Maximizing a Policy for Your Retirement

We really encourage our listeners to shift their mindset from the idea of retirement. Recognize what it means for you, quantify what it means for you, try to issue out that word, you know, like sweep it away into the garbage and insert something new. Talk about passive income. Talk about the way, the way you want to live, the vision that you have for the life that you want to live.

You know, one of the benefits is as you're capitalizing your system, your policy that you're going to use for this process, you get to access that capital. Like it doesn't have to just sit there and do nothing. You can put it to work during that window of time that you're capitalizing. So that's another great benefit.

Hey, welcome everybody. So today we want to talk about how you could use a cash value life insurance policy for retirement. Hey, I'm Dan and I'm here with my colleague Richard. And we're just excited to be here with you today. And hey, what a great topic. Everybody thinks about passive income. Like, we just go back and think about this. Richard. I don't even like the word retirement because it means, you know, like taking something out of action. And I don't plan on going out of action myself. I'm, I'm just going to, you know, slow down in life and actually enjoy more things. Things, because I have freedom of time. And for me, that's what I'm focused on, more freedom of time when it comes to retirement. But today let's just talk about how you could use a, you know, very specific cash value life insurance policy for retirement.

Well, I'm glad we're going to do this. It's a great topic, Dan. And I think to take it one step further just on the word retirement. I mean, we've got a number of videos I'm sure we're on, basically, you know, saying that that's essentially a swear word in my, in my world. But you know, I think about like, you know, like, like an old, like an old show, like from England and you know, where there's like a person with a, you know, an English accent and they're saying, oh, I'm going to go retire for the evening. So I just, I always associate when I hear the word retirement, I have a picture of somebody who's like having high tea and it's like, oh, it's time for bed. And essentially retirement is the big sleep, right? You're just like, you're packing it in and you're just gonna, you know. Well, and, and statistically, like people just don't live as long once they do that because they, especially for men, they lose purpose. They don't have that, that drive, that ambition, that energy to, to thrive into something. And there's a huge transition phase when people go into what society refers to as, you know, retirement. And for, for many, it can be very damaging. And so we really encourage our listeners to shift their mindset from the idea of retirement. Recognize what it means for you, quantify what it means for you, try to issue out that word, you know, like, sweep it away into the garbage and insert something new. Talk about passive income, talk about the way you want to live, the vision that you have for the life that you want to live, and then be inspired to live it. And so it's that energy, that effort, that's going to actually keep you living a much longer time. In fact, we're going to go through an example that Dan's going to show us of one of his own policies and how it's going to produce a retirement income. We're going to talk through his thought process on the example he's going to show us and that the concept of living longer, how that plays a role into this example. So we'll just kind of have some general discussion there. But to get us started, we want to talk about how exactly does the cash value policy the asset? How are we utilizing that to create this passive income stream? So with that in mind, I'm going to bring up a drawing. I'm a. People know, I like my drawings. So here we're redirecting money. This is money from other assets that you have. It's money from your regular cash flow. It's, you've, you've met with a, with an infinite banking coach, a practitioner. They have worked with you with your budget. And some of the money's coming in and the money's going out and said, hey, we could take this and reallocate this. We could take this and reallocate this. Hey, you got a tax refund, Maybe we can work with that. You were sending money to your RRSPs. You don't like those anymore because you're not happy with what the government's doing and you're kind of worried about who's in control of the money. Hey, let's redirect that and put it over here. So these are just a couple of really quick hits on areas where people have money flowing through their life that they might want to redirect into an insurance contract. So we get a properly designed contract or contracts, depending on how Many family members and the dynamics, you know, that's something you work out with your coach and then you get a ton of benefits. Okay, well what are some of those benefits? Passive income is one of them. But you also get the benefit of the insurance. You know, for a lot of people, they just don't have the coverage or they're under covered or the coverage that they presently have won't actually be in force the day that they're most likely to leave planet Earth. So we're restructuring that so that we can get something solid that we know is going to be there. We have safety, security and peace of mind. You're getting all those benefits. You also get the benefit of constantly growing cash value asset. It's every single day that you're aging, that you're taking air into your lungs, you know, putting your head down on your pillow, waking up the next day, boom, there's more cash in there than what we left with. And so you get, you then have an opportunity to choose kind of two different paths on how you can receive that passive income. Now we're expanding that a little bit more, but let's just kind of at a high level talk about some of these two paths and, and we'll talk about the path that we want to go down, the recommended path for infinite banking in general, like what Nelson would have wanted. And then we'll tie into a little bit about how Canadians may choose to adjust that differently for their life based on some of the dynamics that are different in Canada. How does that sound, Dan?

