EP93: Smart Retirement Strategies with Mark Willis

And glad to be back, man. Yeah, there's a lot of ground to cover. We've got a lot of ground still to go. So I'm excited to share with your audience. Yeah.

Yeah, the misunderstanding of the idea of diversification. Now, first of all, I got to just say, good on you for anybody who's able to save. I think in this world today, the margins are being compressed. Prices are being, people are haggling us on price for our jobs. The equipment, the materials, the inventory, prices are going up. So margins are getting cut. So anybody out there who's able to save, way to go. That's the hardest job in finance. It's just living within our means. And I mean that for our families, and I mean that for our businesses. The average American is saving 2.3% of his or her income as of October 2022, man. So 2.3%. That includes everything for your emergency funds, through your retirement accounts, for your kids' college, the flat tire, all of it. So there's no way that we're going to be able to make all of our goals happen on 2.3% of our income. If you're one of the lucky ones who can save money, that's awesome, first and foremost. Now, back to diversification. Once you can save, where do we put it? I think we talked last time, most of us really don't know what we want our money to do for us. And the other problem is that many people know exactly what they want your money to do for them, meaning financial planners, meaning... big brands like Apple and Google and Lexus and Gucci and the rest of them, they'd love to take that money and put it into their financial plan. So when we talk about diversification, most people think, I'm going to put my money in broadly diversified stock market funds of various types. I got my aggressive, my conservative, I got my dividend payers, I got my value, I got my growth stock. And they think that's a little bit in bonds. Don't forget about bonds, right? So that's the general definition of diversification. At least the oh-so-average way of diversifying. And we talked about last time how that's sort of like putting all your eggs in 12 different baskets, but they're all on the same truck. And that truck can go off a cliff. And then what good did all of our diversifying and hand-wringing do for us if all that money just went over a cliff like it did this year? This year is one more example where the stock market can go down and the bond market has gone down too. So what good did all that diversifying do for us? If all of our accounts, including our safe bond money, is also gone. So where else can we put it? We can put it on another truck. We can put some of our eggs on separate trucks. And the fancy word here is non-correlated assets. It's just the phrase we use. But what it turns out to be is things that are outside of the markets, the paper wealth markets of Wall Street, things that don't go down when markets do. What else is out there? Is it possible to pack money into something that has nothing to do with the public markets? With who tweeted what yesterday? I don't want my financial future to be based on a tweet, for goodness sakes. So that's sort of what I meant by eggs in various trucks.

Pros and cons of a pension?

Got it. Yeah. The pro is obviously, that you have a default option if you have an employer, which I know a lot of your audience may not. You might be your own boss. And Brad, last time I checked, when I started my business, I didn't have a 401k just falling out of the sky, laying in my lap. So there's that. And most self-employeds do not have a retirement account set up for themselves because they got mouths to feed. They got bills to pay. They got this Saturday. They got the kids' birthday parties coming up. So there's less of an incentive to think in terms of long-range retirement planning. So there's that part. Now, of those that do start up self-employed retirement accounts, there's a few options. There's a SEP, which is a simplified employee pension. You can set up your own pension, which is kind of cool. You can set up other accounts like a solo 401k if you're an independent contractor, for example. And these are accounts that allow you to put your money in the stock market and hope and pray. And sometimes you get a tax deduction when you put the money in. That's the pro. That's the benefit. You get a tax deduction this year. That's about all I can say as far as the pro goes. So what do you think? I'll ask you this question, Brad. And I ask a lot of clients this when we're talking over the phone or over Zoom. We'll just look at their 401k and they're saying, hey, Mark, I'm doing great. I'm maxing out my 401k. I feel so good about that. And I, first of all, I applaud them for living within their means. And then I asked them just one question. What is your understanding of how that 401k is going to be taxed in your retirement? And they say, well, what do you mean? And they say, well, well, I guess it's going to be taxed in retirement. And I said, well, that's interesting. Where do you think, Mr. Client, where do you think taxes are going to go over your lifetime? Are they going to go down or up? I say, I don't care about this year's tax rates. I don't care about. how you feel about the president or Congress, I'm talking over the next 10,30,50 years, however long you expect to live, where do you think tax rates are going to go, down or up? And 100% of them correctly say taxes are going to go up. And then I just ask, well, just help me understand why does it make sense to take a tax deduction now when tax rates are at their lowest that they've been in our lifetimes? To get taxed at a higher rate on a bigger number, if the market goes up, you're going to get taxed on a bigger rate on a bigger number in retirement. And every one of them, myself included when I first learned about this, just the jaw drops. There's silence. And you can hear the wheels turning. And you realize, wow, we've all been hoodwinked. You guys got to realize that the 401k is not even old enough to retire yet. It's only 41 years old as of 2022. So if the 401k was a person, it itself would still be unable to touch its own money. All right? That's how young this experiment is. We're in a grand retirement experiment. Now, I'll give you one more stat, and then I'll shut up and pass the ball back to you, Brad. I was just doing some research for an episode this morning for one of our podcasts at Not Your Average Financial Podcast, and the average balance. Well, you want to take a guess? I've kind of seeded the conversation here so I get it, but... What's your best guess on the average balance of someone who's 55 years old in their 401k and other retirement accounts? The total retirement savings on average, the average American,55 years old across this country. What do you think the balance of that 401k is?

