75. How to Double Dip on Gains Tax-Free Using Indexed Universal Life Insurance with Brenyn Mcconnell

00:05 Dr. Ann Tsung Are you struggling to advance your career and sacrificing time with your loved ones because of endless to-dos, low energy, and just not enough time in the day? If so, then this podcast is for you. I am your host Dr. Ann Tsung, an ER critical care and space doctor, a peak performance coach, a real estate investor, and a mother of a toddler. I am here to guide you on mastering your mind and give you the essential skills to achieve peak performance. Welcome to Productivity MD, where you can learn to master your time and achieve the five freedoms in life.

00:52 Hello. Welcome to Productivity MD Podcast. I am your show host Dr. Ann Tsung. Today I have Mr. Brenyn McConnell. He is a wealth strategist for Money Insights. This is an alternative wealth-building firm. They do whole life insurance, indexed universal life insurance, and they help you invest that money that funnels through the insurance into other alternate investments like real estate, like debt funds, self-storage, et cetera. Anyway, the reason why I have him here, it’s because we want our money to also be efficient. When I first learned about this, your indexed universal life insurance, I was like, “Why don’t more people know about this?” So this is the reason why I brought him on. Just before we start, we’re not financial advisors. Talk to your own financial advisors, okay? And this is for information only. So, anyway, Brenyn, thank you for coming on the show. Tell us how you got it. Like, why did you get into this field at such an early age, and why should people care about this?

01:51 Brenyn McConnell Yeah, thank you, Ann. First of all, thanks for having me on the podcast. Super excited to be here. So the way that I got into the field is, when I was in school going to college, I actually started doing — it’s an interesting story. I started doing door-to-door sales, and I was selling pest control. So if you, you know, many people have had somebody knock on their door, right? They’re selling pest control, alarm systems, solar systems, whatever it is. That was me. And I did it all four years of college. So what’s interesting is, and what a lot of people don’t know, I live in Utah and this is a huge market for door-to-door salespeople. Like if you go to any college in Utah, you’ll run into somebody that does door-to-door sales around every corner. The reason is: you can make a lot of money doing door to door sales while on college. So I go out for four months of work during the summer in between semesters. My first year, I made $25,000. It was enough to pay for school. I thought it was awesome, and I only had to work four months. It was great. I got to go on some fun dates. I went on a couple trips, things like that, with the company. Well, anyways, fast forward three or four years, and I was making $200,000, $250,000 in four months doing door-to-door sales.

03:02 Now, the reason this is important, specifically for how this got me into what I’m doing now, is I was managing a team of sales reps—15, 20 sales reps—every summer. Some of them were making more money than I was. Some of them were making $300,000, $400,000, $500,000 in four months, and they were just blowing the money. I mean, they were buying brand new sports cars, and they just weren’t doing anything to set themselves up for success down the road. They weren’t investing it. They were just bottle service, all sorts of crazy stuff. I mean, you can imagine it. You know, 20-year-old, 21-year-old making $300,000 in four months and then not having to work for eight months. It’s just so much idle time. They were just doing crazy stuff. So what happened is, I got married with two summers left. So I got married early. I was 21 years old. I had done a service mission, which is why I didn’t start school until I was 20. My father-in-law is a financial advisor. He would come out and sit me down, and he would help me plan for my future. I ended up helping a lot of my sales reps with investing and getting into different investments early on, helping them see a vision for what they could do with some of that money. And that’s really where my passion came from in terms of helping people with money and wanting to help people accelerate their money and create wealth.

04:22 And so, eventually, I sat down with my father-in-law. I said, “Look, door-to-door sales is great, but I don’t want to move my family out every summer to Connecticut and New York and Missouri and all these different places.” It’s not sustainable for me. I’d really like to have a more consistent career, and I really love the idea of working in finance. And so that’s where I started in finance. Now, what happened was I started with my family, right? That’s where you start with personal finance, typically as family and friends. I dove into my own parent’s situation. My father is a high-income earner. He’s an attorney. He does really well. He’s kind of done what a lot of people hear, a lot of mainstream media say, which is basically, “Just max out your 401k every year. Eventually, you’re going to have this big enough nugget at the end of your working years where you’re going to be able to retire. Everything will be sunshine, and you’ll be sitting on a beach.”