Yeah, I like that because that's always a good place to start. Richard. And the other part that I was going to build off is you showed that great example when you, when you, when, whenever I go through that with people, what I say is one of the benefits is as you're capitalizing your system, your policy that you're going to use for this process, you get to access that capital. It doesn't have to just sit there and do nothing. You can put it to work during that window of time that you're capitalizing. So that's another great benefit. But going back to your comment about the difference and either going the left hand way or the right hand side, depending which way you look at it. It's just like using the method that Nelson taught us. And you know, again, I always qualify. The difference between Canada and the U.S. is some of the laws in our countries and one of the things that always impacts the insured retirement, because that's what we call it, using an insurance policy for retirement purposes that impacts it in Canada is the fact that, you know, different than the US Is policy loans at some point will become taxable. Like some portion of it would be taxed over time. You will get above your adjusted cost basis. So it's just like I always tell people, it's like any, anything you bought where there's a capital gain. So if you bought a property and you had it for a purpose and then you increase the value, the value of that property increased over time over and above what you put into it. Well, there's going to, when you sell it, there's going to be a portion of that that's taxable. And that is a fact in Canada when it comes to the laws of our land. And just, you know, the cra, they would look at anything over and above your adjusted cost basis in a policy that you take out. So it's like a capital gain similar. Think about it. That's actually, you know, a little different terminology, but I think people understand capital gains that you have to pay tax on that portion. So that's one of the things. But let's just give them an idea of how it would look if they just use the IBC way and took that money out. And it's pretty straightforward. Once you get cash value built up in your policy, you can choose to start to take a policy loan against that cash value. Now, life companies, the ones that we work with here in Canada, they allow for us to take policy loans up to 90% of your cash value. So, you know, say you got a million dollars of cash value. Well, you're going to be able to take up to 900,000 of that out. Now if you're doing it for passive income time, you don't want to take that all out at once. You're going to take it out over.

Time and just that'd be one really good year.

That would be a really good tax year.

For, you know, our friends and CRA would really like us if we took all that out in one big chunk. Because you could, because you're the owner of the contract, you could choose to take that out in one big chunk. But when people are thinking about passive income time, they're going to take it out at the amount that they need to support their life at that point. And so each year you take out a loan for that amount. And because we own that contract, Richard, one thing that's really unique about it is we don't have to pay the interest back if we choose not to. Like, we could choose to you know, capitalize that interest within that policy and you know, the next year we take out whatever that amount again that we think we need and then we could go through that process over time. And then at some point our friends at you know, cra actually the Life company would tell us, hey, you know, this is going to be taxed and you take this out, this much of it is going to be taxable. And then you'd have to deal with that. So that would be a way that Nelson would have coached us to do it. Take it out as a policy loan. Don't take it out in any other way because you don't want to kill the growth. But there is options and that's what I always tell people. You can actually take cash directly out of your policy and you know, you can, you know, access the cash value that you built up for paid up additions and you can ask the Life company start sending that to you. Same way it works the same way after a point, you know you're going to still be taxed on that and so you get to make that choice. Which way do you want to take it out? Nelson would have taught us and take a policy loan. So that's a high level Richard. That's just an example of how you could do this process using the infinite banking concept.

