into some more details that matter.
There's really three main types of insurance companies, you've got stock, you've got mutual, and then there's a third called fraternal. I'm not going to talk about fraternal life insurance companies, they're very rare. If you're doing business with a fraternal life insurance company, it really means you have a desire to help another organization, whether it's the Knights of Columbus, whether it's the Catholic Church, whoever. That's what a fraternal life insurance company is. And so people that do business with those insurance companies, it's really not for what that policy is going to do for them, even though it might give them some benefit. It's because they want to further benefit some other organization.
So for eternal life insurance companies, they don't want, they don't work if you want to have a life insurance strategy that works. That leaves you with stock and mutual which, which has to be over 95% of the remaining life insurance companies.
A life insurance strategy that you want to utilize for some sort of a financial strategy for you while you're living meaning it's not a term policy, right? You don't benefit from a term policy, and you don't want someone else to benefit from it either, because that means you're dead, right? So this is a policy that is going to give you benefits while you're living, you're going to want to use a Mutual Life Insurance Company.
Stock companies don't have obligations to pay profits to policyholders like a mutual company does, because their Mutual Life Insurance company is owned by the policyholders.
Now, you might hear this elsewhere. But now let's get into another idiosyncrasy. And again, why I'm not a fan of infinite banking. There's actually two different types of Mutual Life Insurance Companies. There's direct recognition and there's non direct recognition.
The first policy that I mentioned that I had that didn't work, one of the reasons it didn't work was because it was a direct recognition company. Guess what no one told me that there even was classifications of direct recognition and non direct recognition. I was looking at the numbers, and I was like, wait a minute, this was what the dividend was supposed to be. But it was less why? And it's because it was a direct recognition company. What does this mean?
Well, direct recognition is a legal term. And it means that the insurance company is going to directly recognize any policyholders that actually borrowed against their policy the previous year, and they're going to change the economics of the policy. That's a problem, right? And so what that means is, is that when you were pitched this life insurance policy, and you were shown this illustration, there is no way that you can see direct recognition at play on that illustration, because it only happens when you borrow against the policy. And you're being shown an illustration where you haven't borrowed against it yet. So this is like, you know, smoke and mirrors in a sense, this is, you know, in my opinion, bait and switch. This has to be explained to people on the front end, so that they can make a decision with all of the facts.
And so again, most people that are pitching Infinite Banking are utilizing direct recognition, life insurance companies. If you want to know whether or not the policy that you have is direct recognition. If you want to know whether something you're being pitched as direct recognition, feel free to reach out to me, I can tell you pretty much instantly. There's not that many insurance companies in the space, I pretty much have them memorized. And then you could also ask the person you're working with, but I do want to give you a heads up. Interestingly enough, a lot of people selling this stuff don't even understand it. They don't even know. I'll give you an interesting case study here. I had a representative contact me recently. And somehow he heard about me, and he heard that I teach people about direct recognition, which I don't like and non direct recognition, which I prefer. And he represents an insurance company called Northwestern Mutual. If you've heard of life insurance, you've heard of it. And in banking, you've probably heard of Northwestern Mutual. They are a big company, but they're also a direct recognition company.
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So he asked to talk to me because he wanted to find out why I'm so adamant about this. And he made an interesting comment. And he by the way we spoke yesterday. He said, Will, I really didn't understand the full ins and outs of direct recognition. And so I called the Home Office of Northwestern Mutual, which I think is in Milwaukee. And he said, it was not easy to get this information from them. He said he spent at least an hour on the phone, trying to get this information out. This is my point. This is information that's being suppressed. That's not being described. And that is a red flag. And that means it probably doesn't benefit you, as a policyholder.
So if you have a direct recognition policy, you want to know that number one, if you're being pitched one, you want to know that number two, and I'm going to tell you right now, I have never seen it to where it benefits you as the policyholder, it makes the numbers worse. So that's huge.