05:20 The unfortunate thing is, and I think this is common with a lot of high-income earners, he started looking at that, and we realized that he wasn’t going to have near enough the money that he needs to have a great retirement, right? He’d be able to pull out — I mean, he’s making seven figures right now. And so the safe withdrawal rate, what Wall Street would tell him he’d be able to pull out, is a 3% to 4%, It’s kind of that safe withdrawal rate. That’s how much they recommend pulling from your portfolio. And so that might be $125,000, $140,000 as far as a safe withdrawal rate. So he’s got a big 401k. Well, when we were looking at it, he really only had the 401k and then he had social security. Both of those accounts are both taxable, ordinary income, right? And so he would have to pull a ton of money out of his 401k to get to a place where he has a livable income in terms of keeping up with his lifestyle. He doesn’t need seven figures to live in retirement, but he does need $350,000. It would be ideal for him to live in retirement. But in order to get that from fully taxable accounts, he’s going to have to pull out $500,000, $600,000 and that’s going to take a huge hit on his overall portfolio.

06:31 So what we ended up doing is, I started researching a few different strategies. The first one was sequence of returns, which is basically the idea of if you have a different asset that is not correlated to the market, you can let your other assets recover in down year. So if there’s a down year, the 401k dips 10%, you don’t pull any money from the 401k because you’re going to let it recover. Instead, you have this other bucket of money that isn’t correlated to the market, and you can pull money from there. Right? So that can be a few different things. I really like the high cash value life insurance for that purpose. Then the second thing was, if he has this bucket of money sitting over here and high cash value life insurance, he can draw tax free income from that policy, right? Which effectively, if he could pull $100,000, $150,000 a year from his life insurance policy, that means he doesn’t need to pull so much from his 401k. Therefore, it’s bringing down his tax bracket. And so that’s kind of where my love for high cash value life insurance came. It’s helping my dad get to a place where he’s going to be in a way better position when he comes to retirement because of these policies. And what he loved about it is even though he’s setting $100,000, $150,000 a year aside into these policies to get to a place where he’s got that, he has full access to that capital and can use that cash value in the policy to go out and create wealth in other ways as well before he retires. So it’s kind of a multifaceted and a multi-step tool where he can use the cash value right away. Eventually, it’s going to get to a place where he’s going to retire. He can tap into it for tax free income. Then the third stage, there’s going to be a tax-free death benefit that pays out. And so that’s kind of how I got into the high cash value life insurance space.

08:21 Eventually, I got connected with Money Insights, which is the company that I work with right now. My partners over there are phenomenal. We really work with high-income individuals for investing in cash-flowing alternative assets. The way that we help them is we set up these policies where they flow their money through those policies first, and then take a loan against the policies, invest it into self-storage, multi-family real estate, debt funds. And what it does is it creates an additional layer of profitability for them, in addition to whatever they’re investing in outside of the life insurance.

08:55 Dr. Ann Tsung Yeah, I think when I first learned about this, I was like in shock. I was like, “Why don’t people know about this?” It could seem very complicated for people who have never been exposed to it. So I just recently started one, or I just signed the paperwork like yesterday—one for my 11-month-old and one for my two-and-a-half-year-old. It’s multifaceted in, like, number one, versus a 529. I actually pull money out from a 529 to invest in these funds. Because number one, from what I understand — and you can go through this in detail. But for our listeners, just for simplicity, number one, you put money in. There’s a cash value that’s going to accumulate. You can pull it out to use for school, to use for a car, to pay for college for themselves. Number two, it’s accumulating interest not tied to — well, it’s indexed against the market, but it doesn’t drop, like crash like the market. So it’s not actually in the market. So you’re protected against that. Number three, if you’re already investing in real estate syndications or other funds, why not use, borrow it from that policy? Use that cash value and then invest in those syndications, so you’re getting interest or gains on both sides. Number four, when you need to retire, you can pull that money out from that, from your kids—which is what I’m doing—and then you assign that policy to them. And when I think you die, then they get your death benefit, or they would get the retirement money later or something like that. They can reassign to their kids. Long story short, lots of benefits. If you have any real-life value or dollar amount, as an example, in terms of the difference it could make, that would be really appreciated. And I know there’s two different policies.

