PODCAST EPISODE 186: The Whole Life Timeline (pt.1)


When most people consider using whole life insurance for retirement they usually don’t think about, how it can maximize cash efficiency, using it to substitute bonds, or even use it as a volatility buffer. This conversation is all about using whole life insurance in a way that most people are never taught to use it. Believe it or not, whole life insurance can help grow your wealth even through retirement. Join Paul and Cory to discover what methods are appropriate for utilizing a wholesome financial plan.


  • 00:00 – Show Starts.
  • 00:30 – Paul Welcomes.
  • 02:25 – Setting up the topic: Whole Life Insurance.
  • 05:30 – Whole Life Insurance Example.
  • 10:25 – What is an external rate of return.
  • 11:44 – The different ways you can use a whole life policy.
  • 16:43 – What happens as your whole life policy evolves.
  • 20:05 – What you may get “hung up” on.
  • 21:37 – How people were trained to use life insurance at age 65.
  • 23:23 – A Message From Sound Financial Group. (Commercial)
  • 24:23 – Back From Commercial.
  • 24:54 – What happens when you start to draw from your whole life policy.
  • 29:00 – What happens when you hold onto your whole life policy.
  • 36:50 – Closing thoughts.
  • 39:51 – Show ends, thank you for listening.



Whole Life Timeline White Paper Link

Curious what you can accomplish with our help? Schedule a free 15-minute meeting with us! sfgwa.com/scheduling

Sound Financial Group’s Website for a Financial Inquiry Call – Info@sfgwa.com (Inquiry in the subject)

Your Business Your Wealth on Instagram

Your Business Your Wealth on Facebook

Sound Financial Group on LinkedIn

Paul Adams on LinkedIn

Cory Shepherd on LinkedIn

Cape Not Required (Cory’s Book)

Sound Financial Advice (Paul’s Book)

Clockwork: Design Your Business to Run Itself

Mike Michalowicz’s Book – Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine

Loserthink: How Untrained Brains Are Ruining America


Did you enjoy the show? We would love it if you subscribed today and left us a 5-star review!

Click this link – Your Business Your Wealth

Click on the ‘Subscribe’ button below the artwork

Go to the ‘Ratings and Reviews’ section

Click on ‘Write a Review’


Contains a sample of “King” by Zayde Wølf courtesy of Lyric House.

Full Episode Transcription


Unknown Speaker 0:01

Welcome to your business your wealth. We’re your hosts, Paul Adams and Corey Shepard teach founders and entrepreneurs how to build wealth beyond their business balance sheets.

Unknown Speaker 0:34

Hello and welcome to your business your wealth. My name is Paul Adams. I’m CEO and founder of sound finance group then joined

Unknown Speaker 0:40

by one of the Best

Unknown Speaker 0:42

friends, best business partners. A man could have Corey shepherd, and I’m just always great to have us reconnect for our episodes.

Unknown Speaker 0:52

Geez. I mean, I know we’re supposed to have witty banter to start the day not you know supposed to make me cry like God But it is your right. This is our chance to really get together every week now that you’re on the road. But I think that I’m more emotional than usual because of the journey that our journey together is not ending. But a journey that we’re on is reaching an end point, which is the new book we’ve been working on. I don’t think I don’t know if I told you I just ordered the first two author copies in the mail. They’re on the way.

Unknown Speaker 1:26

So will they be there by the time I arrive in Chicago,

Unknown Speaker 1:30

fingers crossed, you know, I think this the website, always over, under promises, trying to over deliver, there’s a chance that they won’t be but I’m really hoping that they that they will. Now I know. That’s exciting. So anybody we’re going to talk about at the end of the episode, but leave us an honest review on iTunes or wherever you’re watching and send us an email with the screenshot and you can now get on the pre release list for a copy of our book, your business, your wealth. Coming soon, probably within a month, I would have a guess. Right on Well, I

Unknown Speaker 2:04

that not only is that something I can’t wait to see, but you guys may wonder like, Paul, you’re going to Chicago? Yes, we’re actually on the road with our family right now for a total of about a seven week trip that takes us Wyoming, Colorado, back to Wyoming, out to Chicago, down to Oregon. And it has just been a blast. And today we’re getting a chance to kind of showcase and put on the show for the first time, a conversation we’ve been having with clients, and a conversation we’ve had with clients about using a particular tool, using whole life insurance in a way that most people are never taught to use it. And, you know, kind of before we jump in, Cory, is there anything that you kind of want to say about what you’ve noticed in terms of client awareness or interaction is we’ve kind of share this with them over the last year, so well put it this way.

