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Insights: Income Generator IUL

IMG_1296 copy[su_dropcap style=”flat”]I[/su_dropcap]NCOME GENERATOR IUL or InGen ( like engine ) is new, innovative and it works very efficient due to its unconventional design. This is a simple but powerful example of Modified Index Universal life. We will then compare to a 401K.

Growth With No Stock Market Loss

You are not going to micro manage this plan.  So, approximately 95% of the monthly or yearly payments go into investment grade bonds. The remaining 5% goes into options on the S & P 500. All done by a few companies proficient in this niche over 100 years old with financial strength ratings of A+. One particular company will provide growth in your account every year  matching the growth in the S & P 500 from zero to 13.5%. If the market is down, the option expires without value. If the market goes up the account gets credited the same amount as the growth in the S & P 500 up to 13.5%.

Just in case you are wondering the average annual returns of one company are for 5 years = 10.8%, 10 years = 8.2%, 20 years = 8.5%, 40 years = 8.1%.

The returns are not out of sight but the wealth you build without market loss can be very comforting in the face of volatility and other asset classes losing value. If you are really paranoid and you think we may have another lost decade, the aforementioned company will make sure you get a minimum 3% interest rate. So if the market tanks and you have a plan like this you will feel pretty good. If the market continues to go up and you have a plan like this, you’ve done pretty good.

Here Is Income, Tax Free Income

After tax dollars enter the plan, grows without tax and exits tax free. When the income comes out of the plan it is actually a loan from the company and your account value is used as collateral. The loan is paid back because there is a coordinated death benefit included in the plan design to pay off the loan and the excess cash will go to the beneficiary tax free also.

Taxes

After tax dollars go into the plan and not on the way out when the account value has become large.

 Expenses Decrease Over Time

The average annual expenses for 20 years are about 1%, after 40 years are about 0.3%.  The total expenses are available in a company report – complete transparency a little rare in today’s day and age.

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Real World Example For The Number Crunchers

Let’s take two average 45 year old guys. One has a qualified plan like a 401k that gives him a deduction on contributions which more accurately is a deferral, grows without tax and taxed on the way out. The other guy invests in an after tax plan like the InGen plan. Both start saving at age 45 and start income at age 66.

                                                 401k guy                        InGen guy

Contribution/year                      $ 16,000                             $ 12,000

Tax Rate                                     25 %                                  25 %

Rate of Return                               7 % assumed                     7 % assumed

Expenses                                       2 % assumed                   actual

Total Contribution                      $320,000                           $240,000

Account Value age 65                 $555,508                           $498,859

Note: The 401k guy contributed $80,000 more but only has about $57,000 more in account value due to expenses.

   Look At Income At Retirement

                                                401k guy                        InGen guy

Income Starts                           age 66                               age 66

Tax Rate                                    25 %                                    0 %

Withdraw/year                          $ 59,333 pre-tax               $ 44,450 no-tax

Rate of Return                             7 % assumed                     7 % assumed

Account Value age 81                   zero                                    *

* The InGen guy take income to age 100 and still has account value.

                                                     Taxes Paid or Saved

                                                401k guy                       InGen guy

Contribution/year                      $ 16,000                         $ 12,000

Tax Deferred/year                     $  4,000 to age 65

Tax Paid/year                                                                 $  4,000 to age 65

Total Tax Deferred                    $ 80,000

Total Tax Paid                                                                 $ 80,000

Tax Paid to Age 81                    $237,328

Total Tax Paid                                                                 $ 80,000

                                                             Expenses

                                                401k guy                      InGen guy

Annual Fee Age 45                    $      342                          $  1,922

Annual Fee Age 55                    $  4,829                           $  1,266

Annual Fee Age 65                    $ 11,110                          $  2,562

Annual Fee Age 75                    $  5,460                           $  1,452

At age 81 the 401k is out of money, total fees paid $208,102  At age 81 the InGen has account value and total fees paid $77,189[/message]

If you want to supplement or complement existing plans this is one way to diversify asset classes in your investment portfolio.

Clif Albino
Clif Albinohttps://www.linkedin.com/in/taxfreeincome/
If you are a highly compensated professional, executive or business person, and worried about not saving enough for retirement and you do not want to experience market losses. I will share with you how to receive 60% - 100% net more income and benefits from the same amount of money you are spending now and no market loss Would you rather pay tax on the seeds or the harvest? That is the start of a tax-free income conversation. taxes are your biggest expense - minimize them when you can. Are taxes a pain point? If you borrowed money to buy a house would you consider that strategy for retirement? That begins talk on leverage - You put in $1 and we will match $3. Would that help you catch up? People who increase wealth use the money of others. Would you be less stressed if you knew how? If you could go to the casino and keep 80% of your winnings and none of the loses, how long would you play? Intense stress testing on these programs creates more confidence. Albino and Associates will explain all of this. Visit at https://www.linkedin.com/in/taxfreeincome/ Call or text me at 262-893-9853 or email me at [email protected]

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