Like we said above, this strategy is not for everyone. Some people are content to just stay with all the amazing benefits of the IUL explained in Option 1, and that’s perfectly fine.
However, if you are interested in really maximizing your returns, you’ve never seen anything else like this that’s available for the average investor. Let’s use the example of Bucket A and B below to explain how this works.
In this example, the investor purchases an IUL, selects the blended index account, purchases a rider to be able to borrow against his cash value within the first month, and puts $100,000 into the policy the first year. This is bucket A. (Again, we are using an example of $100,000 because it is an easy, round number, but you can invest just about any amount you wish.)
At the end of the year, the policy holder earns the actual blended indexed rate of return on his cash value amount. So if the market index goes down 18%, the gain is 0% and the cash value of the policy remains intact, and you have zero losses against your cash value due to market downturns.
On the other hand, if the market index goes up 23%, the policy holder will be credited with a 17% gain on the total cash value of his policy. (Note: There is an upside market cap of 17% and a market downside floor of 0 %.)
During the first month of the policy, since the policy holder purchased the rider, he can choose to borrow the majority of the cash value out of the policy. Let’s just say he borrows $80,000 from bucket A. He takes the borrowed funds from bucket A and puts them in an alternative investment in bucket B.
Yes, he is currently being charged approximately 4.5% on the funds borrowed. However, he can choose to never pay the interest charges back at all, or pay them back in any amount at any time. It’s totally up to him.
Now, let’s just say, for example, that the policy holder takes the funds he borrowed from bucket A and invests them into an investment in bucket B where he earns 12%. Here’s the amazing part. The policy holder continues to make the market returns on the funds in bucket A while at the same time earning the 12% (in our example) on those same funds (borrowed) and now in bucket B.
Keep in mind that if your Bucket B investment goes down, your returns for Bucket B go down. However, the amount you can earn on your Bucket B investments is unlimited. If you can find investments that return 20%, 30% or more per year, on funds that you “borrowed” from your policy (Bucket A), then your overall returns can be substantial.
Let’s don’t forget about the death benefit. The amount of the death benefit varies during the lifetime of the policy. Based on the illustration above, in the early years the death benefit is about 2 million dollars. I always like to compare the difference of putting funds into our program, to just putting the money into an IRA or a 401(k).
At the end of year one, with the IUL you have been able to leverage the values of your funds and have the potential to make an above-average total return on your funds, plus you have approximately a 2 million-dollar death benefit for your family to boot.
Compare this to just putting 100k into a 401(k).
(A) You only get to earn once on your money. You can’t leverage it.
(B) You get zero death benefit.
(C) You will have to pay taxes on all of your funds when you pull them out.
I told you this program was powerful. Do you think returns like this could help you make up for lost ground in your retirement program? Do you think this could raise your horizons as to what could be possible with your retirement? Do you think this could help you to live the Barefoot Retirement lifestyle you’ve dreamed of?
That’s one of the biggest questions we were hearing from clients. They love this program. Most love the leverage option and really want to maximize their returns by double dipping and borrowing from bucket A, and investing those funds into bucket B.
The only problem is, most people don’t know what to invest their bucket B funds into.
The average investor simply doesn’t have a clue about what to invest in, nor the connections to find solid investments. We’ve all been killed by the stock market, and many of us suffered greatly with the housing market crash. Many of us are understandably gun-shy when it comes to investments. So how/where does the average investor know what to invest in?
It’s always good to invest in what you know. If you are really good at something, completely understand it, and there’s a way to invest in it, then that may be perfect for you. If you know real estate really well, are good at it, and know your local market, you could use the funds to invest in residential or commercial real estate.
If you own your own business, this program is the PERFECT solution for expanding and growing your business. You can read more on this concept in the Chapter below titled The Barefoot Business Program.
If the above options don’t apply to you, or if you are looking for a “hands-free” investment that does not require time, hassles and effort to manage the investment, we may be able to introduce you to some great options.
Our Barefoot Retirement team has been in this industry for a quite a while. After years of experience, we’ve seen a lot of really bad investment options out there, that you should avoid like the plague. However, after sorting through tons of them, and through our connections, we’ve discovered a hand-full of options that we’ve found to be top-notch.
We always look for smart and ethical people, who’ve consistently delivered above-average returns. Additionally, we look for programs that have a very high percentage of their investors who continue to invest with them over, and over and over. That statistic alone, speaks volumes. Many of our Barefoot Retirement team members personally invest in many of these options as well. If you have an interest in finding out more about any of these programs, just ask us. We do not actively promote them. You have to ask.
We at the Barefoot Retirement group are not investment advisors, nor are we licensed securities dealers. You should ALWAYS seek the advice of a knowledgeable investment advisor and conduct your own due-diligence before making any investment decisions. We cannot, and do not, guarantee any specific results or returns with any of these options. As with any investment, it is possible to under-perform or lose money. Market conditions as well as results, can and do vary.