10:36 Brenyn McConnell Absolutely. Yeah, and it’s a great question. So I’ll start with this. Usually, when somebody is investing in cash flowing assets or alternative assets, what we refer to them as, they typically have a place where they store capital. They build it up until they have enough, 50K, 100K. Then once they have a deal ready, they’ll just deploy the 50K, 100K into the deal. Then as that deal kicks off cash flow, they’ll flow it back into that same—we call it an opportunity fund—and then rebuild that and then redeploy it. Right? Most people for that opportunity fund, the place that they’re storing that dry powder, that capital in between deals, they want that to be safe, predictable. They want it to be liquid, right? So this usually ends up for most people being some sort of bank account—a checking, savings, money market. Because it’s, again, safe, predictable. It’s liquid. You’re not worried about what the market’s doing, right? It’s always going to be there. If you’re planning to use it for that kind of asset, that’s what most people use.

11:33 So what we’re doing with what we call the investment optimizer strategy but, really, it’s just these high cash value life insurance policies, we’re just replacing that place—that people store that dry powder, that capital in between deals—with this high cash value life insurance policy. And the benefits being: we can get a consistent 5% to 6% return, sometimes more with the index universal life policies. It’s all coming tax free. So instead of getting a 1099 for growth in our money market account at the end of the year, it’s accumulating tax free. Then you already mentioned a few of the other benefits. You can pull tax-free income down the road from it. A huge reason that people love this is the ability to take loans against the policy. This is where that extra layer of profitability comes in. This is how this can enhance your other returns and your outside investments, is using this loan provision. So instead of withdrawing the funds from the account, we’re strategically going to take a loan against the cash value of the policy. So what happens when you capitalize one of these policies is you create this bucket of money, which is called the “cash value” of the policy. And then because you have this bucket of money, this cash value, you get access to a much larger bucket of money, which is the general account of the insurance company. So they’ve got this huge bucket of money sitting there.

12:49 What happens when you take a loan is, instead of it coming out of your bucket of money, it comes from the general account of the insurance company. That’s important. Because your bucket of money continues earning compounding interest as if those dollars never left. So if you’ve got $200,000 sitting in that bucket and you pull $150,000 out for a loan for an investment you’re going to make, you continue earning compounding interest on that full $200,000. Even if you have it out, that $150 ,000, if you have that out for 8 years or 15 years, you’re earning compounding interest that entire time in that bucket of money. And you can take that loan, that 150K that comes from the general account, and you can invest that into multifamily real estate syndications, single family, self-storage debt funds, car wash funds, any sort of investment that you’re interested in doing, reinvest it in your business. Then what happens is when we create that cash flow from those assets that we’re investing in, we just flow that money back into the policy—not because we have to, but because we want to replenish our opportunity funds so that we can do it again. So an easy example to give you how this can impact your overall investing is, there’s a handful of debt funds there that we love. One of them produces a 9% return, which what you’re doing is you’re taking $100,000. You’re giving it to the debt fund, and the debt fund is going to pay you a 9% cashflow on that every year until you say, “Hey, I want that capital back.” But as long as it’s sitting with the debt fund, it’s just going to keep compounding and hitting a 9% cash flow.

14:18 Dr. Ann Tsung What’s a debt fund, for those who are not familiar with it?

14:21 Brenyn McConnell A debt fund is just a fund where an operator — let’s say, it’s a self-storage operator. They’re going to go out and do a ground up construction of a new self-storage unit. The debt fund is going to finance that, right? So they’re going out and using your money to finance different deals, whether it’s ground up construction on self-storage, ground up construction on multifamily, anything like that. Those debt funds are going to be lenders to other people. Usually, it’s other operators, other major operators and general partners. And so they’re charging an interest rate. It’s going to be higher than the 9%, but you’re getting a very nice consistent 9% cash flow. And so it’s a win-win-win for everybody, right? The debt fund wins; you win. Then the people lending from the debt fund win, because they get to go out and build this new construction apartment building or a self-storage unit.

15:14 So if you just invested in that debt fund with $100,000 from your bank account, you’ll get the 9% cash flow. That’ll flow back into your bank account. That’s really it, right? That’s everything there is to it. If you flow your money through the policy first and then take a loan against your policy for that 100K and invest it into the debt fund, over time, that’s going to bump your return from 9% up another 3%. So instead of getting 9% total, you’re going to get an extra — well, not an extra. You’re going to get a total of 12%. So it’s bumping your return by 3%. So you can imagine, right? The policy itself is not the investment. I think if you asked anybody and I said, “Hey, you can get a consistent 5%, 6%, 7% return,” most people would be like, “Well, I can do that in the S&P 500, right? There’s a lot of different places I can get higher than that.” But if I said, “Well, you can get an extra 2% to 3% on investment that you’re making in a debt fund or a piece of real estate,” then it becomes very interesting to people. Because if you can just add an extra 1%, 2%, 3%, 4% on top of your regular returns, that’s going to start doubling and compounding your wealth like crazy, much faster than it would be if you weren’t using it.