$50,000. All right. And boy, that's pathetically small. It is. For a 55-year-old. And you have to remember averages. mean nothing except you know that means there's somebody out there with a 10 million dollar 401k and somebody else with zero right 10 bucks in it but the average is actually much better than that thank goodness but it's still dramatically underwhelming it's 160 000 bucks is the average balance should have went

there you go yeah yeah there you go well it's like the price is right you don't want to go over you know But in this case, you do. I mean, really, you need a lot more than $160,000 when you're 55 years old. It sounds like a lot, you know. But the reality is that converts to about $400 a month of after-tax money to spend in retirement. $400 a month is what we can expect to live on from our wonderful 401k experiment that was set up 40 years ago. Now, can you live on $400 a month, Brad? Because I can't. No. I can't. Neither can most of the clients that I work with. So the downsides are market volatility. Taxes and retirement. Oh, by the way, fees. The Department of Labor says fees on your 401ks or IRAs. Even if you get a low-cost one, it's still going to be somewhere around an average of 1%, and it could be 2% on smaller 401k and IRA plans. But the Department of Labor says if you just have a 1% fee on that 401k over 35 years, which is a good retirement there, that's 27% of your life savings eviscerated due to fees. Just the fees. All right. So that's a third of your life savings. And then you add the

That's it. That's it. Yeah. And thank goodness the government figured out a way to get all that tax off your back without paying any fees. Remember, some of that 401k goes to the IRS in retirement. How much of the fee did the IRS pay for that privilege? Were they willing to be a partner with you in the fee paying? Of course not. But they're certainly going to be a partner with you in the distribution of that 401k or IRA or anything else that's tax deferred. So that to me sounds like a wonderful charity. I mean, you should hopefully get a thank you letter from our dear uncle every year.

we don't. So I'm saying a lot of doom and gloom. And please understand there are some powerful strategies that are beneficial specifically. for folks that are in just down the middle of the alley of where you love to talk to folks and where you do such a great job coaching folks in the trades, in the electricians, the plumbers, the landscapers, general contractors. There are tools and strategies that do not rely on the stock market, that are tax-free when we pull the money out, that we can get out both when we're 59 1⁄2 and 79 1⁄2 and 39 1⁄2. You don't have to wait for some magical age. to finally be an adult and have access to your own money like you do with a 401k, there are financial tools and strategies that we only touched on last time that we could dive deeper into today if you'd like.

Well, and as of this recording, and I hate to interrupt you there, but I'll just pile on with what you're saying and then I'll pass it back to you there. Venmo and PayPal and all these Zelle and many other cash apps. They used to have a $20,000 transaction before you'd really need to report anything. I know a lot of your listeners may be taking payment through some of these cash apps. Now, as of the start of the year, January 2023, that limit has been lowered down from $20,000 to a $600 limit. So you're going to get a lot of 1099Ks next year, which are the paperwork just flooding the IRS. It's going to slow down our tax refunds. If we still get one, and it's a crazy invasion of privacy from the IRS. Now, I'm sorry to interrupt you there, but yeah, you're exactly right. There's some big changes coming with the tax code as they've hired all these different agents.

Hey, yeah. You know, here's the thing. Where else in your life are you getting free money? Just think about that for a minute. There's no such thing as a free lunch except the cheese on the wrong end of a mousetrap.