Now, as I mentioned before, David, I decided I was either going to scrap this idea and never look at life insurance again, or I was going to solve it and I was able to solve it. So what I've been able to create, and we are, we've got a really good reputation for this across the country, because I was actually able to create a life insurance strategy that works, that doesn't have the problems that I just described. Before I go into that I want to make good on my promise. And that is telling everybody, what is the biggest cost with life insurance. And no one else will tell you this, trust me, I've listened to tons of presentations, I've read a lot of books, nobody will mention this, here it is right here.
The biggest cost with life insurance is lost opportunity cost. That's your largest cost. For those of you that don't know what that is, lost opportunity cost is when you don't have access to funds, and therefore you lose out on the opportunity to invest in something else. That's what lost opportunity cost is. And so with a life insurance policy, the amount of money that you put into it, that you do not have access to either the first year, first two years, three years, whatever, whatever that timeframe is, that is true lost opportunity cost.
Now, you also have lost opportunity cost in your example, when you own term insurance, but it's just on a little bit of money, you're paying for term and you can't invest that money. So we need to look at whole life insurance the same way and say if you put $25,000 into this policy, and you can't access any of that $25,000 you have lost opportunity costs on that money. And so any type of financial projection financial numbers comparative analysis on should I do this whole life insurance policy? Or should I not have to take in that last opportunity cost? And nobody will do that. That's the key.
Most whole life insurance, just I would call it off the shelf, whole life insurance, you're going to have access to almost nothing that you put into it for at least the first year. That's unacceptable to me. I love to invest when I find a deal, and it's a deal. And I want to take advantage of it. I've got to have liquidity. I've got to be able to use my money to do that. So that's off the table.
Now some people that have experienced even some people in this infinite banking movement, if you will, they're gonna they're gonna say, Will, I'm gonna come to the rescue. And I've got this incredible magic rider called a paid up additions writer. And if I put that on your policy, you're actually going to have access to some of your money early on, okay they are right.
Now, I still don't like it. Why? Number one, the paid up edition riders that they're putting on these policies. I don't use them. And I don't recommend that people use them for a couple of reasons why, number one, this is the biggest one. If that rider is not removed from the policy at some point in the future, usually around year six, seven or eight, that life insurance policy becomes known. It becomes what's known as a MEC, it stands for Modified Endowment Contract. If a life insurance policy ever becomes a MEC, you have just lost all of the tax benefits of the life insurance policy. You now really don't want to touch that money until you're 59 and a half and it becomes this vehicle that you don't want anymore. So avoiding MEC is key. And I'm going to tell you unfortunately, these people sell it. Don't stay in the industry long enough and come to your six, seven or eight when you need someone to tell you and help you to take the ride off properly, they're nowhere to be found, because they're off in some new career.
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So this rider that they're saying comes to the rescue, it doesn't really come to the rescue, it's what it's going to do, it's going to cause you future problems. And my plan here is for you to not have any future problems down the road.
Number two, that rider is only going to give you about 60 to 70% liquidity of your money, which is better than zero, but in my opinion, it's not good enough. So my strategy, David, that I have personally created, I call it the bank replacement strategy. The reason I came up with the name was twofold. One, I need to get as far away from Infinite Banking as possible. And two, what I'm saying is that a bank savings account is actually probably not the best place to store cash, that you are saving up to invest in something like real estate, like a business, etc, down payment, whatever. And so I'm saying, let's find something better than a bank account than a bank savings account to accumulate significant amounts of money, let's call it 10s of 1000s of dollars, maybe even hundreds of 1000s of dollars, that we can utilize to still do the same investments we were going to do, but not earn pennies, or next to nothing like we would with a bank savings account. That's the difference.
So if I can create a policy, that's going to give you similar liquidity to a bank account, that's going to earn a return greater than a bank account, that's going to give you tax benefits, meaning the gains are tax free, it's going to give you a death benefit. And it's going to give you the ability to access it to take advantage of these investments that you are planning on making anyway, that in my opinion, is a winning strategy. And that's exactly what this strategy is.