16:26 Dr. Ann Tsung And you’re getting that extra 3% — because if you’re saying that the policy gives you maybe, say, 5%, right, wouldn’t it technically be 14%?

16:38 Brenyn McConnell Okay. Yeah, great point, great question. So the insurance company, when you take a loan against the policy, they’re charging an interest rate as well, right? So I have to account for the interest that I’m going to pay. Because I’m going to pay a simple interest, and then I’m going to earn a compound interest in my policy. And if you’ve ever looked at simple versus compounding, especially if you’re paying back the loan—simple interest on a decreasing value, compounding interest on an increasing value—that’s going to add an extra layer of profitability there. So because of the interest that I pay over time, that’s going to decrease the — if I’m getting 5% in my policy, yes, it’s compounding at five, but I also have this interest rate that I’m paying over time. And so net, it ends up being an additional 3%, 4%.

17:22 Dr. Ann Tsung Copy. I thought I heard that if you borrow, say, 100K from it from cash value, you technically don’t have to pay it back because they will just deduct from your debt benefit if you don’t take it back.

17:32 Brenyn McConnell That’s true. Yeah, exactly. Yeah, so strategically, we always have our clients pay back the simple interests if the cash flow is there, right? So if you’re getting cash flow and the deal is going great, just flow the money back in. Repay the loan. And again, not because we have to do it, but because then that money becomes available again for us to go and deploy into another asset. But sometimes you invest in a multi-family real estate syndication, and let’s say there’s no cash flow from it, right? Maybe it’s a buy and hold. It’s a four-year, five-year, six-year hold. No cash flow coming off of it. You do not have to pay any interest, right? If you don’t want to, you can just let it go. The insurance company is not going to be messaging you saying, “Hey, where’s this interest?” You’re not getting penalized for it. It does start compounding, right? So it will compound on the principle of the interest. But that’s okay because we’re also earning compounding interest in the policy with the same dollars. And so what will happen is, when we have somebody that has an investment like that, usually, they’ll just wait for the five-year liquidity event to happen. Then they’ll just take the liquidity event. Usually, it’s much more than what they need to pay off the loan for. They’ll pay the loan off, and then they’re off to the races again, take another loan and invest it.

00:18:41 Now, when you’re never going to pay back the loan is when we get to that second phase of the policy. So the first phase is the active investing phase, where we’re taking loans against the policy for investments. And to your point, kid’s policies, a lot of people are going to use kids’ policies to pay for college. They might help a child with the first-time down payment on a home, right? Maybe they’re going to start a business. So there’s a lot. You can use it for any purpose. We’re typically hyper focused on creating wealth with the policies. And so that’s why I always talk about investing in this kind of assets. The second phase is the tax-free income phase, which is what you mentioned. When we start taking income, you can take withdrawals. So life insurance is unique in that, it’s first in, first out. Meaning, you can take your basis. So you can withdraw your basis without touching the growth of the policy. That’s all obviously going to come out tax-free. Once you get through that basis, we’ll switch over to taking loans, because we want to keep that income coming to us tax-free. We’re not going to worry about paying any interest. We’re not going to worry about paying back any of the loans. We’re just going to let that accumulate over time. Because what you said, Ann, the death benefit eventually is going to pay out, right? So if we’re 93 years old, we’ve been pulling income for the last 35 years, the death benefit is going to pay out. It’s first going to pay off all of those outstanding loans, tax-free. Then the remainder, because there is going to be a remainder, is going to go to our beneficiaries—whether that’s our children, a charity, or whatever we decide we want that money to go to.

20:07 Dr. Ann Tsung Yeah, so it sounds like it’s another form of Roth. Because once you become a high-income earner, the Roth kind of phases out unless you do the backdoor Roth. But this is just another form of Roth but better. Because if you take a loan against your Roth, you’re not earning interest on the loans on the same amount, if that makes sense. But in this case, you’re earning interest no matter what how much you take out. That’s what it sounds like.