Regarding the investment options below, the Barefoot Retirement group does not own or manage these programs. If a client is interested in finding out more about any of these programs, and asks us for this information, we’ve been pre-approved to introduce potential investors to these closely held, and sometimes private programs.
Let me give you a brief overview of just some of the invest options that we’ve found to be excellent. (Some of these options, not all, but some of these, are strictly available ‘by invitation only’.)
We have a number of different Real Estate programs that we refer clients to. Remember the guy I told you about earlier in the book? The guy with the private investment group that has not had a single losing deal in over 19 years? Many clients choose to put some of their funds with him. In most of the deals he does, he actually gives you the title to your prorated share of the investment. His company handles 100% of everything so you don’t need to get involved at all. Don’t worry, no tenant is ever going to call you in the middle of the night when their toilet is stopped up.
By the way, he will not allow us to even mention the rates of returns that he routinely achieves for clients. Returns vary from deal to deal and are presented with each deal’s offering. He always tries to under promise and over deliver. All I can say is the fact that 97% of his investors are repeat investors should give you an idea of how happy they are with the returns they are getting. Also, since he is a total value investor, when market conditions are not right for buying real estate, he does not buy. He is happy to sit on the sidelines for as long as it takes for the market to come around for him. He is conservative and VERY selective. That discipline is what enables him to be so successful.
Another Real Estate program that we refer clients to has an outstanding track record as well. They have been in business for over ten years and during the past 10-year period, they have averaged an 18% return for investors. During that time, they have had 3 deals that broke even, but the clients did not lose money. Over the past 10 years not one of their investors has lost a penny. Again, the track record speaks for itself. They average a 95% investor retention rate. In other words, 95% of the people who invest with them once, continue to invest with them in future investment deals, over and over.
As you know, past results are no guarantees of future returns, but that’s a pretty impressive track record. Especially if these were your Bucket B returns, that you were getting in addition to your Bucket A returns.
This may seem strange to you if you’ve never heard of this before. This team is made up of experts in investing high-quality debt. It’s been tested and tweaked for years. Offices are spread out around the world and the systems they use are cutting edge, state of the art.
They typically do these deals with some of the wealthiest families in the world. Family names who are house-hold, recognizable names. These guys know how to make money and rarely lose money. Return rates are typically in the 12% range, but the returns are not guaranteed. There’s always risk in any investment deals but the beauty of working with these guys is that you get to invest at the same level, and use the same systems that the largest and smartest guys in the world are using.
At the time of writing this book, a Patent is being submitted for this program, so we can’t give you any detailed information without first signing an NDA (Non-disclosure agreement.) What I can tell you is this is an investment loan deal that typically pays out around 10% to 12%, and it’s completely backed by some of the safest and most solid types of collateralized loans available. When most investors discover the details on how this works, their only question is, “How much can I put in?”
The beauty of the Barefoot Retirement program is you can choose to invest in anything you wish. You can also move in and out of investments as you wish. If you believe gold and silver are ready to break-out to a big move upwards, you can buy precious metals. If you come across a great deal on a rental unit or apartment building that you know will be a great revenue generator for you, you can invest in that. It’s your money, and you can invest it ANY way you wish.
This vehicle gives you the ability to double-dip and gives you the possibility to earn two different returns on the same money.
Bucket A: It’s important to be aware of this. As stated earlier, when you begin to take funds out of your bucket A, typically during retirement, if you take them out in the form of a loan against the cash value of your policy as we advise, they will be 100% completely tax free. Your policy can be structured so that you never have to pay back the loans or the interest charges for the loans if you don’t want to.
Here’s a simplistic example to help explain the concept. Let’s say you reach the age when you want to finally retire and start living off of the funds you’ve built up in your IUL cash value account. Let’s say the cash value is 1 million dollars, and you start pulling out $150,000 to live on each year.
The beauty of this program is that since you “borrow” the $150,000 from your account each year, you still have the full 1 million dollars of cash value working for you each year. Your cash value account has the possibility to continue to grow and build, (depending on the market index performance). This makes it possible that you would never run out of money. Plus the $150,000 you take out each year is completely tax-free.
Let’s say in this example you live until the age 95. You have 1.5 million in loans against your policy. Your death benefit at the time of death is 2.5 million. When you die, the insurance company takes the 1.5 million from your death benefit, and pays off the loans against your policy.
That leaves 1 million dollars which the insurance company gives to your beneficiaries. That 1 million dollars is tax-free to them. So to recap; you never had to pay your policy loans or loan interest back. You got to enjoy the money you took out in the form of tax-free loans, and your beneficiaries got a tax-free win-fall to boot. Not too bad, wouldn’t you say?
Bucket B: It’s important to know that all of your gains from bucket B are taxable, so you will need to account for that. If you structure it correctly, bucket A proceeds are NOT taxable but the gains from bucket B are taxable as ordinary gains. Some people look at the gains from bucket B as kind of “found” money that they would not have had otherwise, and are happy to taxes on this money.
