Dynamic Chiropractic – December 14, 2000, Vol. 18, Issue 26

Millionaire Revisted

By Stanley Greenfield, RHU
The response to my article on "Who Wants to Be a Millionaire" was overwhelming. Every day I received hundreds of requests for additional information from all over the world. I responded to every requests and I am happy to say that those doctors are now on the way to becoming "millionaires." I thought it might be a good idea to revisit this subject and go into greater detail on how one can become a millionaire.

In the last article, the examples I used were based on a variable universal life policy issued by a life insurance company. These policies have a portfolio of mutual funds. Instead of a cash value that is determined by the insurance company, the cash value in these policies is based on the return earned by the funds. You get to pick which funds your money goes into and you can change those choices. The funds range from conservative to aggressive. For a company to issue such a policy, it must have a close relationship with a broker dealership, which is a wholesaler for securities and funds. Currently there aren't too many companies that have these contracts available within their portfolio of policies. Originally when these contracts first came out, I was not a fan of them because they were loaded with lots of fees, but over the last few years they have been redesigned, and now they work quite well.

One argument against these policies is that maybe you won't be able to pick as well as the "pros" that are running the regular universal life policies. That may be true, but you can change your choices in the variable policies.

I also do something else with these policies, which allows them to really become "cash cows." I suggest to my clients that they should deposit additional money into the policies. This additional cash does not buy any additional death benefit, so it goes in almost without any additional fees charged against it. The money goes right into the mutual funds. You can add additional money to these policies as long as you don't violate the TERFA guidelines set up by the tax law of 1986. If you put in "too much" money, you then change the complexion of the policy and the policy then becomes a modified endowment policy (MEC). That is not good, as any money you take out of this policy is now taxable. You need to make sure that this does not happen.

One major advantage that life insurance policies have is that you can take the money out without incurring a tax liability. How does that work? Insurance works on what is referred to as FIFO - first in, first out. What went into this policy first was your deposit, so the first thing out is your deposit, not the interest earned on that deposit. This is very important! Once you have taken out your deposit, you then access your money via the loan provision in the policy. When you borrow money, the law says you do not have "constructive receipt" of that money, so you pay no taxes on that money. What that means is that you can have an income stream from the policy with no taxes to pay- federal or state. Tax-free income - words that bring a smile to anyone's face.

As long as this policy does not lapse or you don't cancel it, you have no tax liability. You want to make sure this policy outlives you by at least one minute.

A life insurance policy means: no forms to file with the IRS; no fees to pay to keep your retirement plan current and with the latest changes in the tax laws; no waiting until a specific age to get to your money; no limit to a specific contribution based on your plan and your current income; no employees to include or make a contribution for each and every year; and best of all, no taxes to pay.

What kind of money will a plan like this generate? I will refer you back to my original illustration of the 28-year-old male who deposits $100 per week into this plan. At age 65, he could receive an annual tax-free income of somewhere between $157,000 and $177,000, depending on what plan he uses. By the way, this is based on him living until age 100 and receiving payments each and every year for 35 years. Not bad!

You say you have an IRA and you are happy? Will you still be happy when you retire and have to pay taxes on every penny you receive? How about a SEP? SEP has the same problem, and both of these plans have one major flaw. If you get sued, the money can be grabbed. Still happy?

Tired of working hard and sending all of your hard earned money to Washington? Are you sick and tired in seeing most of the money you contribute to a retirement plan march out the door every time an employee leaves? Are you sick and tired of having to pay large fees every year just to keep your current retirement plan legal? Are you just sick and tired? Are you going to do anything about it? Now is your chance. Don't blow it; don't say I didn't tell you how to really become a millionaire. It is now up to you - and that is my final answer!

Stanley Greenfield,RHU
1829 Green Heron Court
Jacksonville Beach, FL 32250
Tel: (800) 585-1555
Fax: (904) 247-1266

Click here for previous articles by Stanley Greenfield, RHU.


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