All right. So let's start with that presumption. What's the catch? Yeah. What's the catch? Well, here's the thing. There was a recent study done on this. And of those companies that set up an employer match, there was a corresponding reduction in the salaries of those same employees dollar for dollar. So she's simply just not being paid an extra 10%. That's what's happened there. Now, I'm a fan of putting in up to the match most of the time because, hey, it's not like you can negotiate with a giant employer like a university and ask them just to pay me my 10% more money, please. If you've got a small employer and you can negotiate with your employer to say, hey, don't put money in my 401k, just give me my money today and I'll go put it where I want. Rather than it being forced into a retail amateur investment product like the 401k, I would... you know, generally encourage you to explore that option if it's a small employer. But again, if it's a big employer and they're just going to throw that 10% away, if you don't contribute to it, then please go ahead and put up to the match. Most of the time that does make good sense.

Well, there's a lot there. I agree with you. A lot of those listening, contractors and more, would say that they could probably do very well with extra money to invest in their own business. Things that they know, things that they can control. A lot of the business owners I talk to, their investment portfolio, like in the stock market, is very little. And almost all of their net worth is tied up in their business or real estate. And I think those are good things. Risk is only something when it's outside of your control. If you can't control it, it's typically a risk. Like if I'm driving on a wide open highway, I can see what's going on. I can control the road underneath me with my steering wheel. I can see a mile ahead. But if I'm on a tortuous road where it's lean corners and there's heavy rain and ice, I'm going to be a lot more at risk. of an injury or whatever, because I don't have the control over the vehicle. And so this is where I mean, you know, looking at the business owner who has their net worth tied up in their business, I don't feel like that's as risky as putting your money into something that you cannot control. Look at the recent explosions in the crypto market, such as FTX, Sam Bankman, Fried, and more. There are things outside of our control we couldn't see or control that just... you know, evaporated billions of dollars of people's real money there.

Well, what's so funny is the money he lost, maybe he had some money invested with that particular crypto, but he was a spokesperson for FTX. And so he lost a lot because he was a spokesperson. So he lost his reputation as much as anything, in my opinion. And now he's looking for retribution. But now I'd say most of the people that I meet with who are business owners or real estate investors have a sense of desire for control, for agency, confidence in the outcome before they even start. And that's what I love too. And in fact, I look at real estate not so much as bricks and mortar. I'll tell you a quick story. I had a gentleman, he was a general contractor by trade, but he had retired from that. And he then, at the time of meeting with him, he was just doing his own stuff, repairing his own properties. He had 10 properties,10 rentals, fully paid off, and he was just collecting the rent. And in fact, while I was talking with him, he was doing tile and ground for one of these properties. He was working on one of his properties. And we got to talking about his real estate and I congratulated him. on paying off the houses and having all that fun with that. And then I asked him, you know, what is it about those properties that makes them yours? Why do you like real estate? And he thought about it and he said, well, you know, I can put my hand on it. I can feel it. It's bricks and mortar. It's drywall. It's tile and grout. It's carpet. It's real estate. And I said, well, that's not why they, you know, first of all, you know, it's true. You can see it. It's not like someone can just take that property and run. to Mexico with it or something. But at the same time, it's not the physical nature of that asset that makes it yours. I mean, there's a phrase, squatters rights. It's not the physical nature that makes it yours. I mean, whoever has the bigger shotgun could take over those properties and make it theirs, right? The power and the wealth comes from a contract. And that's where real wealth resides. Not paper wealth, like you see on Zillow or like you see on the stock market where Dollar signs can go up or down depending on tweets and feelings and sneezes. But real wealth is baked into contracts that is really the bedrock of all human civilization. If I don't have a contract, then there is no wealth. If I don't have a contract with my county, that's not my land. If I don't have a contract with that renter, he or she doesn't have to pay me a thing. And if I don't have contracts with my other assets, whatever they might be, like literally written unilateral contracts, then I've got problems. I mean, you as a business owner know that it's the contract that matters when it comes to building or protecting that wealth. Otherwise, it's just a guessing game. So that's what I'd say really makes real estate real. And there's actually some etymology there. Like real comes from the word royal, which again, is built around the contract.

