The Math Doesn't Lie - Whole Life Insurance Is A Better Bond

Hey, what's going on cashflow hackers. It's Chris with life 180. And I'm here with two of my favorite people in the industry, Todd and Kim, uh, from truth concepts. And, um, today we are going to be doing what I think is going to be a fun video on how full life insurance is actually in fact, a better bond. So before we get into that, um, what I want to do is, um, kind of set the stage as to why we're doing this. Like I, I, I did a video, it was a couple of years ago. Um, and it was all about how whole life insurance is a better bond. It was a short video and I got a lot of pushback and a lot of people fighting with me being like, Chris, you're an idiot. Whole life insurance. Like, it's not that good because I could put money in a high yield savings account and beat your garbage whole life product. Right? Like, that's what people are saying at this point in time. And you know, Kim Todd, we all know like how this works from a long-term perspective and sometimes people just look myopically at this one little environment we're in and they don't think about the long-term effects of it all. So I thought it would be really fun, especially after the last training video we did for the life 180 agents behind the scenes to do a video that would be public on the life 180 channel showing how in fact whole life insurance is a better bond and it's a better bond with benefits. Right. Which is cool. Right. So, so I'm right. This is a fun topic. Yeah. I'm going to turn it over to you and let you run pilot on this because you guys are awesome at this. Well, well, this is fun because what I like about it is it really shows that there's a lot of rhetoric that's just not true out there in the marketplace. And, and, you know, so I ran an illustration again, looking from now dividends under current assumptions out into the future, which is one of the lowest dividend times we've had. So it's really not completely fair to the whole life side, because if we backed up and looked at what happened 35 years ago life insurance dividends were way higher than they are now, but we're going to assume that the life insurance policy performs as it is from now in a low dividend period out into the future and compare that to what's happened in other areas that had advantage of better financial environments back in the past. And so we'll look at that and see how, how that compares. So if we just pull in a life insurance illustration here on a 35 year old, and it shows that it would grow to in cash over this timeframe, based on again, current actual performance of the policy out into the future, $770,000 of cash value and the death benefit would grow from $382,459 out to $1,247,718. And so if we look at that over time, what would it take if we put money into an account, $10,000 a year, what would we have to earn to get to $770,000? Well, it turns out that if it was the same earnings every single year, we would have to earn 4.03% every year to match what the policy does. Now a life insurance policy doesn't earn 4.03 every year. What it does is it has a much lower amount in the first few years, and it earns more than 4.03 on the back end so that it does an overall of 4.03, not an average, but an actual return of that 4.03. And you can look at that and say, well, you know, I could do a, a bond at say four and a half percent, and it's going to outdo this, right? So let's take a look at that. And so if we switch over to this alternate account and assume we had money to the same $10,000 a year, but going to a four and a half percent account, and we'll look at the alternate account instead of the life insurance at four and a half percent, then yeah, there's $851,000 over this timeframe. So that bond doing 4.5 every year would outdo the life insurance policy, except for one thing, there's costs associated with the bond that have already been taken care of. When we look at the life insurance policy, those costs are taxes and fees. And so if we look at taxes on this, on this bond of say 24%, if somebody's in a 24% marginal bracket, then all of a sudden that took away quite a bit. We actually have now $100,000 less than what we have in the whole life policy, even though we're earning four and a half percent every year, because the taxes that came out of the account and the growth on that would pull it down below what we have in the life insurance. And now if we added fees to this as well, and say a point and a half, I know you had done some research and they're showing that overall everybody's paying what 2.1, 2.1 according to Forbes. Yeah. If we do a point and a half, we can see, wow, that knocked us down to $495,000. And it shows that at a point and a half, we would actually have to earn 7.42% on the bonds just to keep up with the cash value in the life insurance policy. And we're not even talking about the death benefit. I know some people say, well, I wouldn't want the death benefit anyway, but that's a huge benefit that, you know, if, if used correctly can strategically change somebody's spending ability out during those distribution years, but. Top of that though, Todd, like some people might not want the death benefit or might not care about the death benefit, but I don't know anybody that doesn't care about having the living benefits that would come with it. That's exactly right. And it's a great point. And, but you know what, those living benefits haven't been explained to a lot of people. And we need to go through those strategies to really see how big that impact is. Right. So here $495,000, we'd have to do 7.42. I don't think we're going to see that. You know, what we could do is let's, let's go ahead and bring