So we have figured out a way to give our clients at minimum 90%, sometimes more liquidity on day one of that policy. That's significant. Now, we're talking about similar liquidity that you would have in a bank account. And then again, we are not looking at this life insurance is often pitched as this is better than an investment. This is better than your bonds in your portfolio. This is something you need in your investment portfolio to diversify. I think that's all bogus. What I'm saying now is no, this is not going to be better than an investment, this is now going to be better than a bank account. And if I can give you something better than a bank account, that enables you to continue to do the same investments that you are planning on doing anyway. Now, that's a winning strategy. And that's exactly what this is. I don't have to play with numbers and statistics and try to pull the wool over people's eyes to try to convince them that some life insurance policy is going to be better than some investments that they're making. Because the life insurance policy is tax free. And the investment is not. That's all bogus. But if I can show you that this life insurance policy, David, is actually better than a bank account, and has a higher return than a bank account, and you can still invest in the same things you are going to invest in anyway. I think that is a winning strategy.
So I love a couple of things here.
I love the fact that you mentioned opportunity costs because I agree. And that's one of the reasons that I tell a lot of people like this makes sense if you can over fund because if you can't, then you're stuck, I think I think I heard like seven years is like the average kind of breakeven on on being able to start pulling that capital, which is a lot of that's a lot of opportunity cost. And then I love the fact that you clarified like that it is a great, like savings alternative as opposed to like your your main investment vehicle because I definitely see, I think my favorite, my favorite whole life pitch that I see in my Facebook group is where people are like, Well, if you look at 2007 and 2008, and you were going to retire in 2009, then life insurance is the only thing that would have saved you. And it's like, Well, okay, but if you look at the last 100 years, then the stock market outperforms, and they're like, well, that's not what we're talking about right now. Okay. Like different strategies, right?
So I love that you solved a lot of those problems, especially the liquidity upfront, I think that's huge. I think if you can't pull the capital out, then you're kind of shooting yourself in the foot unless you're just looking at it from a preservation of capital standpoint as opposed to a wealth building strategy.
30:00 - 35:00
Yeah, let me give you a quick success story. It's an outlier. So people don't need to think oh, if I can't do that, then this isn't for me. This is an outlier. I had a very wealthy family from California contact me about seven years ago. And they said, hey, Will we hear about your strategy. We like it. But we are wanting to buy a multifamily property. But this property is off market. And so we've got to buy it with cash. So we want to do your strategy. But we also need to close on this within the next few weeks. Can we do both? Otherwise, we're just going to do the apartment building? And I said, Absolutely, we can do it. That's what this strategy was built for. That's what it was designed for. And so this family wrote a check for $2 million into their life insurance policy, and within the next seven days took out around 1.8 million to pay cash for that multifamily property. That is the power of this strategy.
And that's, I mean, that's phenomenal. And then this is a non direct recognition, I assume, because you hate direct recognition.
And to clarify for that, and super dumbed down layman's terms for well, I can't be the only idiot marine listening to this podcast. So my understanding is that actually, I just read the book, lifestyle investor, like last week, and that was the first time I'd ever heard about direct versus non direct recognition. And I've thought I'd done a little bit of research and whatever. So essentially, what that means for those who are listening and correct me if I'm wrong is that if you have $100,000, that you're getting paid the dividend on in a direct recognition poll, or in a non direct recognition policy, if you lend out 90,000 of it, you still earn on the 100,000. In a direct recognition, you're now only earning interest on the 10,000 that's left in the account. And the other, is that accurate? Or is it that the percentage drops or?
It's fairly accurate.
But by the way, I had no idea you read that book. Justin Donald, who wrote that book, came to me to have me fix his life insurance. And I taught him about direct recognition and non direct recognition, which is why it ended up in the book.
I actually, it was the first like, strictly investment related book that I've read in a long time that I actually enjoyed, like a lot of it just seems like it's regurgitating new stuff. And I was reading his, or listening to it. And I was like, oh, there's actually a lot of good stuff in this. So it was a nice change of pace. So yeah, it's awesome.
Yeah, his stuff is phenomenal, you almost got everything perfect.
So in a non direct recognition environment, which is what I help people set up, and what I recommend, you're going to get the dividend as if you had not taken any money out of the policy.
They're not going to say, Oh, Will, you took money out, but this person didn't. And so they get more money than you do. That's not what they're gonna say at all. So yes, you can borrow against the policy, and you're going to get the same dividend as if you had not borrowed against the policy.