Well, no, I think, again, great work on getting to that point where you're just collecting the rent and just paying nothing but property taxes and repairs and even doing your own repairs. I think that's a great way. For some people, that's a great lifestyle. He liked it. I'd say that there are other places you can park money for contracts. Just case in point, there's a little-known variation of a whole life insurance contract. It's a contract built around life insurance where you can park money and it grows guaranteed every single year. rental properties don't grow guaranteed. Just see, for example,2008. It has liquid access to the money. So he has these 10 rental properties, but he doesn't have any liquidity in those properties. What if he needs 200 grand right now? He can't get it. All he gets is the monthly check. So having a whole life insurance policy that's got a big bucket of liquid money, not the death benefit, but the living benefit, we call that the cash value. That cash value. Is liquid growing on a guaranteed basis? It's another kind of a contract that couples very nicely with rental properties. In fact, you can use the two together. Just case in point, and I'd love to get your insights on this, Brad. But let's say that you had the $200,000 in your whole life policy. And let's say that you wanted to buy a new rental property. You could access that money, that $200,000 out of the life insurance, go buy your real estate deal. That, to me, beats paying cash for a number of reasons. Beats paying cash for my rental property. One, that's an insurance company that's sure safer than a bank. We could talk about why that's true. It's at least 10 times as safe as putting my money into a regular bank due to fractional reserve banking. We can talk about that. Second, the returns on that whole life policy's cash value is going to be at least 500 times as much as my savings account. You know, literally. We're getting a 0.1% return on our savings accounts. These insurance companies do somewhere between 4% and 6% returns over time. And third, and maybe most importantly, when I borrow from one of these whole life insurance contracts, if it's designed a very specific way, we call it the bank on yourself designed whole life policy. If we borrow against that, instead of just withdrawing the money, if I can become my own banker, rather than relying on some bank down the street, I can borrow against that policy. And the policy itself will continue to grow and compound and earn interest and even dividends as if I had not borrowed against the policy. It grows even on the capital I borrowed. So when I do this for a rental property, I go borrow my 200 grand. I go buy my rental. My rental is still kicking off rent money and appreciating in the market. But my policy at the same time is still compounding on the full $200,000 as if I hadn't touched a dime of the money. Now to me, That's a beautiful way to couple contracts together to build real wealth at the same time.

Yeah, in the old whole life, there were... Okay, so first let me back way up. What is life insurance? It's just giving your family something if you croak. It's been around since Roman times, thousands of years. Term insurance is the typical type that you hear people talk about. It's super cheap. It's like renting an apartment. You rent the term insurance for 10 years,20 years, and then the landlord starts raising the rent on you after the term is up. You build no wealth. There's no equity that you can build up in term insurance. And the landlord, the insurance company, can kick you out if you aren't healthy enough or get too old. That's essentially what term insurance is. And if you go 20 years,30 years, and you've paid all that money in and get nothing out of it, I call that a huge waste. 99% of term insurance never pays a claim.

Oh, yeah. Yes, correct. Definitely take care of your family. That's first and foremost your best duty. And there's a reason why term insurance is so cheap. They're not stupid over there at the insurance companies. They know that no one ever gets paid out. I mean, very rarely, less than 1% is the statistic. So now you don't want to be that half a percent. And so everybody go get some term insurance for sure. But... If I'm going to spend $30,000 over my lifetime, which is about average for term insurance, I want to get something back for that. That's a lot of money over a long period of time. So put that money into something, buy some term insurance to cover your family's needs. But in addition, whole life insurance is more like owning a home. So it can be both and here. So the whole life insurance, the rent does not go up. The premium that you pay never increases. Think about that for a minute in a world where we're seeing every other. Price go up, gallon of milk, gallon of gas. Whole life insurance premiums never increase. The cash value is set inside the policy along with the death benefit. So Dave Ramsey would love to talk about how there's no cash value in the first few years and they just absolutely are riddled with commissions. He's right. About 90% of whole life insurance is designed the way he describes it on the radio. But another 10% of that whole life insurance space is designed the way I'm talking about with you right now, where we cut the commissions down by 70%. We shrink down the expensive death benefit and we flood the policy with cash value. And again, the cash value is a lot like equity in your home. When you buy a house, are you familiar with how equity works? If you buy a house, you start to pump a bunch of money into it. It's your equity, right? You own that part of that house. And so if we can design the policy to just be flooded with equity called cash value, the cash value will grow on a guaranteed basis outside of the stock market. It's eggs off that truck. It's eggs on a totally different truck. Whole life insurance grows guaranteed no matter what the stock market's doing, no matter what the bond market's doing. Contractual guaranteed growth every single year. In addition, they throw dividends on top of that. Now, again, Dave Ramsey doesn't seem... to know or does not mention dividend paying whole life insurance. It's been around for almost 200 years, but he doesn't seem to know about it. Again, I'm a huge fan of Dave Ramsey. I cut my financial teeth on budgeting with his help. So thank you, Dave. But he just doesn't seem to care or know about this exception to the rule. And I get it. He's got a big radio show to run. But if you can design the policy correctly with dividends, the death benefit grows to keep up with inflation. The cash value grows keeping up with inflation. I have liquid access to this money. Does this seem like it could possibly help us with our financial lives to have a tax-free access to money with guarantees baked into it that we can use when we're at any age or even into our retirement? It doesn't seem real. I can't look past it. Yeah.

