- 477
I need a new insurance company. When I borrowed $30,000 from my NYL policy my interest payment went to them and not back into the policy. It did not increase my loan value DB,CV,it went to NYL.
Infinite Banking concept
- Thread starter HoosierLife
- Start date
- 11,512
Now, if you want to figure out the capital equivalent value of life insurance:
Start with a net amount of income you want to solve for.
Gross it up by the amount of applicable social security taxation charges & Medicare IRMAA charges.
Gross it up by the blended Federal and State income taxes. I use Columbus Life's Tax Guide App to figure that out: Tax Guide App | Columbus Life Insurance Company
Divide that number by 2.8% safe withdrawal rate (or the recently revised 2.4% by Dr. Pfau).
Don't forget to factor in the portfolio management fees on that portfolio to be charged against the portfolio... but not as a taxable distribution. I used 1.5% because there's often some breakpoints over $1 million portfolios. And I'm talking about gross portfolio costs, not just the advisor's compensation.
That is the amount you would need in an IRS qualified plan to generate a specific amount of income with a 90% chance of not running out of money.
Now, take that same amount of net income.
Divide it by 6% for an approximate loan you can take against a life insurance policy for the equivalent cash flow.
That's the amount you would need in a life insurance policy to generally last up to life expectancy + 5 years. You can lower that % if desired.
Now, yes, if net income is too low, it may not make sense - if you're considering other tax deductions and the current standard deductions.
This isn't for someone who is already in retirement (generally).
This is for someone who is at least 5-10 years away from retirement - someone who is successful - who, once they realize that as government spending increases, so does their qualified plan balances - so that government benefits more from the increases in their plans than THEY do. Someone who wants to insulate their retirement plan from taxation and market volatility. In fact, someone who wants to borrow against their life insurance when the market is down - invest it - ride it back up - repay the loan and pay the capital gains taxes.
I happen to be in a higher-tax state where there are plenty of people who are wealthier who probably either don't know they'll be paid 6th out of their savings... or just resigned themselves to believing that "well, that's the system and there's nothing I can do about it."
Well, there is... if they want it.
Start with a net amount of income you want to solve for.
Gross it up by the amount of applicable social security taxation charges & Medicare IRMAA charges.
Gross it up by the blended Federal and State income taxes. I use Columbus Life's Tax Guide App to figure that out: Tax Guide App | Columbus Life Insurance Company
Divide that number by 2.8% safe withdrawal rate (or the recently revised 2.4% by Dr. Pfau).
Don't forget to factor in the portfolio management fees on that portfolio to be charged against the portfolio... but not as a taxable distribution. I used 1.5% because there's often some breakpoints over $1 million portfolios. And I'm talking about gross portfolio costs, not just the advisor's compensation.
That is the amount you would need in an IRS qualified plan to generate a specific amount of income with a 90% chance of not running out of money.
Now, take that same amount of net income.
Divide it by 6% for an approximate loan you can take against a life insurance policy for the equivalent cash flow.
That's the amount you would need in a life insurance policy to generally last up to life expectancy + 5 years. You can lower that % if desired.
- Not subject to Federal income taxation
- Not subject to State income taxation
- Not subject Social Security to being included in taxation
- Not subject to Medicare/IRMAA charges
- No additional portfolio management fees
Now, yes, if net income is too low, it may not make sense - if you're considering other tax deductions and the current standard deductions.
This isn't for someone who is already in retirement (generally).
This is for someone who is at least 5-10 years away from retirement - someone who is successful - who, once they realize that as government spending increases, so does their qualified plan balances - so that government benefits more from the increases in their plans than THEY do. Someone who wants to insulate their retirement plan from taxation and market volatility. In fact, someone who wants to borrow against their life insurance when the market is down - invest it - ride it back up - repay the loan and pay the capital gains taxes.
I happen to be in a higher-tax state where there are plenty of people who are wealthier who probably either don't know they'll be paid 6th out of their savings... or just resigned themselves to believing that "well, that's the system and there's nothing I can do about it."