And the beautiful thing is again, Nelson wouldn't get, you know, bogged down in the details. And you know, as he became more and more familiar with some of the differences in Canada, you know, then, you know, he, he, he thought it was odd that, you know, policy loans would, would get taxed eventually in Canada. But we actually talk about that in episode 100 of our podcast without Bay Street I actually draw out. So if anyone's interested in learning more about that, you can check out episode 100. We talk about this taxable event, we draw it out visually so you can understand how it works. And we also talk about the reason why it came to be. Now we don't want to get into that here for the purpose of it today, but the key understanding point is, is that you can fund a policy, you can access a passive income, you can do it with the Life company directly or you can do it by doing what's referred to as a collateral assignment where we work with a third party institution. And because the money isn't coming directly out of the Life companies coffers, it's coming from a third party that can now be in a tax free environment. And so we're always kind of struggling with the things that we want to solve in this process. We want to try not to do business with banks. That's one of the core components of Nelson. We want. We don't want to do business with banks. But Nelson, although he wasn't a fan of those guys, he really wasn't a fan of Uncle Sam or in our case, uncle, you know, Uncle Cra either when it came to dealing with your financial affairs. And so he wanted you to secede from that as much as was reasonably possible. So the Canadians can be empowered when they understand these two different dynamics, the way that they can choose to go down the path. And you said something really, really important, Dan, that I want to isolate. You said prior to even getting to that stage, as you're capitalizing the policy, you're putting capital in and capital is building, it's building up and building up and building up. Well, you have access to it. And boy, oh boy, if you're just going to let it sit there and not do anything, it might not be the most efficient as you're going through life. And hey, maybe you're 40 like I am today, and maybe you got another 20, 30 years before your quote, unquote retirement date because you're vibrant and young and you're living longer and you're healthy and you want to contribute to society. Well, do I just park it all in there for 30 years and never touch it? No. I'm going to go buy some investment real estate. I'm going to go acquire some Bitcoin and I'm going to go and find some businesses that maybe I want to either start or I want to invest some capital in and I want to help them optimize because of skill sets that I have. And I think I can produce a good rate of return by doing that. So the policy simply becomes the capital reservoir by which I'm going to go and accumulate the other assets. So for me, what I'm going to share with people is, although we're going to show you an example of using the cash value to produce the retirement, I want you thinking as you're watching this, rather than having the cash value produce my retirement, how can I use the cash value to produce assets and those assets produce my retirement? So it's the same trajectory. The difference is in how we think about it and the way that we actually accomplish the objective. If the goal is to have passive income, well, there's lots of ways that you can generate that in life. And we've got lots of other videos talking about that you can churn through in Fact, you can hear some examples and you can start to learn more about how this works by going to watchibc.com or there's a 90 minute session there. We teach about the basics of infinite banking, the rationale behind it, the power of the grocery store example. And we go through examples of people doing this in their life. Now, once you understand those fundamentals, you begin implementing the process. The next step is to start thinking about how do I grow my other assets? You might already be good at that. Perfect. Then you've already got skills. But if you're brand new and you don't know how, we've got lots of content to help you start to expand your horizons on that. But if I have a growing resource of capital and it's building up and building up, boom, there's an opportunity. It just struck me. I can decide do I want to take advantage of that. I have capital, I can do it. Boom. Policy, loan, policy, loan to the deal. I now have the deal. The deal. Maybe it's a year or two years, it starts producing some good revenue. Those revenues, where am I going to put them, Dan? I'm going to put them back on the policy loan. Policy, loan goes down, cash value goes up. Couple of year, two years later, boom, there's another deal. Let's go get another deal. And so if you go through that throughout a period of time, the end result is you've created probably some good capital gains in whatever format and probably some cash flow from different resources. So if I've done a good job of that, why do I need to go and use the quote unquote, cash from the policy in any format that we're going to talk about today? You really wouldn't because you've already used the cash for its real purpose, which is to grow and to harness the potential of your financial life while you're living. So now, now that I've said my piece on that, my little rant, I.