We should do a video series on it. Yeah.

No, you've got a good handle on it. Now, here's the thing. There are two kinds of insurance companies out there, and not all of them are doing what you and I are talking about. In fact, you now know more than most life insurance agents about this particular part of the insurance world, man. Yeah, yeah, you sure do. I'm telling you, because they don't teach this stuff in the licensing. And I'm a certified financial planner, and I didn't learn it even going through my CFP designation. I had to go get extra mentoring and specialized training. I got certified with Bank on Yourself. It's a niche professional training group. mastermind group certification process. There's only about 200 people that's gone through this training program in the country. But to answer your question, there's two kinds of insurance companies. There's publicly traded, which is like on the stock market, your MetLife's and that sort of thing, AIG's and all that. And then you got mutually owned life insurance companies. Mutually owned is more like a co-op, if you will. You know, you and me and 10,000 other people own a piece of that company when we own a policy. with that company. Does that make sense?

Yeah, that's right. Yeah, exactly. So we're all co-owners in essence with the insurance company. And so that's why we get a dividend. Think about that. That's why dividends are paid on this particular kind of hold. Otherwise, the dividends would go to the shareholders on Wall Street. So why does the insurance company do this? It's because we want to. We are the owners of this company. And yes, they've made it work out so that they're always going to be profitable, you know, because they're collecting giant premiums. You think about it like this, like when you're a renter, you want to pay as little rent as you comfortably can to not waste a ton of money, giving it away to the landlord. But when you own your home and you overfund it and you add extra bedrooms and you add extra bathrooms and you finish the basement, you're adding, what are you doing? You're adding wealth to your family. You're adding extra home. And all that home is now appreciating in the neighborhood. And you got all this extra living space that you can enjoy now. And so, yeah, the insurance company loves it because we're pumping giant premiums. Giant could be a couple hundred bucks a month or it could be a couple hundred thousand bucks a year. You know, every person has a different number. And of course, you know, each person's situation is going to be custom tailored to them. Some people might do a couple hundred bucks a month. Some people might do a couple hundred grand a year. or anything in between. But the key is the insurance companies love it because, yeah, they're getting all that cash flow coming in.

Okay, cool. And I want to quickly share too, this is not something I just go tell everybody to go do. There are plenty of reasons to stay away from this strategy, which we can go into now or later if you want. Maybe I'll hold that for later and I'll answer your question first. So yeah, if you and I are meeting, we'd have a sit down conversation. I'm doing most of the talking on this podcast. That's because you've been kind enough to let me come on. In our one-on-one, I'd be doing more listening and I'd be taking lots of notes. On average, I'd take about 10 pages of notes just to get to know somebody and learn more about their financial situation. I want to know, how's your income doing? How's your debts? How's your other savings? What kind of goals are we trying to go for? What are we scared of, concerned about? What's the financial world looking like for you, good, bad, or ugly? If for any reason this strategy that we're talking about is not a good fit, I'm not going there. I'll clearly tell you. And we'll go look at other options, IRAs, social security strategies, wherever else we need to go. If it turns out that this tool might be a help, then I'm going to be clear about that. And you and I together would work out, well, okay, let's find these four different parts of your financial life that you told me right in our interview time where I got to know you. These four areas seem like we could reposition some things to something I could put together for you. I'll give you a couple of examples. Maybe you said, hey, Mark, I could set aside 300 bucks a month. Okay, check. I can do that. Mark, I get a $4,000 tax refund every year and I just blow it on flat screen TVs. Check. We're going to put half that, at least half that's going into a policy. You can still buy that TV, just get it on discount. Next, Mark, I got 40 grand just sitting in a savings account and it's earning nothing. I need to do something with that. Okay, maybe we leave some in the savings account for flat tires and quick cash, but we can move that money into a policy. Now, why is that? Because it's still liquid in the policy. The money is still laying around. It's still available. I can get money out of my policies that I own within about four or five business days for any reason. So that's not quite as liquid as a savings account. So I still keep money over there for quick cash. But I'm going to go look at that savings account. My real emergency fund is going to go into my policies, not into somebody else's bank instead. I mean, the list could go on. We could keep going. Cash out refinances. you know, rethinking some of your other windfalls that you might get, like a bonus or distribution off your business every year. The list could go on and on, but that's where we would take things step one, two, three. Does that make sense? Yeah.