Unknown Speaker 3:00

If you’ve heard anything about whole life in the, in the past this get ready to have our Jerry Springer episode, like we’re gonna get, you’re gonna get angry, you’re gonna get triggered, you know, but there is, you know, we created this conversation because everybody has always heard something about life insurance and not just whole life, but all kinds of life insurance and certain assumptions about what they need or don’t need or how how it should work. And the truth is, every family’s just got to make those assessments for themselves. And so we just wanted to create a grounded academic look at some of the ways that you could use whole life in a timeline over your life to integrate with other assets. And I think what you’re going to want to watch out for is that the comparisons we’re making are different than the comparisons you normally see of whole life to to other things. And that’s the thread that that I think is important. So I don’t I think we should just dive into it. And we do no need to say much more about that.

Unknown Speaker 4:04

Perfect. Well, and and just add to what you said courts also that idea that in the typical financial realm, what do they do they design each product to be looked at as a standalone decision. Mm hmm. You get your mortgage, you make that decision, get your 401k to make that decision, you get your Roth IRA, and you make that decision. You each of those stand individually, five to nine plans, etc. and kind of an overriding theme of our show is that our assets need to be integrated with one another on our personal balance sheet no differently than we would organizing the assets and intellectual property that we have inside of a business. You would, you’d want to make sure that those things work together, not try to work out there separately. And so when we think about whole life insurance, and it’s common view, people are really focused on this idea of just the return of the tool by itself. They think of it as just Having one use which by the way is not your fault is consumer. That’s the way the insurance industry’s taught it, they teach, grow money in it, start taking money out tax free, and you’re at age 65. And that’s it. You could feel like you could do better with your money elsewhere, certainly in some of those. And it always seems like just getting term insurance will be the quote, unquote, cheaper way to go. And now, this is the part everyone really looks forward to now what we designed is a basically a fictional whole life policy that we can walk through this with. But as you look at that illustration, this person is putting in their 43 years old putting in $65,000 a year, and you can see their cash value increasing every single year. But it looks like it’s just doing okay. You know, you look at those first few years and at least the example I like to point out is somebody might be looking and saying, well, gosh, Paul, it looks like I don’t make any money. And that’s true for a little bit here. Put in $65,000 a year first year goes by 37,000. So I’ll put you on the spot. Cory. If that’s you, how much did it cost you the first year?

Unknown Speaker 6:13

Let’s see. I just realized that. I can’t see it as big as I want to.

Unknown Speaker 6:19


Unknown Speaker 6:23

let’s see. So the first year, yeah, about

Unknown Speaker 6:28

you know, 30 30,000 Yeah, under $30,000.

Unknown Speaker 6:35

Little under 30,000. The first year and your expensive term insurance policy. Matt is could be Paul, I put in 65,000. It only grew to 37,000 you call me and say terrible things about my mom. Then the next year you put in 65,000 and it grows by

Unknown Speaker 6:51

almost 40,000 so it cost you about 25,000 the second year.

Unknown Speaker 6:56

You might be mad better. Getting better though. It’s is getting I wouldn’t be mad again.