Direct recognition, though, is going to change what your policy is credited based on how much money you actually borrowed against the policy. And so I look at that as actually something that is going to deter someone from wanting to use the cash, which, again, maybe it's a little conspiracy theorists minded, but I think that that's what the insurance company is going for. They're like, hey, what can we do to deter people from borrowing against the policy? That's one way of changing your dividend if you borrow against the policy? That's what direct recognition is.
Which I mean, essentially? Well, I wouldn't say it completely eradicates but 100% makes the I mean, that's essentially the whole idea behind infinite banking is that when you borrow money, you're earning interest in, you know, three different ways. And so if they're not telling me that, oh, by the way, we're not actually going to give you that interest, once you use the money. Like, I mean, it actually kind of makes like, it's almost comical to me to hear some of those things. Because if you think about it from like, a, like a, like a residential lender situation, like the amount of regulations that those guys have, it's like, you could never get away with not, you know, whatever. But then in the insurance world, it's like, there's just, I wouldn't say it's the Wild West, but like, the regulations are much less. And so the fact that somebody could give you a policy with a sales pitch that says this, and then not even mention that that's not really the case is.
Yeah, I mean, it was mind blowing to me when I heard that because I was like, I didn't know that was a thing. And that's, I mean, that's a huge difference.
Yeah, yeah. Honestly, people just need to be told the truth. And trust me, it's very frustrating to me, because what happens is it ends up giving the entire industry a black eye. People have done it and they get a bad taste in their mouth, and they're like, I'm not going to make that mistake. Again. It's not really helping anyone.
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I definitely may or may not have when I first read Rich Dad, Poor Dad got into a first command, whole life insurance policy that, you know, I think I had that thing for four and a half or five years. And when I finally got fed up and cashed it out, I think I got like a check for 600 bucks. And you know, so I was like, oh, yeah, I made so much progress with this thing.
Yeah, I get it, I get it.
Any other questions you can think of?
Yeah, I mean, those are the most common things that I hear when I'm hearing this is, is people trying to pitch it as the best investment ever and not mention that it's more of a saving strategy, or a wealth preservation capital, capital preservation strategy. People do not mention the opportunity cost and how long it's going to take to actually get access to those funds, if you can't afford to over fund it. And then the direct recognition, non direct recognition, I think that's, those are probably the biggest things. I guess the question for me would be like, in your opinion, is there like an avatar that this makes sense for more than like, for most of my audience, it's like young service members or service members in general, like, do you think? Like, is there a spot for this in like a 19-20 year old who's thinking long term? Or is it better geared for somebody who is a little further along? I’m curious if there's an avatar that this is a better strategy for or if it just depends on how you use it?
Yeah, it's really going to be for somebody that feels like they're ready to start saving a certain amount of money on an annual basis and investing that money going forward. You really need to have, you know, your income established, you need to have your, you know, discipline established to where you're not spending everything you make, it's like, Okay, here's what I make, I live off of this, I save this, and I invest it, once you're established in that regard, that's a time to begin to look into it. But really, that's what it comes down to, we're just taking a portion of what people are saving and investing on an annual basis anyway, and just running it through the life insurance policy in order to give them an additional asset that they're going to be proud of, as opposed to a simple bank account.
Yeah, I mean, that actually is a really simple and very understandable explanation. I appreciate that. Because you're right. So I think the reason that I originally got like such a sour taste in my mouth, other than the my personal first command experience was, I was just seeing people get told in the Facebook, at one point, I saw somebody get told that they should liquidate their 401k, their thrift savings plan, and just dump it into life insurance instead. And this is like a 19 year old kid who was living paycheck to paycheck. And I'm like, you know, like, no, no, you shouldn't like you could do both, but maybe not, you know. So I think that's actually a really, I hadn't thought about it from that perspective. Or it's like, well, yeah, if you're already able to save this money consistently, then why not earn a better return on it?
Yeah, that's malpractice.