20:31 Brenyn McConnell Yeah, absolutely. And what I would add to that is, because if you said, “Well, which one is going to get a higher return, the life insurance policy or the Roth,” I’d say, well, the Roth is. Right? It’s invested in the market. Now, once you start saying, “Well, are you going to take loans against that to invest in other income-producing assets,” that’s where this strategy has huge amounts of power. I’m just making the point again. The life insurance policy isn’t my end goal. That’s not where I’m trying to get my returns. But it is enhancing everything that I’m doing and creating additional layers of profitability. I’m going out and getting higher returns in my alternative assets, right? I’m chasing 10%, 20%, sometimes 30% returns in the kind of assets that we like investing in. Plus, you know this, Anne. You get bonus depreciation and all kinds of tax benefits when you invest in this kind of assets as well. So there’s just so much to it. But a lot of people will argue and say, “Well, which one is going to get a higher return, a Roth IRA or life insurance policy?” And I’ll tell them every time the Roth IRA is. However, you can’t loan against the Roth IRA and have it keep compounding for you and invest it elsewhere, right? So there is definitely benefits. And you want to be strategic with it, right? If you’re not going to use this policy to go out and create wealth elsewhere, maybe it doesn’t make sense. Maybe a Roth IRA is better in your circumstance. But if you’re somebody who wants to create additional streams of income and go out and create wealth and those kinds of assets, it’s absolutely a phenomenal way to do it.

21:59 Dr. Ann Tsung Yeah, it’s a way if you’re going to invest like, say, I’m invested in two syndications, I should have — if I had known about this, I would have put that money in there, funneled it through the policy. Basically, put it in the policy first, then take out the money. Have it earn interest in that policy regardless, and have it earn gains in the real estate.

22:18 Brenyn McConnell Exactly.

22:18 Dr. Ann Tsung Never too late. That’s why we’re talking about this. The cash value, how does that accumulate? I don’t know how that works. Is it just depending on how much you put in at a time and a percentage of how it accumulates?

22:28 Brenyn McConnell Yes, great question. So this is where I’m actually going to break up the two policies. So I’m going to talk about indexed universal life, and then I’m going to talk about whole life. But simply put, the cash value grows because we’re putting in cash into the policy, right? So we’re capitalizing the account with our own dollars. Now, the way that it earns a return, I’ll first talk about indexed universal life. So indexed universal life is a different kind of permanent life insurance. What happens is, you have a floor and then you’ve got a cap, right? And so the floor just protects your downside. So let’s say that the indexed universal life is using a certain allocation in the stock market. A lot of times, it’ll use the S&P 500. There’s other certain dynamic indexes out there. But for simplicity, I’ll just use the S&P 500. What it’s going to do is, it’s going to track the S&P. If my anniversary of my policy is March 15th, it’s going to say take a snapshot of the S &P March 15th, 2025, and it’s going to track it March 15th, 2026. And if the S&P went -15%, my account has a floor. And so I just get a 0% return, right? Some policies have a 1% floor, but most of them are sitting at either 0 or 1. And so my downside is, always protect it out. I’ll never lose money in this account.

23:50 Now, because I have that floor, I give up some of the upside, right? So I’m not able to capture the full upside, but I’m able to capture the majority of it. And so if the S&P 500 in that same time frame goes up, let’s say, 20%, I might have a cap of 12% or 15%, right? So if my cap is 15%, even though the S&P did 20, I’m only going to capture the 15. And so that’s how an indexed universal life policy is going to earn returns. It’s based off the specific index that the insurance company is using. And you get to pick that, right? They give you a list of maybe 10 or a dozen options, and you can tell them which ones you like. But it’s all based off of those specific indexes on the indexed universal life side.

24:34 Dr. Ann Tsung Yes, you don’t lose your principal. In stocks, you can always lose down to 0 or 50% of your principal. But in this, you don’t lose the original money that you put in. So that’s the upside. Okay. Go ahead.

24:47 Brenyn McConnell Well, and the reason that’s really great too is, let’s say, that there was a big drop, right? So let’s say that we had a negative 30% return in the S&P, right? Big crash in the market. What happens is we get a 0% return, right? So we don’t lose anything. Then our point-to-point resets. So if the S&P went from easy numbers again—let’s say, 7,000. It was at 7,000 and then it dropped to 5,500, our new point to point starts this next year at 5,500. So it doesn’t even have to recover the full 30% that it lost. Even if it recovers from 5,500, 6,200, we’re still getting, capturing a large amount of that gain because it’s a point-to-point focus. Right? It’s not like traditional investments where I put in money at 7,000; I have to get back to 7,000 to get even. Because it’s looking at a specific snapshot in time and then resets every anniversary date. Does that make sense?