Unknown Speaker 7:02

But now you’re three you put in 65,000, it grows by 59,000 a year. So cost a little over 5000. You might look at and go, well, the death benefits growing. Maybe that’ll be okay, maybe that’s not such a bad deal. But then by year four, you put in 65,000. And that your gross by 68,000. It grows faster than we put money in, in this case by year four. And nobody sends a tax form. You see it starts outpacing its own growth in internal cost to provide the insurance, in this case by about your for. And the rest of the time. It’s got to make up for that. But when we look at it just growing over time, it certainly doesn’t look like a big sexy rate of return. It just looks like it account that’s growing conservatively over time. And that is exactly what it’s doing. Here’s that common view. If we look at it by the numbers, well, you end up with a very Return of putting in $65,000 a year and doing it for 23 years total, the cash value at the end of year 22 is 2.25 4 million. So you have over 2.2 million of cash value, but that’s just a 3.78% rate of return. So it doesn’t restart shooting the lights out, certainly. And while the pre tax equivalent is about 5.4%, that is not a bad return certainly outpaces most of the fixed income investments we’d have in a portfolio. But you can see how many people would take a look at that and why they would say, Well, why don’t I just by term invest the difference? Why don’t I put my money somewhere else and see if it can do better. But harken back to a radio host for many years ago, saying, well, there’s the rest of the story. And so let’s look at what the rest of the story is. And we’re going to start Can I just deal with

Unknown Speaker 8:59

sorry, Something as a as a comparison, because this is what I talked about before is a lot of people compare whole life to a stock portfolio. And that’s the opposite of what we’re, we’re doing, like the whole conversation that erupts on message boards on the internet, if you’ve ever been out there, which is mostly insurance agents, going ranting on those message boards, is a lot of people are saying, whoa, life’s The best thing ever best thing since sliced bread, or it’s the worst thing ever. You’d be stupid to put your money there. And that’s just the wrong conversation entirely. Just like when folks are comparing the first few years of a whole life policy and we’re talking about someone being, you know, mad to burst about it not growing as much as they thought it would. Well, there’s lots of periods over the last 2030 years where over the first few years of putting 65 grand into the market, you would have had exactly the same amount So it’s not any, what we’re trying to say is like, let’s have the same conversation, the same comparison and just look at how all these assets are, are behaving and take advantage of the differences, not just not just look at that narrow lens. So I’m starting, I’m going to go on my soapbox, so I don’t stop right right now.

Unknown Speaker 10:23

So let’s get let’s get out to that wider view Korea’s talked about which is the idea of an external rate of return. An extra rate of return is the total financial impact to your balance sheet from having made a new decision. And now that we’ve kind of seen the way the financial services industry typically looks at each tool on the micro level, let’s instead look at how a whole life policy can evolve throughout our entire life to actually work more effectively as it evolves further to be able to meet different needs on the balance. sheet. So we’re gonna This is the I

Unknown Speaker 11:03

used snuck in this guy in here I hadn’t seen

Unknown Speaker 11:11

that. This is what happens when Corey gives me creative license. So now when we, when we pick up a life insurance policy is things that can do and I figured I’d give everybody a little look at that first and then we’ll go through them one at a time, we get immediate death benefit when we get a life insurance policy. If we qualify, we also get waiver premium, which would say that if we’re permanently disabled, they’ll go ahead and complete that one part of our entire financial strategy for us by paying the premiums on our behalf while we still have access to all the cash value. Maximizing cash efficiency is going to be the first then we’re going to talk about bonds substitute. And we’re going to talk about how life insurance can actually allow us to use capital elsewhere on our balance sheet more effectively, when we’re taking income and then our Last two about how we might use it as a volatility buffer. And how we’ll use it for asset acquisition will be in the second part of this episode, which you guys will hear in a couple of weeks. But, of course, we talked about it immediately. If somebody does this, they put in $65,000 a year they’re 43 years old, in this case, female, immediately pick up $2 million of death benefit and pick up the benefit of $65,000 a year of the premium being waived on the individual’s behalf, should it become permanently disabled. Now, but what’s the first step everybody talks about with their money? Cory, like the first thing that you should do when you’re first laying the groundwork for your household financially?

Unknown Speaker 12:46

Well, what everybody says is contribute to your 401k to get your employer match. What we would say is build up cash on your balance sheet get that emerged. See fun, as a nice warm bubble bath of cash insulating you against the randomness of life. Indeed, and and if you think about it, you build that up early on in life for that six months to one year worth of income or expenses at least.