Guess we're gonna talk back.

We're gonna, we're gonna zip back to our diagram and I want to just highlight, you know, before you go there, Richard, that's. Yeah, totally.

That's such a goal when you just get people with so much gold there. I just want to build off of that. And I go back to, you know, our mentor, the late, great R. Nelson Nash, and when you think about his book, and I just go to the equipment financing section. And one of the things that I remember distinctly from that, again, one of the things Nelson did when he put illustrations into the book, he always showed passive income later on. So every illustration in the equipment financing showed how much a person could take out later in life. But I remember the comment that's in there that he put in there, say, hey, when this young man got to be this stage of life where he's been using, he's been using that capital that he built into his system for his business, couldn't he just keep on leasing vehicles to whoever he sells that business to? And isn't that a form of passive income? Just exactly what you were speaking about, Richard, That, I think was huge. Like what you said to people. I just did. I just wanted to add to that because it just goes right. Took me right back to that page in the equipment financing section where Nelson said exactly that same. The opportunity to utilize, you know, the business you've built for passive income. Just a great segue. And now we'll jump into that, that.

Diagram again, tying to the bottom of this again. We talked about our benefits. So we've got the life company over here. You have access to 90% of your cash values. The key components is that the owner has all the contract rights and authority. If you need money, you don't have any questions. There's no credit, doesn't show up on your credit report. It's simple, it's easy, it's fast, and you're always in control. And there's no requirement to make a repayment. We teach you to do that. It's important to do that when we're getting to that retirement phase. You may choose not to do that, which is your prerogative. And Dan's going to walk us through an example like that, in which case you're still going to make a quote unquote loan repayment, but it's going to happen when you're dead.

So the loan will get repaid. It's just a matter of when. And you're making a choice as to how you want to do it. And then there's the bank loan option again. So for Canadians here, for many of Canadians, this will be the option they choose or are likely going to go down when it comes to the retirement phase. Even though it somewhat. There's some contradiction there between what Nelson said that really has to do with our tax rules and it can provide again a higher, higher income without taxation to a degree. And it's using this mechanism. There might be some hoops you got to jump through a little bit. Nothing too crazy, but the bank's going to earn the interest versus a life company. So that's not ideal, but it is what it is. You're going to have to do some qualifying. Yeah, you might have to have an okay credit or a reasonable credit. It's very lenient there because the banks that we work with to put these things together, they're very aware and they have specialized departments to deal with cash surrender value lending. If you just walk down to the corner bank that you normally deal with, they don't have no idea what you're talking about. They have specialized departments that work with this and not every bank does it. Okay. The key advantage here would be that there's a very high potential that you can get some tax savings by going this route. Again, there's many ways of getting this done. We're just highlighting the two main paths. And then I guess I've added in the third path, which is just go build a bunch of assets, which I think is a better deal. But I will try to refrain from utilizing too much of my opinion here, Dan. Now with that, why don't we, you know, if you're open to it, Dan, why don't we jump into the example that you have to show us and just bring up your screen and kind of walk us through the thought process of this example. And this is very personal to you, which, you know, if you're watching this, be very grateful to Dan. He's, he's cracking open the.

Hood here and he's showing us underneath the engine a little bit of an example of one of Dan's own policies.