25:42 Dr. Ann Tsung Yeah, so you’ll earn to start earning right away after 5,500. And the next time it gains, you earn that interest right away. You don’t have to wait until recovery. That’s what you’re saying.

25:56 Brenyn McConnell Yes.

25:56 Dr. Ann Tsung Yeah, okay. Got it. Okay.

25:58 Brenyn McConnell That’s indexed universal life. Whole life insurance is a little bit different. So whole life insurance, I would describe, is a little bit more guaranteed and predictable. It’s going to earn interest in two different ways. The first way is guaranteed interest, which is contractual, right? That’s in the contract. Each company is different. It’s going to be sitting anywhere from 1.75% up to 3.75%. The company that we use the most for whole life insurance policies, they have a 3% guarantee. So we’ll use that for the example. So you’ve got that 3% guarantee that happens every year. That’s basically your floor, right? So you’ll never earn less than 3%. Then in addition to that, you get a dividend. So we only work with mutual life insurance companies because they offer a dividend. And that dividend right now is sitting — again, it’s different with most carriers. But with this specific carrier, it’s sitting at 3%. So you have the 3% guarantee, the 3% dividend. And so total, you’re earning 6%. That is not going to fluctuate very much. So to give you an idea, the lowest in the last 30 years that this company has had their dividend — and now I’m going to combine them. So when I say this number, it’s combined. The lowest it’s been is 5.74% the last 30 years. The highest it’s been is, coming out of the 1980s, the high interest rate environment, the whole life policies were earning 9.5%, 10%, which is pretty solid.

27:21 So let me tell you why somebody would pick one or the other. And before I say anything, both policies are great. Then one other word of advice to anybody listening: anytime you’re getting a high cash value life insurance policy, you want to be very intentional about how these policies are designed. Because they can be designed in a lot of different ways. The cost can fluctuate greatly. And so the way we’re designing them is, we want to get the minimum death benefit or the lowest death benefit we can. Then we want to maximize the cash portion of the policy. Okay? Because what that’s going to do is that’s going to set the policy up for success right out of the gate—from year one and then moving forward through the rest of the life of the policy. Because we’ve minimized those costs as much as we can and maximized the cash value portion of it, those policies are rock solid all the way through the end, right? Some people will say, “Oh, I’ve had a bad taste in my mouth from a policy where my parents had a really bad experience with a policy.” 99% of the time, that’s because that policy was not designed for high cash value; it was designed for high death benefit instead. What happens there is, there’s just way more costs associated with it. And that drags the cash value down to a point where it really breaks even in those policies. I mean, it can be 15 or 20 years before somebody breaks even on a policy like that. So, not great, right?

28:40 So my advice, just make sure you’re working with somebody that is designing these policies properly. Because that is absolutely pivotal if you’re trying to use it for this specific strategy. So those are really the two kinds of policies—IUL, whole life. The reason why somebody would pick an IUL is because they like the idea of being able to capture a little bit higher upside, right? Because, traditionally, an IUL is going to capture a little bit more on average than the whole life policies are. And they’re okay with the fact that the floor is at zero, right? Somebody else might say, “Well, I’m a little bit more conservative. I’m taking my risks, my real estate deals, or my debt funds, or my self-storage deals. My risk is elsewhere. And so I just want a very predictable asset that I know it’s going to consistently bring me 5%, 6% every single year.” And so that’s why somebody would pick whole life. Again, our clients use both. Both are great policies. One is just a little bit more predictable and guaranteed; the other one has the ability to capture a little bit higher upside.

29:39 Dr. Ann Tsung Would you say that’s the reason why I went with IUL with my advisor? Because they’re like one or two?

29:46 Brenyn McConnell Absolutely. Yes. Yep, those kid’s policies have a ton of time to grow. And so, no brainer, right? Typically, if somebody’s a little bit older—maybe they’re late 50s, early 60s. I don’t want to say older there, but a little bit more seasoned in life—then that’s where they’d say I think a whole life policy probably makes a lot more sense. And then there’s this wide gap in between, where, really, it’s just preference. Because both policies are awesome. Both policies can accomplish a very similar goal. It’s just completely up to the individual on what they want—if they want that guarantee predictability, or they want the ability to capture a little bit higher upside, again, with the guarantee that you won’t see the negative returns.