That's right.

Real simple. It's, it stays real simple. I think simple is good. Because if it gets complex, then I can't keep up with it. Sure. Neither can my clients. So real simple. You pack money into a policy as you want to and can. Make it a challenge for yourself, but don't burden yourself with it. Step two, find your property that you want to buy. Step three, borrow against the life insurance and go pay cash at closing. Or at least the down payment, if not the whole property. So we can talk about that if you want to.

Yeah, if I could take that million-dollar death benefit and squeeze it down to $100,000, that would cut a lot of the expenses out of your policy right away. Okay, so the expenses are in the death benefit. So if you've got $500 a month, it's going to take a long time to save, even in a savings account, $200,000. Right. And that's sort of the same way we should think about these policies. All right, these policies, I don't even consider them investments, really. They're life insurance. And they're more of a saving strategy, you might say. So if you can put away 500 bucks a month, we're going to be buying small properties for quite a while there as it takes time. One of the other things to keep in mind is that this is not a good fit if you need overnight triple digit rates of return. This will be a boring, steady, middle single digit return, tax free, of course, but that's still a modest return,4%,5%,6% over a long period of time. So as you pack money into this thing, you're going to see, you're going to log into your account, log in, you're going to see I've got 10 grand in there now. I've got 20 grand in there now. I've got 30 grand in there now. And as you start to see that number grow, you're going to start having ideas. What can I do with this money? So that it's not just souring inside my policy. I want to use that money. Why? Because even if I borrow against it, that policy will still compound and grow like I did not touch the money. And that's called a non-direct. recognition policy loan. It's real similar to a HELOC. If folks are familiar with how HELOCs work, you borrow against your house with a HELOC house doesn't stop growing. Right. So if I borrow against my policy, I'm just using that policy as collateral for a policy loan. And so I borrow, let's say I do that. I go grab some money and I go pay cash at the closing table for my real estate deal. And now I've owned, now I own my policy and I own my property, my new real estate property. And that. renter in that property is paying me a check. I also have a loan against my life insurance. So what happens there? Well, the loan is under my terms. I'm the owner of this contract. Remember, it's like your own banker. So I can repay my loan quickly. I can skip a few payments. I can wait till I'm done flipping the house and then I can put it all back into the policy three years later or 18 months later or whatever. I'm the banker. I get to decide the repayment terms. If I never pay off the loan against my life insurance, then it just gets deducted from my death benefit when I pass away. Whatever my loan balance is when I croak, if I got a big death benefit, subtract the loan, and my family walks away with what's left.