Unknown Speaker 13:18

And yet it sits on your balance sheet. And its growth is, of course going to be lackluster sitting in a bank for say, from the fourth year of this, so this would be this person starting at age 43. So about age 47. There’s, they would have to keep $200,000 in cash for the rest of their career. And that’s appropriate and everybody does it, but nobody thinks about the eroding impact of it. But if we look at our life insurance policy about its fourth year, it now has enough cash in it. Not only did we notice it’s now growing faster than we put money in by the end of the fourth year. It also has enough cash in it that that could supplement our otherwise emergency savings the back. So we have 200,000 that’s totally accessible in a life insurance policy. Cory, do we have to leave the same amount of money in the bank for our family for emergencies?

Unknown Speaker 14:15

I wouldn’t, I wouldn’t think so you always want a certain amount that you can just get at in a split second, but that’s relatively small. And then the rest could live in a whole life policy that takes you a few business days to get at if you’ve got your account linked with your your bank, and you can usually do it online with most insurance companies.

Unknown Speaker 14:36

And as we get in each of these steps, I also want those of you listening who already have a whole life policy to know that if if you need help with planning on a more broad scale, nobody’s taught you these things before, reach out to us. We’d be happy to even if it’s just helping you over a 15 minute call or if appropriate, makes sense to engage in our wealth design build process, but now we

Unknown Speaker 14:58

you know, for folks who don’t already have a whole life policy and don’t already have that emergency fund. Don’t think that we’re telling you the first step you should make is build the emergency fund in your in your whole life. Well said, No, we’re talking about the many rate of return. But the distinction is, if you don’t have an emergency fund, the best rate of return you could get is building some cash on the sidelines. But then once that’s built, once you’ve got other assets building, you look back and say, Okay, how can I optimize what I already have? And I, so we’re not making guilty for not having a emergency fun. Just work on that for now.

Unknown Speaker 15:33

Yep, indeed, we’ll buy gear for that life insurance policy has grown to 2.6 million to death benefit where we’ve talked before about the tougher Tamar corridor, you know, that death benefit has to rise. Otherwise, we lose a bunch of the tax benefits of life insurance, but we also have 205,000 of cash value. So what could we do different with our money in the bank? Well, instead of letting that money just sit in a bank earning half a percent interest we can achieve deploy that into an academically allocated globally diversified portfolio, and let that money grow at market rates of return over the next set of years from your four to your 23. And when you look at the benefit of that, well, that’s adding a total of about $400,000 to our balance sheet by age 65. So that’s just the first little move of money, we have the rate of return of the life insurance policies exists on its own, and we just expose the first external rate of return, which is our ability to invest our bank cash differently than we would have before allowing us to put more money on the balance sheet by age 65. So let’s get on to what happens in year seven as our little whole life policy evolves. We’re still adding $65,000 a year, but now there’s enough cash in this case to move an extra $200,000 but this 200,000 is not moving. From our bank into the market, but rather taking our existing market based portfolio, and now having the fixed income portion of portfolio be made up in part from the cash values of the whole life insurance policy.

Unknown Speaker 17:15

And I can hear someone saying, wait, but I’m you’re saying as I’m getting older, you’re making me more and more risky. Don’t folks get less and less risky when they get older? But that’s actually what we’re saying. Because the whole life is there. Moving money from bonds to stocks in your portfolio, leaves you with the same amount of risk. And we take a look at all of those things together.