Well, there is... if they want it.
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- 11,512
New York Life charged your policy the interest. Then you repay your policy back the interest they charged.
If you have -$5,000 and you paid in +$5,000 = $0. You restored it back to your policy.
Unless they are billing you the interest - then that's different.
- 11,512
So, I posted earlier about the CBNC article of the largest life insurance policy sale?
A billionaire is putting in $1.2 million a month into these policies (they're 10-pays).
That's 14.4 million per year for 10 years.
After 10 years, he'll put in $144 million and it'll only grow to $150 million.
However, he'll be able to borrow out $10 million per year.
Now, run the calculations.
He'd have to have an equivalent IRS regulated plan balance of about $550 million to equate it to how the tax code would let him spend $150 million in life insurance.
It equates to a 21.58% annual rate of return based on retirement income spending.
That's the capital equivalent value of life insurance. He can spend against $150 million as though it was $550 million.
A billionaire is putting in $1.2 million a month into these policies (they're 10-pays).
That's 14.4 million per year for 10 years.
After 10 years, he'll put in $144 million and it'll only grow to $150 million.
However, he'll be able to borrow out $10 million per year.
Now, run the calculations.
He'd have to have an equivalent IRS regulated plan balance of about $550 million to equate it to how the tax code would let him spend $150 million in life insurance.
It equates to a 21.58% annual rate of return based on retirement income spending.
That's the capital equivalent value of life insurance. He can spend against $150 million as though it was $550 million.
- 2,386
Sure - people that have a cadre of accountants and lawyers and that have already filled up all of the more simplistic tax advantaged products 'might' benefit from buying a Whole Life Insurance Policy. There are dozens of other tax sheltered things he/she might have done as well - Perhaps he/she could have developed a property is certain zip code.
However the notion that something that a billionaire did somehow makes it appropriate for the masses - is... way off. Billionaires buy Railroads, they Launch Rocket Ships, they Invest against a countries currency, and they Create and Fund entire charitable organizations - but that doesn't mean that any of these are good things for a regular Joe like me.
Many consumers that are force fed these financial "concepts" don't have attorneys or CPAs to review these products.
However the notion that something that a billionaire did somehow makes it appropriate for the masses - is... way off. Billionaires buy Railroads, they Launch Rocket Ships, they Invest against a countries currency, and they Create and Fund entire charitable organizations - but that doesn't mean that any of these are good things for a regular Joe like me.
Many consumers that are force fed these financial "concepts" don't have attorneys or CPAs to review these products.
- 11,512
I guess your tax pain is rather low or tolerable.
Whenever someone doesn't like the strategy, that's what they're really saying.
The issue isn't whether a billionaire's strategy is great for others. The issue is... do they want it?
Remember: The objective isn't to do business with people who need what you sell. The objective is to do business with people who believe what you believe.
You don't believe as I do... and that's okay. That doesn't make the strategy any less valid. It means that you are not my prospect.
Whenever someone doesn't like the strategy, that's what they're really saying.
The issue isn't whether a billionaire's strategy is great for others. The issue is... do they want it?
Remember: The objective isn't to do business with people who need what you sell. The objective is to do business with people who believe what you believe.
You don't believe as I do... and that's okay. That doesn't make the strategy any less valid. It means that you are not my prospect.
- 5,048
The answer is no. You cannot deduct life insurance interest on your tax return on individual life contracts. There are some even further limitations that you cant deduct bank interest if the loan was used to purchased life insurance.
- 11,512
You didn't read my post, nor do you seem to understand the tax code.
You can deduct interest from ANY source, if the purpose was to generate a profit.
You can deduct interest from ANY source, if the purpose was to generate a profit.
- 11,512
There's a reason why we've got at least 4 CPAs with our group.
- 5,048
You dont ever pay the interest or principal back to your policy as the principal never left the policy. The insurance carrier merely put a collateral lien on the policy cash value. So, anything you pay "back" is paying the insurance company back your liability and their asset. Feels the same & all, but it is a bit disingenuous to talk about paying yourself back, etc.
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