in the term insurance and let's say that we did want to have the same, um, protection for our family, we would have to buy term insurance. And if we did that, if we bought $380,000 to have it try to keep up at least the first year with what we would have automatically thrown in on the whole life insurance, um, that would be a $692 premium actually, until we get down a ways. When we go down to that, cause this is a 30 year level premium. Once we hit that 31st year, if we want to keep it, it's going to jump to $13,000, almost $14,000. So, you know, most people would cancel the insurance then, and when, yeah. And when we do that, now we see it would take 7.84 to keep up. Let's look at this on a chart for just a minute, Kim, and we'll get the index in here and let's turn off the legacy or the death benefit portion. We'll just look at the cash value growth. So here we can see what would happen if we had a four and a half percent every year bond is that gold line. And then the blue line is actually what the whole life insurance did. Assuming again, that we didn't have any increase in dividends, but they were exactly the same as they are today, all the way out in this low dividend time. Pretty amazing. Right? So a lot of people would say, well, I think my bonds could do more than that. Yep. Right. Let's, let's get a bond index. Would that be fair? And look at the last 35 years of what say the Dow Jones composite bond index has done, that's been one of the highest. It's, it's certainly beat treasuries, right? Yeah. Perfect. All right. So if we take that and we put that in place of the four and a half percent every year and turn off the tax credit for losses, now let's look at our chart and we end up at about the same place that we did with the four and a half percent, except it's less predictable along the way. Right. We have a lot of ups and downs and rounds. Yep. So that's a real apples to apples. But like you said, like, so there's a couple of things here that I think are important and I just want to reiterate this is like, we're this, this whole life curve, this blue curve that we're looking at for whole life is assuming that we're kind of participating in the lowest dividend rate environment in, in whole life history, right? Like, like for the past, like 80, 90 years. And so taking that into consideration and then realizing if we were to overlay and we can't do this, right? Like it's so apples to apples, it's impossible to do. But if we were to be able to go back and overlay the dividend rates on a policy that would go 35 years overlapping this, well, dividend rates in, in like 1989 were like eight, 9%, something of that nature. So, so, or, or, and if we were to look at that, these numbers, like whole life would be when we compare really apples to apples for the same timeframe would be off the charts, comparatively speaking. Right, right. And so we're taking, we're taking a pretty good environment overall over, you know, there've been low years and, and high years for the bond market and comparing it to like the lowest market ever for whole life insurance and whole life still wins. Fair enough. I want to make sure I'm really clear about it. Explain it. You're, you're right on track. This is not fair to the whole life. The piece, because it would be way more than this. We had the actual dividend returns that occurred over the last 35 years. It's like we're making a hop on one foot and it still wins. Yeah. And not just a little bit more, but almost twice as much more. Yeah. Right. And on top of that, so not only is this great from a cash standpoint and, and one of the things that's left out on that blue curve is, is the fact that we are not even talking about what we could do with that access to cash, because we have it in a place that we can instantly get it and make an investment in real estate or some other deal that comes along that maybe is a once in a lifetime deal. So this is, this is kind of minimums of what we can expect on this. We really don't have that flexibility on the bond side for using the cash, but then that death benefit that's thrown in with the whole life insurance for these same costs, let's just look at the legacy instead of the cash here. And this is, this is what happens from a protection for our family across this timeframe. This purple line is our whole life insurance, death benefit continuing to grow and it'll continue out. This is only out to age 70. And yet look at what happens on this gold line. If death were to occur along the way. So you, once we get to that age 64, the term insurance goes away because we can't afford it anymore because that huge jump that it made from 690,000 or $690 a year to almost $14,000 a year. So it drops there and the death benefit basically, you know, this individual is self-insured and I don't know about you, but there's a reason I have my car insurance and homeowner's insurance with an insurance company. It's because they know a whole lot better how to insure things than I can do personally. I would much rather shift that risk to an insurance company, right? Oh, absolutely. Now do me a favor here real quick. Just can you put the cash back on as well at the same time just so I can look at So like when we look at this, cause you get to have it all right. Like, I mean, you're, you're paying the $10,000 a year instead. Like at first, if you like, to me, this image tells a story like at the, at the beginning, the bottom two images, the gold and the blue, you know, you got that like crossover point obviously at year 15. So there's going to be a little bit of cost and this, you know, this is like pretty much almost a full based policy. It seems like a blended policy, not like what most