Unknown Speaker 17:40

Exactly, exactly. And, and now what would be the kind of anticipated return on bonds if we did an after tax rate of return, we’re going to see that that money is going to grow to about 320,000. And for those of you who aren’t watching this on YouTube, listen to the podcast. We’ve got a white paper you can go right to the show notes and download called the Whole Life Insurance timeline that will explain all the specific rates of return that we used, etc. But now we have this 200,000 that was only going to grow to 320. But because we can now change the fixed income portion of our portfolio to buy equities instead, because the whole life insurance is making up that additional chunk of the bond portfolio, we now have, the fixed income component of our portfolio is able to get equity like returns, which means we add about another $300,000 to the balance sheet by age 65. Again, we haven’t had to touch the whole life policy. What we’re able to do because we have the whole life policy on the chessboard, if you will, it’s like having an extra queen. And what we’re able to do is move our other pieces are the result of the presence of that whole life insurance policy on our chessboard. Well now our cash value continues to grow and by year 10 If we can make another one of those bond reallocations, which gives us in this case, we move about a quarter million of it. And it adds a little under $300,000 of additional wealth this time. Now, as you guys might imagine, we could have gotten very granular and done this every single year. But what we did is we just chose one more year to illustrate it now, by year 13. There’s now $4 million with a death benefit almost a million dollars of cash value. And it year 13. Because of that surplus, additional cash value, we can rebalance another $300,000 that would have otherwise been fixed income in bonds, and instead have that money deployed to the market. Because we have this other fixed income asset called whole life insurance that is going to give us those consistent fixed income returns every single year on our balance sheet so we don’t need to leave as much of our money locked up in bonds. So we’ll pause there for a second Do you see any places that clients get hung up on this that you want to make sure that you’re with audience?

Unknown Speaker 20:05

I was just thinking about that. And it’s it to go deeper on the normal online debates that we see. It’s really saying, you know, well, what’s going to get a better rate of return whole life or the stock market? And like I said before, that’s the wrong question. Because we’re not, that would be, no one says, oh, savings accounts are awful, you should never put money in them because the market gets a better rate of return. Because we’re putting money in certain places for certain purposes. So really, it’s not about all of our money, getting the highest rate of return every time it’s portions of our money, getting the appropriate amount of rate of return because the appropriate amount of risk that they’re that they’re at, and I think that’s where people get hung up is there. They’re making an apples to oranges comparison, when really they should should just be using all the apples to bake a pie. I took that metaphor away for me.

Unknown Speaker 21:05

Yeah, I think I think your will said isn’t it that when we look at a whole life insurance policy, what it does on its own is not the appropriate assessment just like what your 401k does, by itself is not the appropriate assessment. It’s what it does elsewhere on the balance sheet also. So we’re just demonstrating a way to do that using whole life insurance. And we’ve just demonstrated how we can add a significant amount of money to the balance sheet through efficiency and optimization of other assets because the existence of whole life insurance. But now let’s talk about how we would use it starting at age 65. In terms of taking income now In fact, I’m thinking let’s have you share Corey what most people end up traditionally taught to use life insurance, and then we’ll come back and talk a little bit about have a solution to it.

Unknown Speaker 21:53

Sure. So the how we were originally trained how life insurance companies trained other agents is to tell a story about here’s a place to park some extra money and accumulate it safely. And when you hit 65, here’s a here’s some supplemental income, you can start drawing money out of the policy for extra spending whenever you need it in retirement. And it sounds great. It’s a it’s a warming tale. But the problem is, whole life has dividends and interest that give it the same kind of compound and curve as anything that pays interest and right about 65, when you’ve had a policy for 15 2030 years, is when it’s hitting that takeoff piece of the curve. So to start pulling money there at the beginning would be cutting the Achilles heel of that policy right as it’s becoming the safest most easily compounding place for a retiree to to grow their money. So that’s how folks are typically trained. And by the way, insurance companies wants you to do that because take money out then reduces the cash in your policy reduces the growth reduces the death benefit gives them a lower liability on their books. And so they would just assume Have you you do that. So we’re going to take there’s a perfect time to go to a break have a message from sound Financial Group and when we get back, we’re going to show you a different way to use a whole life policy that can have some surprising results. So stay with us.

Unknown Speaker 23:24

Paul Adams here at sound Financial Group. Are you curious what you can accomplish with our help? You’re here enjoying the show? Our philosophy is helping you increase your effectiveness with money. And now we have a way to help you take another step on your financial journey. We have designed a financial inquiry call for you and the thousands of other listeners of your business your wealth. This is a complimentary 15 minute conversation where one of our team members will ask you some key questions. understand your concerns, and if appropriate, schedule a time for further conversation with an advisor. If you look at the episode description, you’ll see a link to schedule a call at a time this least invasive for you. And even if now’s not the right time for us to work together, we’ll point you toward resources to help you in your financial journey. We always look forward to connecting with our listeners, and we look forward to talking with you

Unknown Speaker 24:21

soon. Welcome back to your business, your wealth and our episode on the whole life timeline. Paul, I just talked about the traditional way that folks have been trained to use a whole life policy, we start to tell us about a different way and different option.