30:29 Dr. Ann Tsung I think the best thing, of course, is to find a financial advisor. The last question I’ll give you is, how do you make sure? How are the financial advisors or the policy builders paid to make sure there’s no conflicting conflict of interest?

30:45 Brenyn McConnell Such a great question. So with life insurance, there’s three costs. There’s the cost of insurance, there’s administrative costs, and then there’s commissions that get paid. Right? So the insurance companies don’t have a team of — they don’t have a servicing team. So there’s not people at home office that are really on client calls helping people service their policies. They rely on any advisor or agent. Whoever set that up, they’re the servicing team, okay? So because of that, almost all every insurance carrier that I know of has commissions that get paid. Those commissions are based off of the base premium of the policy, okay? So you have two kind of two separate portions of premium going in. You’ve got the base portion, and then you’ve got the overfunding or paid-up additions portion, which should be much larger than the base portion.

31:37 So to give you an example on a well -built policy, your base premium should be anywhere from 10%-25% of the overall premium. So if somebody’s putting in 100,000 a year into a policy like this, the base premium most likely tends a little bit low. But you can get there anywhere from 10,000 up to 20,000, 25,000 is a good solid base premium. If an advisor isn’t building for high cash value, they can take that base premium all the way up to a 100,000. Now, what that does is if 100K is the premium we’re putting in, if we’re building that policy, we’re decreasing the death benefit as low as we can go, which decreases the base premium. And so you’re probably going to see like a $2-million death benefit on a policy that somebody’s putting in 100,000 into. Okay.

32:26 Dr. Ann Tsung Can you explain base premium versus the premium we’re putting in? Is that like what we’re putting in versus what we’re paying the insurance?

32:34 Brenyn McConnell Okay. Good question. So the base premium is where the majority of the costs lie, and the base premium is kind of the traditional life insurance piece of it. So the overfunding or the paid up additions portion, that’s actually optional funding. Meaning, you don’t have to put that in every year, which is nice, right? That gives us a lot of flexibility. So for an example, again, somebody’s putting in $100,000. Let’s say their base premium is $20,000. The insurance company is only wondering where that $20,000 is coming from, okay? The other $80,000, they don’t care if you put in or not. But if you do put it in, it’s going to accelerate the growth in your cash value. If you don’t put in any paid-up additions or overfunding, then all you have is your base premium, which is where the majority of the costs lie, including the cost of insurance. And so it’s going to take a really long time for that cash value to build, okay? So when somebody’s designing a policy, it might look good. So if I’m designing a policy, I could say, “Well, instead of getting $2 million of death benefit for 100K going in, I could get you $15 million of death benefit for 100K.” Right? And if you’re looking to death benefit, you’re like, “Oh my gosh. Why wouldn’t I get the one that has $15 million?” Right? Well, the difference is: that person that put in 100K that first year, they’re going to see $0 in their cash value. Meaning, all of that got eaten up in cost that first year. Whereas a well-designed policy, you’re still going to have those costs, but those costs are proportionate to the base premium. And so if somebody’s putting in 100K and the base premium is 20, you’re probably going to see 80,000 to 90,000, or 80% to 90% of that be available to use right away in cash value.

34:18 Dr. Ann Tsung Got it. So we need to make sure we find an advisor who knows how to design it like that and is paid what — they’re usually paid by commission, typically?

34:27 Brenyn McConnell Yeah, almost every life insurance product is sold by commission. Now, again, you can understand or kind of see what those commissions are depending on what the base premium is. Now, well, some people are very open about it, which is Money Insights. We want you to understand exactly how we’re getting paid, and we’re happy to walk anyone through that. The main questions you want to ask is, “Hey, what’s the base premium on this?” You want to pay very close attention to that first-year cash value. If you’re not getting 65% plus — depending on your age, if you’re under 50 years old, you should be getting 75% plus showing up in cash value. If you’re not getting that, that policy is not designed well. That means there’s a higher death benefit and also much higher commissions getting paid out to the agent or advisor. Instead, you want to see 75% plus in your cash value year one. And if you see that, typically, that’s when you know, okay, this policy is pretty well-designed.

35:28 Dr. Ann Tsung So you’re saying you need to see, if you’re putting a 10k, you need to see that the base premium is $2,500, and the additional cash you’re putting in, the premium is $7,500. Is that what you’re saying?