A TSP is going to give you tax benefits. I don't know their situation, but hopefully, they're using the Roth side of that. So they would get tax free growth. I'm a huge Roth fan. I didn't mention this. But I wrote a book on Roth called Roth's for the rich, it's on Amazon. It's the only book that I've ever found written on Roth, specifically for the affluent, most of what people believe about Roth is not true. It's a phenomenal tax free vehicle that I think everybody should be utilizing, if they can.
Here's what I would say, David, I'm going to save your people so much time right now, it's going to be awesome.
Here's what you need to do. Anytime someone is pitching you life insurance, just immediately ask two questions. Ask if at once ask the best for the company name. But as soon as they give that to you, it's going to be meaningless. Follow up with this question. This is the important one. Is it non direct recognition or direct recognition? Start there. If they don't know, then they're probably not your person. Okay? If they don't know the industry, they're not your person, right? Like if you're, if you're going to somebody for a mortgage, and you ask them, you know, do you do a VA loan and they don't know what a VA loan is? They're not your guy. Okay?
So if they say direct recognition, then they do know what they're talking about. And you know, it's direct recognition. You can just shut the conversation down right there and just say, I'm sorry, I'm not interested in direct recognition, life insurance. Huge. I've just saved you so much time.
The second question is, if they seem like they know what they're talking about, they immediately say it's non direct recognition. The second question is this. Can you give me 90% liquidity on day one of the policy and if they hesitate either they said oh no or not quite well, then you just say I'm not interested. Because that exists. That's what we're doing for hundreds of people right now.
40:00 - 45:00
If they say yes, then you could say, Great, show me an illustration. That's where you want to see you, then you want to make sure that they're not just saying yes to get you to move into further conversations, but you're probably going to get at least one no if not two no’s, it's going to save you a ton of time.
Yeah, that's, I think that right there is worth the entire podcast is just knowing, like, Look, these are the two biggest, maybe risks isn't the right word. Because I mean, life insurance is fairly secure. But maybe not risk. Maybe cost is probably a better word. Biggest expenses.
And if you just know how to ask those questions, then at least you're headed in the right direction. And obviously, you know, the natural follow up here towards the end of our recording is, where can people get a hold of you, if they would like to talk to you about this?
Email is best you can just throw that in the show notes. It's just my name. So it's [email protected]
[email protected] If you're looking for, you know, a review of your existing policy or looking for review of something that you're being shown right now, or you even want to get life insurance, email me, I'll connect you with someone on my team, and you'll be well taken care of.
That sounds awesome.
Is there anything we missed?
Oh, I have a friend who always asks this question. And I'm trying to teach myself to ask it because as ridiculous as it is, I think it's quite a good way to frame it because it always gets a good response.
What questions would people smarter than me ask that I have not?
Yeah, if we got as in depth as possible this week, it honestly talks for three hours there, there's always going to be things that come up. So let me try to hit some of them.
If you don't, if you're not healthy, if you have serious health issues, you might not be approved by the insurance company, which means this strategy is off the table for you anyway, if you have health issues, it's fine. I'm talking about serious health issues, we're talking about, you know, stage four cancer, you know, diabetes, things of this nature. So let me give another piece. Another really helpful tip for everybody that follows you and listens to you, you can do what's called an informal request with a life insurance company where you don't even have to give your name. You don't have to fill out an application, you don't have to take an exam. The informal request just gives your statistics, your age, whether you're male or female, and then it gives you know, your health condition and any medications you're on, we can send that to an underwriter and they'll tell us if it's even worth going into underwriting or not. You have to take your health into consideration when you're looking at this strategy. There's a flip side to this coin, though, which is that if you're healthy, now you might not be the rest of your life. And so getting it done while you're healthy makes sense. Because if something ever does happen to your health, even if you get cancer and survive it, they can't take away that policy from you which you have that, you know, good health rates. So that's something to take into consideration. You can use other people's lives.
So all the time, we have not all the time. But frequently, we have either a husband or a wife that has health issues, but they still want to do the strategy. We can do that on the spouse no problem.
