Did you know you can become a millionaire with $500 a month?
Watch full video on YouTube:
Let’s address the famous question of “What is the minimum amount that I can put into or invest in an IUL?”
You’re going to see that it’s not what you begin with but it’s what you end up with
And so I really am a big proponent that people as they prepare for long- term goals such as retirement or maybe their business or with real estate management, college funding for kids that one of the best places to accumulate their money
So I’m Justin Smith and I’ve been helping people with max-funded IUL ever since the beginning of the pandemic
safely where its liquid, its safe, its projectile rates of return between 7 to 10%
Mind you, we don’t have to pay tax when we take it our nor do we have to pay tax when we transfer it to our heirs.
When we are long gone there is not a n income tax due to whoever I leave it behind to
There actually not that many vehicles that give you tax advantages like that
On top of that there is no other vehicle in the entire Internal Revenue Code that allows you to accumulate access and transfer your money totally tax-free but when it transfers, it blossoms in value
So when the question is asked, what is the minimum amount I can but in just keep in mind for starters you have to cover the cost insurance
This was all dictated under the tax citations that was under TEFRA, DEFRA and TAMRA to accommodate the maximum amount you wanted to but in
So that’s the real question, which is what’s the most amount you want to put in?
This is generally what we call the Guideline single premium
Meaning this is how much you want to be allowed put in to the policy over the life of the policy and no faster than the first 11 years
So for example, let’s say it’s $500,000. Now you don’t have to necessarily put in $500,000 but let’s say that’s the most you can put in over the first 11 years.
In Fact you could actually put that in the first years and then you’re done funding the policy
There’s no limit to what it can grow, it can easily grow to millions and millions of dollars tax-free, there’s only a limit to how much can be put in.
So if you’re trying to set up a contract, a policy, a savings vehicle using indexed universal life with the least amount of premium, then you want to think about what’s the least amount that I can average on a monthly basis?
Today I am putting life insurance policies on new born children at a rate of as little as $25 a month that shows over time how just $25/ a month can grow to hundreds of thousands of dollars.
But if you can start by just socking away $500 a month today which is $6,000 a year.
Now you can put more in than that and you can also put in less than that. If you put in more you can cruise.
So if you throw in 10, or 20,000 and then have to stop and not put anything in, you can do that, if the minimum is 500 a month because you just divide that into how much you’ve already put into the policy.
It also allows for flexibility. Which is why its called UNIVERSAL LIFE because its universally applicable to but minimum and maximum funding
But the question is, how much to you want to accumulate to generate tax-free income at the end of the day
Let’s use the rule of 72 for example
The rule of 72 says you take the interest rate that you are earning on any investment and divide that interest rate into the number 72
So that means 8% into 72 means your money will double every 9 years.
If you’re earning 10%, your money will double every 7.2 years.
If you’re earning 7.2%which is the average that people earned in the worst decade since the great depression
Literally just falling asleep for and waking up 10 years later, people doubled their money
The average return was 7.2%
Let’s use 7.5 for example
If you started socking away $500 bucks a month and you earned an average of 7.5% you would have $1,015,000 in 35 years.
So my suggestion to the minimum question is, if your goal is to have 1 million bucks, I recommend at least $500 a month for the next 30-35 years.
Or even if you had a lump sum, meaning, how much could I set aside so that 30 years from now I have a million if I have 125,000 right now.
Well $125k right now, if you’re earning 7.2% it will double every 10 years so $125k will grow into $250k, to 500k and then 10 years after it will double to a million and this shows that its pretty simple
So when I meet with people, I would say, how much money do you need in today’s dollars, meaning how much would you need to sustain today’s living
Keep in mind we have to take into consideration inflation.
So let’s say you only need $3000 and your project that inflation will be up %5 30 years from now,
That means that $300/month would only buy what $1500 buys $15 years earlier.
So you’re going to need $6000 a month in 15 years to be able to buy the same gallons of gas and bread and eggs that $3000/ month bought 15 years earlier.
We all know how those gas prices are treating us right now.
And if you are looking 30 years down the road it will double again, so $6000 goes to $12,000.
You’re going to need $12,000 a month to buy the same gas and loaves of bread that $3,000/ month buys today.
So in order to have $12,000 a month which is $144k a year, we are going to have to– assuming a 7 or even a 10% rate of return.
We would reverse engineer it and go we need a million and a half or we need 2 millionaire or even a 3 million dollar nest egg to hit that goal.
And so it’s really a function of not what’s the minimum, its how much do you NEED to set aside and then with flexibility being allowed to put in nothing or a very low amount, but its really, what’s the most I can put in to achieve my goals.
So yes, you can become a millionaire by socking away $500 a month for 30 years at 7.5% and if it’s at 10% you’ll see it quicker
But maybe a million is not going to be enough and so this is where you would need to maybe accumulate 2 million or 4 million
People who have used maxed funded indexed universal life, IUL where it was structured correctly and funded properly under the TEFRA, DEFRA, and TAMRA guidelines, this has turned into a cash cow for them.
Claim your copy of our Tax-Free Retirement E-Book:
Investsmiths Blog 