people would consider like a banking policy, right? So we're looking at just the longterm perspective. And so yes, there's that short term cost that goes with it, but longterm, look at how you win. And then what is that gold line? That's the, the gold line below. That's the death benefit drop off of the term insurance and like the combination of the term insurance and the cash value. Is that the deal? When it drops off at 64, what happens is our legacy now just becomes the cash in the bond. Basically it's the same line at that point in time, right? Right. Because the term insurance is gone. So the cool part that I'm seeing here is like, and this is where whole life insurance becomes a better bond is because of how you can utilize it as a, as a buffer asset. And the fact is like, if you look at the bond return there where, you know, over from 67 to 68 69 there, you see 67 to 68, it goes down in performance, right? And the bond market's actually lost. So when you look at the 60 40 portfolios that everybody had been relying on, if you're relying that, you know, they always say you never want to pull from a negatively performing asset. And historically speaking, the reason people do 60 40 portfolios is because that bond theoretically is supposed to perform when your other equities are going down. Right? So now we have a scenario where the 60 40 portfolio is busted. So, and the reason it's busted is because now it's been proven that bonds can lose the same years that equities lose. Yeah. Right. And people rely on that. Wow. That's like, that is like absolute doom day for people in retirement that are, that are relying on that bond to actually do what historically they said it would do. And not only did it happen one year, but it basically happened two years. And now we're talking about like the fact that whole life is basically going to get you bond like equivalents, but better as we're seeing here and a lower standard deviation, right? Like, so now you're not going to have a situation where like in retirement, when you need to lean on it or income to allow your other assets to recover your, like the insurance company saying, we're going to give this to you no matter what, like you're going to have a positive return. We'd pay dividends every single year for 110, 120, 150, 180 years in some situations. So we're going to pay you that every single year, no matter what, we'll take that short-term risk on. And that's kind of one of the benefits of, of having your money with us. So from like, as a bond alternative, especially when we hit income planning and distribution planning with all of our assets, to me, like we're looking at this from an accumulation perspective, but it gets even better when we start talking about distribution. Right. Well, see, even if the insurance company didn't pay a dividend, the cash value is still guaranteed to increase every year. That's that's amazing. It can't go down contractually. It has to increase every year. And yet we see the bond and think about the impact when we had this drop, like you're saying out there and obviously be worse during the distribution phase, but keeping that 60, 40 split means not only did we lose money here and we lost money in the equities. We probably had to shift money from the equities to the bonds to maintain that 60, 40 split. Amazing. And this is, this is where the old, uh, you know, permission to spend kind of comes into is because you could see here, like if you have this death benefit on the top side of just over 1.2 million, and then you have your other assets, you know, whatever they are like in, in the, in the life insurance side and the cash value on the life insurance side, you're looking at 700,000, even if you, you know, had to spend that money down, whether it's like through partial surrenders or loans or whatever, you're still going to have $500,000 of death benefit above and beyond it. Whereas with the bonds, if you spend it down, you're, you're passing on nothing. Correct. Right. And so it's like so much more efficient in every capacity. How do people not see this? That's what I want to know. How do people. It's it's because again, there's so much misinformation in the marketplace about the way this works. Everybody's just accepted this idea. Life insurance has a terrible rate of return without actually looking at it. And you know, they do what you said, they look at these first couple of years on something that's a long-term product. So really you would rather have a little bit more money on the front and give up all this we have on the back. What was the point of saving the money? I thought it was all for what's in the back during that retirement phase. And here's an interesting thing. And we need to look at this maybe on a future video, but it's interesting the way losses work. You can kind of think about this, but if you're going to have losses, you want the losses up front. You don't want them at the end. Okay. So, so a life insurance policy is designed perfectly for individuals. If it's going to have, if it was going to be behind or have losses, you want them in the beginning, not at the end, the more money you have in there, the bigger impact of down year is right. Yeah, absolutely. Absolutely. Yeah. And I, especially, and especially, I mean, you know, you can see that's, that's a whole, whole different video, like you said, but it's like sequence of return doesn't really matter until you start needing to pull money out of it. Right. And then the reality is when you're going to need to pull money out of it is, is later when the costs are bigger, when you're, when you're in retirement, when you have no more income to put into it. And so if you have losses