Unknown Speaker 24:40

Yeah, I think one thing everybody can see on the screen now is that you’re 23 there’s life insurance policy as a little over five and a half million dollar death benefit. And as almost $2.4 million of cash value in the way people gravitate toward it is I want to start accessing that cash value and start taking income from it. To corys point though, this leaves less money compounding inside this tax exempt vehicle called whole life insurance. And as that money is now struggling to grow, we’re drawing money off of it, rather than letting one of our strongest players on the team that always has at least some positive return, continue to compound in a tax exempt environment. So instead, we’re gonna look at a different way to use whole life insurance by looking outside of it, again, macro view of somebody’s balance sheet. And as we do that, at year 23, is when we’re going to start integrating and coordinating the life insurance with our other spending strategies. You see, you now have the permission to spend down other assets you wouldn’t have had otherwise. You see if you went to your spouse’s, so let’s just go in and spend all of our money over the next 20 years. It’s okay, I’ll probably be dead by then. You’re probably going to sleep on the couch that night. Gotta go, you know, there’s checkbook writes everything, but what we can do instead is strategically consume our other assets because of the existence of this guaranteed backstop. Now, to give an idea of how big of a deal this is, let’s just look at what most people do when they’re spending money in their old age. You know, Cory, you helped with your grandparents and they were doing basically this just money and CDs, take out interest every year. Right?

Unknown Speaker 26:27

Right. And you know, CDs might have paid 4% back when they were buying those, those CDs. So this was a little while ago. Might be harder now. But yeah, interest only never consuming the principal. There’s a certain amount of comfort to that as far as the safety of keeping that money intact, but it’s the kind of comfort that a hoarder feels really by having piling all their possessions around them. We are literally forced to be a hoarder of our cash because of that. threat of worry is always in the in the background.

Unknown Speaker 27:03

Yep. And and what we’re looking at here is what most people do so they accumulated five and a half million of assets. So this is stocks, bonds, mutual funds, academically allocated globally diversified portfolio, whatever they have. And they’re taking the 4% distribution that is that sustainable distribution rate throughout their lifetime. Well, you can see that they’re taking about $220,000 a year gross income, paying a 30% tax rate. And that’s just a blend of what likely tax rate might be plus capital gains on some of the assets. But it leaves them $154,000 a year and leaves them pretty exposed because tax rates could go up. Inflation is going to whittle away at two things. Your five and a half million dollars investments will feel like less and the money you’re taking off every year will feel like less, we could have lower interest rates causes Somebody have to lower the amount, they could lose some of the capital. And then they’ve always got market risk. And what’s a bigger deal now that they’re studying across institutions in economics departments across the country, is that longevity risk may be a much bigger risk than even portfolio volatility to many people. And then when you die, your family just gets whatever’s left of the principal of your investments, hopefully five and a half million.

Unknown Speaker 28:32

But assuming that the tax the estate tax situation hasn’t changed by then because that that could come into play with that much money.

Unknown Speaker 28:41

Of course, yes. Well, and and because of the income most of our clients have, they have to have millions and millions of dollars stacked up somewhere else, to be able to produce the same level of lifestyle they enjoyed while they were working. That’s how they reach definite financial independence. But let’s take a different look at what we could do. With this same five and a half million, if we have that same five and a half million in other investments, so let me just be absolutely clear here. We’re not showing you anything that have to do with the life insurance policy. Right now. Everything you’re seeing on the screen, and everything we’re talking about is the exact same person with five and a half million of the exact same portfolio, earning a 4% rate of return. The reason we’re doing this the same reason we learned with scientific experiments, you have a control group, you drop in your catalyst, and you see what changes in the experiment. Now, in this case, our catalyst is what if we had the five and a half million and we also had five and a half million of guaranteed death benefit whole life insurance. If we know that that’s the case. And then we tell our spouse that we want to spend down five and a half million of our money, but we tell them don’t worry. We put in that big ugly orange rubber Rubbermaid container in the garage is where that guaranteed life insurance policy sitting Then I suppose know

Unknown Speaker 30:00

where I store my life insurance policies.