No, I can, I love doing that because I just, I'm always focused on giving people, you know, a thought, you know, helping them think about possibilities. And, you know, and again, as we segue into this, you know, this example, and I just, you know, there's a lot of numbers on here, so be careful with that. But I'm going to talk about, you know, what I have structured here. So this is just a projection because I'm, I haven't started to, you know, use this for this purpose. It's something that I have this policy specifically designed for a reason and I started it later in life. So just as you can see, I was 58 years of age when I started to capitalize this particular policy. And you know, the interest, I'm going to show you that it gets capitalized as we go through this example. Again, Richard, great job of speaking to. And I tell people when I, when I do go through this example with them, you know, I wouldn't be capitalizing my interest in the first number of years if I, even if I was using it for passive income, but that's just the way it's illustrated here. And so I'm going to start actually, you know, in this example using a loan. And again, you can use it through the policy, through a life company or you can use a bank. Now the bank loan rate that I selected just for this example was 5%. And that's something that's quite doable. Today you can get less than 5% if you, you go out there and negotiate. Now you can do better than 5%. But I didn't want to be too conservative with that. I wanted to make sure it was a reasonable number. And the years that I chose for this illustration to take out passive income was 20 years. So let's just look a bit at how this thing all rolls out. So the first thing I'm going to focus on is just this, you know, capitalization phase and what I decided to capitalize my system with. So each year, this particular policy, I put that 36 plus thousand dollars into it and I made a decision to do that for 12 years. That's right, 12 years. And at that point, you know, good lord, gives me the breath and the energy. I'm going to keep on working past 70. Just don't tell anybody.

Don't tell Dan's wife.

Yeah, exactly.

I plan on working past 70 because I get to help people and that's what I, you know, that's what motivates me. And I might slow down more than I am now when I get to 70, but I'm not even committing to that.

But anyhow, I wouldn't put it past you to speed up, Dan.

Exactly. So here I am, I'm cap this example. I said I'm going to capitalize it for 12 years and then I'm going to stop because I could with this example, I want to give you a bit of background before we go on so I could, you know, this is what I've chosen to take out each year. And this would be, if you did it through a commercial bank, this would be tax free. You know, that is an amount that you wouldn't be taxed on it. So it's not going to be something that shows up as a income stream for you. So realistically, if you're using a commercial bank in this process, you get to access in this case that 22 plus thousand dollars a year and no, no line on your income tax return that year shows that amount. So that's why important.

Dan, I want to touch on this. This is what you're saying is really critical here because people need to understand as Canadians, if you're collecting CPP and oas, these things are taxed and they all add in. And if you're drawing down from a registered account or you've got rental real estate, you have other income lines. Those income lines can stack up. And if it starts getting you above a certain amount, I think it's about roughly 72, $73,000 a year. Now any old age security that you might be receiving or able to receive starts to get clawed back. So to be able to augment and increase some of your passive income using this kind of a resource in a tax free manner is so critically powerful because it overlaps in other areas of your financial life. There's additional benefits that you don't see on an illustration on a page.

Exactly. Well said, Richard. And that's why Canadians, and Richard and I both have a duty to notify people of this option. Like we have the duty of care to tell people about this is an option for you as a Canadian. And so we do have that conversation with people, we just say, okay, if you do collateralize this at a bank, be aware that you're dealing with the bank. And here's another part that I tell people because it's true, we're never going to get away from using commercial banks in some way. It's just a fact of life for us here in Canada. So this is just another way. And I loved how Richard said it. It's just, you know, kind of a perspective of you can reduce the tax because we're not about doing anything that's illegal. This is very legal. This is very good tax strategy for you to consider. That's why we have the duty of care to talk to people about it. So going back to my capitalization phase because I kind of got ahead, how much money, Richard, did I put in in those 12 years?

Well, I'm glad that you asked me that before we started recording again. So we didn't have to calculate on the fly, but it's $439,620. So we'll just call it simple. We'll call it 440,000. A little bit underneath that mark.

Exactly. So that's a, that's a good number to know. And so plan because hey, I'm going to live past 90. But as you go down and look at each year, there's 22 plus thousand dollars coming out. It takes me all the way up to 90. And I purposely, just for this illustration purpose, I Stopped it there. So after 20 years of taking out 22,700.

How much did I take out?

You took out just a hair shy of 456,000. So is that you've taken out tax free, more than every dollar you put in. And you still have the insurance contract, you still have the death benefit, and it's still growing. And you could take more out?

