Why Front-Loaded Whole Life Insurance Could Be a Mistake (Do This Instead)
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- เผยแพร่เมื่อ 6 ก.พ. 2025
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UPDATE: Hey everyone, Joel here, the producer for BetterWealth. Some of our amazing viewers pointed out that at 16:40 the Guardian and Penn Mutual labels got flipped and a cash value number was incorrect. We have removed this section to avoid any confusion. The section removed helped summarize the numbers but no important info will be missed in the cut :)
There are actually two errors on the slide at 16:45. You show Cash Value of $555,229 but CV should be $382,022. The $555,229 is the Total Death Benefit w/o Dividends.
A backpack is something new I never heard of. Thanks for the input.
@@cwall216 It’s a helpful analogy definitely!
Want a Life Insurance Policy Like This? Go Here: bttr.ly/bw-yt-aa-clarity
Great video and concept. The one caveat I’d add is that one would get a 1099 for the interest earned in the PDF and that would be taxable.
Great point!
Amazing content!
Thank you!
Love it!! thanks!
You are welcome!
This is a great video. Thanks for sharing this strategy. Quick question. How is the interest treated in the PDF?
Taxable!
@michaellong5672 thanks
You got you policy labels wrong at 16:45. Guardian is on the left and Penn mutual on the right. I got confused for a minute because it seemed oposite of your point the way the data was being presented.
Thank you! We will leave a note in the comments highlighting this!
@@BetterWealth There are actually two errors on the slide at 16:45. You show Cash Value of $555,229 but CV should be $382,022. The $555,229 is the Total Death Benefit w/o Dividends
I keep the funds in a vanguard money market fund..it has paid me 5.27%..I have 4 cashvalue life insurance policies..everytime a payment due at the policy annual year…I send the required funds to my bank account and pay the insurance premium..What benefit does PDF have over this strategy? I like liquidity because I come across private money lending opportunities and I am able to get the funds from my vanguard money market fund to my bank account in 2 days
For your setup likely no benefit outside of guaranteed 5.5% for a decade. Vanguard Mm is great, but not guaranteed ;)
Guys - this is fantastic. I really appreciate all this information you're providing us. I'm fully invested in btc and I want to be for another 10 years at least. I wonder if there is a sensible way to convert some of my btc into a policy and then use the cash value to invest it back into btc. Do you have people like me who have done that before?
Thank you! And yes, we’ve seen it all! We even had a client use their cash value to flip cows with a 4,000% return 😆 Really anything is possible. Now, I think there’s some caution to be had since bitcoin can change pretty dramatically but we know people that are very bullish on it long term and don’t mind the risk. Feel free to schedule a meeting with our team if you’d want to discussthe idea further! Schedule here bttr.ly/bw-yt-aa-clarity
Just curious….wouldn’t you see similar results just spreading by out the dump in like that even without the “backpack”? You could still use a CD or money market account to gain taxable interest. I’m wondering if the benefit is more from the “backpack” or from the reduced cost of term and (presumably) higher base premium?
It’s a combination of what you mentioned. The PDF gives you guarantees AND liquidity whereas a mm or cd cannot. Just depends on how you wanna do it!
Fantastic thanks!
Thanks so much for watching!
Its not a huge thing, but I suspect that the interest earned when the cash is in the premium deposit fund is taxable.
can i recommend some things that y'all can talk about in the upcoming tom wheelwright and destiny debate?
Sure! Add some recommendations :)
@@BetterWealth For destiny, notwithstanding the fact that it was deficit spending, what were the best parts of the tcja? salt caps, full expensing, tax credit for businesses offering paid and family leave, opportunity zones, reducing the corporate income tax, r&d amortization, increasing the child tax credit seemed like pro-growth policy which certainly contributed to the economic growth trump had.Studies found that it increased domestic investment by about 20 percent
@ We have a couple questions like this actually that should open up the conversation around tcja!
Good video, what i really don't like is the fact that you don't do apples to apples, you need to do both penn, so it really comparable, if you do penn and guardian it's not clear of the benefits are because of pdf or because penn is better. Can you fix it?
Great in concept! But not all carriers can do all designs. Penn can’t due a frontload of this amount of premium. The other carrier can’t do a PDF like this. Gotta play the right game with the right carrier 👊🏻
@@AldenArmstrong RU sure? Penn did a front load simulation for me, 2 or 3 years ago, it sucks (like all front load , when you want to do IB),and PDF you can(ifnot supported by your carrier) with money market account, so yes you can compare apples to apples
@@Unicorn-Black I am sure :) Penn's base premium and term rider would be higher than the requested 10k/yr premium by the client so the frontload, with these premium dollars, was not possible. Thank you for your engagement and watching our channel!
@@AldenArmstrong so dont use Penn
Hi Alden, are PDF gains taxable?
Taxable on the growth
@mickaelsimonet675 Thanks for the info. I appreciate you sharing even though you didn't have to.
What vehicle/medium is the backpack really?
Basically a liquid guaranteed annuity
Sounds like the backpack is an annuity
Interesting. 🤔 Is this possible for annuities?
Like... replacing the Premium Deposit Fund with a MYGA or period certain annuity? That's probably what the PDF is under the hood anyhow.
@jaycox1836 after some research. A PDF is basically a MYGA.
The PDF is basically a SPIA - Single premium immediate annuity - but it is liquid
@@AldenArmstrong for someone in the 37% bracket, plus 3.8% Net Investment income tax, that 5% SPIA is paying 5 x (1 - 0.408) = 2.9% after tax (or I pay the tax from a bucket not shown here). 😉
@@jaycox1836 lol the question wasn't if it's the best call for everyone, it was if this PDF is basically an annuity. Yes it is, but liquid! To your point, taxes suck, I think we can all agree there. Either you pay the tax on the growth of a guaranteed asset like a MYGA, SPIA, or PDF, or you pay the taxes on the growth you experience wherever else you store your capital. The asset isn't the problem and it isn't the solution - it's the question - the quesiton is, does this help get me closer to my goals? We have done SPIAs into LI as well (more benefit in some cases than a PDF) across many income levels, including HNW. Planning doesn't happen in a vacuum and the tools we have only make sense if they tighten that nut! ;)
Is there a world where you would advise the client to break up the 110k and the 10k a year afterwards something like 20-25k per year since the total principle amount going in over 10 years is 200k?
Certainly there is a world where that makes sense! Just depends on the level of management the client wants to take on for that strategy, whereas this one is closer to a set it and forget it
What was the percent design for the 10year example?
I don’t understand your question
Was it a 90/10 design in the fast fund example
@@jewman40 The Guardian illustration, the frontload example, would be considered a 5.7/94.3 ratio, base to bua
It sounds like Caleb has a cold. I hope he feels better soon.
Already feeling better 😊🙏
Just curious….wouldn’t you see similar results just spreading by out the dump in like that even without the “backpack”? You could still use a CD or money market account to gain taxable interest. I’m wondering if the benefit is more from the “backpack” or from the reduced cost of term and (presumably) higher base premium?
@AldenArmstrong
2 minutes ago
It’s a combination of what you mentioned. The PDF gives you guarantees AND liquidity whereas a mm or cd cannot. Just depends on how you wanna do it!