Unknown Speaker 30:03

I don’t know what it is everybody puts them in orange Rubbermaid containers. So you but now you can begin to actually consume principle off your five and a half million that changes your distribution each year to 404,000 off the same amount of money. And if that’s all money that’s after tax, as we spend it down, we actually get lower lower tax exposure because we’re invading our basis. So we have protection against some of the tax rate risk. Some of the inflation risk, the interest rate risk because we’re consuming principle, the loss of capital is diminished because we also have whole life insurance that has a guaranteed cash value in it. We take some of the market risk off the table and the longevity risk doesn’t become a problem because it’s automatically hedged for in the death benefit a life insurance policy. So instead of your family getting the five and a half million when you ultimately die if you died at age 86 your family gets about seven points. 7 million. Now when people hear this or look at it, it could seem pretty daunting that I’m talking about all these numbers. So let me just make it more daunting by filling the entire screen with numbers.

Unknown Speaker 31:15

But so it’s not so bad, because on the left is what I already talked about with my grandparents. Here’s a picture of Korea’s grandparents. And, by the way, this was much more lucrative for them in terms of the CDs that they had compared to now, but it’s an interest only, never invading the principle on the left, and it’s the same numbers, every line all the way down the screen. So if you just catch that really quick, it’s much less intimidating because there’s only 12345 numbers repeated every line.

Unknown Speaker 31:50

But this is the thing I love to bring to people’s attention, Cory is if you lived from 66 to 85 in this exact scenario, and he took 4% distribution every year, even though you spent your lifetime building up five and a half million in capital, even if you live a healthy 20 years in old age, you’ve only gotten to enjoy 3 million of the five and a half million that you built up,

Unknown Speaker 32:16

right? I don’t think you’d get to the five and a half million if you live to 95.

Unknown Speaker 32:21

Yeah, it takes a long, long, long time and on top of it, who does get to enjoy our money? Well, the financial institution that’s managing it every year is still getting a chance to take their fees

Unknown Speaker 32:32

on the full 5 million the entire time.

Unknown Speaker 32:36

Yep. Yep. And now what if Now, you might imagine like, why does nobody talk about this? Well, let’s think about who the players are. One set of players are the life insurance companies, the investment companies, etc. Well, what we’re now doing is we’re saying the life insurance company No, no, we don’t really want to take hardly any money out of our life insurance and start from 65 to 85 we’re going to leave that there and let that thing compound as much as possible. Meanwhile, we look at the investment company now and say what we’re going to do is strategically spend down all of the money that we have with you. And as we strategically spin down all the money we have with you, what we’re going to show you is that you get to spend much more of your money because you’re spending down your money instead of letting the bank manager I know that that that sounds overly simplistic, but it takes something to get it. And that is that now we can take out and spin down all of our capital work that we had in investments. Now we take gross withdrawals of $8 million. And on the back end, we’ve now enjoyed $7.3 million after tax.

Unknown Speaker 33:54

And this is my favorite favorite part. Can I say it? Yeah, you enjoyed more than twice the income and paid half the amount of tax as you did before.

Unknown Speaker 34:10

That’s my favorite part.