Let me mention this one. This is a question that somebody smarter than both of us asked. And I learned from it. I learned from it. The question was this: does the size of the life insurance company matter? And I didn't know the answer to this at the time. And I now know the answer is absolutely. I categorized life insurance companies into three categories: small, medium, and large. What I've learned over time, is that large life insurance companies have the resources and wherewithal to make investments that the small Insurance companies do not have the ability to and so when it when it comes to the insurance company's dividend rate when it comes to the insurance company's general portfolio performance, the smaller companies are struggling to create yield in their portfolio because they're only able to invest in traditional bonds. And his interest rates are historically low. And so they're really struggling to find yield. Whereas the big insurance companies, they can invest in real estate, they can invest in businesses, and they actually have the ability to create yield in this low interest rate environment. And so I would say yes, insurance company size absolutely matters. We only work with large companies. So a couple other pieces there that might be helpful for everyone.
45:00 - 46:01
Well, I hadn't thought about that last piece. That's awesome. I mean, that's a phenomenal question too. But that's cool, man.
Will, thank you so much for joining me on the show. This is good. I am glad to. I mean, I'm gonna hit you up, and we're gonna have to talk. I've been thinking I might be in a spot where it makes sense. So especially with the irony that I just read that book, and you're the reason he was saying all the things I like, I feel like we should and obviously Chris recommends you so definitely, definitely gonna chat but I really appreciate you kind of dispelling some of these rumors.
Yeah, yeah. Happy to be here. Happy to help and we'll talk soon.
Absolutely, brother. Thanks for joining me.
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Join your host David Pere and Alex Felice in this episode with guest Will Duffy as he explains why he personally wouldn’t do any of the life insurance policies that are so commonly pitched to people today.
One thing should be known to anyone being sold a life insurance policy: most insurance agents we have today only sell for one company. And if your insurance agent works under one insurance company, for Will, that’s a conflict of interest to be aware of right there.
In this episode, Will talks about the two questions you need to ask when being pitched to a life insurance policy, why the infinite banking concept simply doesn’t work, and why the bank replacement strategy is better than any bank account.
About Will Duffy:
In the world of investing and finance, there are those who follow the crowd and those who know how to turn unconventional strategies into potentially winning hands. Will Duffy became a millionaire at age 33 by following the same contrarian wealth-building and tax-saving strategies he teaches his clients.
Not just a financial advisor, Will’s specialized excellence as a Chartered Financial Consultant (ChFC), Retirement Income Certified Professional (RICP), an Enrolled Agent (EA) lets him create customized, innovative financial plans or partner with a client’s current team of CPAs, advisors or attorneys.
The author of multiple financial books, and a go-to source for other financial professionals nationwide, The Duffy MethodTM is Will’s proven roadmap to help high net worth individuals, family offices, and businesses realize their financial goals.
Real Estate Investing 101: https://www.frommilitarytomillionaire.com/teachable-rei
Outline of the episode:
- [03:52] You can’t get too far researching tax planning without running across life insurance
- [05:52] Will Duffy – on most life insurance policies today
- [10:16] Dissecting the Infinite Banking Concept (IBC)
- [14:18] What is a captive agent?
- [17:03] The red flags with direct recognition policies
- [21:15] What is lost opportunity cost?
- [25:28] The Bank Replacement Strategy
- [30:01] About a family who wants to close an off-market multifamily property and do the bank replacement strategy
- [35:01] David Pere – on making $600 from a whole life insurance policy after five years
- [38:46] When someone’s pitching you life insurance…
Roths For The Rich: How to Fund Your Roth With Over $100,000 Each Year, Book by Will Duffy:
Compound Interest: 10 Financial Truths to Protect Your Wealth, Book by Will Duffy:
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My name is David Pere, I am an active duty Marine, and have realized that service members and the working class use the phrase “I don’t get paid enough” entirely too often. The reality is that most often our financial situation is self-inflicted. After having success with real estate investing, I started From Military to Millionaire to teach personal finance and real estate investing to service members and the working class. As a result, I have helped many of my readers increase their savings gap, and increase their chances of achieving financial freedom! – Click here to SUBSCRIBE: https://bit.ly/2Q3EvfE to the channel for more awesome videos!
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