Is Hyper-Funding Back??? or MPI(Maximum Premium Indexing)

Apr 4, 2019

  1. tomtom4
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    tomtom4 New Member

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    With volatility controlled indexing strategies and over 100%+ participation and dollar cost ave (12 buckets a year vs 1 bucket) smoothing out and further reducing the possibility of ever locking in a 0% in any giving year does using index loans to pay for premiums as leverage for the arbitrate play have a place for seekers of retirement income? Not banking not DB but striking retirement INCOME after A65


    Hyper Funding or MPI(Maximum Premium Indexing) (a guy in AZ) claims he invented something that has been around for years....I call it the poor man's Premium Financing ... using loans to pay premiums.

    either partially or fully after let's say 3-4 years of using your own cash to fund the policy then leveraging the cash value avail to continue to pay the rest of the premiums to say A65 then switch to taking out loans as INCOME forever.


    Just wanted to know if anyone has ever ran the numbers and/or designed these types of policies before?

    How do carriers feel about it???

    I would assume they would frown upon it but don't technically see how they could stop someone from doing it.

    obviously, a safer version than the 100% financed in year 4(see below) would be to use something less than the entire amount every year , almost like LTV with real estate

    i used 50k loans to pay 50k premiums (Below) but you could easily use 40k or 25k loans(more skin in the game) to pay 50k premiums that way your still adding outside dollars to the policy putting less stress requiring the policy to perform every year and also less roll compounding loan interest growing negatively.

    fyi when I say loans Im definitely talking about variable or index loans on a IUL policy.....not standard loans or even sugg. this could work with Par WL (maybe it could but sticking with IUL's for now)


    once again This kind of design is not for IBC or banking or talking out side loans before a65 other than to pay for the premium this is strictly a Retirement INCOME play using leverage


    I hope when i send this the example below doesnt get all smushed up but I got a feeling you guys probably get what im saying anyway n dont need an example


    any way any thoughts or does it sound like a good topic to do a deep dive for a podcast?

    ***is this not from any illustration i ran I made these numbers(BELOW) up on the fly its just a visual example

    Premium . Loan CV . Accum Value

    40 50k . 0k

    41 50K . 0K

    42 50K . 0K

    43 50k . 50K loan 95k

    44 50k 50k . loan 98k

    55 . 50k . 50k 165k .

    65 50k 50k LOAN . 460k . 1.6 million .

    66 0k 80k INCOME

    67 0k . 80 k INCOME

    85 0k . 80 k INCOME . 4 life!

    Yes I know there is risk for a blow-up, there is risk for a blow up without doing this if a IUL gets enough zeros and in underfunded, but most of the risk involves underfunding when a 0% happens if one is prepared to add more funds to cover most if not ALL expenses for that 0% year I think that would DRAMATICALLY reduce the risk !

    Outside of that what are the IUL experts opinions about this concept??????????

    for Sh*ts n Giggles

    fyi I ran this doing 1 million for 3 years(A45) then taking 1million loans for 17 more years(A65) n got $866k a year for life! under a 6% illustration rate the software said it would work !

    if you die at age 85/86 the quick and dirty numbers are

    Invest/fund 3million A45
    receive 17million+ A65-A85 (Income/loans)

    the policy never blows up it could go to a121!
     
    tomtom4, Apr 4, 2019
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  2. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    Worm, meet can.

    Carriers do not allow it. You will lose your contract for pitching this.

    Ive had clients (usually engineers of some type) who wanted to do this. Its a terrible idea.

    Relying on hypothetical index returns to fund future premiums is an E&O claim waiting to happen.

    Hybrid indexes can still get 0% years. (ive seen it happen in real life)

    Carriers can (and always do) reduce Participation Rates and Caps.

    Carriers can (and often do) increase internal expenses from the minimums they start at.

    Clients can (and will) get lazy, forget, or have the unexpected happen.

    ---

    And if you really run the numbers at reasonable expectations. The result to the client (CV) is about six one way and half dozen the other. If those funds were left in the CV, they would receive a higher credited rate each year and would be earning more money. This method is relying on a constantly reducing return.

    Basically, its a way for someone with just a little bit of premium to buy a lot of IUL... not a good idea.
     
  3. pfg1
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    pfg1 Guru

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    I agree SC. Buy what you can afford, max fund it...and enjoy a nice return over time.

    I have some clients literally maxing out their policies as fast as they can. Like all the premium in - in the first 5yrs or however fast they can get it in. Others that max fund at guideline level every year. Either way, it works well over time.

    I think that if you try to manipulate the system you will likely get burned. Its hard enough for people to fund as planned long term when they are using their own $. LOL
     
    pfg1, Apr 4, 2019
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  4. pbar
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    pbar Expert

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    I was very interested in this at one point. I was planning on borrowing from my wife's policy to max fund mine but unfortunately, our policies were not set up properly and I could not find an agent who supported this.
     
    Last edited: Apr 9, 2019
    pbar, Apr 7, 2019
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  5. HoosierLife
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    HoosierLife Want to write $20,000+ Guaranteed? bit.ly/learnfe

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    Fairly sure I know who you’re talking about. Adjusters?
     
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