Unknown Speaker 34:12

And can you imagine why American funds Oppenheimer, BlackRock, any of these firms that are out there aren’t telling people why it can make a ton of sense for them to spin down their own assets in their old age? Well, because this person went from managing five and a half million dollars with whatever institution it was with to zero over 20 years. And what this makes the case for is that the death benefit of your life insurance can be used as a current asset, as long as we match it with an equal amount of money that we can somehow spin down. Now we’ll talk about a little more in our next episode about how that spin down would work. How you would access it and how we’d integrate something we called volatility buffer with a Have your retirement spending. But let’s just look at the grand total of the external rate of return of this life insurance policy. Remember, it started a little over three and a half percent. Well, now, we added $440,000 to our entire balance sheet, just by redeploying the bank cash, then we reallocated our fixed income assets to equities three different times as the cash value got large enough to allow for it. And then at age 65, we have the value of the death benefit gives us the ability to spend down other assets. Now, this is one point that I want to make really clear, you’re gonna see here the after tax equivalent is 12.28%. That is not the return of the life insurance policies put some really cool funds in it. This is the return on strategy. This is the difference between having the golf swing that puts the ball where you want it versus just buying The cool golf clubs, if we get the cool golf clubs and we don’t add a great golf swing, this goes

Unknown Speaker 36:07

to show you how to use those clubs. Exactly

Unknown Speaker 36:10

right. But the total value of deploying $65,000 a year, and it creating $7 million of total value on your balance sheet, which I think we wildly underestimate because we never showed somebody using their cash value to buy their first commercial building. We never showed somebody using their cash value to start a business or acquire a competitor. We’re only showing these somewhat simple macroeconomic moves on your balance sheet. But it gives us a before tax equivalent of 17.54%. And so let me leave our conversation today on this, and then we’ll let Cory take us out of the episode. But it is that almost everyone out there. The real estate agent would say you should buy real estate. The mortgage person would say buy real estate but just have a mortgaged to the hilt. Your stockbroker is going to say you should just buy stocks or the portfolio managers gonna say just put it in your portfolio, the banker is going to say that their products are the best. And you have all these expert individuals who all kind of point to the thing that they know best. And here’s where we’re a little bit like a voice in the wilderness. And it’s not controversial. It’s just that the only reason a whole life insurance policy has the potential to have this kind of impact on your balance sheet is simply only because we coordinated with and built up other assets. a life insurance policy is not this valuable unless we also build up the rest of the balance sheet, which means we need our stock and bond portfolio, which means we may need our rental properties means we need the value of our business and exit strategy there. All of those things get integrated into what we’re doing, not just on this whole life decision, but every decision that we make, and if this is something that you’d like to look deeper into On a whole life policy that you already have, or this is a different enough look and you’re like, Oh, I might need to go through this wealth design build process these guys have where this is one of the many, many, many, many strategies we might implement. But we’re just staying an open book here on the podcast and on the YouTube show to let you guys know, what is out there and how you can look at these tools differently in an unconventional method to produce uncommon results on your balance sheet. So

Unknown Speaker 38:27

Jordan is gonna have a download on the show notes for this episode with a white paper that goes through some of these same numbers that you saw here on the screen or if you were listening, and couldn’t see anything. Great way to get that info into your eyes quickly. Please leave us a honest review on on iTunes that helps more than you could know and getting this message out there to more people that this could and in thank you for whatever your honest review is just send us a screen. Shout out that to info@sf.com and we will put you on the list for our new book, your business, your wealth, coming out in about a month that you’ll get it back out the door as soon as we get it in our hands. And as always,

Unknown Speaker 39:15

we hope this has contributed to you being able to design and build a good life.

Transcribed by https://otter.ai

Transcribed by https://otter.ai

This Material is Intended for General Public Use. By providing this material, we are not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation.

Sound Financial Inc. dba Sound Financial Group is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through Sound Financial Inc. dba Sound Financial Group and individually licensed and appointed agents in all appropriate jurisdictions.

This podcast is meant for general informational purposes and is not to be construed as tax, legal, or investment advice. You should consult a financial professional regarding your individual situation. Guest speakers are not affiliated with Sound Financial Inc. dba Sound Financial Group unless otherwise stated, and their opinions are their own. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. Past performance is not a guarantee of future results.

Each week, the Your Business Your Wealth podcast helps you Design and Build a Good Life™. No one has a Good Life by default, only by design. Visit us here for more details:


© 2020 Sound Financial Inc. yourbusinessyourwealth.com



Podcast production and show notes by Greater North Productions LLP

Recorded using Switcher Studio: sales@switcherstudio.com