35:43 Brenyn McConnell Roughly. Yep, roughly. Yeah, and you should be able to see that, Ann, in the illustration. So when you’re looking at an illustration from somebody, from an advisor or agent you’re talking to, you should be able to look at that illustration and see the cash value that first year. And again, just make sure you’re getting 75% or more. And if you see that, odds are it’s a well-built policy. Now, I’ll throw this out there too. We are more than happy to pop the hood on anybody’s policy. So even if we’re not designing the policy or doing it ourselves, we have people reach out to us and ask us to just check on their policy and make sure it’s a well-built policy. Even if you’ve had it for a couple years, we are more than happy to do that. We’ll give you your options. There’s plenty of times where I say, “Hey, this is a well-built policy. Feel free to move forward with it if you’d like.” Other times I come back and I say, “I’m so sorry. It was not a well-designed policy, and I really recommend getting out of it. And if you’re open to it, I’d love to show you some options that are much better designed.” But we don’t do any of that recommendation without showing the numbers behind it.

36:47 Dr. Ann Tsung Yeah, and I think that’s great that you can either — like for those of you guys who are listening, if you already have a policy or don’t have a policy, we’ll get into the contacts quickly. But I would take this opportunity. At least, get your policy reviewed or figured out if you want to start a policy, if you’re already going to plan on investing. And if you already have a well-built policy, then you can even work with them to figure out what other operators you can invest your money into. As an example, from what I understand, from my illustration, I am putting — just so people get a sense with the numbers. I’m putting in $6,000 a year, that’s $500 a month per child. From my understanding is that, by the time she’s 65, she will be able to take out 550k every year, I think, until she’s 120 or something.

37:36 Brenyn McConnell Yeah, when there’s that much time for that cash value to compound, the numbers do get pretty amazing, right? Almost wild. But again, you have to realize that you’re putting that in on a young child, right? And so there’s just so many years for that to compound. It’s going to be a phenomenal asset. And to your point, Ann, it’s a phenomenal asset for you if you should need it. And if you don’t need it, then it’s a phenomenal asset for the next generation and your children, right? But you’re in control of it the entire time. If and when you decide to transfer that policy to your children, you can. But even if you wanted to use that as your own income as you go through retirement, you could then transfer the policy. Or if the policy is on yourself, the death benefit will pay out and that can go directly to your beneficiaries as well.

38:23 Dr. Ann Tsung Yeah, and I forgot to mention that is $6,000 until she’s 18. So it’s not like $6,000 forever. So it was a total of like 100K in. And I think by like fifth year or something, I think I have like $33,000 of cash value to borrow to invest. So, anyway, I know we went in lots of detail, lots of stuff thrown at the audience. So I’m sure they have questions. Thank you so much for coming on the show. How can people book a call with you, reach you guys, to figure out if they have the right policy or to build a policy?

38:55 Brenyn McConnell Yeah, the easiest way is you can just go to moneyinsightsgroup.com, www.moneyinsightsgroup.com. There’s a bunch of educational material on there. We have other strategies beyond the investment optimizer that you can look at as well. Then there’s going to be a place there that you can go ahead and book a call. Again, we typically do a 30-minute call to begin with. If you want somebody to pop the hood on an existing policy, we will. If you’re interested in learning a little bit more about how these policies work or the strategy, we’re a very educational base. We’re happy to talk through any questions and go from there.

39:28 Dr. Ann Tsung Do you guys have any social media as well?

39:31 Brenyn McConnell We have a YouTube channel and a podcast. So you can go to — again, search Money Insights on YouTube or The Money Insights Podcast. You can find a bunch of educational material there, and that’s probably the best place to look for.

39:44 Dr. Ann Tsung Okay. Yeah, sounds good. Thank you again. And for those of you guys listening, don’t just listen. Book the call now. Go on the website now. Go pull up the policy that you have now, whatever it is, and start taking steps into building wealth or maybe generational wealth. If you have young kids or if you have kids under 18, this may be a perfect time for you to start something for them, to build up their funds for college, so you’re not stuck with the 529. So, anyway, thank you again, Brenyn, for your time, your expertise, the knowledge. I’m sure, from what people hear now, this might be the two-millimeter shift they need to actually exponentially grow their wealth. So thank you again.

40:23 Brenyn McConnell Ann, thank you so much for having me. I had a blast.

40:25 Dr. Ann Tsung Thank you. And for the audience who is listening, just remember that everything we need is within us now. Thank you.

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