I could take more out because I stayed really conservative with this strategy right here. So, you know, if anything changed, and this is the way I think I go, okay, so what happens if interest rates went to 6%? I want to give myself some, you know, kind of playing room there because I, you know, I don't want to, you know, basically leave my family with less than I ever put into this thing. Because if you'll notice over here on the right hand side, if I, you know, the good Lord took me home when I was 90 years of age, this is the amount that would still go to my family. Over here in the right hand side, you want to put an arrow in there for me, Richard?

Yeah, well, I'm going to connect the dots here because we've got at that point, the Death benefit is 1.393, so just about 1.4. We have an outstanding bank loan because, Dan. Oh, here he wasn't paying his loan back. He said he was going to. He told us he was going to do that. So we got to pay out that loan from the bank and then the net remainder that goes tax free to the beneficiaries. Is this again, very, very powerful. And I also want to draw attention here, Dan, that at this stage, you're roughly at about 68% of the total cash value. So and that cash value is still growing. Like the very next year, it goes from 1.1 to 1.2. There's about a $60,000, sorry, $43,000 increase. So you still have the ability to take more capital. And that's the key thing. Again, we're very conservative here. So if you chose to go up, increase the loan to value, you could have taken more income per year or you could continue taking 22 for more years. So there's several options available here because people, you need to understand life is dynamic and it will change and shift and markets will change and shift externally from the policy. The policy is very rock solid, so. But you now have the control to make certain decisions as those changing dynamics unfold.

Exactly. And yeah, it's just so well said, Richard and I, because this is one of my objectives. When I built this strategy for myself was, you know, I wanted to leave at least as much as I put into this contract for my beneficiaries. So I built it very much that way. And it does, like all the way through. When the good Lord blesses me all the way to age 100, I'd still have, you know, a death benefit after this amount was paid off to the old bank here. I'd still have more than I ever put into this policy. If God blessed me with, you know, a number of years to get to 100, and if he takes me home anytime sooner, my beneficiaries are going to do fine with this kind of strategy. And yeah, that's just, this is just a real snapshot of one way that you could consider doing it. You know, this is just one of the tools I have in my toolbox when it comes to using cash value life insurance for retirement. And, you know, this is just one of the ways that I'm planning on using it because just like Richard talking about, I'm using some of my policy for opportunities right now to build, you know, cash flow, you know, just passive income. But this is another way, and we wanted, we thought it's worthwhile to show you. And this is, you know, this is based on an actual policy that I own and the way that I'm capitalizing.

It now, now, Dan, you don't just have this policy you got, you got another one or two of them kicking around, right?

Oh, yeah.

So, you know, again, just take a moment and imagine, you know, let's just say you had two of these or you had, you had one of these and then you had two that were half as much, but they're on different bodies, you know, your wife and, you know, kids, whatever. As you start to stack these things up, what ends up happening is you have, they're just multiple streams of income. How often have you been watching YouTube and trying to figure out how you can create multiple streams of income? Well, you can use cash value insurance to create multiple streams of income, multiple policies creating different streams of income, and you're in the driver's seat of the decision making process the whole time. Now the multiple streams of income can be from the policies themselves, or like we've identified, it can be by utilizing the policy to go and create the other stream. So you have a wide open sea in front of you of opportunity in paths that you can take to implement financial strategies in your life. You spent some time with Dan and I today. We encourage you to head over to watchIBC.com and take 90 minutes so you can learn more about how to implement this become your own banker process in your life and decide if it's the right thing for you or not. And get a copy of the book. Head down to the description down below. Click a link, go and order a book. You'll be glad you did. It can change your life. It's changed mine. I know it's changed Dan's. And the fact that you spent this time with us says an awful lot about you and that you have not been taken out by the arrival syndrome. If you don't know what the arrival syndrome is, well, you need to get a copy of the book so you can learn all about it and we'd encourage you to do that. So right about now, poof. There's some new videos showing up on the screen, a whole new playlist. Go ahead, dig into some more content. There's some great stuff there. And thanks for tuning in.