Yeah, in this case, we start with your cash flow. What can you save? Savings. tax refund, whatever. And what we would do is we would say, all right, how old are you? How's your health doing? Smoker, non-smoker, that sort of stuff. And then I say, how small of a death benefit can I calculate into our formulas here at these different insurance companies? How little death benefit can we possibly get away with where it's still classified as life insurance by the government? So this has all been established in the tax law for over 100 years. Clear back to 1913 when we established the income tax, life insurance was still doing this. 100 years ago. I mean, J.C. Penney, James Penney, during the Great Depression, used his life insurance policy, borrowed against it to keep his business afloat during the Great Depression. Walt Disney used his life insurance policy to start Disneyland construction. So these life insurance policies have been around for a generation. Babe Ruth bought a bunch of life insurance when he got signed with the New York Yankees. So there's just a long history of how these policies have been used. And yeah, to your point, it sort of comes down to the... How little death benefit can we get away with? Because that cuts, the bigger your death benefit, the smaller your cash value. It's almost like a seesaw. So if I can cut that death benefit down, but still pack a ton of money into the policy, it builds equity. If you'd like, I can wrap it up with a metaphor and see if this helps too. Or does that answer your question? Go ahead. Go ahead. All right, I'll be quick. So let's say that you want to buy, you got enough money in your pocket where you can afford a 10,000 square foot house. 10,000 square foot house. I don't know what that would be. 10 grand a month mortgage. Let's just say it's 10 grand a month for a mortgage. All right. So you got 10 grand a month you can put into a house and you're looking at that 10,000 square foot house and you say, I can afford that. But instead, Mark, I don't want a 10,000 square foot house. I'm going to buy a 3,000 square foot house, but I'm still going to pay 10 grand a month on that house. What's going to happen? How much equity? Are you going to build a lot of equity, right? Oh, yeah. As you throw in all that extra money. Very quickly, yeah. Overpaying on that mortgage. So you shrunk down the house, but you still paid the same amount for it. That's going to just supercharge your equity. Now, let's say on top of that, you take some of your monthly money you were going to throw on that big house and you take that money and you go buy additions on your house. You do the addition for the back. You add a porch. You finish the basement. You build a second floor. Now your house is 3,000 square feet. Now it's 5,000 square feet. Now it's 15,000 square feet. Now, again, you're just packing that 10 grand a month then, but it's now being built up as a massive mansion. All of it's appreciating in the neighborhood, whatever your neighborhood is doing,4% a year or whatever. And you have the liquid control in the equity of that house. That's what we do when we design the policies. We shrink down that death benefit, but we still pack it full of money. And we buy additions. They're actually literally the contracts, these whole life contracts, call them paid up additions on our policies. That's what builds all this wealth inside the contract.

At some point, your policy's cash value will be way greater, much greater than what you've paid into it.

of time, though. Over a period of time. At the very beginning, no. You've got insurance expenses. Again, this is a long-term financial vehicle. But yeah, over a reasonable period of time, you're going to see cash beyond what you've contributed to it.

Yeah, there's no fees. There's no penalties to access your money. There's obviously insurance expenses and there's loan interest. But again, your policy still grows beyond those to give you what the fancy word is arbitrage. But basically, your money grows even on the capital you borrowed. So it works out. Otherwise, we wouldn't do this as a financial strategy. It works out in the policy owner's favor to own and control the policy. I mean, to me, it's sort of like, I'm already in the banking business. If I'm a general contractor, if I'm a plumber, if I'm an electrician, I got to deal with banks anyway. I had a guy, he had a million dollar line of credit with the bank. And he was running his whole business off that line of credit. And the bank called him up during a downturn and said, I'm sorry, but we're terming out your loan, man. So he had to come up with a million bucks in five years. He was sick of those guys. He said, I want to fire these bankers. I never want to walk through their doors ever again. I'm setting up my own line of credit to myself. And that's what he did. He set up a policy, a whole life policy. And over five years, this guy was able to pack in a million dollars. Now, take a zero or two off if you need to, for your own example, or add a zero if you want to. And it still works. But he built up a million dollar line of credit that's now guaranteed for his life. He can use that money, access it for any reason, doesn't have to kiss the ring of the banker. Right? Yeah. So anyway, that's why I love this as a business owner solution. We didn't even talk about how this thing is now a big bucket of money for you in retirement. You get a million bucks in that thing, you can take money out of that thing tax-free in retirement. Under the tax law, there's no taxes due for the cash in that policy.

That's right. Wow.

Oh, man. And I'm going to have to give you a call after this. I got some stuff I need help on. Help. We help each other out, man. It works out.

Well, thanks again, Brad, for having me back on. It's a real honor and I treat podcasts like living rooms. I want to make sure I leave it cleaner than I found it. So I hope it's been a great, valuable experience for you, for your audience. I've had a lot of fun here too. You ask great questions and everybody leave them a five-star review because Brad, you do a great job on your show and you're doing a great work with a lot of the folks in your mastermind. your coaching group. If you want to connect with me and learn more about how this strategy or other strategies might work, please go to kickstartwithmark. com. That's kickstartwithmark. com. And that can help. We can set up a strategy session,15 minutes over the phone, and we can see if this strategy or other strategies might help your business as we head into 2023 and beyond.