later, you need to have an account like a life insurance that is guaranteed to not go down. Otherwise you're, you're, you're way more exposed. And that's the challenge is like, there's so many people that, you know, are sold on this whole, just accumulation method of methodology of retirement. And they're thinking about saving and growing this bucket of money and, and nobody, well, not nobody, very few people focus on distribution planning and understanding what it looks like to unwind all this savings that we're doing, you know, and all this investing that we're doing when it looks to saying like, all right, what's that going to create for cashflow? Uh, you know, how, how does that unwinding period or distribution period look like? And that's the way I look at it is, is like the whole life insurance. Yeah. You're a little bit behind on the front end, but look at the benefit on the backend. You're going to have more cash. You're going to have more legacy. You're going to have more predictability, more stability, more protection, more living benefits. Like, and you know, like the, and like I said before, the bond, the 60, 40 portfolio has now been proven to be a broken model, or at least not as dependable as it was once thought. Yeah. One of the things I want to add to your list of what we have out there at the end and it's options, you know, that's one of the biggest things I think that, that people need to understand is you really think that the financial environments 35 years from now are going to be the same as they are today. We don't, we don't know what that's going to look like. Right. And so most people, most, most advisors put people in a box that they don't that's based on today and they get out there in the future and they don't have any wiggle room, right. They're stuck in that box and they have to do what they have to succumb to whatever the financial markets are. What we want to do with life insurance is if we have access to that cash, we're in a position to shift based on whatever, uh, you know, the market dictates is going to be our best option. And so that's a big piece of what we have in here. And that's the importance of that liquid cash, right? A hundred percent. I love it. I love it. This is amazing. And, uh, I would say any, anybody that is watching this, if you haven't utilized a truth concept, uh, you guys got to check this out. This, this software is just amazing. It's been a long time, you know, like I, I leaned on calculators a lot, right. I leaned on like early in my career and I'm just going to say I've been lazy about it because I like, I try to, I try to not like, and I, and I think the reason though is, is guys like for me, I try to not like lean on the numbers and the illustrations. I try to get people to understand philosophically and principally and like all these different things. And that's how I've kind of preferred to sell at this point in time. Um, and then occasionally if you need to pull in a calculator, I do, but like, I think obviously there's a, that's harder to get to, to, to, to get to the place where you can sell like that. Right. Like, and I've just done it. You guys can do it without calculators, but like why? Like it's they'll build your belief. And, and like, I think numbers are proof. We always say math and money math are completely different. And truth concept is going to show how actual money math works. Right. Like, and, and how it will impact, uh, you know, people's goals and objectives longterm. And this is awesome. I mean, I don't, I don't think anybody. So this is my mic drop to all you trolls out there that are telling me that bonds beat whole life. So watch this. And I can't wait to see all their comments. Now I'm going to link this video on my other reel at the top and pin it to the top so they can see it. Cool. Awesome. Well, thanks guys. Yeah. Amazing. Got any, got anything else we want to add to this? Are we going to land the plane? We're good. I think we're good right now. Don't you? Yeah. No, no, no. You know, it is. Oh, go ahead. No, you go. I'm just going to say, it is amazing what you said a minute ago about, you know, you, you've gotten into a place where, you know, you, you understand how all this works and you kind of backed off the numbers. And I have gotten to that place. What's interesting is somebody will bring something up and I'll pull up calculators to previous, like, Holy cow. Look how this works. I mean, I'm still, I mean, no, I mean, it's, it's still amazes me today. How, how, I mean, whole life insurance is so multifaceted and you start through it. And it is, it is amazing how all the pieces integrate on a big scale. But I think, I think the big problem of why people don't understand it is because it literally takes a chapter to be able to explain all the things that a whole life insurance policy does. Right. And it can be overwhelming for sure. You can't do it in a one liner. No, but you can do everything else, right? Look, my bond beat this whole life insurance policy in the first year. Oh, okay. Well, I guess that's good. Yeah. And that's where this like, unfortunately this microwave mindset and this, you know, Instagram real culture and Tik TOK culture is kind of like really hurt the financial space, I think. You know, and, and that's, that's a challenge, but like, think about it this way. I just like, I, I, I love Brendan Burchard. You guys know who Brendan Burchard is. So he's a, you know, high performance coach. He always says in his training, I went through his high performance coach program and he always would say, Chris common sense is very seldom common practice. And, and like, if we get out of all the numbers, all the illustrations, all calculated, we just start thinking about whole life insurance. And we go whole life insurance has stood the test of time for 180 years. And it's participating mutual form the way that we have it. Right. Like, so when we break it down and we look at all the other strategies, all the other investments, the fact that all these companies come and go, all these things fail. And like we've had three different versions of the dollar ever since participating mutual whole life insurance companies has been around and they've weathered the transition with every dollar they've done all this stuff. And it's like, that doesn't happen by accident. Like, you know what I mean? Like this is, but here's, what's amazing. Here's what the financial media has put on people. This is kind of, it's not necessarily new, but what they say is that's an outdated asset in the whole life insurance. And now it's like, no, it's actually still here. That's the whole point. But they're, but they're looking at is, oh, that's, that's old hat. That's that's, there's nothing flashy and new. And so they've turned that twist. And I think it works. Yeah. Unfortunately people fall for it. Right. Because if they don't understand, I mean, at the end of the day, it is complicated. And I think this is why IUL sells more than whole life right now, because of the fact that people are just taking an illustration. It doesn't matter if the illustration is worth the equivalent of toilet paper, like they're buying off of the illustration. And it's easy if you don't know what you don't know to look at that and be like, oh, an insurance company is putting this on paper. So it must be conservative. It must, there must be some level of morality to it. I think that was, that was my conversation with Bobby Samuelson that I did with IUL. And he said, listen, it's not that IUL is good or bad, you know, it's like, it's, the big, the biggest mistake that people make with IUL is that they look at the illustrations and because it's an insurance company putting numbers on a paper, people assign a level of morality to the numbers when in fact there is none. And that was like, that's what he said, right? Like, so think about that. It's like, no, these insurance companies that are doing IUL for the most part are stock based companies driven by a profit and their, their alliance and allegiance and obligation is not to you, the policyholders to the shareholders of the stock company and to turn a profit for them, period. And when you look at the moving parts in it, like it's, it's, it's, you can't compare it. Like, and when you look at whole life insurance, you know, they're going to stand the test time. And like, to me, if I'm going to put money in an insurance company and into an insurance policy, I want to partner with the companies that have my back, you know, that I can actually know that if they're around, I'm going to be around. My policy is good. I'm safe. My money's safe. And, uh, and I get a lot of pushback, not pushback, but questions from people. Like I had a conversation with the guy yesterday, said, Chris, I'm doing this big policy. I'm worried about the dollar. I'm worried about, you know, all this stuff. Like I'm still dealing in dollars, you know, when we put money into a whole life policy. And I'm like, listen, man, like I'm not going to sit here. Like I don't play that game. First of all, like if, but I will say this, if you are in fact worried about the dollar, do you question your ability to manage the transition to whatever currency that we're going into? Or do you trust these insurance companies that are managing billions and billions and billions of dollars that their biggest customers are like really wealthy people, corporations, banks, like all these people that are relying on the stability, like whole life insurance companies are really the foundation. Then when we look at Boley, the foundation of a lot of banks, right? Like, so if you look at that from that perspective, do you have the ability to manage that better than these companies, you know, that a whole life insurance company, like let's, let's just say that the, the, the, the dollar did get, you know, debunked or like we lost a world's reserve currency status or something crazy like that happened, right? Like, I don't think it's going to happen anytime soon. I really don't think that'll happen anytime soon, but if it did, do you think you have the ability to manage that risk or like these fund managers making tons of money that deal with billions of dollars and are dealing with managing some of the wealthiest people's money and wealthiest corporations money in the world? I'll put my money with them and trust them a hundred percent of the time. I think I'm a pretty smart guy, but like I'm not that smart. Well, and, and, and quite honestly, the bottom line is if that's what you're really worried about and you just need to be, you just need to buy food. I mean, that's the only, that's it. Gold's not going to help you. Nothing is going to help you. Water, food, guns, and ammo. Let's go. Yep. No. So, all right guys, well, that was a fun ending, but if you guys haven't already, make sure you're subscribing at the bell that we're notified every time we launch a new video. Also, I'm going to put a link in the description below. Go and subscribe to truth concepts. Not only are they a calculator, they actually create their own content as well. So if you haven't subscribed to their channel, make sure you do it because they put out really amazing stuff, like educating to the X's and O's and numbers of this stuff as well. So until next time, hopefully you found value in this, have a blessed inspirational day. We'll talk to you. Thanks.